Dingdongler

Pete, may I ask, are you still renting?

Petem95

No I own a home, but it doesn't mean I'm automatically in the "more house price inflation the better" camp

Dingdongler

No, nor are most homeowners to be honest.

All govts play this game of using house price inflation to boost the economy. We can all see the dangers. However for balance I did give a number of links that might indicate that things are cooling and that some banks are restricting lending so perhaps it isn't all doom and gloom.

jonc

You're quite right, FTB's do need cheaper homes, but they aren't just going to appear out of nowhere, not unless the Government puts everything asside and facilitate a massive nationwide house building initiative; easier said than done, where are they going to put them? I speak for the majority when I say "not in my back yard!" I'm sure you'd be first to object should developers build enmass affordable homes in your vacinity. And then there's planning laws and regulations that developers have to abide by. The long and short of it, it woudld take too long and the system is too bearucratic and too expensive. With HTB, you aren't mortgaged to the hilt, you pay a % portion of the mortgage and when you sell, you only get the same % portion back (that portion likely to have appreciated with value of the property). FTB have been crying out for help to get on the property ladder, they have done that for over 27000 with HTB, they're happy and the problem is it's impossible to please everyone. Having said that, the take up of HTB has been relatively low and only amounting to a tiny fraction of the overall property market so when you say it's taking growth and prosperity from the future, I hardly think so in the overall scheme of things.

mamoon2

Yeah... just outside Stockport, Cheshire but still Greater Manchester.

Disley is about 2/3miles from Manchester Airport

Confusing isn't it? lol

tony de wonderful

No I've never said it was an only cause.

It's one of several causes. My main issue is the way anyone with an agenda is so quick to dismiss it as contributing in any way to price. It has apparently increased demand, helped builders build, but as for price...no affect at all!?!

And nobody asked whether it affects the market activity of people who aren't using HTB, including the supposed educated people writing jonc's articles. Because it is 'just' 4 or 5 % of new mortgages, it is seen as self-evidently irrelevant. If demand for sugar was 5% more tomorrow you would probably see Tesco empty.

Henrik

iTrader: (5)

This is simply not true. The government has put everything aside to *KEEP PRICES HIGH*.

Off the top of my head:

* Record low interest rates
* Quantitative easing
* HTB as already discussed
* Funding for Lending
* Shared ownership
* Mad planning rules, including allowing the usual NIMBY objections
* Protection of green belt, when just releasing 1% of this would make space for an enormous amount of housing.

I include the "independent" Bank of England with the government, as they're all part of the same establishment.


If house prices had been allowed to correct, like they have in many other countries, then FTB's would not need government help to buy a house, however that would bring the notional value of house prices down, and of course those who have benefited most from HPI over the years are the elderly, and they're the ones who vote, so the government does everything it can to protect their asset values.


Here's an image of median wage of HTB purchasers, vs median wage for the population in an area:



It bothers me that someone on 80k in London needs help from the government to buy somewhere to live, when only 15-20 years ago, most people even in London would have been able to afford to buy somewhere. It is clearly not sustainable, unless we're moving to a society where most people rent off the few.

Henrik

iTrader: (5)

This is a good analogy, I think.

House prices are set at the margins, with the stock that is currently for sale, but at any one time only a tiny fraction of houses are for sale, yet the sales of those houses (or lack of sales, as it might be) affects the price of the whole stock.


Also, the housing market is hugely sentiment based, so if people assumed (were led to believe) that house prices were due to increase due to some scheme, then they would feel positive about the market as a whole and feel better about paying higher prices themselves, even if they weren't actually using the scheme themselves.

hodgy0_2

Less than 7% of the land in the UK is built on

hodgy0_2

Jeez we're are already, owning only 1 property is so last century, (seriously only losers own 1 property)

I said in a post years ago, wealth flows upwards not downwards


And we have seen in the last 15 odd years, the biggest flow of wealth upwards, to the tune of 100 of billions of pounds, the world has ever seen - simply staggering

f1_fan

iTrader: (9)

Best post on this thread so far

tony de wonderful

Those stats make it look like a middle class subsidy.

jonc

That's absurd and to what end? Whilst the UK housing market is not insignificant, to say that the Government put everything into solely to prop up private property market is ridiculous. QE, Funding for Lending, low interest rates is not the sole preserve the housing market!!

dpb

It's not, but if here in this country if anybody has the notion their house maybe worth less than it was this time last week they immediately stop spending

When we all know they're not anyway

ditchmyster

iTrader: (7)

So what does that make people that don't even have 1 property.

Dingdongler

There is a lot of truth in what you say Henrik but


1) As JonC said the measures taken weren't just to prop up house prices, they were taken to bolster other parts of our (arguably flawed) economy.
And we aren't the only ones to do it were we?

Draghi has just announced negative interest rates!

http://www.cnbc.com/id/101733784


2) You could argue that house prices were allowed to correct to some degree. Outside of London/SE they fell in nominal terms.

In London there were some nominal falls but even those that remained static, given the rate of inflation since 2008 you could argue that in real terms they dropped by a significant amount in real terms up until about 2012

If you wanted to see a bigger fall/correction in prices then the result could have been mass repossessions. Would the govt have been congratulated if they allowed this to happen?


3) Wasn't funding for lending for business lending rather than domestic mortgages?

4) The graph is interesting but I'm curious why they used a median vs mean, seems an odd statistical method.


However I agree that house prices in London are crazy, you do have to wonder where it will all end.

I also agree that HTB has played a part but it's difficult to quantify.

ditchmyster

iTrader: (7)

I think house prices in every capital city throughout the world are always going to be crazy just due to supply and demand.

Over here in Croatia a friend bought an apartment in Zagreb about 5yrs ago for €50,000 apartments in the same building are now €120,000 ok they've just entered Europe but it's still a staggering return in 5yrs during a recession too. My own property in admittedly in a very desirable location but still no shortage of houses to buy has increased in the region of 8x what I paid for it 9yrs ago, so it is completely mental, another friend in Brockley London paid £70k for her house (fixer upper) around the same time I bought mine and hers was recently valued at over £400k probably £500k by now, although she has spent about £100k on it, but still massive growth.

I do feel for those that missed the boat because I couldn't afford to buy what I have now, in the current market I'd probably just scrape to buy a terraced in a dodgy area.

jonc

Your Tesco sugar analogy goes against what we're seeing in the market. We're seeing a slowdown in the overall house price inflation in the UK. Whilst prices are still rising they're not rising as fast as those in the previous years. HTB has been taken up disproportionately more Scotland, Wales, Northern Ireland, the East of England, and the North West and yet the South East still saw the biggest rises despite only making up 1.3% of HTB'ers. You ask whether HTB as affected market activity of people who aren't HTB, well lets take you as an example, if my memory serves me, you've stated in previous threads that you’re a potential house buyer with a sufficient deposit for a property in your area and yet HTB has not spurred you to buy thus pushing prices up, you're still renting, ergo self-evidently irrelevant.

hodgy0_2

fvcked if you ask me (but I have been saying that for a while)


interestingly something like 70% of the worlds trade is financed/conducted from 7 odd cities around the world

as well as London, these include Hong kong, Singapore, Dubai - what is interesting about this, is a that by and large they are semi autonomous city states

and in reality, in respect of it's relationship with the rest of the UK, London is becoming a semi autonomous city state

working to a totally different set of rules etc from the rest of the country - but in tandem with the other city states

Henrik

iTrader: (5)

1) True, however one of the effects has been to prop up the housing market.
It seems to me that the UK economy is more or less the housing market - The reason for this (again, IMO), is that the consumers will happily spend money when they think their assets are rising in value, e.g. down at B&Q, curry's etc etc.

They'll also have work done on their houses as essentially it appears "free" (as in, your mortgage might go up by 50k if you build an extension and fund it with equity withdrawal, but as the house value goes up by the same or more (depending on area, of course), it is still seen as a "win").
Due to the above effect, falling prices affect a lot of different professions e.g. tradesmen, mortgage advisors, surveyors etc etc.

Negative interest rates are just bonkers IMO, however as someone with a relatively huge mortgage, I'm relatively happy from my own selfish point of view that maybe we'll be having 0% (or near enough) interest rates for many years like Japan, however for people who haven't bought yet (mine and others kids), for savers, pension funds etc it's terrible news.


2) That's true, even in London there was a bit of a lull between 2010-2012 IMO.

I don't agree with the lack of repos being a good thing, however (though this is more of a philosophical point rather than anything else).
Basically, it seemed to me (and many others) as if house prices were going ballistic and "insane" already back in 2005. People were taking on unsustainable amounts of credit etc during this period, and normally, some of them would have been repossessed, and their houses sold off.

This didn't happen, due at least in part to political pressure. I.e. some people were "saved" from a repo - however the flip side of this is that buyers who couldn't afford the houses priced at the level they were, were denied from buying a cheaper house (as the lack of repos supported the price levels).

I.e. yes, some people were saved from repos, but that instead meant that future buyers had to pay a higher price (possibly to high to be able to buy at all).


3. The FLS money was used in part for mortgage lending until the end of 2013.


4. The problem with mean is that it is skewed heavily by big earners.

E.g if you look at the data here (granted it's from 2004-2005, but you'll see what i mean):

http://en.wikipedia.org/wiki/Income_...e_bands_2004-5

You can see that e.g. in the 35-39 age group, there's a big difference between mean and median salaries (£20,100 vs £ 26,800).

hodgy0_2

an interesting article here

http://www.theguardian.com/commentis...nspire-obscene

but what I found interesting was the following - which obviously back up my thesis

"Last year's wealth shock stat was that Germans had barely half the net worth per head of the Greeks. The reaction was that this had to be either untrue or fishy. The reason turned out to be that Germans, unlike Greeks and Britons, do not waste their savings on property but put them to productive use. They are thus richer, but "own" less. So?"

http://www.nytimes.com/2013/04/16/bu...any.html?_r=1&


"The study was based on an exhaustive survey of 62,000 households in 15 of the 17 euro zone countries, which showed that the median net wealth of German households was only half that of Greek households, less than a third of Spanish households and less than one-fifth of Cypriot households. Much of the gap stemmed from the low rate of homeownership in Germany. In the other countries, real estate was the main source of household wealth. "

jonc

Certainly house ownership has turned into an unhealthy national obsession due in part with the plethora of constant bombardment of TV programmes such as Location, Location, Location, Grand Designs, Property Ladder, Homes Under the Hammer, Relocation Relocaton, guides in numerous paper media and websites. Adding to this is the immigration and social housing pressure on existing housing stock whereby there simply aren’t enough houses to house everyone. The Government have made small progress in addressing the housing stock but I also think we'll see gradual increments of .25% interest rate rises beginning in Q4 of this year as the economy grows and unemployment falling which will cool the housing market further. If they don't start soon, we may see larger and more sudden incremental hikes which will be a lot more painful for a lot of people. What you see as a solution to this problem will depend on your political persuasion as there are no hard and fast rules that will fix what is a vastly complex problem that we on the whole don’t have a great understanding of.

stevebt

iTrader: (8)

http://www.bbc.co.uk/news/business-27731567

Petem95

Yeah no surprise to see that, but hey Osborne is 'on the lookout for a bubble' so we're in safe hands

Don't expect to really see any significant calming measures from the government (or BoE, who are obviously influenced by the government to an extent) until after next years election, if at all. They want the boom to help collect some votes from people who like the feel-good factor of their house going up in value, and don't really have any understanding of why it's not sustainable and where the money is actually coming from.

It's probably too late to prevent a crash now, so I expect that means the government will be more likely to try and string things out for as long as possible so they're unlikely to pull measures like HTB - just claim that they're 'being vigilant'. I think what will be different with the next bust is that London prices will crash hard, whereas in the 2008 crash they were less affected that the reset of the country.

jonc

The IMF's warnings have come a little late in that the Government are already aware of what is happening with the housing market, however, they also point out that the current market is not showing any of the signs of the bubble that occurred before the credit crisis. So again, ignore the headlines as this is really non news. However, the headline does make it sound like that the whole of the Government's economic policy is dominated by private property market and that the HTB scheme is there to boost the market and people fall for it. That is plain wrong in my opinion, there will be no property price crash and so far the HTB scheme has only been responsible for a tiny fraction of the property market. The big elephant in the room that no one seems too bothered about and is the one that is likely to cause the biggest problem is, I quote, "the unwinding of unconventional monetary policy", ie the scaling back of QE and rising rates.

tony de wonderful

Rocketing prices predicated on unusually cheap money isn't one of the signs of a bubble?

tony de wonderful

It was for domestic mortgages (though no only mortgages) in the form of cheap money for banks and building societies so they could loan money out. Someone could probably explain it better than me but that is the general gist.

I believe that earlier in the year they withdrew some (or all) funding for lending support for mortgages though?

It's one reason we see a BTL bubble.

You can actually borrow money, buy a BTL, then make 'profit' because the rent is more than mortgages repayments. If that isn't malinvestment I don't know what is? It's mountains of debt being accrued to 'fund' what is just speculation or a gamble on future interest rates, all at the cost today of driving up house prices, forcing the poorer to rent and shafting them.

I'm sure you know that of course.

dpb

Only if the tenant doesn't trash the place and scarper.


Winners and losers, winners and losers

tony de wonderful

You can buy insurance for that, plus you are protected by law.

As for your second point I'm not sure what that trite statement means in this context.

jonc

As pointed out earlier, the property market looks like it is cooling down. The growth in property market as seen three terms of Government, both under Labour and now Tory and a global financial crisis, and yet it still shows no sign of abating. So on evidence, I think we may need to look at and perhaps redefine as to what constitutes a "bubble" when we look at this market. This forum has seen a number of discussions and postings from members in the past decade on the impending property crash or a "correction" which so far has yet to materialise just so they can take advantage of cheap property. I believe some of them are still waiting, still renting.