UKC

http://www.newstatesman.com/politics/2013/10/osborne-reveals-true-aim-help-...

In reply to Timmd:

That's Tory policy making for you. "Shallow" would be a compliment.

In reply to Jon Stewart: I'm sure Labour have been cynical as well, so I don't know if being partisan helps.

This is definitely very cynical and irresponsible though, I can't believe it.

In reply to Timmd:

Errr. Where were the big-ups for Labour exactly?

In reply to Jon Stewart: Oh, let's see, freezing energy bills perhaps...

In reply to Timmd:

If you read the original Independent article it was obviously a joke, albeit a poor one.

Help to Buy is a good scheme. Right now there's no properly functioning 95% mortgage market (cue Andy to come along and disagree). Provisional numbers out seem to suggest it will lower rates by a reasonable amount for this part of the market. I've got friends planning to take advantage of it because otherwise they can't get on the housing ladder.

In reply to Sars: It's an appalling idea..... if it does 'help' a significant number of people get on the housing 'ladder', it will obviously push prices higher, thereby making it harder for the next lot.

In reply to SARS: There was a financial adviser on radio yesterday saying that she wouldn't (probably) be advising take up on the basis that the %APRs being offered by providers under the scheme just aren't competitive and the guarantee is very short term (a couple of years or so IIRC) which just isn't long enough. Her advice- save a slightly bigger deposit and buy on the open market.

In reply to Jon Stewart:

Oh please Jon! If they'd done nothing the NS would be bleating "what about he poor mortgage holders?" And "where's the economic growth"?

It's a quick fix.thats what governments do.

In reply to Timmd: For a house up to £600,000 you only need to find £30,000 for a deposit and the government stumps up the differrence to make it 10%. Sounds like a no brainer for some of the richer people in the banking industry...

http://www.theguardian.com/money/2013/oct/09/help-to-buy-scheme-to-benefit-...

In reply to Timmd: I'm a tory, though a liberal one. Have to say this help to buy thing does seem like a bit of a political vote winner rather than sound economic policy. That said labour would have done the same thing.

There is a good argument for the Chinese way of doing things, elections every 10 years or so (though not exactly open ones in their case). Gives the government time to put a long term and sound economic policy in place with a big incentive on it working out in the long term rather than short term gains for votes which are just dumb.

In reply to Postmanpat:

Everyone knows that the problem is high house prices because there aren't enough of them. State intervention to raise prices further is destructive in the long term, Cameron and Osbourne know it, but they know what matters now is winning the next election. That simple.

I don't understand why it should be a priority for govt to increase home ownership. The market doesn't support that increase because there aren't enough houses and banks don't want to lend. It's not a quick fix, it's a policy that will please a demographic important to the political parties while having potentially negative effects in the bigger picture.

"Shallow" would be a complement.

In reply to Jon Stewart:

Agreed. They don't se it that way in France, for instance. It's buying votes, pure and simple. The Tories have always done this; that's why they sold off council housing.

jcm

In reply to Jon Stewart:
It's a government priority to get the economy going. Avoiding negative equity problems and stimulating housing demand is a simple way of doing this. Relaxing planning laws should enable more houses to be built.

I agree that it's not a great underpinning for the economy but its been that way for fifty years so its not exactly a new problem or a Tory monopoly. Governments like to get re-elected. "It's the economy, stupid". You're just being tribal.

In reply to Postmanpat:


Well let's wait and see. I think it'll take a bit more of a push than that myself. The planning laws aren't there just to obstruct building, it'll become obvious what the purpose of each silly rule was as soon as it is relaxed, and things will not speed up.


I never implied that it was. I think all major parties announce stupid polices that sound nice to voters.


There are two faces to this policy, the economic stimulus and the free money for young couples. You can concentrate on the former and deny the existence of the latter if you like, I won't be convinced that this isn't simply buying votes. If stimulus was the focus, this is not how you'd spend the money. Just because you voted them in, don't pretend you can't see how crap and shallow their policies are.

In reply to Jon Stewart:

People are always very keen to blame planning laws whilst developers are sitting on land which has planning permission and letting it lapse.

In reply to Jon Stewart:

Well actually as a quick fix stimulus it seems to be very effective. Much quicker than long term infrastructure projects.

I agree its not an optimum policy and that we should be getting away from housing, consumption based on credit as the main stimuli of economic growth but that is a long term project.

In reply to Timmd:

When quickly scrolling through thread titles I thought the title said 'How to buy and election.'

Not a bad summary.

In reply to Postmanpat:

The frustrating think is they seemed to understand this earlier on but are now pandering the the Brit public obsession with house prices, as we get closer to the election. Still Labour were no better.... Gordon Brown's 'I will not let house prices get out of control' '97 speech compared to his later polices.

I guess it is ultimately 'our' fault.

In reply to higherclimbingwales:

No, the government guarantees the difference, it does not stump up any money for the buyer. The guarantee will only ever mean anything if the buyer defaults and the house repossessed.

In reply to Postmanpat:

False dichotomy. The money should be going into active industrial policy.

In reply to Jon Stewart: "Everyone knows that the problem is high house prices because there aren't enough of them"

is that really true? Homelessness has fallen between 2001-2011

The main reason house prices are high is because of the lending environment. You hike base rates to 5%, and make 4 X salary compulsory and see what happens to house prices.

In reply to Bjartur í Sumarhús:

That evidence doesn't answer the question. It's not one house per person/couple/family and the rest on the street you know. People live in shared houses when they want their own, they live with their parents, etc.


Yes, it's an interaction of those factors too. What I'm saying is that a load more stock would be beneficial for the market to function in the interest of first-time buyers.

In reply to Postmanpat: "I agree its not an optimum policy and that we should be getting away from housing, consumption based on credit as the main stimuli of economic growth but that is a long term project."

IN the four weeks of September...just 4 weeks. 400,000 new cars were sold in Britain. FOUR HUNDRED THOUSAND!!! brand new cars. 75% on finance.

A long way to go.

Most people in my experience in all walks of life are financially inept at planning for their future. Total head in the sand policy punctuated with "feel good" purchases on finance. I don't know what the cure for this is, but I suspect when the current mob of 30/40 somethings attempt to retire they will be offering some sage advice to their children about the dangers of finance/credit for stuff you don't really need

In reply to Jon Stewart:

Which is equally not a short term economic stimulus.

In reply to ebygomm:


And they will until the next bubble comes along.
jk

In reply to ebygomm:

It's easy to blame planning laws. The developers are all waiting for housing prices to rise.....

In reply to Postmanpat:

No I guess not, just a better use of money than short term economic stimulus with potential negative consequences down then line.

In reply to Jon Stewart:

You would prefer they allow the economy to continue moribund for a few years whilst an industrial policy which may or may not work is developed? I rather doubt any government or the population would prefer that.

In reply to Timmd: A bit like that worthless Labour megalomaniac abolishing stamp duty for first time buyer just before the last election. Cheers easy but I’m still never going to vote for you. Imagine how much shit we'd be in now if they'd won!

In reply to Postmanpat:

You are joking? Help to buy will save our ailing economy? Pull the other one.

In reply to ColdWill:

I think the world would look pretty much the same.

In reply to Postmanpat:
Why don't the developers built out the permissions they have? 400,000 and rising, whatever Boles and Pickles say, planning really isn't the issue.

In reply to The New NickB:


Because in their words 'the remaining development will not achieve a satisfactory 20% return based upon gross development [...] and a profit of 15.51% is unsatisfactory.'

In reply to Jon Stewart:

Intrigued that you question the connection rather late in the debate. Unwelcome though you may regard it, rising house prices stimulate the economy. It's happening in front of your eyes.

In reply to Postmanpat:


Agreed. But a housing bubble burst also wrecks the whole economy and significantly. So we have to ask, do we want short term feel-good house price rises that end in bust, or a stable economy based on real rather than perceived economic output.

In reply to Postmanpat:

Hoorah! Rising inflation - what larks!

In reply to Postmanpat:

How annoying. When we've got rising house prices already, in what way is Help to Buy a worthwhile stimulus?

The consensus amongst the commentators I've heard is that it's bad economics and good politics, and that's not just from the left wing press (last night it was Michael Portillo saying that).

In reply to tony:

House price inflation is different to retail inflation. Not sure what point your making.

In reply to Jon Stewart:
Sheesh, anticipation of the scheme is on of the remains prices are rising!

In reply to Postmanpat:

Well it must be the solution to our economic woes then.

In reply to ByEek:
>
As I said have said above and have said several times in other threads, almost the whole political and media (and much of the economic) establishment is wedded to to the goal of reestablishing the economic growth of the early 2000s. You and if tell them that2007 was followed by 2008.
However, given that false parameter, it seems one eyed to carp when the government in power makes progress in achieving it since none of the others have the aim or the policies to achieve an alternative goal.

Incidentally, it is not "perceived output", it is real output in the form of consumption and construction.

In reply to Postmanpat:

House price inflation isn't really different to retail inflation, except in the time-frames over which it's experienced. Rising house prices will make mortgage repayments increase (particularly when interest rates start increasing, as they must do sometime). Those increases, regardless of official definition, manifest themselves as increasing costs to the mortgage holder.

In reply to Jon Stewart:

No, it's not. I agree it's a short term policy etc but where I disagree with you is your implication that this attitude is some sort of Tory monopoly. "The're all in it together".

In reply to tony:


Those are to different points. Interest rates will rise when the economy recovers, regardless of house prices.

House price inflation prices some people out of the market, obviously.

In reply to Postmanpat:


Maybe "perceived" was the wrong word. I suppose you can borrow money and spend it and call that GDP, or you can buy stuff, put them together, add value, then sell it on and call it GDP. I know which I prefer.

I do wonder if this policy will see the Tories winning long term support amongst the middle ground of floating voters. Given the fact that we are still very sore from the last housing crash, I can't see this as being a quick fix for that ill feeling or a long term political game plan. It makes me feel rather sick even though as a home owner I may benefit short term.

In reply to ByEek:
Well that's the way we've ,erasures it for at least 60 years!! Is building a house different to building a car? It's more complicated than you make out but I'm going out now.

In reply to Postmanpat:


But we aren't building any houses. At least not in the numbers we need to satisfy demand. Instead, we are just making it easier for people who can't afford to borrow, to borrow. If housing were to follow a pure capitalism model, house prices would fall as demand was met and efficiencies in building practice increased competition between house builders. But because housing is about wealth and how to maintain that wealth, and not about somewhere to live, it will never be that way.

In reply to Timmd:

So housing prices are too high for people to afford, but not high enough to trigger private developers to build houses...

Seems like a perfect opportunity for the Government to either insist the private developers build houses, or compulsory purchase the sites and build houses themselves. Plenty of councils would probably love to own a bit more housing that they can put people in who would otherwise be claiming housing benefit, or worse need to be put up in B&Bs.

We did used to have lots of council housing, whatever happened to it? Oh yes...

In reply to ByEek:

Housing starrts are stimulated by housing prices(for obvious teasins) and are already picking up

It's Help to Sell ... inflated prices are not so good for buyers

In reply to ByEek:

I don't think that we need all that many more houses, what we need are less landlords.
If rents were fixed by the government and an ever increasing landlords tax were applied there would be a glut of housing hitting the market and driving prices down.
It will never happen though, too many powerful people make a lot of money as a landlord.
I would also impose a massive tax on second / weekend home owners to help reduce prices in rural areas but again it will never happen and being as I am part of the problem owning a second house that I rent out I am glad it will never happen.

In reply to Dax H:
Er, just one thing: what happens to all the people renting? They need to live somewhere so net demand and supply doesn't change unless you think they're all going to emigrate or live in tents.

In reply to Postmanpat:

I've never been great at economics but I think the idea would be that if being a landlord was less profitable, demand for houses would go down because fewer people would be interested in owning more than one, which should in turn lead to lower house prices overall.

In reply to Postmanpat:

There is a point here though PP. There are probably more people renting who want to buy than houses exist on the market - certainly in some areas.

Take where I was living before - Putney. Very little housing stock on the market, lots of people renting who wanted to buy. So when something did come up it got bid up by many people and so fixing the price points for any new stock entering the market. A mini bubble in fact.

If Putney landlords were forced to sell - for example on my previous street 75% of properties were owned by two families - then I think we would have a more normalized market place: natural buying and selling as people up size, move out etc etc.

In reply to ebygomm:


Ed Milliband said that Labour would do something about this at the recent Labour Party Conference, and was then accused of Mugabe-style Marxist land grabbing by the right wing press, and - bizarrely - Boris Johnson, who conveniently forgot that he put forward exactly the same plan last year for 177,000 properties in London...

http://www.huffingtonpost.co.uk/2013/10/01/boris-johnson-robert-muga_n_4021...

In reply to SARS:

You 'd simply transfer the problem of shortage to the rental market which is where we were in the Rachman era

In reply to Postmanpat:

Come on, you can't have it every which way. The difference between modern landlord domination and old-style, large-scale council renting was that in the past 'prioritising according to need' included masses of ordinary working people; these days the stock is so low in some areas often only the most desperate families can be emergency housed and sometimes even then in even more expensive and very unsuitable accommodation like a hotel room. Biggest genuine need in the UK is for masses of more reasonable rental stock in areas where the work is. I feel sorry for people stuggling to buy their first homes but that is a luxury not a neccesity and the very real house price bubble is the main culprit and this is just stoking it further. Sadly I suspect this scheme will be mainly end up being exploited by people who can already afford things and the genuine strugglers will get better deals elsewhere and will de-risk against negative equity if they wait.

In reply to Offwidth:


How am I doing that? I'm simply suggesting that curbing buy to let will not improve housing availibity. It will simply transfer some of the existing stock from the owner occupied to the rental market. The net supply demand situation will not change.

It may be that the rental market should primarily be supplied by the State (I doubt it) but unless there are more houses or less inhabitants the overall balance doesn't change does it?

In reply to Postmanpat:

No, but I think that when you only have a small supply of properties to buy the marginal impact to overall prices can be huge. Basically prices ramp up because of a small excess of demand over supply; then all other prices of the commodity are then marked against that new price level based off a small sample.

I've seen this exact thing happen before in the OTC derivatives market. Brokers marking prices to a thinly traded instrument - which then basically fcked lots of banks because they had to mark their positions to the last traded value. In the housing market it's the next buyer who is screwed.

Lots of people are currently trapped in rental accommodation because of this squeeze on properties. They can afford to rent - which suggests there's reasonable supply - but can't buy because they are priced out of the market by buy to let investors. Or, in much of the case, by foreign buyers.

My personal view is that there's plenty of new stock in London, but it's all getting mopped up by foreign buyers. If you take the river boat you can see vast swathes of London bankside with empty new buildings.

In reply to Postmanpat:


Sense.

It is one part of a multipronged approach ie low intrest rates, QE etc to stimulate an important part of the economy giving confidence for First time buyers to buy, downsizers to downsize, upsizers to upsize and doer uppers to invest in doing up. London excepted real house prices are still well down on 2007 highs and values based on rental yields attractive compared to lending rates (assuming you can get the bastards to lend).

In reply to SARS:
Haven't you just contradicted yourself? You've argued that the market is so thin that the marginal buying of buy to let landlords has an outsize proportion on the market. Then you've said that it is the foreigners that are driving the market up.

Personally I think the foreigners are more of a "problem" because,as you say, many of their flats are empty so, unlike BtoL, they take capacity out of the market.

In reply to Postmanpat:

Well I didn't write it very well. Basically both are the problem. But they are two separate markets - although interlinked obviously. Point is, I think rental prices are affordable for much of London but house prices are too high. This much is clear if you look at rental yields. Of course I'm talking mostly about "prime" London.

E.g. my old place in Putney had a rental yield of 3.8%. God knows why anyone would buy it at that price - but such is people's desperation to get into the area. And as I said before, 75% of my street (couple of hundred + properties) are owned by two families. If tbese two families were forced to sell I think there would be a more functioning buying/selling market. As it is, the smart money rents there and buys where yields are higher

In reply to SARS:


So, lie I suggested, if you artificially take rental capacity out of the market you just switch the shortage to that. And probably encourage more foreign buying.

In reply to Postmanpat:

Looking at my peer group I know 11 people in private rented accommodation, 1 of them is renting because they don't want the responsibility of maintaining the house and 1 travels around for work and rents in the city that he currently works in.
The other 9 rent because they can't afford to buy, they can afford to pay the same or more in rent than a mortgage would cost but they can't put together the deposit.
Anecdotal evidence yes but I would be willing to stake £5 that a national survey of the rental market would show a similar ratio so maybe more rental properties swapping to the ownership side would be a good thing.
Foreign investment is an easy fix, if your not a UK citizen then you can't buy a house in the UK. (though I suppose it would be better to say EU citizen).

In reply to Dax H: i can see your point, but I bet you're wrong with your ratio by quite some distance. Students make up a large part of the private rented sector, as do people getting housing benefit (which of course isn't available to pay mortgages on a long term basis) - neither of which would be able to/wish to buy.

In reply to Dax H:
>

Have you thought about the negative knock on impact of that on the London economy?

In reply to Postmanpat:


There's the last electioneering ploy of selling off council houses and changing the rules about funding to buy/build new ones lurking on the edge of my consciousness.

If only they hadn't been sold off, then rental prices mightn't be quite so high?

Inarguably so I'd have thought...

In reply to Timmd:
That wasnt simply an electoral ploy. It was a central tenet of Conservatism.


But house prices might be lower. Supply was simply moved from the rental to the owner occupied market.

In reply to Postmanpat:

That may be, but selling them off well below market value was an election ploy.

As to the supply and demand for housing, well, people aren't sleeping in tents or under bridges in large numbers (nationally that is, I believe there is a problem in London). There are generally enough buildings, the demand comes from lots of people wanting to invest in property and lots of people wanting to own a home.