Owning a home

Today I have been granted a debate on how more people can become homeowners.

A large number of people who rent their homes would like to be owners. Over a lifetime it is much cheaper to buy and hold a home of your own than to rent one. A person can be free of the mortgage to buy after say 25 years, leaving them without mortgage payment or rent for the rest of their lives. There are maintenance costs still to pay, but no rent rises and service charges.

A home owner has other advantages. Homes often go up in value, giving the owner an appreciating asset. This can help raise finance for other purposes, leaves something to pass on to another generation on death, or helps pay the care home bills in a home of their choice if the individual has to go into a care home at the end of their lives. There is more flexibility in switching between homes if you need to move areas or alter the amount of accommodation you have, than if you rent from a social landlord.

The issue today I want to encourage is how can we help more people into home ownership? I will of course state again that better controls on the numbers of people coming in to the UK will ease the demand pressure on our housing market. I will consider ways of more homes being built.

It still leaves open the question how can we assist all those first time buyers who do not have access to the bank of Mum and Dad?

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117 Comments

  1. Duyfken
    Posted July 13, 2017 at 5:34 am | Permalink

    A significant obstacle for homeowners, actual and aspiring, is the dreadful conveyancing procedure. Why is it that the English authorities cannot devise a system which provides a safe, punctual and certain outcome to property transactions? Surely something along the lines of or even better than the methods used in such places (for example) as Scotland and Australia could replace what we presently have.

    I write with a personal interest, my being stuck in a seemingly interminable “chain”. If there are insufficient means of mobility for existing houseowners, this surely must similarly affect potential new buyers trying to join the property “ladder” (mixing my metaphors).

    • Mike Wilson
      Posted July 14, 2017 at 1:34 pm | Permalink

      You need to be more flexible. I am selling at the moment. I will move into rented or impose ourselves on one of our sons. Might even by a motorhome and disappear for a while. I won’t lose a house sale because I insist on selling and buying on the same day.

  2. Narrow Shoulders
    Posted July 13, 2017 at 5:37 am | Permalink

    Completely off topic, for which I apologise but….

    Why was Labour allocated the Parliamentary committee for exiting the EU? Is there no right of recourse one the speaker has decided?

    Why was a Europhile elected unopposed, was Kate Hoey not tempted? What is it with you politicians and coronations?

  3. Martin
    Posted July 13, 2017 at 5:38 am | Permalink

    Surely the answer is quite straightforward, increase the supply of land by easing planning restrictions.

    • Peter Martin
      Posted July 14, 2017 at 10:51 am | Permalink

      Australia has lots of land and a small population so you’d think housing would be cheaper there. But it isn’t! They are talking about exactly the same problems as us.

      So easing the supply of land isn’t necessarily going to do it.

      Maybe we have to accept that rental housing isn’t just for poorer people. It doesn’t have that stigma in Germany. Maybe we need to copy them more? Or copy anyone who seems to be able to provide housing better than us. Better than the Australians too!

  4. matthu
    Posted July 13, 2017 at 5:51 am | Permalink

    “A person can be free of the mortgage to buy after say 25 years, leaving them without mortgage payment or rent for the rest of their lives. ”

    In previous years, buyers were trapped by the endowment mortgage scandal as a result of which the house that they fully expected to own after 25 years was still partly owned by the bank …

    Of course, what typically happens even without an endowment scandal is that a family finds it needs a bigger house after 10 years or else is forced to move for employment reasons and finds it has to buy a more expensive house in a rising market. This often means an extension to the mortgage period far beyond 25 years.

  5. Lifelogic
    Posted July 13, 2017 at 5:57 am | Permalink

    The more one hears about Granville the more appalling the various arm of the state seems to have been.

    Firstly in allowing so many towers to be clad in clearly flammable cladding, secondly in failing to notice and/or stop the initial fire spreading to the insulation. Thinking wrongly is was out. Perhaps more appalling of all they were still telling residents to stay in their flats even two hours later.

    Yet it was very clear from TV footage (after a just a few minutes) that the cladding fire was totally out of control and rapid excape was likely to be the only way out.

    Almost all would surely have escaped had they been told to get out after say 10 minutes I suspect.

    How can these experts be so incompetent? Some brave and heroic perhaps yes, but so misguided and misdirected. No one thinking the blindingly obvious in real time.

    And no it is not “too early to speculate” that is what speculation is.

    • alan jutson
      Posted July 14, 2017 at 8:38 am | Permalink

      I find it incomprehensible that all of these products are now failing so called tests by the Building Research Establishment.

      Given most of these products would have The British Board of Agreement approval Certificate, an organisation which is in itself is Part of the Building Research Establishment.

      I wonder, are the tests which are now being conducted, being conducted in exactly the same manner as their original approval tests, if so why did they pass the first time, but all failing now.

      Something simply does not look right here at all.

      I have been to the complex at Garston where such products are tested, and have seen insulation products (not cladding products) under test, and am somewhat confused by the now results.

      My guess would be that the type of tests now, are very different to those which were carried out for approval, or the products may have changed specification from the originals supplied and tested for approval.

      In my view much further investigations are required.

  6. Bryan Harris
    Posted July 13, 2017 at 6:10 am | Permalink

    1. Encourage people to save from an early age build up enough for a deposit

    2. Where savers have been with a bank/BS for 5 years plus, give them a better mortgage rate

    3. Tie these things in together so that people understand what is required

    4. Create more new towns in areas otherwise under populated

  7. eeyore
    Posted July 13, 2017 at 6:14 am | Permalink

    I hope your debate on this important subject is fruitful, not least because, as others here have pointed out, a home owned is likely to mean a voter won.

    Clearly the housing market is in a mess, like so many others in which the gentlemen from Whitehall and Westminster have worked their malign magic. Happily there is a solution. It’s called a free market. Conservatives used to believe in it, back in the days when they were popular and successful.

    That said, homes are still affordable and plentiful up north. Despite what many imagine it’s really very nice there. As people must live near their work, perhaps for once government actually could assist with policies encouraging business to move away from the overcrowded and overpriced SE.

    • libertarian
      Posted July 17, 2017 at 7:50 am | Permalink

      eeyore

      Totally agree but the malign influencers of govt dont even need to encourage businesses to move, just provide tax incentives to employers/employees to work from home

  8. Bernard from Bucks.
    Posted July 13, 2017 at 6:25 am | Permalink

    “A home owner has other advantages. Homes often go up in value, giving the owner an appreciating asset. This can help raise finance for other purposes, leaves something to pass on to another generation on death.”
    Not with the ridiculously low threshold for IHT.
    If Mrs May wants to do something positive before the next election. (whenever it is?) raising this to at least £1,000,000 per person would be a sensible move.

    • Lifelogic
      Posted July 14, 2017 at 9:23 am | Permalink

      As was promised by the Tories 9 years back by Osborne, but he ratted on it and Hammond is too.

  9. Duncan
    Posted July 13, 2017 at 6:26 am | Permalink

    Any policy that prevents the left from turning private individuals into socialist automatons would represent a huge step forward. Encouraging private home-ownership by whatever means must be implemented using the tax system, direct grants and public-private partnership

    Home-ownership develops self-reliance, reduces state dependency and encourages personal responsibility. It puts you in charge of your own life. It forces you to take responsibility for your own affairs.

    What we are seeing today in politics is a war of ideas but more than that, it is a fight whose aim is to change the fundamental nature of who you are. The left are targetting the young for indoctrination and they are succeeding as witnessed by Corbyn’s popularity amongst the 18-25 year bracket. The Tories need to respond but understand…

    Yes, you cannot pander to young people like a parent would with a petulant child but the tories must offer young people a start. They must bang the drum of self-reliance, self-determination and taking control of your own life rather than being a socialist puppet

    Oh, and by the way I read in today’s FT that MP’s from all sides are conspiring to water down and dilute Brexit legislation. With N Morgan being named Chair of the TSC it is important that these attempts are fought against. Some of these MP’s are shameless even in the face of a democratic vote…

    If the UK does not leave the EU in its entirety I will never vote Conservative again. It will be a massive betrayal of the UK, its people and of democracy itself

  10. Darren Brice
    Posted July 13, 2017 at 6:26 am | Permalink

    Hello John ,
    I am extremely surprised that no one has mentioned anything about prefab homes.
    These prefabricated dwellings got Britain out of a drastic shortage of housing after the second world war and some still stand today.I`m sure with new technology and materials new prefabs could better than the earlier made prefabs and all produced in the UK with a much smaller price tag .In other words a much affordable mortgage for first time buyers and the lower paid in society. Compulsory land purchase with a set price to prevent greedy land lords form over pricing . A very simple solution don`t you think.

    • Cheshire Girl
      Posted July 14, 2017 at 7:53 am | Permalink

      I watched the debate yesterday, and when John mentioned the pre fabs erected after the War, a lady ( dont know which party she was from, as the TV didn’t put names up) mentioned that there was such a thing as. ‘ Modern’ pre fabs, being trialled in her area( I think it was in London). I have often seen these prefabricated buildings at the Ideal Home Show, and they are very impressive.

      Of course, a big part of the solution to a shortage of housing, is to restrict the amount of people coming in from abroad, but that is something that the
      Politicians are reluctant to address.

  11. Posted July 13, 2017 at 6:28 am | Permalink

    How much is this a problem outside London?
    What part ought the local and national governments play in the owning and building of Council Houses? (I think they might perhaps build them, but certainly not own them.)
    With Brexit is it really sensible to concrete over good farm land?

  12. Mark B
    Posted July 13, 2017 at 6:28 am | Permalink

    Good morning.

    Remove Stamp Duty / Tax for first time buyers and for those over retirement age. This would allow them to move in and trade down freeing the market.

    Reduce immigration and place restrictions on non-UK citizens owning a home. All homes that are not in use for say 3 months must go on a national register. You can do it with cars, (SORN) so you can do it with houses. This would allow us to know what properties do not have inhabitants.

    More competition in the rental market. Cheaper rents will allow people to save more.

    And above all – STOP ALL GOVERNMENT FUNDING via the right to buy schemes. All it does is drive up prices and makes bigger profits for developers.

    • Mark B
      Posted July 14, 2017 at 5:46 am | Permalink

      24hrs Later and still waiting. Sorry to be a pain and yes, I am sure you are busy, but ?

      • Narrow Shoulders
        Posted July 14, 2017 at 7:04 am | Permalink

        Looks more like 23 hours 15 minutes to me but you are correct we are hanging on your every word.

    • Bob
      Posted July 14, 2017 at 5:34 pm | Permalink

      Housing benefit drives up demand and prices, and encourages buy to let landlords.

  13. 37/6
    Posted July 13, 2017 at 6:33 am | Permalink

    “Homes often go up in value, giving the owner an appreciating asset. This can help raise finance for other purposes, ”

    Therein lies the fall of western economies.

    Until the asset is sold the money does not exist.

    Homes should not be allowed to be used to back credit. Foreclosure on debts would see the value of assets upon which they are based disappear in a puff of smoke as people try to realise them all at once.

    Not a likely scenario, but to illustrate that this wealth is false.

    Here’s a fact. People who have done nothing, offered no extra talent, economic output, added nothing extra to the economy have become vastly richer by happenstance, nay, simply by constricting the supply for sale of the homes they live in.

    Thus – by magic – top range 4x4s appear outside ex council houses occupied by people who gave up work on small pensions.

    It would be better if people did not treat their homes as cashpoint machines. It might make them less reluctant to move on and give up space to needy young families.

    Then, of course, there is mass immigration giving the false impression that house prices can only go up. How so if the people coming are nearly all poor ?

    • 37/6
      Posted July 13, 2017 at 6:36 am | Permalink

      Bank of Mum and Dad.

      There I was looking forward to a debt free retirement. Yes. I shall have to take out loans against the house to help my kids survive.

      Fat lot of use house price inflation has done me !

      • 37/6
        Posted July 13, 2017 at 7:08 am | Permalink

        “Homes often go up in value, giving the owner an appreciating asset. This can help raise finance for other purposes, ”

        Chiefly BTL landlords use their home as leverage to create a portfolio. Invariably on interest only mortgages speculating that house price rises will make the plan come good.

        Yet they call first time buyers a ‘risk’ ?

        I’m not usually one for regulating what people can buy but I think landlording is in need of limitation.

        In general landlords do not provide the security that home makers need.

  14. Caterpillar
    Posted July 13, 2017 at 6:34 am | Permalink

    Two questions that should be considered before pursuing this debate are:

    1) why is there a large disparity between owning and renting over a lifetime, and
    2) why have house prices grown much more rapidly than GDP per capita?

  15. Turboterrier.
    Posted July 13, 2017 at 6:34 am | Permalink

    how can we assist all those first time buyers

    Grow the economy, creating more meaningful jobs and wages.

    Take control in the real sense of energy prices, buying a home is akin to buying a car, you have to run and insure it. Cut out all the green crap and all the other payments that generate billions into the energy sector coffers. Every sector within the UK business world uses energy and the cheaper it becomes impacts on all in society.

    Cut out the waste in the public sector, start listening to the people on the front line, it is them that will tell you where the waste is, they see it every day. Remove the layers of management that are not cost effective.

    All public sectors and charities that depend on the public purse in some shape form or another have to purchase UK manufactured goods, the obvious being the transport sector and military contracts. British steel for British ships and tanks. It will hope grow our economy and secure UK jobs. It may well increase foreign investment or at best wake up our industries to provide what is really needed. The market on the home front especially in these areas is massive

    Make people responsible but also accountable. The days of the top down triangle business model is way past its sell by date, where the front line of the business is at the base, invert the triangle where the CEO/Chairman is at the base supporting all above providing the ever changing visions to drive his/her organisation forwards.

  16. Tabulazero
    Posted July 13, 2017 at 6:47 am | Permalink

    “It still leaves open the question how can we assist all those first time buyers who do not have access to the bank of Mum and Dad?”

    By not diminishing their future earning prospect by leaving the World’s largest free trading block in favor of an ill defined promise of a better tomorrow ?

    Given the fact that 74% of the 18-24 old voted for Remain and since they are the one who will have to live the longest with its economic consequences, it would be fair to increase inheritance taxes in the UK to compensate them for their economic loss.

    It would be a transfer of wealth from the old who voted Leave to the young who voted Remain and who will have to live with it.

    The U.K. has already fallen to the bottom of EU growth league.

    • graham1946
      Posted July 14, 2017 at 8:44 am | Permalink

      I thought the referendum was a secret ballot but you seem to have demographic information which is not available to the rest of us. Can you please supply your sources of the ‘fact’ that 18-14 year old voted remain (not counting the BBC of course).

      • Tabulazero
        Posted July 14, 2017 at 10:12 am | Permalink

        Yougov exit poll or if you care to read the Daily Telegraph, just superimpose a demographic map of the U.K. with the election results.

        The old voted Leave. The young voted Remain. Good luck finding a Tory strategy to get the young to vote Tory.

        • anon
          Posted July 15, 2017 at 12:31 pm | Permalink

          Perhaps those that voted “remain” can now freely choose leave for the supposed greater economic opportunites in the EU.

          Bon Voyage

          Until that happens the actions of the “remainers” show their true colours.

          The old were once young and were denied a referendum since 1974 ish, even though the table was moved. Those that did not like it moved. A lot moved elsewhere, to the commonwealth.

          Try and keep a balance, the EU will be there for those that want to go, well at least for now.

        • libertarian
          Posted July 17, 2017 at 7:59 am | Permalink

          Tabulazero

          Oh theres a really really 100% effective strategy to get the young to vote Tory. A Labour government. Just like Corbyns first go round in the 1970’s. The young voted in droves over many elections for Maggie after the socialist dream as always degenerated in to greed, violence, apathy and mass unemployment.

          Oh and you may be in for some interesting stuff the local papers are reporting that the vote upset in Canterbury was caused by students multiple voting , there are lots of young people bragging about how many times they voted . Shame they didn’t bother voting at all in the referendum. Good luck with getting young people interested in democracy

    • Bob
      Posted July 14, 2017 at 5:44 pm | Permalink

      ” the World’s largest free trading block”

      it’s not free if you have to pay £10 billion a year to be a member.

  17. James Doran
    Posted July 13, 2017 at 6:47 am | Permalink

    Bring the cost of houses down by increasing the supply, a lot. Do this by removing the planning restrictions, including to the green belt. Change the housing standards to permit small, cheap starter homes, like bed-sits, to be built.

    Then Stand by for the outrage expressed by existing home owners when they see reduced equity and from liberals complaining about the ‘lowered standards and reduced regulations’.

    • libertarian
      Posted July 17, 2017 at 8:00 am | Permalink

      James Doran

      I’m afraid you dont understand supply and demand or the housing market

  18. Anthony
    Posted July 13, 2017 at 6:49 am | Permalink

    John,

    The imbalance between housing demand and supply is often discussed when this subject comes up, and doubtless it will again. Immigration is often mentioned, as it should be as a driver of this imbalance, but there are other drivers. The population is growing for other reasons too and lifestyle changes mean that there are fewer people per household than there once were. These drivers should also be reckoned with.

    The imbalance in supply and demand is also a geographic question. There is a lack of supply where there is economic growth. House prices in the North of England and much of Scotland and Wales are still reasonable. It is the South East and various commuter towns where there is a problem with prices. Much of this problem could be addressed by spreading the economic growth around the country so that more people wanted to live in places where they could afford a house. Could regulations be changed so that the private sector could spend much more on small scale infrastructure projects around the country? In aggregate, this could help enormously. What about fracking? Pushing the Brexit theme, what about free ports as a driver of growth?

    Of course, another major driver of the, frankly, ridiculous property prices in London (I have benefited from these prices, but they are no less ridiculous for that) is the low interest rates that have been prevalent for nearly a decade now. This is a delicate question as a hike in interest rates that is too fast would doubtless put a lot of people out of their homes and, moreover, might tip the economy into recession. But the fact remains that with rates so low, saving for a deposit generates no return and borrowing is cheap so house prices stay high.

    A grown up government (and Commons) would recognise that generating high prices for those with assets whilst simultaneously putting those assets out of reach for those currently without is likely to create resentment and ask itself if there are any government policies that could ameliorate this situation or, indeed, whether a change in the mandate for the Bank of England is necessary.

  19. Narrow Shoulders
    Posted July 13, 2017 at 7:00 am | Permalink

     I will of course state again that better controls on the numbers of people coming in to the UK will ease the demand pressure on our housing market.

    Will you be calling for restrictions on access to council and social housing and financial assistance for those who have chosen to come to another country? Anyone making that choice should surely expect to stand on their own two feet.

  20. Narrow Shoulders
    Posted July 13, 2017 at 7:03 am | Permalink

    I disagree with you that owning a home provides greater flexibility for moving than owning. The real downside of moving within the rental market is the (only) two month notice windows that renters have to find a new property when a lease is terminated by either the Tennant or the landlord.

    • Narrow Shoulders
      Posted July 13, 2017 at 7:09 am | Permalink

      Greater flexibility than renting, sorry

    • Lifelogic
      Posted July 14, 2017 at 9:25 am | Permalink

      Except that the landlord cannot in practice get them out without a court order taking far longer than the notice period.

      • Bob
        Posted July 14, 2017 at 5:46 pm | Permalink

        “the landlord cannot in practice get them out without a court order”

        Typically 7 months.

  21. Helen Taylor
    Posted July 13, 2017 at 7:03 am | Permalink

    It seems to me that if people can afford to pay high rents then they can afford mortgages payments. The hardest part is coming up with the deposit. People who are in social housing and paying the rent on those should be offered 100% loans with 25% equity held by the seller(government) till the end of the loan. When the person buying gets to 75% ownership of the property they should then be able to buy the final 25%. This overcomes the hurdle of people having to find the deposit.

    • Bob
      Posted July 14, 2017 at 5:49 pm | Permalink

      @Helen Taylor
      The deposit protects the lender in case of a fall in values and default?

      Are you suggesting that this risk is transferred to the taxpayer?

    • libertarian
      Posted July 17, 2017 at 8:06 am | Permalink

      Helen

      You are right about the first part. Its the deposit thats the problem , not the repayments. You are right we should go back to offering 100% mortgages . However they do not need to be backed by the government. The Lender owns the property under existing mortgages and does so until the mortgage is paid off.

      The only reason that banks stopped 100% mortgage loans was because of the huge amount of nonsense talked by ignorant people following the banking crash of 2007/8 . Junk mortgages was primarily a US problem , the issue here with NR etc wasn’t the mortgages themselves it was how they sold off their loan book which was a different issue.

      We MUST go back to offering 100% mortgages for people in full time work on expensive properties

  22. Narrow Shoulders
    Posted July 13, 2017 at 7:08 am | Permalink

    Please call for restrictions in the resale of right to buy housing.

    Those benefiting from heavy discounts should not be able to profiteer on resale.

    Right to buy stock should only be resold to those who qualify for social housing and should be sold at the same market discount that the purchaser received. This allows proportional profits to be realised but also ensures others get access to the same deal as the original purchaser.

    • libertarian
      Posted July 17, 2017 at 8:08 am | Permalink

      NS

      Nope sorry doesn’t work I’m afraid. Mortgage lenders won’t lend against a property with restrictions and covenants on its market value at resale

  23. Bob
    Posted July 13, 2017 at 7:23 am | Permalink

    “helps pay the care home bills”

    Sorry to disagree with you Mr Redwood, but if you decide NOT to spend your life paying a mortgage out of TAXED income, then you will be provided with FREE OF CHARGE care anyway, so elderly care is not a valid reason to buy.

  24. David Cockburn
    Posted July 13, 2017 at 7:29 am | Permalink

    One traditional way for young people to get a home of their own is for them to buy the bare land, live on it in a caravan and build the new house themselves with support from occasional helpers.
    Currently this is very difficult because getting the bare land with planning permission is so difficult and expensive. Then having spent £250K on the land it would make no sense to put a house worth less than £500K on it. So the whole thing becomes just too difficult for young couple.
    The solution is to make more self-build land available. Developers could be required to sell off 25% of permissioned land to self builders. There might be a regime for small single plots to get permission quickly, cheaply and without onerous conditions.

  25. The Prangwizard
    Posted July 13, 2017 at 7:29 am | Permalink

    I hope you will find yourself able to make a strong against the absurd levels of immigration and demand firm action against it and illegality in all its forms and the protection of our borders ports and harbours. Millions of us expect change and for our views to be respected but your government with Mrs May seems to prefer to ignore us. Whose side is she on some of us wonder.

    For those who find it difficult to raise sufficient funds to buy a property could one solution be to encourage and facilitate a market in long term lettings, some form of fully repairing and insuring form, and perhaps with new builds initially a method where the tenant fits their own kitchen with a right to assign. A lower rent would accrue. The kitchen could then be sold to the assignee if it had a worth.

  26. formula57
    Posted July 13, 2017 at 7:32 am | Permalink

    House price inflation has been aggressive (I recently bought a new garage door (#despite Brexit) that cost as much as my parents paid in the 1960’s for a self-build 3 bedroom property) and, exactly like footballers’ wages, has proved possible because of the amount of money available for such expenditure. Whatever solutions are adopted that curb demand and promote supply would do well to recognize plentiful and generous funding for buyers has promoted conditions of unaffordability for many.

  27. JimS
    Posted July 13, 2017 at 7:58 am | Permalink

    Why buy your home when a ‘social’ landlord will look after you? New heating, new windows, new kitchen, new insulation all done for you!

    New child? Need a new bedroom? The landlord will provide! House burns down? The landord will provide better and exactly where you want it! Need an extra income? Sub-let, the landlord won’t mind. Relatives need a passport? The government will provide.

    Need care in your old age after spending all your spare money on fags, booze, foreign holidays and drugs? That’s OK, the local authority and government will look after you.

    Don’t worry it will all be paid for by those who were daft enough to live within their means and leave money or assets to be seized by the state when they die. Three cheers for socialism, red, yellow or blue!

  28. a-tracy
    Posted July 13, 2017 at 8:03 am | Permalink

    Encourage better-paid graduate jobs into other regions instead of so much in London that is causing a brain drain from the North East and North West.

    An uneven amount of money and effort is put into Scotland and Wales compared to these regions. The motorway roads to the NE are insufficient, there needs to be more development of the ports. I’d be interested in what % of Durham University graduates stay living in the North East?

    We spend a disproportionate time worrying about London and the SE when affordable properties elsewhere can’t be purchased because there are no top ranking jobs in those areas like Stoke on Trent where you can buy a brand new one bed for £50k and a two bed for £67k and they are left for Labour to control and nothing ever changes.

  29. A different Simon
    Posted July 13, 2017 at 8:08 am | Permalink

    Quote “Homes often go up in value, giving the owner an appreciating asset.”

    That is the problem .

    The taxpayer (national) pays for infrastructure like schools , rail connections and roads close to the location of the house .

    This causes an uplift in the rental value of the location .

    The taxpayer who has paid for all of this gets none of the benefits . They accrue to landlords , freeholders and mortgage lenders .

    Another example of socialise the costs , privatise the profits .

    It’s not capitalism but crony-capitalism .

    Isn’t it time to introduce Adam Smith’s proposed annual ground rent or the modern equivalent Land/Location value tax (LVT) to fund govt spending and provide a negative feedback loop to deter location/house price inflation ?

    If this is done simultaneously with a reduction in treadmill taxes , then the playing field is swung away from absentee landlords and overseas buyers towards owner occupiers .

    Canadian central bankers (though unfortunately not Canadian nationals working as central bankers in other countries) have broken the taboo of telling their populace that house/location values can go down as well as up .

  30. JoolsB
    Posted July 13, 2017 at 8:10 am | Permalink

    “A person can be free of the mortgage to buy after say 25 years, leaving them without mortgage payment or rent for the rest of their lives. There are maintenance costs still to pay, but no rent rises and service charges”

    Let’s not forget the punitive exorbitant council tax charges that take no account of one’s income or ability to pay and set to rise still further to pay for this Government’s failure on social care. Under Labour, council tax charges doubled in England and now will be on the rise again thanks to May. For those of us living in the south, council tax charges can be the equivalent of a small mortgage which we will never be free of.

    • graham1946
      Posted July 14, 2017 at 8:57 am | Permalink

      Hear, hear.

      I live in a village where we have no street lighting, the roads are never swept, the rubbish is collected fortnightly, the police station has been closed down, the fire dept is 5 miles away, the nearest hospital is 20 miles away for A&E and the bills keep going up, at the moment the thick end of 2 grand a year. Time was when the water rates were included, but that’s another £750 on top since privatisation although the water is the same but we are told to use less because they haven’t built the storage capacity despite taking the money from all the extra housing and just sent the money abroad.

      No, I don’t want to live somewhere else, just a bit of value for money would do thanks.

      • Bob
        Posted July 14, 2017 at 6:04 pm | Permalink

        @Graham1946
        The cost of provided final salary pensions to local authority employees needs to be fund somehow, hence the simultaneous tax rises and withdrawal of services to the tax payers.

  31. James Neill
    Posted July 13, 2017 at 8:23 am | Permalink

    I own my own home- best thing i ever did- but not without sacrifice- it took years of saving scrimping and with no foreign holidays, but now that i’m older and retired it’s a great weight off not having to pay rent and be beholden to anyone else- you could say that i’m secure and very independent.

    So from experience i believe every youngish person should have the chance to go out there and get/buy through mortgage loan or other, their own place. I believe it’s a natural right and will be a lot cheaper in the end than renting for life- but that’s me

    However a word of caution, advising people that they can use their home as collateral for some other type of financing is a mistake..the family home once owned should never ever be held out in this way- speaking from experience again, i have seen so many go under who lost both business and family home in this way.

    How to help young people get started is a whole different story and would be too long to go into here.

  32. Richard1
    Posted July 13, 2017 at 8:25 am | Permalink

    Whatever policy is adopted it needs to be able to demonstrate some immediate progress. Only by reversing the decline in home ownership can the Conservatives have any hope of winning the next election. It’s amazing Theresa May and her 2 dysfunctional advisers thought there was no need to address this critical issue at the last election. The labyrinth of bureaucracy surrounding planning needs to be radically pared back, and a regime of incentives and disincentives to speed up building which has been given permission. One way and another the Country has chosen to increase the population by over 20%. We have to accept that means more housing. I hope every Conservative MP feels the clock ticking on this issue. I’d also suggest a big cut in the interest rate on student loans as part of the policy to make mortgages more affordable for young people.

  33. alan jutson
    Posted July 13, 2017 at 8:27 am | Permalink

    Your question today John is not a simple one to answer, as there are many factors which need to come together to make house purchase possible for the many.

    When my wife and I got married nearly 50 years ago we could only afford a house which was out of the inner London area where we both lived as single people, both of our parents rented privately.
    We both lived with our parents until we got married.

    I had two jobs for 2 years, working 16 hours a day, and my wife studied at night school to get further qualifications, and we saved up hard, very hard, spending little on ourselves and gaining a 30% deposit, we moved into our first house with a second hand bed, and two deck chairs in the lounge, no TV for 2 months (before we purchased a second hand black and white one), no carpets on the floor, but yes we had an old small car, which I serviced and maintained myself in order to get us both to work.

    Things were different then, mortgage rate was 8% but we had MIRAS, we had near sensible house prices (relative to today) we paid little in stamp duty, both of us worked for another 4 years after getting married to get ourselves established before we chose to have a family.

    I feel sorry for today’s youngsters with high house prices, and high stamp duty, but many just seem to want it all, without putting in the effort or any personal sacrifice at all, still wanting to live the high life with all off the trappings and expense that incurs.

    Its a question of choice.

    We had no help from the Bank of Mum and Dad.

    • alan jutson
      Posted July 13, 2017 at 8:36 am | Permalink

      When the government stop using the rise in house prices as a way of milking more money from the population by way of taxation, I will then believe they are serious in wanting to extend home ownership, until then I think all governments simply encourage it.

      Likewise when it excludes house prices (principle house residence) from any so called wealth tax, Death tax, Inheritance tax, or dementia tax, then I may also think they are serious about house ownership.
      When the government scrap VAT on house improvements and maintenance, then I will believe the government is serious about improving the quality of our housing stock.

      If you want a sensible scheme to encourage people to purchase a home then reintroduce MIRAS, do not give handouts for deposits.

  34. Chris
    Posted July 13, 2017 at 8:49 am | Permalink

    I see the first reading of the formerly entitled Great Repeal Bill is today. Judging by this report in The Sun and elsewhere, things are extremely serious for Theresa May, and for those who want to honour the Referendum result.
    https://www.thesun.co.uk/news/4007863/theresa-may-faces-humiliating-defeat-on-flagship-brexit-legislation-as-labour-threaten-to-block-her-repeal-bill-to-replace-eu-law/

    I have felt that the Conservative Party has only itself to blame by electing a Remainer as leader, and then May not appointing a strongly pro Brexit government. Her dithering and delay have caused profound damage, and her pleading to others just demonstrates weakness and also illustrates, in my view, that she is completely out of her depth, and should be replaced asap. This was all foreseen months ago. It is, I fear, a disaster.h

    • alan jutson
      Posted July 14, 2017 at 8:55 am | Permalink

      Chris

      Going for a General Election was always a big risk with the Remainers likely to use it as another referendum.
      Afraid Mrs May compounded the Mistake with a Presidential type campaign, shutting out sensible Conservatives, and promoting increased taxes and huge Social care costs where houses were to be forfeited for payment.

      In short Mrs May went for the lose, lose option.

      Not jumping on the bandwagon, I said it was a huge risk and mistake at the time.

      She had the power, but went for broke, thus not surprised at the result.

      Such a sad decision for our Country.

  35. Lifelogic
    Posted July 13, 2017 at 8:52 am | Permalink

    The value of homes goes up, perhaps but only sometimes. Not if there is a decline in population in a given area or if there are few jobs, a major employer leaves, or if lots of land for new homes is made available.

    Not usually economically sensible to buy for the short term. Or indeed late in life as the government are likely to confiscate it at some point. Still waiting for the Tory and Osborne’s promised £1 million threshold each. You cannot trust anything they ever say.

  36. hefner
    Posted July 13, 2017 at 9:01 am | Permalink

    Average price of a terraced two bedroom house (roughly 60-70 m^2) in Reading £250,000+: assuming a standard family with two twentysomething children, the so-called bank of Mum and Dad would have to find £100,000 to allow each of their children a 20% deposit on such homes (20% being the minimum deposit to get a reasonable interest rate on a 25-year mortgage).

    Obviously there are people here dealing between breakfast and dinner with companies worth tens of £M (they will recognise themselves). Unfortunately they are not representative of the median UK earner, not even of the present middle class in the UK who in their fifties might still have to pay for their own mortgage.

    As JR, I would also like to know how to square the circle: how to save for my old age and possible care home, and for my children possibly going to/finishing university, and for helping the children with a deposit for their first home, and for having something to pass to them on death.
    I am waiting breathless for today’s comments.

    • libertarian
      Posted July 17, 2017 at 8:21 am | Permalink

      hefner

      As always the market answers your questions. If you stopped relying on inept, ignorant, and interfering government you might get somewhere .

      Average price of the same house you specify in Wales is £127,000

      Average price of a house in North East is £118,000

      Average price of house to that spec in East Midlands £140,000

      We need a return to 100% mortgages, as repayments on the mortgage are normally no more than the rent you would pay and often can be less .

      It would help if government stopped fraudulently manipulating the base rate in order to borrow vast amounts of money to pay for their socialist utopia. This would enable people to save too.

      Oh and if you really want govt to be involved then it should be in the form of tax reliefs for first time buyers ( we used to have MIRAS until Blair scrapped it) now with interest rates so low the tax relief should be applied in other ways .

  37. Ralph Hulbert
    Posted July 13, 2017 at 9:03 am | Permalink

    With net migration averaging 230,000 since the turn of the century, and housebuilding unable to match that, it is obviously necessary to train bricklayers, carpenters, plumbers etc. We clearly have to look at discouraging, for example, media study degrees (amongst others), and encouraging young people to realise that their earning potential and value to society are in more mundane areas.

  38. Eh?
    Posted July 13, 2017 at 9:09 am | Permalink

    It is not something I would not suggest to children. There must be a law to prevent it.
    Unless loving and rich parents can step in making mortgage payments at any given time. However, the parents should be reprimanded for not advising their children in basic economics…unless the parents went to a Grammar School where there is a bad habit in such.

  39. Denis Cooper
    Posted July 13, 2017 at 9:15 am | Permalink

    Off-topic, why has this information not been sent out in press releases to all media outlets as well as being communicated to those directly concerned?

    Damian Green, at Column 294 in Commons Hansard yesterday July 12th 2017:

    “I am again genuinely happy to answer this question, because this is a very important issue and there has been some unnecessary worry caused to cancer patients by speculation on it. Let me set out the position.

    The import or export of medical radioisotopes is not subject to any particular Euratom licensing requirements. Euratom places no restrictions on the export of medical ​isotopes to countries outside the EU, so after we leave Euratom our ability to access medical isotopes produced in Europe will not be affected. I hope that clears the matter up and reassures cancer patients around the country that the scaremongering that is going on is unnecessary.”

    Because the Secretary of State for Exiting the EU simply cannot be bothered to counter false propaganda from those who would prefer that we did not exit the EU?

  40. gyges01
    Posted July 13, 2017 at 9:18 am | Permalink

    Deflate the housing market using the ‘equity for rent’ mechanism outlined in earlier notes to this blog.

    Continue with the policy of making buy to lets an attractive proposition (see earlier note in this blog for academic paper).

  41. Posted July 13, 2017 at 9:20 am | Permalink

    The youngsters who want a home should learn how to save for a decent deposit. So much of their earnings seems to go on what I would regard as non-essentials if I was desperate to save. Sky Sports subscriptions, daily (or twice daily) coffee in Starbucks, latest smartphone, newish cars on contract, night out at least once a week; no wonder they can’t save.

    I got my first mortgage when they were in very short supply and hard to get. You had to put your name down with a Building Society and save a substantial monthly amount with them for about a year before they would even consider you for a mortgage. And, of course, only the husband’s salary would be considered. Not an easy task when you are living in rented accommodation and have to pay out the equivalent of both rent and a mortgage.

    Were houses cheaper then? Our first home cost £7495 at a time when I was earning just over £1000 pa, a 7:1 ratio, what is it now? Certainly the interest rates were far higher, at one point they went up to almost 20%. The only new item of furniture we bought when we moved in was a bed, the rest, such as it was, for the first few years was second hand. But we managed and as a result can now live in reasonable comfort in our old age.

    The secret of becoming a house owner is saving and not wasting money on non-essentials which would have been normal for my generation.

  42. Bert Young
    Posted July 13, 2017 at 9:41 am | Permalink

    Owning a home is a basic “must”. The whole attitude to “belonging” and “feeling safe” changes when home ownership occurs . The value of a home is of great benefit to the family and it should never be included in the sum of assets when calculating estate duty. In areas where the values are almost impossible for locals to achieve , there should be a levelling out process .

    Responding is always something I enjoy ; each day there are several entries from one or more individuals – many OT . I think it is reasonable to respect those who stick to the subject to have their effort published .

  43. Epikouros
    Posted July 13, 2017 at 9:42 am | Permalink

    “Homes often go up in value, giving the owner an appreciating asset.” -“It still leaves open the question how can we assist all those first time buyers who do not have access to the bank of Mum and Dad?”

    Speculation opposing affordability so both are in competition with each other and both mainly due to government intervention. Government legislation and monetary policies affecting the former and subsidies the latter(not to the level that satisfies every prospective purchasers needs as it is too demanding of the taxpayer so limited). The last couple of decades has seen affordability dramatically decline as mortgages require ever higher levels of income to be able to service them. The situation is unsustainable. Eventually there will have to be an adjustment. Prices will fall and subsidies will disappear. Asset bubbles burst eventually despite the assurances of the likes of Gordon Brown and Yellen that they will not.

    Redistribution of wealth may appear socially and morally attractive but only if it is correctly targeted and and limited to what is prudent. Currently neither is the case. If we continue to ignore the truth that modern policies on not just housing but also on welfare, health, education, policing, immigration and more then the myriad of problems that government face will become ever more more intractable. Resulting in either the capitulation to the incessant demands that government do more and so electing Corbyn into no 10 and giving Marxist socialism a free reign. Alternatively but unlikely we revert to free market capitalism and work prudently on correcting it’s social justice deficiencies.

  44. Sir Joe Soap
    Posted July 13, 2017 at 9:54 am | Permalink

    Where to start?
    1 places for 10-15pc at Unis on merit with tution fees paid, loans for maintenance only as they can work in vacations to minimise these. Close down 70pc of undergraduate places at university and replace with technical and commercial apprenticeship s where employers sponsored by government.
    2 Introduce tax free savings schemes for those coming off apprenticeships and degrees to enable them to save a deposit in 2-3 years, so by 25 they’re ready to buy.
    3 Reduce the ability of overseas buyers to flip second home UK residential property free of CGT when UK owners pay.
    4 Reduce immigration
    5 Use road tax to improve infrastructure to allow easier commuting and enable young people who are fit to commute into town to do so.
    6 Reduce stamp duty to encourage a more flexible market.
    7 Drop VAT on home improvement and buildings projects which will both even out the cash versus vatable trader imbalance and encourage buy to renovate.

  45. graham1946
    Posted July 13, 2017 at 10:03 am | Permalink

    If you can afford to rent, you can afford to buy. The big problem is raising a deposit, especially if renting which is almost impossible.

    If someone rents for say 3 years without a default, they should be eligible for a mortgage without a deposit, or a very low one, with repayments equal to the amount of rent they pay. 25 years for a mortgage for a young person, whilst perfectly good in my youth is probably too short today with the price of houses and should be say 35 years to help make it affordable. Also it would help if councils were allowed to use some of their reserves for house building for profit, not for rent which would lower the price of new properties and form a virtuous circle, keeping their young in the area. If the builders don’t like it, tough, they have had their rip offs for too long already, charging high prices for substandard properties. If the banks won’t lend, then similarly the government who can borrow for practically nothing, could lend for profit creating another self financing circle. Keeping people in rented accommodation is storing up problems for later life when incomes are cut in retirement and would lower the government’s welfare bill over time.

    • a-tracy
      Posted July 14, 2017 at 9:08 am | Permalink

      “If someone rents for say 3 years without a default, they should be eligible for a mortgage without a deposit, or a very low one, with repayments equal to the amount of rent they pay.”

      I agree with this.

  46. NickW
    Posted July 13, 2017 at 10:04 am | Permalink

    Politicians frequently make the mistake of assuming that if more houses are built, the price will come down.

    Builders are capitalists, and the last thing they want is to release so much new property onto the market that the price drops.

    All builders tend to phase their new developments to ensure that the housing market in their area preserves its price level.

    Falling prices bring negative equity which freezes the market.

    • OhDannyBoy
      Posted July 14, 2017 at 9:38 am | Permalink

      See Arborfield for a perfect example of this. A 20 year house building plan if I’m not mistaken.

  47. Christine
    Posted July 13, 2017 at 10:10 am | Permalink

    You put forward a one sided argument. For some people buying their own home is a very risky proposition.

    1. People on low incomes get help with their rent via housing benefit. People who buy their own home get no help with their mortgage. So why would this group want to buy?

    2. If you are renting and lose your job the state will pay your rent through housing benefit so you don’t lose your home. If you own your own home and can’t afford to pay the mortgage the banks will repossess it, throw you out onto the street and sell it for a knock down price. You will lose everything you put into it.

    3. If you want to move jobs renting gives the flexibility to easily relocate around the country at short notice.

    4. There are added costs to owning your own home on top of the mortgage payments – e.g. maintenance, insurance, stamp duty, solicitors fees.

    5. Large amounts of capital are locked away in a house. If you are asset rich but income poor sometimes the better option is to sell up and enjoy your money. As we have seen with Government policy the feckless are favoured in this world.

    6. In some areas of the country buying can never be an option unless you are one of the lucky few who get into social housing and get tax payer subsidised ‘right to buy’.

    What Government needs to do is move jobs from the expensive South East to cheaper areas. If there are jobs the people will follow. Houses are affordable in these areas but people need to work. The current policy of moving Civil Service jobs from the towns to the cities is so wrong and needs investigating.

    I’ve both rented and owned houses in the past so I’ve seen both sides. I agree that for the majority of people buying is the better option but renting will always have a place within our society. We need to be careful that people don’t overcommit themselves during a period of very low interest rates as this will lead to repossessions and heartbreak in the future.

    On the continent renting is the norm I’ve never understood why the British have the fixation of buying their own home.

    • a-tracy
      Posted July 14, 2017 at 9:18 am | Permalink

      Christine, on the Continent, do you know what happens to people that rent say a three bedroomed home most of their lives after they retire if they can’t afford to pay the rent on that property anymore?

      What will happen in the UK if all the renters get to 67 and are reliant on pensions of the equivalent of just £8500 pa now and can’t afford to pay the private rentals, where will they all go?

      Will the cries of ‘bedroom tax’ explode when people with spare room subsidies that are covered by housing benefit alone should be asked to move into smaller properties to free up their social homes for British families. The first thing the Government need to do is build lots of Housing Benefit provided retirement one bedroomed and two bedroomed for disabled carer requirements to free up housing for their grandchildren. The problem is the Councils aren’t redirecting these properties to their grandchildren, they are prioritising the homeless arrivals from the rest of the world and migrants that get into difficulties in their private rentals who have no parents here that they can be forced to move in with.

  48. Ian Wragg
    Posted July 13, 2017 at 10:28 am | Permalink

    The government should get out of the housing market altogether. All the various schemes distort the market and artificially inflate prices.
    What’s happening to the Great Repeal Bill. Will you use the Parliament Act to get it through as you did for SSM or isn’t it so important.

    • Hope
      Posted July 13, 2017 at 5:43 pm | Permalink

      Cut, or better still stop, your parties mass immigration policy while feigning targets to reduce it. There is NOT a housing crisis we have a mass immigration crisis. Look at Italy at the moment. We have Bill Gates now joining the debate that the mass exodius of Africa is not sustainable. Merkel needs to provide aeroplane transport straight to her country if that is what she wants. The caveat being those transported would not be allowed to go elsewhere.

      Why is Corbyn speaking to Barnier? This is bound to undermine negotiations and act in stark contrast to the public wishes. No more pandering to the Repeal Bill or watering down. Tell it as it is, Labour want to be ruled by Brussels and not create law in parliament for this country. This is supported by Morgan, Soubry, Grieve and Hammond. We all know the majority of MP s want to be ruled by Brussels but the public does not. Moreover, why are they MPs if they do not wish to do the job of an MP to create laws and taxes for the people of this country?

  49. Blessed plot
    Posted July 13, 2017 at 10:31 am | Permalink

    The UK Ecocomy vis-vis your owned home is not a “..precious stone set in the silver sea..” It is not an island.
    It, and as a statistic in the very least if you are always lucky you too, is the object of envy and hate by at least half of the Labour Party members.
    A cross on the wrong side of the nation’s ballot papers will sink your home and everything in it, at any time.. irrespective of external boom and busts. Do not gamble on Labour not getting into power.

  50. Posted July 13, 2017 at 11:14 am | Permalink

    How about adopting UKIP’s policy of factory-built homes affordable on the average wage?

  51. Posted July 13, 2017 at 11:17 am | Permalink

    A subtle change would be to place more emphasis on the creation of family units. At the moment the state encourages people to be independent, if the state instead encouraged people to form lasting family units this would free up a lot more dwellings. This would have benefits for the state as it would reduce the cost of supporting those not able to support themselves in the current market whilst also alleviating the pressure on the overall demand for houses thereby making homes more affordable.

    The other issue is first access to capital, the people looking to own their own home often don’t have the first access to the lowest costs of financing.

  52. Ed Mahony
    Posted July 13, 2017 at 11:32 am | Permalink

    Regarding housing, Brexit offers nothing over Remainers here.

    There is no guarantee Brexiteers will be able to bring down immigration when immigration is higher from outside the EU than inside. And when India has demanded increased immigration to the UK from India in any future trade deals. How many other countries will make similar demands?

    I think housing is now probably the number one concern in the country at the moment, with housing being outside the grasp of so many young (and middle aged) people in this country, including the middle classes. Many young middle class people in the UK feel let down by their older middle class peers over Brexit. They feel that their peers can afford to take the risk of Brexit as they already own their homes (including second homes), as well as pensions, and money stacked up in general. But the younger, middle class voters don’t and feel let down by the Conservative Brexiteers on this. One reason why the Conservatives are going to struggle for votes from the younger middle class voters in the future.

    At end of day, leading Conservative Brexiteers have to try and unite the country if they want Brexit to be a success. I don’t see much of that happening. Another reason why i think we must press for remain in the EU whilst trying to REFORM the EU, as opposed to remain or leave (with soft, middle and hard Brexit all damaging our country in some shape or form).

  53. David
    Posted July 13, 2017 at 12:13 pm | Permalink

    Make single parents on benefits share homes, it would free up 800k homes for rent/purchase and cause prices to crash.

    • Lifelogic
      Posted July 13, 2017 at 4:03 pm | Permalink

      Perhaps then they could share childcare too then and get a job!

    • Hope
      Posted July 13, 2017 at 5:46 pm | Permalink

      Why allow some people to have several families all of whom on benefits? No. Limit children eligible to child benefit, two. None to those who do not live in this country.

  54. stred
    Posted July 13, 2017 at 12:30 pm | Permalink

    The basic problem of home ownership comes down to cost. The affordability index is too high, even with very low interest rates. This has happened because of a number of factors, over-population, low rate of building because of lack of land and planning, QE making mortgage lending easier than to industry, foreign buyers free to invest and repatriate, and the destruction of pensions, leaving BTL as a much better option.

    At the moment there are a lot of BTL investors who are finding that regulation , such as very expensive HMO compliance, and taxation are making it unprofitable and worrying. They would sell tomorrow, if it was not for CGT, which taxes at a higher level in real terms, without an inflation allowance, than it did before Brown reduced the rate.
    With returns down to 4% or sometimes a loss, few BTL landlords are interested after doing the sums and with Labour on the horizon.

    The value of money has halved over 20 years. If the inflation allowance were to be restored, and CGT returned to 18% then many unwilling landlords would be pleased to sell. The result would be to increase the supply of housing for sale, reduce prices and increase tax revenue.

    But they won’t because the national wealth figures would not look good and government borrowing would become difficult.

  55. Mark
    Posted July 13, 2017 at 12:35 pm | Permalink

    When property is at bubble prices a first time purchase locks the buyer into the prospect of falling prices at some point in the future, and also requires them to take on a very large debt that will crowd out spending on raising a family and saving for a pension. It does not offer the prospect of financial security, which is why so many rent reluctantly.

    There is only one way around the problem: improving real earnings relative to real house prices. That means seeking a more productive economy, and training and education that has a real payback – not more loans that are written off as a burden on the younger generation 30 years hence. It means limiting the amount of money going into the housing market.

    It is the money, not some hypothetical fundamental housing shortage, that has driven prices higher. Money has come in from foreign buyers speculating (particularly in London), from over large mortgages approved under ZIRP, from BTL investors who see no other sensible investment given policies that attack the productive economy such as government mandated white elephant investments and expensive energy, and from government subsidies ranging from Help to Buy through Housing Benefit. All need winding down judiciously, with policies to mandate the banks to protect their balance sheets against falling prices by securing early repayment of principal of high LTV loans.

  56. Posted July 13, 2017 at 12:46 pm | Permalink

    As a recently retired IFA who used to operate in the investment and mortgage market, I’ve posted about this many times before.

    All I will say on this occasion is that outside London, a minimum 5% deposit is relatively easy to save but one large barrier to young people being able to obtain a mortgage is a lack of any evident history of saving and existing debt.

    Credit card debt invariably needs to be paid off and regular payments such as large car loan repayments are deducted from earnings before applying income multiples. In my experience, these and the propensity for young people to spend all of their income and more is the main reason they cannot get any mortgage at all or one sufficiently large to buy a property.

    It has always been difficult to borrow sufficient funds to buy a home on one income but the move to equal pay has lifted female incomes and actually made it easier for a traditional couple to buy.

    But forward planning is the solution. Instead of spending out, prospective home buyers need to save for a deposit.

    • alan jutson
      Posted July 14, 2017 at 9:02 am | Permalink

      ChrisS

      What you say is as true now as it was 50 years ago.

      It needs some extra effort and self sacrifice to save for a deposit and to get established in a home of your own.

      • Bob
        Posted July 14, 2017 at 6:40 pm | Permalink

        People need to consider looking outside of the M25.

  57. Beecee
    Posted July 13, 2017 at 1:15 pm | Permalink

    Perhaps it is time to reintroduce the Prefab concept.

    They gave thousands of people somewhere to live and outlived their sell-by dates by decades.

    Detached, self contained with small gardens; in my youth I had friends and went to school with youngsters who lived in them and they were very happy.

    And they were relatively inexpensive to build and maintain.

  58. Fed Up
    Posted July 13, 2017 at 1:31 pm | Permalink

    How about border controls so our population is increasing in such an out of control way. It’s no real surprise that there’s a shortage of housing and rental costs are high when our population has grown by 10M in the last decade or so.

    Admittedly this is only part of the problem, but any other measures are useless without tackling the elephant in the room.

    • backofanenvelope
      Posted July 13, 2017 at 3:57 pm | Permalink

      Having effective border controls is only the first stage. You then have to have the will power to use them.

  59. Gareth
    Posted July 13, 2017 at 1:59 pm | Permalink

    John, great idea. I really do feel for the young and how hard it is for them to get on the property ladder. Bless them – for they would not dare say what I am about to – but they have sufferred the double whammy of uncontrolled immigration, at levels since 2000, never before seen in this country, forcing up property prices and at the same time depressing wages. They have also taken the bait and sought to gain third rate degrees from third rate universities at a time where almost 50% of their peers are doing the same and in so doing coming out with student loan liabilities in excess of £50000.

    so good luck with your debate

    Only drastic action will provide a solution

  60. Tom William
    Posted July 13, 2017 at 2:25 pm | Permalink

    How about reducing/abolishing stamp duty for genuine first time buyers?

    • Wonky Moral Compass
      Posted July 13, 2017 at 3:58 pm | Permalink

      How about abolishing it all together and leaving people with more of their money to spend on other better things?

    • Lifelogic
      Posted July 13, 2017 at 4:04 pm | Permalink

      Turnover taxes like SdLT are wrong in principal and for all transactions. At 15% they are insane.

    • A different Simon
      Posted July 13, 2017 at 5:18 pm | Permalink

      Anything which increases the amount of deposit a buyer can put down or the amount they can afford to pay in interest will be capitalised into an increase in house prices .

      The market is not governed by supply of and demand for houses but the supply of credit ; essentially whatever the banks can get away with lending against a house .

      This is hardly surprising as the banking industries product is debt .

      Thus scrapping stamp duty on houses which attract first time buyers will have no effect other than to increase the price of the house by what would have been the stamp duty .

      I’m in favour of scrapping stamp duty , an awful transaction tax , and replacing it with an annual location value tax (LVT) paid by all freeholders of land , landlords . Essentially this would be a fee for “exclusive use of the commons” . The idea would be to reduce damaging treadmill taxes like income tax and replace them with LVT .

      This would provide a negative feedback loop against rising house prices rather than the current credit driven positive feedback loop .

      • Lifelogic
        Posted July 15, 2017 at 4:31 am | Permalink

        Credit has an effect in high demand areas, but it is largely supply and demand. If you have a town where there are lots of property and building land and few buyers or few jobs prices will fall. As in large parts of the EU. There is not much point in borrowing to buy a house if no one want to live in it, however easy that credit is.

    • Roy Grainger
      Posted July 13, 2017 at 5:33 pm | Permalink

      Wouldn’t work, prices would rise to compensate. All these interventions ave unintended consequences, for example one of the current government help to buy schemes there has been a huge increase in London houses selling for £600,000 which is the upper limit for the scheme and developers are switching to building flats for that exact price – so the more buyers wealthy are favoured.

      • A different Simon
        Posted July 14, 2017 at 7:38 am | Permalink

        Exactly ,

        House prices / rent prices just expand to whatever people can afford to pay , just as David Ricardo observed 200 years ago .

        Why is it that only a few of us can see this ?

        Most of the back bench lobby fodder will not be able to see it either but the likes of Osborne , Browne etc must have been fully aware of the effect it would have on house prices .

        That is the banks job , to puff accommodation costs to condemn citizens to debt bondage so they have to work like slaves and have no energy left to cause trouble for HM Govt .

  61. libertarian
    Posted July 13, 2017 at 3:48 pm | Permalink

    How about a tax incentive to save and put a deposit on a home ? Make mortgage only building society savings account for a non home owner tax free. ie money put into savings account is taken from earning before calculating income tax/ni

    How about making working from home more viable from areas of the country where hosuing is cheaper and more plentiful

    How about going back to 100% mortgages which worked fine and were NOT any contributor to the financial crash ( that was banks shenanigans with the loans book)

    Scrap stamp duty on first homes. There are so many things you could do through the tax system that you really dont need to think much about anything else

  62. Not quite British
    Posted July 13, 2017 at 4:37 pm | Permalink

    EU summit with Ukraine. Juncker says of Ukraine’s corruption “There is much work still left to be done” We may take it Luxembourg’s tradition of understatement is still in its infancy to that of the British

  63. French Fries Day
    Posted July 13, 2017 at 5:04 pm | Permalink

    This second, Trump is standing alongside Macron. Parliament français has a proper Speaker and the Mayor of Paris is a proper Socialist not a nincompoop pretender.
    #Today is French Fries Day which we should all celebrate as a worthwhile historic and much repeated attempt to make a chip.

  64. Thames Trader
    Posted July 13, 2017 at 5:04 pm | Permalink

    I believe that all the schemes to help first time buyers are pointless and a waste of everybody’s money. Property prices are driven by supply and demand. All these schemes just pit buyers against each other and force up or maintain prices. The only way to help buyers is to increase the supply of houses for purchase or reduce demand. Two observations, not recommendations are: 1) reducing immigration is one way of reducing housing demand (Brexit). 2) Punishing current and potential landlords financially (as practised by George Osborne) will increase the supply of houses to buy

    My suggestions are:
    – reduce stamp duty across the board to improve turnover of houses
    – financially encourage owners of large houses to trade down in the market (this can’t increase the supply overall but does at least get the market moving)
    – legislate to encourage the release of single plots of land to local private individuals to build their own houses instead of relying on corporate house builders who just drip feed new houses on to the market to maintain prices (with measures that penalise early resale). Remove Section 106 payments for single plot self builders.
    – Limited use of green belt land to increase supply of land for housing

  65. Aatif Ahmad
    Posted July 13, 2017 at 5:18 pm | Permalink

    You want to discourage foreign buyers buying UK homes. Yet, in one of your posts several years ago, you compared the UK’s luxury housebuilding industry to the German car industry (with the UK exporting luxury flats compared to cars and hence retaining the follow-on business such as servicing etc.). Are you blaming foreign buying or lack of enough newbuilding?

  66. Anonymous
    Posted July 13, 2017 at 6:26 pm | Permalink

    Park homes. They are durable, substantial, factory built and adored by people who live in them.

  67. Oliver
    Posted July 13, 2017 at 7:37 pm | Permalink

    You have to look at the mechanism by which home ownership “creates wealth”.

    This should be by enabling savings from income as your mortgage becomes a less onerous portion of income (unless you decide to consume more housing by trading up).

    It should not be by endlessly rising HP#s, which has got us to the absurd situation we’re in today, creating a major structural generational unfairness, soley to allow people to persist in the fantasy that that they’re rich because their house has gone up in value.

    You have to tax housing gains.

    And you have to start by reforming IHT to recoup these ludicrous gains over the past forty years. The way to do that is probably by taxing people who inherit significant amounts so that they are focred to sell unless they’re palying a productibe role in society that enbales them to afford to live in the most desirable properties.

    And at some stage someone has to accept we simply can’t endlessly build more houses in a small country without entirely ruining it, as is already happening in the South East.

    I think I read that Macron proposes to change the French Wealth Tax so it focuses only on property, so as not to disincentivise those who get rich by thier efforts, rather than just being “lucky” in homeownership.

    If you don’t tax property gains, you’ll end up with an extremely destructive wealth tax. Only the Tories can do this in a responsible sensible way.

  68. John E
    Posted July 13, 2017 at 7:37 pm | Permalink

    1. Abolish Osborne’s Help To Sell Schemes which were put in place to subsidise the housebuilders, not help buyers.
    2. Stop the things that government does to stop houses being built. They are there to serve the interests of landowners who make massive windfall gains from planning permissions.
    3. Direct the gains from planning permissions to pay for the infrastructure and public service costs arising from the developments.

    Try proposing those and I think you’ll find where the vested interests are and how little they care about house buyers.

  69. Peter Martin
    Posted July 13, 2017 at 9:24 pm | Permalink

    The best way to make home affordable is to stop using the creation of private sector credit as a short term economic fix. It must follow that if money is leaving the UK to pay for net imports that the UK as whole is in deficit and the rest of the world is in surplus.

    Therefore the deficit has to be shared out between the Govt sectors and the private sectors in the UK. The Govt doesn’t want to be seen to be in too much deficit so it tends to push the deficit on to the private sector by encouraging them to do more borrowing so it can do less.

    The result? An asset bubble has developed in the UK property market which has made homes unaffordable for younger buyers.

    Of course there are other factors involved. But Germany and France have seen higher levels of immigration too and their property markets haven’t been inflated to anywhere near the same extent.

  70. anon
    Posted July 13, 2017 at 11:13 pm | Permalink

    Abolish leasehold and the service charge rip off’s.
    Maybe right to buy rules for private tenants where property is owned by a company.
    Right to buy out “ground rents” where they have been set at anything other than “peppercorn” e.g. £1 pa
    End the practice by which private estates are setup by builders, land owners and councils ,whereby public access is enabled but with all lights, roads etc paid for by the leaseholder whilst of course full council tax payable.

    Can we have regulators that work in the interests of the public.

    A land value tax and an increase in interest rates and a lowering of tax on earned income. Reduce stamp duty at the mid lower end of the market. Ensure legals are cheap and fast using blockchain technology.

    Ensure a more level playing field in the housing market between the private and public provision.

    Increase the means testing allowance(“ignore amount” if the money is held in a long term account specifically for a deposit.

    Tighter rules & checking to apply for all our overseas arrivals, who are not all destitute. Ensure British citizens & legal long term residents come first.

  71. Lindsay McDougall
    Posted July 14, 2017 at 1:14 am | Permalink

    Getting more people into home ownership is reasonably easy. You allow wages and salaries to rise at about 5% per annum. That won’t be too difficult because the Governor of the Bank of England has already kick started inflation. The BoE must slowly increase rates – by about 0.25% per quarter – until base rate reaches 3%. The government imposes a complete tourniquet on immigration to ensure ZPG. This should ensure that house prices stay constant in nominal terms while salaries push ahead.

    The process should only be stopped when wages have risen 30% relative to house prices, a necessary condition to increase home affordability while avoiding a significant number of repossessions.

    I remain sceptical that the government will actually do this. I think that they prefer piss and wind to actions that will work.

  72. Peejos
    Posted July 14, 2017 at 7:41 am | Permalink

    Whilst there is clearly a deep need to have a permanent home, in reality most people move several times in their lives so the very first house is not where they end their days. Similarly most people buy a car and over the years change it, equally several times, but with very few exceptions do not expect to sell at a profit. Why is a house different from a car?

    The unspoken reason is that by getting on the property ladder one is increasing one’s wealth and riches and that is the pressure behind the demand for more houses. Like cars; houses deteriorate as they get older and become increasingly expensive to own and maintain, though that is never quantified. If such figures were commonly available some reality would enter the market place.

    Clearly apart from the few actually sleeping rough, everybody is housed to some degree or other. Those recently arrived after considerable privation having spent months travelling vast distances are happy just to find a roof and do not expect to join the home owning group immediately. The whole concept is en-snarled politically and so emotionally to buy votes from both sides, to mollify financial bodies whilst legislation is antiquated.

  73. RDM
    Posted July 15, 2017 at 11:52 am | Permalink

    Hi John,
    I’m a first time buyer, or I will be, if I ever get a chance.

    At 54 and based in a poor region of GB, the real issue is lack of a stable income that I could show to a bank.

    I am flexible; work as a contractor throughout GB and Europe, but my income has fallen (for a number of reasons, IR35, etc,…).

    If I was to generalise this point, I would say, the issue is going to get even worst, with the real falls in income from 2008, onwards.

    This will end up with Labour, and their Socialism, taking over.

    Time is running out John, time to generate real income growth, and may be some redistribution to the students. Investment in our main resource, up skill all the workers, increasing productivity levels. How does a contractor, a limited company (I need a limited liability on the projects I do), pay to up skill?

    There are other Investments to be made, eof cousre, etc,..

    So, Invest to increase our real GDP.

    But you have to ask; with such a big devaluation, why aren’t company’s (Exporters) Investing heavily, the rebalancing that I believe is needed?

    Do the Asset owners and asset rich company’s want to resist this rebalancing?

    What is in the best interest of the Peoples of this country, surely not other countrys high priced assets?

    So, I still believe we need to rebalance our Economy, not relying on the financial city, or centralise to the city of London. Not any city, in fact. Not everyone has the skills to work in a city!

    How much is it taking out of our Economy the cost of the F35 program? When the truth seems to be that both the Harrier and Tornado are better suited to our needs!

    And, then there’s the overheads and inefficient structure’s of Devolution!

    Well, I will leave that one to you!

    Regards,

    RDM.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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