It is fashionable now to criticise government housing policy. Some people argue that helping more to buy their own home through Funding for Lending and Help to buy will simply fuel a new boom. They then often go on to criticise the tendency for others to invest in buy to let properties, as savers seek some way of earning a real return on their savings at a time of ultra low interest rates. If you do not like either of these it just seems to leave the idea that the government should borrow or print even more money to build more Council houses.
I appreciate some here simply want to stop all inward migration and say we have enough homes. This is not about to happen, with only the Conservatives of the 3 main parties in Parliament pledged to make a substantial reduction in net migration, and with continuing membership of a common work and border area with the rest of the EU the will of this Parliament’s majority. There would still need to be some new additional homes in popular parts of the country anyway. In some parts of the UK there are plenty of homes, but in others, there are acute shortages at affordable prices.
I favour helping home ownership. Most people either own their own home or wish to do so. It is the most flexible type of housing, leaving you free to sell and move in a way which you cannot do from social housing. It is the kindest on the elderly, as by the time you retire you will have repaid the mortgage. If you live in rented accommodation you will pay the dearest rents in your elderly years when you have less income, which is far from friendly. It is the best to give you the greatest freedom to adapt, decorate and enhance your property as you see fit, and change it over the years as your family needs change and fashions evolve. It also means you own an asset, which may be useful as security for borrowings if you wish to venture in other fields.
I have no problems with the government helping bridge the gap for people with too little savings to make the large deposit for a first home. Banking Regulators have lurched from allowing or encouraging banks to lend far too much against each home, to letting them lend too little. The government has decided to intervene directly whilst the banks and their regulators are being so cautious.
Of course I have no wish to see another unsustainable boom like the 2005-8 one. The government is limiting the time for its Help to Buy and Funding for Lending scheme. If it started to trigger high price rises and overheating they would need to wind it down or reduce it sooner. If we wish to see more homes built where people want them then we do need to ensure a sensible flow of finance to the home market. Recent years have seen all too few new homes built, making it more difficult for people to find the home they need in the parts of the country under pressure.
I am also intrigued by the hostility towards Buy to Let. It was not so long ago fashionable commentators were urging the UK to be more like the continent and have a larger private rented sector. Now it is expanding it has its critics. I see nothing wrong with people using savings or prudently assessed borrowings to own and rent out property. Government has not been a great landlord, and is itself so hugely overborrowed that it is not in a good position to borrow to build Council houses on a big scale.
August 16, 2013
It doesn’t need to be one thing or another. Struggling areas where council houses are the only option could be built, but not on a grand scale. There is a supposition that those who live in council houses will do so for the rest of their lives. Many will, but these houses are often a cheaper option for those accruing a deposit for their own house and are usually more likely to be maintained to a higher standard at little or no cost. Council houses are often stepping stones.
A bridging loan also seems a reasonable option providing the interest on the loan is not too high , but a mortgage is the cheapest way to borrow money anyway , so perhaps it would be wrong to encourage 100% mortgage with a loan as a deposit. It is hard John this way. Providing there is enough income coming in and an end to the repayment can be seen, then the lifestyle is often meagre, without holidays or time off, working nights , in fuel poverty , without television, and much more to get to that point. Then you see the Council house neighbours laughing, going to the cinema , to the Caribbean for holidays, to the pub most nights: you wonder what it is all about.
I still think that part ownership is a better way forward . A couple of years in such a property without the initial outlay and an opportunity to save and then a small lump sum (hopefully due to equity) would make a deposit for a first home buyer.
August 16, 2013
Margaret ,
The problem is not that they are spending it but that you and I have to hand so much over to the financial services industry in mortgage interest that it goes straight back to the bank without circulating in the economy first .
Chances are they won’t be trying to take any responsibility for their old age either like you either .
A huge part of the population are incapable of managing their money on a monthly basis – they celebrate pay day and three weeks later have run out of money .
Scale that up and you have people being paid for 40-50 years and there is no chance they will put aside enough to look after themselves for the next 15 – 25 years .
Either society will end up picking up the pieces with means tested old age benefits and housing benefit or the money can be metered out to them so they can’t spend it all before they reach old age .
Personally I prefer the latter . The state would have to deducted more of peoples earnings but instead of the Govt of the day spending it it would have to be essentially put into escrow in the form of a state operated part funded pensions scheme comprising mainly UK assets . The scheme would have to be beyond the reach of the Govt of the day .
Not so different from the sovereign wealth funds which countries with foresight , less influential finance sector and less dogmatic politicians have benefited from setting up .
A consequence of this is there would be less money to be spent on accommodation and the financial industry would have to accept a smaller part of the fruits of people’s labour than they currently feel entitled to .
Could signal a return to normality after the craziness of the past almost four decades .
August 16, 2013
Your vision ADS of a State that takes most of our money from us in some and just doles the balance out like some sort of citizens pocket money whilst organising housing and old age care in return is one that fills me with dread.
August 17, 2013
D0 you know that 8 out of 10 people retire with a pension pot of less than £30,000 , many of them with nothing .
Do you have a proposal for how society should support them when they are too old to work and have liquidated all their assets or are you advocating they be euthanased or kicked out on the street ?
You criticise my solution , how about telling us yours please ?
Is it any different from the current kludge of means tested old age benefits ? Are you convinced NEST will fix it all ?
August 17, 2013
Well the post is about really housing ADS, but to answer your question about pensions, firstly there is a fall back State old age pension and there is additional money for those pensioners who need help in terms of rent, fuel etc to add on.
I would very much prefer to see individuals taking responsibility for having their own private pension rather than a huge State compulsory scheme that you prefer.
Give incentives for employers to provide and employees to take out pensions and let the State provide as they do now a basic pension for those who cannot join in these private schemes.
If you encourage self reliance and individual responsibility it will be better in my opinion to having a huge State system.
I understand in Australia it is compulsory to pay into a pension if you work and perhaps making it compulsory is necessary to get the young to put something by at the earliest opportunity.
Its a shame the last Labour Government changed many of the tax rules on pensions which have, as predicted, spoilt returns for pension funds and made many now think if it is worth investing in a pension at all.
Regarding NEST it is worth trying but I hope it has more success than the previous Stakeholder pensions floated by Governments when I was an employer.
August 16, 2013
Of course this is a mistake , one wouldn’t need a 100% mortgage with a loan as a deposit. 100% mortgage would most likely be cheaper than a combination of a loan for deposit and the remaining mortgage repayments.
August 16, 2013
The main problem with homes is that there are not enough of them. It is not easy to see how the government’s schemes will do more than allow some new people into the market, thereby pushing up prices.
We need a lot more homes and a significant reduction in prices. The house that I bought for £44,500 in 1983 is now worth £450,000, ten times as much. When I bought it my salary was £18,000. The equivalent job today pays a small fraction of £180,00o.
Was my house underpriced in 1983? It certainly didn’t feel like it as I struggled to get a mortgage.
The hostility towards Buy to Let, which you are intrigued about, is not difficult to understand. It’s because it takes properties out of the sale market and pushes prices yet higher.
August 16, 2013
Buy to let does not really do that as the tenants would then have to buy, they have to live somewhere. Increase supply, make building new cheaper, get some competition in banking going, relax planning and stop building silly toy rabbit hutches.
August 16, 2013
The flexibility you suggest of owning your own home comes with a heavy price tag.
If you want to move as the family grows, for work location, for better schools, to be close to Mum &Dad in their later years, you pay the government Stamp duty to do so, which in many cases, is many tens of thousands of pounds on top of the usual moving fees and expenses.
I have no problem with encouraging home ownership, but surely it is going too far when governemnt, via the taxpayer, is underwriting mortgage loans.
We need sensible stability in the housing market, not intervention with false interest rates, high loan to values and the like.
Yes by all means let the market find its true level, but let us have some sensible control on loan to value, and income multiples, so we do not have mini boom and busts as people take advantage.
You speak as if immigration has nothing to do with housing cost or availability.
Sorry, but if our population is growing at a rate greater than the provision of housing, then we will have a shortage and such a demand pushes prices up and leads to either overcrowding, or sheds in gardens..
Builders WILL build if their is a demand, because they want to make money, but for builders to build they need land, and they need land that they can get permission to build on.
The present system is a confusion of costs, taxes, tax allowances, delays, planning permission restriction, section 106 agreements, ever changing building control requirements, listed consent when attempting modification, local/regional plans, conservation areas, green belts, bat surveys and the like.
The fact that we sold off much Council owned stock to residents cheaply under right to buy, often funded by their children for a windfall gain (through inheritance) in later years, also did not help availability, when Councils have a duty to house certain groups of people, and now have to pay private landlords (perhaps a previous Council house) large sums to house such people.
No Joined up thinking !!!!!!!!!
Reply I am an opponent of current Stamp Duty rates and have lobbied for a change so the higher rates kick in only above the threshold figure and do not apply to the whole cost, as a starter.
I support the government’s plan to make a substantial reduction in net migration, partly to reduce pressure on housing.
The sale of a Council house to the family living in it makes no difference to housing supply. They continue to live in the same home.
August 16, 2013
Indeed huge obstacles and cost in the way of more building. Stamp duty at current rates is absurd why should someone be taxed for having to more home?
Often in the year people move they can pay well over 100% of their total income, that year, in taxes. So many do not move, commute further, extend the property, live away from elderly relatives, even when moving would be better for all. Excessive tax and waste, Cameron/Osborne style caused real damage to real lives.
August 16, 2013
There’s no stamp duty on properties worth less than £125,000 and it’s 1% for properties worth £125,000-250,000. So the current rates are unlikely to discourage the majority of people from moving.
August 16, 2013
uni5
Please find me a “family home” within 25 miles of London below £250.000
August 16, 2013
Think about where you can move into a property for less than £250,000 in the SE, or move out of one for less…..
zorro
August 17, 2013
Hornchurch. Have a look at Zoopla.
August 16, 2013
Well, as a one bed flat, above an Indian restaurant on a busy road in central London can be over £400K my point rather applies to much of the South East anyway.
August 16, 2013
@unaime5
The UK average house price hit £250,000 in June this year. The stamp duty on that would be 3% on the whole amount or £7,500+. In terms of earnings that would require £9375+ which is quite a sum of money to simply throw away, not far off a third of an average male income.
And it would likely be much more than that since a buyer will almost certainly be financing the purchase with a mortgage and so will be paying interest on that tax. A 25 year mortgage of £7500 assuming 3.94% fixed interest (which it won’t be) would cost £11,925 which represents at least £15k of earnings thrown away.
These are not trivial amounts of wasted money and would make me think carefully. I certainly wouldn’t be as blase about it as your are.
August 17, 2013
Indeed David I agree and anyone contemplating moving has to key in legal costs, survey costs, estate agents costs and removal company costs on top of Stamp Duty.
A report in todays papers says that if Stamp Duty were to be made more progressive and had lower rates on the less expensive properties then the Treasury would gain overall by more property sales and more VAT and other taxes as a result.
August 16, 2013
“I am an opponent of current Stamp Duty rates”
You’re not alone Mr Redwood. It’s acting as a disincentive for people to move home, which in turn means that people convert their loft instead of moving to a larger property, which means less property available for new buyers down the chain.
A drastically lower flat rate would probably result in many more transactions, which added to the knock on effect of the refurbishments that tend to follow when people move to a new house would yield more in tax that the current stifling rates, which appear to be more about punishing the better off than raising revenue for the Treasury.
August 16, 2013
There’s no stamp duty on properties worth less than £125,000 and it’s 1% for properties worth £125,000-250,000. So who exactly is going to benefit from this lower, flat rate? Millionaires who don’t want to pay 7% stamp duty on houses worth over £2 million?
reply Try reading what I said. I said the higher rates kick in on the excess over the threshold, so it is progressive, just as you like it.
August 16, 2013
In January over 2,000 out of 70,000+ sales reported by the Land Registry were at prices of £249,950, £249,999 or £250,000 exactly. In some cases the duty will have prevented a higher sale price: in others, estate agents will have argued the buyer should pay up so long as they weren’t paying the higher duty rate. The break point acts as a price magnet. However, we know from the previous stamp duty holiday that abolition simply means a higher price achieved by sellers, and no lower cost for buyers.
August 16, 2013
JR, how can you support the government’s position to reduce net migration when there is no means to check the figures accurately? The government has no idea how many people are coming and going. Alan is absolutely right, immigration is the cause behind the huge housing boom- also the government need to change to NPPF and use NHB to bribe councils to build more homes to make up for short falls in grants not infrastructure for increased population, however on the so called ‘ need’ basis people from the EU and wider world have the same right under ‘need’ as local people and are equally eligible to apply for social and affordable housing. Thefore the character and nature of areas are being transformed into (different communities, Recently arrived people (ed) without any such investment allowed to jump to the head of the queue based on so called ‘need’. Wait until January when those in ‘need’ from Romania and Bulgaria (come ed) here. The government has made a ham fisted mess of planning, housing and immigration. That is before we discuss wind farms applications and the useless Pickles pledge for localism. Localism only exists in name only. You might support the government, the rest of us see the mess for what it is, namely changing the nature and culture of our country at our expense at the behest of the EU to build a superstate.
August 16, 2013
Tulips are too expensive, we need to grow more tulips !
How about there is instead malinvestment in tulips?
Malinvestment pulls capital away from economic investment in areas of real shortage eg. manufacturing. The economy becomes a speculative casino in asset bubbles. THAT is what is wrong with govt becoming a market speculator.
This is a textbook asset bubble that would have burst 6 years ago without govt life support and it is going to end in absolute disaster, because of the size and scope of this bubble.
August 16, 2013
Absolutely no doubt about it, when the multiple of borrowing to asset cost is so high, there is a bubble.
Interest rates at such a low level haave allowed the property market to hover in midair rather than crash but low interest rates cannot last forever and that will burst the bubble.
I sometimes feel I am reading a socialist blog when I read support for National Institutions like the NHS and support for the redistribution of incomes in the regions and support for STATE education and support for such low interest rates and now support for government guarantees for house purchases.
Quite incredible how invasive socialism has become even with some of our more sensible MP’s
August 16, 2013
I think that John has been quite consistent in his approach to housing….and a lot of us have been consistent in pointing out the dangers of creating another bubble. John seems quite sanguine in his approach to the matter, I am afraid that I do not share his confidence in the government or BoE’s ability to sail in these waters. They just won’t understand that house prices are too expensive for our economy to support. They are relying on the ‘feel good’ factor on the back of notional price rises and hoping that this gets them through the election.
zorro
August 16, 2013
With regards to BTL, there’s nothing to be intrigued about. Those that called for continental like rentals are hostile because BTL is nothing like continental like rentals!! Whereas they offer secure, purpose-built, professionally managed properties, BTL is dominated by amateurs, speculators and chancers, compete for and outbid on first-time buyer housing, offer hugely insecure contracts that see families evicted, widespread disrepairs and out-of-control letting-agents.
As usual John, you’re blinded by the Tory cult of Home-ownership. Deeply disappointing.
August 16, 2013
well said
August 16, 2013
@PT & Iain Gill: Well said x2…
August 16, 2013
I mainly agree with these points. Social housing doesn’t need to inhibit mobility. There is the ability to swap flats/houses and this option should be expanded by councils and made easier. Moving house can often be an expensive option.
zorro
August 16, 2013
I don’t agree I think John has a whole scenario perspective.
August 16, 2013
You havn’t seen the standard of social housing in places like Portugal, Greece and Italy then PT
Take a city like Naples and have a look at the standard of housing for tenants.
Its OK in parts of Germany and Holland but even in these countries there is a growing desire to own your own property.
August 17, 2013
I have been letting 3 houses for 20 years, as my retirement income, and have had to completely refurbish each 3 times owing to the incredible rate of dilapidation and ever changing regulations, sometimes to find that these have been reversed. One thing I have learned is that continental tenants are far more careful, respectful of the property and reliable. Five years ago I lost the continentals in one property because of noise and refusal to cooperate from the neighbouring British tenants. Since then I let to British 20-30 age tenants who overcrowded, sub let and have left me with another total refurbishment as well as rent unpaid and stolen furniture.
Give us continental tenants standards and then long term rental periods will be possible. This situation is not new and is a cultural problem. A Swedish tenant once told me , in their direct way, “We have higher standards”. As regards standards of the privately rented property, a survey of tenants by the landlords association showed a higher satisfaction level with private tenants than those in public housing.
They very high rentals and HB are almost all in central London and caused by the absurd housing prices driven by foreign money and tax advantages for non doms and foreign wealthy investors.
August 16, 2013
‘ … Some people argue that helping more to buy their own home through Funding for Lending and Help to buy will simply fuel a new boom. …’
When did it become the government’s job to use MY money to help other people buy houses?
‘ …If you do not like either of these it just seems to leave the idea that the government should borrow or print even more money to build more Council houses. …’
Yes, borrowing money to build social housing – that the rent will repay over a reasonable period – is an area of housing that the government should involve itself in.
‘ … I favour helping home ownership. …’
Then YOU (personally) lend people money or underwrite their borrowing. Don’t do it on my behalf. That is not what you were elected for.
‘ … I have no problems with the government helping bridge the gap for people with too little savings to make the large deposit for a first home. …’
I do have a problem with the government helping bridge the gap. Why should you use my tax to underwrite other people’s borrowings. The only reason to do this is to try to maintain house prices. A famous person you may have heard of once said ‘you can’t buck the market’. Yet, once again, the government thinks it can.
‘ … I am also intrigued by the hostility towards Buy to Let. It was not so long ago fashionable commentators were urging the UK to be more like the continent and have a larger private rented sector. ….’
Because renting in this country is covered by the Assured Shorthold Tenancy legislation a previous Tory government introduced. These only provide security of tenure for SIX MONTHS. If you rent a property you need to be able to consider it ‘home’. The current legislation just turns renters into serfs. You can be chucked out on your ear whenever your landlord fancies. You are inspected every 3 months. How would you like it if someone came around your house every 3 months and poked their noses into every room? And, renting on the continent is affordable. Rents here are being used to buy landlord’s buy to let mortgages. Why should one person simply pay another person’s mortgage for them. What about when interest rates rise? The buy to let landlord says ‘my mortgage has gone up, so your rent is going up’. Why should tenants be at the risk of interest rates rising. You aren’t if you rent social housing.
The whole thing – like almost everything government pokes its nose into – is useless. Fine, if you want to have a big rented sector. Pass legislation to give people secure tenancies and fixed rents. Then people could consider their rented property as their ‘home’ – and would have the stability to raise a family in them.</strong.
And, finally, why don't you force owners to get the million empty houses back into use?
Reply I have rented so I know what it is like. Quite often people only want a property for a limited time, as their needs and preferred place to dwell change over time.
August 16, 2013
@Mike Wilson: “MY money”
Whilst agreeing that the government should not be helping people with what is basically a private investment speculation and option for 40 or 50 years time (as a means to find old age/care costs) I really wish you would just accept that it is only your money if you have not settled your tax affairs, once you have it is the states money for the elected government to do as they please – don’t like the government, kick them out at the next election…
August 16, 2013
@Jerry
Surely this is a matter of semantics. If I give my money to someone else, to spend on my behalf – at the point of a gun or otherwise – it is still ‘my’ money that is being spent. If you don’t pay tax, ‘they’ are not spending ‘your’ money – ‘they’ are spending other people’s money.
It is not ‘their’ money to do with as they want. They could just as easily divide it up between them and move to the Bahamas if, as you say, after giving it to them it is ‘theirs’ to do with as they wish.
August 16, 2013
I can’t believe anybody believes this. We live in a democracy and not a totalitarian state; the State has no money Jerry; the state only has your money and my money; it produces nothing but exists only by virtue of its tax paying productive population.
August 16, 2013
@waramess: You seem to be arguing about the rights and wrong of taxation fairy ‘nough… But by your same logic the Utilities (for example) have no money either, they only have yours and my money, but try telling them that, oh and you and I don’t have any money either as it’s actually our customers, I hope you ask them what they want you to spend it on…!
Once you have paid a legally binding bill the money no longer belongs to you, that is all I said.
August 16, 2013
Indeed it produces virtually nothing but exists only by virtue of its tax paying productive population – which rather oddly it chooses to inconvenience, handicap and mug at nearly every opportunity.
August 17, 2013
Providing infrastructure such as health, education and transport that the private sector could not or a benefit system allowing people to live to a minimum standard also benefiting the rest of the population does not feature in you mindless repetitive rants and fantasy does it? Maybe this is because you are white middle aged middle class man socially and academically disadvantaged because of this?
August 16, 2013
Mike Wilson ,
“The whole thing – like almost everything government pokes its nose into – is useless.”
Yes but the danger is that faults with Govt involvement are used as an excuse to withdraw State involvement completely – throw the baby out with the bath water .
A distinction has to be made between The State (which is all of us collectively) and The Govt .
By playing Monopoly as a child you learn pretty quickly that the outcome is determined by the first couple of circuits of the board – so it very quickly becomes boring .
In real life the natural course of events is for the rich to get richer and the poor to get poorer . This has gone into hyperdrive since 1970 .
The only body with the strength to protect the little people against the might of the super rich is The State ; by it’s proxy – the Government .
That is why we need a strong State doing the things it should be doing . Not a skeleton state .
What is the point in electing a Govt if they are not going to fulfill that duty ?
Reply Monopoly is not boring, but there is a big element of luck or chance as you say, because it is the fall of the dice which determines your paper riches, more than your acumen.
August 16, 2013
I maintain Monopoly has a lot in common with the Monaco Grand Prix in that the first driver to the first corner is likely to remain in front until they cross the finishing line .
Much of the current situation is not of your making and I don’t believe it is all Gordon Brown’s either but regardless , people need their Govt to do more than throw them to the wolves .
I’m not advocating completely institutionalising people either .
August 16, 2013
@A different Simon … ‘Yes but the danger is that faults with Govt involvement are used as an excuse to withdraw State involvement completely – throw the baby out with the bath water .’
No, the danger is that governments poke their nose into things they have no business in. Building hospitals – yes. Building roads – yes. Managing railway infrastructure – yes. Underwriting loans made to individuals to buy houses – NO! NO! NO!
August 16, 2013
I’d argue that the Govt have a duty to ensure availability of affordable housing and that it should intervene to create the conditions necessary for this to take place – and agree that the Help to Buy scheme is a wrong intervention .
Even if the Govt stopped doing everything it shouldn’t be doing that is not enough .
Countries like Malaysia and the Philippines have legislation to reserve ownership and of affordable average and lower priced accommodation for their own citizens .
August 16, 2013
Hmm not sure about quite a bit of this AdS :
“In real life the natural course of events is for the rich to get richer and the poor to get poorer . This has gone into hyperdrive since 1970 .”
I see, so how precisely did we develop a middle class in the 18th and 19th centuries when classical liberalism and laissez faire were in the ascendancy? Should I read this to understand that the manufacturing workers of the early 20th century were truly worse off than their agrarian forebearers? Or might it actually be the case that a free and productive society created wealth that benefitted everyone in some measure?
“The only body with the strength to protect the little people against the might of the super rich is The State”
I’m not sure what the ‘super rich’ are doing against the ‘little people’ (whoever they are). I haven’t heard anything about them robbing or killing or anything like that. Usually it would appear that, if anything, the rich appear to create product, services, job and tax money that only benefit the little people either directly or indirectly.
“That is why we need a strong State doing the things it should be doing . Not a skeleton state .”
Well, I don’t think there is any serious danger of a skeleton state. Spending as a proportion of GDP is well over 40%. Even if this was brought down quite a bit, it wouldn’t be a ‘skeleton state’.
So on this point, lets look at what the ‘strong State’ is doing for the ‘little people’. Here are my choice examples :
1. A system of social protection that has trapped far too many in welfare dependency?
2. A school system that has seen British secondary education slide down the international comparison tables, and leave many poorly prepared to take advantage of the job opportunities available in the information age?
3. A health system that the British worship, but absolutely no other country wants to replicate at all?
4. An endless number of quangos and regulatory agencies and general bloated bureaucracy that doesn’t seem to make anything better?
5. Regulatory and political bungling that has left us with a dangerous shortfall in electrical generation capacity and rising energy costs?
6. Regulatory and political bungling in planning and land use that has lead to a shortfall in housing and which hinders business development?
‘Helping the little people’ may well have been the well intentioned aim of the ‘strong State’ since WWII, but it is highly questionable how successful it has been, and can be in the future.
August 16, 2013
Reply to reply: .and quite often people want to rent for a long period and call it their home, which is very unsettling with the shorthold tenancy.
Mike Wilson has some very valid points that you refuse to address other than your quite feeble defence of the indefencible.
I might add that your government are using the tax contributions of many people who are in commercially rented property and have insufficient income to buy their own homes even with this government scheme.
What do you give them?
This is another overtly political meaasure designed to make it look like the economy is moving in advance of a General Election.
I have not voted for the past 25 years sinply because the offerings have seemed quite substandard, however I have to say that the nonsense now being fomented by each of the parties is making Farage look like a sinecure.
August 16, 2013
Best comment of the day amongst some excellent contributions.
zorro
August 16, 2013
Your blind spot is holding well and truly in place.
You have completely ignored the fact that 30 years ago you could buy a respectable flat in London for 3 x graduate starting salary whereas now it is more like 12 x. The result of this is a far larger relative debt for the young. People will struggle to pay this off as it is. Now you want the government to make the situation worse by tipping more folk into this particular debt pit, and making it worse still for those who follow. At the same time, your pensioner could indeed afford the rent if his income wasn’t being screwed down by the low interest rates being imposed to support the unsustainable debt being loaded onto younger folk.
This isn’t sensible, it’s immoral.
August 16, 2013
Jimf ,
The old graduate remuneration package would have included a pension .
The new graduate remuneration package won’t .
If you include the cost of making provision for old age the multiple is more like 15 times salary after provision for old age than 12 .
August 16, 2013
Student loan + NEST …. 14% extra tax
August 16, 2013
JimF ,
I know you didn’t say it but the vocational pensions a lot of people used to have are barely comparable with today’s NEST pension and other private pensions .
I’ve heard policeman and teachers describe their employee contribution rates as huge . They are not but they look it when compared with NEST contribution rates .
Only those people who actively try to make provision for their old age have any idea how expensive it is and few do that .
Given that people are likely to live 15-25 years after a working life of 40-50 years the contribution rates for NEST are too low for a start especially for people on low wages .
I don’t think responsibility for pensions provision should fall on the employer . The state should deduct as necessary and arrange something so we are “all in the same boat” .
August 16, 2013
And by the way, Help to Buy doesn’t apply to Buy to Let so this is an irrelevance in this saga.
August 16, 2013
Not quite an irrelevence. Osborne decided that Buy-to-Let investors needed assistance too, through extending the Funding for Lending scheme to landlords and giving them cheaper mortgages to bid up the price of starter homes.
August 16, 2013
Oh yes, quite forgot, we have to subsidise BTL via another mechanism then counteract that by helping first time buyers for 2 or 3 years. Then how do we deal with the fall-out for the next lot of first time buyers? Yet another subsidy. For a host who normally despises the word subsidy, this is a plethora of subsidies all trying to outdo each other.
August 16, 2013
I think that John is going all big government on us…. 😉
zorro
August 16, 2013
You forget to mention PT that many Landlords buy properties at auction which need complete renovation.
They invest large sums of money and time to bring these properties back to life.
These are homes that are then added to the housing stock not taken out.
Buying brand new starter homes is not something most landlords do so your claim they bid up the price of starter homes is not correct in my opinion.
August 18, 2013
Are you kidding? SOME landlords buy property at auction and renovate but only a small proportion of BTL landlords are into renovation/building projects. Most of that work, bringing derelict or poor property back into use, is done by builders.
In contrast, most BTL landlords focus on buying ready to go property – often that same property which has just been renovated by builders
eg small flats which would suit first time buyers – and demand pushes up prices.
Whether or not BTL landlords buy “brand new” is irrelevant.
August 18, 2013
Without the economic activity created by buy to let landlords would these derelict properties ever be renovated seeing the original demand is for rental properties.
Many building companies survive on projects given to them by landlord property investment
work.
August 16, 2013
There is £80bn of Funding for Lending money that is currently making its way to BTL Landlords and bidding up prices before the main Help to Buy scheme for existing properties starts in the new year. Landlords smell a period of capital gain and rising rents on the back of it – which will add to the Housing Benefits bill.
August 16, 2013
We clearly need both properties for renting and properties to buy. It used to be that the tax regime encouraged buying (with tax relief for mortgage interest) now the tax regime encourage renting with high stamp duties on purchase and less generous help should you loose your job for owners.
Social housing should clearly always charge market rents otherwise they are selective help for some arbitrary families who will rarely ever move out as they are getting free money. People needing help with rent get it anyway.
The main problem is too many people and not enough building of new properties, abolish stamp duties, relax planning (so people get preference over sugar beet, farming, sheep and pigs – abolish CAP subsidies) and relax the OTT building regulations. Stop the over charging by utility providers for new supplies. Build the new houses on decent plots in the right places and ones that allow some future expansion if needed. Stop wasting land on windfarms and absurd PV projects too.
August 16, 2013
What’s a market rent?
The amount of money needed to pay a buy to let landlord’s mortgage? At what interest rate?
If a landlord owns a property outright, what should the ‘market’ rent by?
August 16, 2013
Mike, would social housing built using money borrowed by Local Authorities result in rents which are any different to private landlords renting houses they own outright or houses they are buying with a loan?
Looking at Council rents and Housing Association rents near me they seem little different to those offered by “wicked” BTL Landlords.
August 16, 2013
The Market rent is clearly the same regardless of what mortgage the landlord has. The tenant will pay what he is prepared to pay to live in the property, he will usually not even know or care what the mortgage is.
If the rate is a good return, due to short supply and good demand, then it will pay more landlords to expand thus increasing supply, if not the reverse.
August 16, 2013
If we have enough properties, rents will be cheaper. Housing benefit caps are important as these subsidies have encouraged increasing rents….
zorro
August 16, 2013
You are certainly right about the elderly! If we didn’t have a free house to live in, we would be scuppered!
Isn’t the problem the fact that everyone seems to want to live in London? Here in Wisbech, North Cambs, we have urban infill as people’s gardens suddenly sprout a home. Meanwhile the centre of the town is derelict. Lots of poorer Londoners come up here too.
I understand that large parts of the North West and North East are pretty well full of unsaleable houses. Why?
August 16, 2013
“I understand that large parts of the North West and North East are pretty well full of unsaleable houses. Why?”
Well expensive energy, employment and other daft regulations, the EU, Cameron’s nearly 50% tax borrow and waste government has left the region unable to compete much in the real world. Many capable leave to go somewhere that they can do. Also government payments and pointless government jobs discourage them from even trying to compete.
reply Many politicians in the NE support all the regulations, the green agenda and high public spending.
August 16, 2013
To reply:- indeed they do alas, such is politics, the buying of votes and the dangling of the magic money tree and the powerful illusion of the land of milk and honey.
One assumes they think they can pull themselves off the floor by pulling on their own shoe laces too.
August 16, 2013
Large parts of the North and north west have many unsaleable houses due to the lack of work avalible in these areas in some cases due to geographical isolation. A relaxation of employment laws and the rest of you usual rant is not going to change this.
August 17, 2013
“A relaxation of employment laws and the rest of you usual rant is not going to change this.”
It certainly would do.
August 17, 2013
By creating more desperation? Do tell us how making the unemployed compete with each other for worse jobs is going to create more work? We are waiting for your reply.
August 16, 2013
Arn’t these 2 different issues? Whether people want to invest in buy-to-let is entirely up to them. The only thing the rest if us should care about is that we aren’t in the hook if they can’t then service their debts. The Govt’s help to buy scheme is different – it is a public subsidy to the housing market.
August 16, 2013
Buy to let is tied to property prices and so are rents as larger BTL loans have to be serviced.
People are being priced out of homes as their wages stagnate or fall in real terms. The govt is playing with fire, all to get re-elected.
August 16, 2013
I think the motivation is to try to sell of the state owned banks ahead of the election if possible. As to re-election, history suggests that a government that orchestrates a house price boom is more likely to lose the subsequent election than to win it.
Heath lost to Wilson, Callaghan to Thatcher. Major didn’t lose in 1992 despite falling prices and high mortgage rates, but did in 1997 when prices were rising. Macmillan also won with falling real house prices, and Douglas Home lost with rising ones (Maudling’s “dash for growth”).
August 16, 2013
What both puzzles and dismays me is the way that the mass media have automatically reverted to celebrating a return to rising house prices, with a prediction that prices will rise by 7% next year being treated as good news:
http://www.telegraph.co.uk/finance/personalfinance/houseprices/10239417/Housing-market-beats-inflation-with-house-price-growth-to-hit-7pc.html
While on the same day the same newspaper correctly reports another increase in the cost of living, through rising rail fares, as being bad news.
What also puzzles and dismays me is that the Chancellor seems to agree that rising house prices are an unalloyed good, even though that prediction of a 7% increase next year is actually in the same ballpark as the average annual rate of house price inflation which led to the formation of the existing bubble, and probably an average annual rate of increase of about 4% would be the maximum sustainable in the long term – 4% a year being around or probably just below the trend rate of increase of nominal GDP, assuming that general inflation or CPI averaged the Chancellor’s present target of 2% a year.
Then we have the new Governor of the Bank of England permitting the mass media to convey the impression that he is actually dropping the Chancellor’s 2% target for CPI inflation and instead targeting unemployment, which would be illegal under Section 11 of the Bank of England Act 1998; while the Chancellor neither reformulates his inflation target to give greater weight to house price inflation – which he could do, legally, in principle, but which would be technically difficult – nor proposes that Parliament should change the law so that the maintenance of price stability would no longer be laid down as the paramount objective of the MPC but would only rank equally with or possibly below support for the government’s economic policy, “including its objectives for growth and employment”:
http://www.legislation.gov.uk/ukpga/1998/11/section/11
And wouldn’t it be better if the Chancellor was to supplement his CPI target by giving some “forward guidance” on house prices, for example that if the annual rate of increase was to rise above 4% then he would take effective steps to curb it and bring it down to a sustainable level?
Or would that be too unpopular with Tory-voting owner occupiers and Tory-supporting property developers?
Reply If you read Mr Carney’s statement – as you usually do – you would see he makes it quite clear he is primarily under a requirement to get us back to the inflation target.
August 16, 2013
As the next generation is priced out of housing – a sustainable level of house prices increases would be, I would suggest, a fall of a few percent a year for 20 years.
August 16, 2013
I don’t think we could expect Osborne to say that he was looking for house prices to actually fall, in either nominal or real terms. But he could and should say that their future growth should certainly not exceed the growth of the economy and therefore average earnings, and should preferably be rather lower so that homes gradually became affordable.
August 16, 2013
That’s true, JR, but it’s also true that Carney must know that the mass media have conveyed an entirely different impression, and I haven’t seen him leaping up and setting them straight on it.
August 16, 2013
All true Denis, and that is an interesting reading by John of Mr Carney’s intention to reduce inflation…..by targeting 7% unemployment, carrying on ZIRP, and by definition QE like you do (not)……Correct me if I am wrong, but isn’t there a historically simpler way to control inflation?
zorro
August 16, 2013
http://www.telegraph.co.uk/finance/business-news-markets-live/10226308/Mark-Carney-inflation-report-live.html
Maybe Mr Carney’s body language gave him away…..
zorro
August 17, 2013
I was impressed by the wording of Osborne’s open letter to Carney, in which he said that he had previously “clarified” something, even though it still remained as clear as mud.
August 16, 2013
The hostility you sense is that, having recently suffered the consequences of a housing bubble, it is shear madness for Osborne to take action to stimulate another one. This is exactly what he has embarked on. Lenders have been given more stringent capital requirements, supposedly to reduce the risk of them needing a bailout from government. Osborne is taking more risk onto taxpayers and at the same time stoking up demand. One problem today is that many people want everything now. They aren’t prepared to make sacrifices to save for a deposit. Cameron famously said that he was the heir to Blair – Osborne is the heir to Brown – a complete disaster.
August 16, 2013
“Government help” is really the rest of us paying for it though isn’t it.
New housing stock is over priced because developers have to provide around 30 % subsidised housing (for housing associations and part rent part buy) as part of their development which get priced into the price the buyers paying full price have to pay. It is also over priced because of the planning regime adding too much overhead. And the government keeps prices artificially high by manipulating interest rates and schemes to help the mortgaged classes, which is just redistribution of wealth from savers and those renting privately to those holding mortgages. The prices are also kept high by the tax perks in the system for people running buy to let properties driving money into the sector.
I don’t believe in government schemes to subsidise housing, such as housing associations or council housing, as much as anything because the service provided to the tenants is often dire. I would rather see needy people given extra benefits and allow them to spend it in a free market for housing. This would allow them to make their own decisions about distances, area, size versus price and so on much more freely. I also don’t believe in government schemes to subsidise or guarantee mortgages.
I would like to see a healthy home ownership sector, and a healthy private rental sector. But I don’t agree with people living in one subsidising the other. At the moment private tenants are subsiding both the mortgaged classes and those in council and housing association houses – this cannot be right. In fact I believe it is a massive injustice and penalises those who need to rent to stay mobile for work, and actually what the country needs is a mobile workforce.
I would like to see big professional companies enter the private rental market as they do abroad, and a move away from the often poor standards of the small buy to let operators and housing associations. This needs some proper competition and the state to stop rigging the market.
I am hostile to the “buy to let” sector here, because it has been a one way bet for investors, massively helped by government manipulation, and has diverted energy away from proper investment to generate wealth. The UK “buy to let” sector is nothing like the rental market in other European countries where much larger percentages of housing is available to rent from large organisations like the banks. And the current short term tenancy regime is completely unfair on decent tenants who need somewhere stable to get their children through school, and so on, ALL of the cards are on the landlords side. In the rest of Europe long term private tenancies are common and enable tenants to, for instance, invest in decorating the house etc.
So I think the UK market is a complete shambles. Driven by political dogma on both sides. And letting down the people of this country. Lots of people have got rich as the government manipulated house prices and this money has come directly out of the pockets of savers and those renting privately, as good as open robbery.
Government should deregulate, stop manipulating the market, and help those people genuinely in need directly. We need much more workforce mobility not less, the inertia the current policies put on people moving for work are bad for our overall wealth generating ability, this is a massive problem.
House prices are over egged in comparison with other places in the world I could live, and prices are not sustainable at these levels long term. There will be a correction at some point, and I would rather our collective tax money was not betting against this happening because we will lose.
The Conservative party should be for light government and freedom in the hands of individuals, and everything I have said lays out ways of doing that. Current government policies are big state, big intervention, big public sector, big bureaucracy, this is not something I support.
Immigration does need to come down radically, and your analysis of that is wrong too, because this remains the number one issue where the political class is massively out of line with what the real people think, I don’t think this difference of opinion can go on indefinitely – the people will win one way or another. And the people are being openly lied to by politicians and the bbc, “no EC work visas are capped” for instance being a common one when ICT visas are completely uncapped and used to move (word left out ed) workforces from India here completely contrary to the wishes of (some of? ed)the electorate. I would rather the political class saw some sense and took on board the realities real people see every day.
And we do need to rebalanced the country. The state is subsidising massive amounts of housing in large parts of the country WHERE THERE WILL NEVER AGAIN BE A READY JOBS MARKET. If the state got out of subsidising housing and instead subsidised needy people then folk would migrate over time naturally to where they jobs are.
And so on. So I think you are a victim of living in the political bubble, nice guy but cannot see the reality. Try harder.
August 16, 2013
“They then often go on to criticise the tendency for others to invest in buy to let properties, as savers seek some way of earning a real return on their savings at a time of ultra low interest rates.”
Come off it, this problem hasn’t just started in the last 5 years, it’s been a real issue for next on 10, if not 15 years – in fact the BTL market has suffered due to the credit crisis.
“If you do not like either of these it just seems to leave the idea that the government should borrow or print even more money to build more Council houses.”
Oh prey do tell us then were the money for this “Help to Buy” scheme is coming from?! Why should it cost the taxpayer to build council houses, which in time could indeed be sold off in a “Right to Buy (Mk2)” scheme, the government/LA could receive the same sort of income from such properties that the mortgage providers and private landlords get from their tenants – oh hang on, I see the issue now, it would freeze the more unscrupulous landlords out of the market, there would be the market (LA) price and the free-market price that few would chose to pay, in effect we would have a return to rent control, ho-hum…
Indeed inward migration is having little effect, we are still seeing the effects of the post war baby boom, adult children want a place to live, their parents want a place to live, the grandparents want a place to live and in some cases the great grandparents still want a place to live, that is all four generations want their own place to live, gone are the days when the newly-weds would shack up with one or the other set of in-laws, gone are the days when mum or dad would automatically come to live with their daughter and family – no, we simply still have to few houses in the UK, but that is good for the private landlords, as it creates a housing shortage and thus higher rents ho-hum….
“I favour helping home ownership. Most people either own their own home or wish to do so. It is the most flexible type of housing, leaving you free to sell and move in a way which you cannot do from social housing.”
Total bunkum! Social (LA) housing used to be very flexible, if one had been living in Liverpool, but need to go and work in Humberside (because that is was were the work was), tenants simply put in a request for a transfer… Under your preferred system first you need to sell, not easy at the best of times, especially if one is on a fixed timetable of events such as taking up a job in another part of the country, impossible if you have dipped into negative equity, and what if you need to move from a area that has stagnant house prices to an area were there is a house price boom what then, increase ones mortgage? Oh and please not I did say need to move, not just a wish to move. If there is a problem with socail housing and moving these days it is because the system has been broken by the politicos.
“It is the best to give you the greatest freedom to adapt, decorate and enhance your property as you see fit, and change it over the years as your family needs change and fashions evolve. It also means you own an asset, which may be useful as security for borrowings if you wish to venture in other fields.”
Short of knocking walls down are not socail and LA tenants not allowed to decorate! As for piling debt upon debt, isn’t that what got us to the debt crisis we now have? A house is only worth what someone else is prepared to pay for it, if you can’t sell and you can’t pay off the mortgage…
“Of course I have no wish to see another unsustainable boom like the 2005-8 one.”
I have counted four or five such booms (and the resulting busts) in the last 35 odd years, so quite why a Tory thinks they can sit smug and slag off the Labour years, in the time Labour were in power -thirteen years- Mrs Thatchers government stood-by and watch three booms and three busts, a lot of people lost their homes in the 1980s or got lumbered with property than they could not move from because of negative equity…
“I am also intrigued by the hostility towards Buy to Let. It was not so long ago fashionable commentators were urging the UK to be more like the continent and have a larger private rented sector. Now it is expanding it has its critics.”
It is not so much the fact that people are letting houses but the fact that rents are out of control -because of the housing shortage, also because tenants have little security of tenure, or because they intend to only stay a short while, they tend to tend to do as little as possible to maintain the area whilst landlords or their agents simply do not want to cut into their profits to do so, thus gardens go unkempt, common areas go to pot and in such cases, unless the police get involved, the landlord is often unwilling to act just so long as the rent is being paid.
Oh and of course the same problems are true for the home owner, and in those cases it is even more of a problem for the neighbours, even if the police do get involved as the home owner can’t be evicted, I know of one case were many new owners to an estate have said that if they had known about the antics of person “A” they would not have bought in that area, thus it is in the interest of the other home owners not to rock the boat to much and complain to the authorities in case they get landed with property blight…
August 17, 2013
“Indeed, inward migration is having little effect”
So Jerry,where are the several million new arrivals over the last decade living?
August 16, 2013
The big worry is a generation of new buyers who have lived for years with very low interest rates and high borrowings. Even a 1% rise would be a huge shock and lots of financial problems/challenges for these younger buyers.
As for buy to let – using that as a means of saving to get a real return in the notoriously bubbly housing market is risky. How many of those investors do the sums and factor in much higher interest rates?
The resulting fun and games would soon mess up the banks’ profit and loss figures.
August 16, 2013
John, do you also believe it’s right that state support for mortgage lending has recently been extended to Buy-to-Let landlords? I’m referring to Funding for Lending here.
August 16, 2013
When maintenance loans were introduced and the number of students increased dramatically, buying to let to students became a great get-rich-quick scheme. Cynical investors took advantage of financially inexperienced 19 year-olds, scrabbling around for accommodation with their maintenance loan and an open cheque book, to hike rental prices to exhorbitant levels. When a basic 2-up-2- down back-to-back in Durham can be converted into a grotty 5 bed hovel and charged out at £1,750 a month something is seriously wrong.
Similarly, in the general population, as immigration and the credit boom increased demand in the South East there was a huge hike in rents, subsidised by housing benefit. The squeezed middle (not on housing benefit) found it hard to find an affordable rent and were driven to buy. As greedy landlords and desperate first time buyers scrabbled around for property, up went the prices. Perhaps capping housing benefit will start to address this overvaluation, but it’s a bit late.
Buy to let schemes in London are so profitable they are now being advertised on telly in Singapore. When our best graduates, starting on very good salaries indeed, find it difficult to find a decent place they can afford to rent it is clear the market has gone mad.
On the continent people have traditionally let property as a long term investment rather than looking for quick buck. The nature of the Buy to Let market in England is very different and has been very damaging.
August 16, 2013
You say “On the continent people have traditionally let property as a long term investment rather than looking for quick buck”
Well in my experience people on the continent like quick bucks just as much as they do in the UK, and people in the UK like long term returns too. People are people after all wherever they are.
There is however usually more building land available than in the UK also different tax regimes and tenancy laws in place.
August 18, 2013
Are you kidding? Only a small proportion of BTL are into redevelopment. Most BTL landlords focus on ready to go property – eg small flats which would suit first time buyers. Whether or not they are “brand new” is irrelevant.
August 18, 2013
Lifelogic,
Clearly I am not suggesting the French, Germans et al are all paragons of virtue, impervious to the attractions of short term profit. That would be absurd.
However, since Europeans have traditionally been much more likely to rent their homes, their attitude to property rental is somewhat different to that in the UK.
The differences in tax , tenancy laws and land availability which you refer to arise out of, and in turn contribute to, that cultural difference.
Reply Doesn’t a larger rented sector mean these countries have a larger landlord class? Presumably these landlords do it for profit. I would rather live in a country with more freeholders independent of landlords.
August 18, 2013
Its all about supply and demand.
August 16, 2013
In my mind the govt should be finding ways of big business to distribute itself more evenly across the UK so that housing demand is more evenly spread thus avoiding the oversupply issue you talk about.
It all goes back to good transport infrastructure, energy policy, workforce skills and taxation levels without which trying to manipulate the housing market is just playing with the symptoms
August 16, 2013
And HS2 will not make a jot of difference……….
August 16, 2013
@peter davies
HS2 will make a world of difference. The government will have 50 billion less to spend on things that would make a difference instead of providing a fast train for a few businessmen to use.
By the time it is built technology will have made it redundant. Who needs to meet when you can facetime already?
August 16, 2013
Indeed they will have to take £50B of productive industries and people to waste on HS2 – which will clearly damage growth and jobs hugely.
August 16, 2013
The “Funding for Lending” scheme certainly triggered a rush of hot cash money into the housing sector; Punters sensed some short term flipping gains. The FfL mortgages are now starting to keep prices rising. When “Help to Buy” fully kicks in next January, that should give prices a further boost. Brits never feel better than when house prices are racing away. It’s a Conservative vote winner, get your money on.
Economically it is a dumb move, increasing supply side cash to meet a debt constrained demand side need (and want) that is. There is little or no inventory on the shelves locally, and the factory turns out houses slower than Aston Martin does its DBS model. We are led to believe there remains unused capacity in this sector of the economy, but I reckon it is going as fast as the Nimby planning element of the supply side chain, will let it.
August 16, 2013
“If you live in rented accommodation you will pay the dearest rents in your elderly years when you have less income, which is far from friendly.”
What will the old be paying their rent with John ? Come on , be honest with us .
It will be society through housing benefit .
People will eventually realise this and grow sick and tired of paying massive amounts towards housing benefit and demand some real solutions from their politicians .
Your crony banker friends have puffed the prices of houses up so much that people have nothing left to save for their old age or spend in the economy which is why demand is low .
They’ve had an indecently good run for their money . It’s time to drop them John and move over to our side .
When the occupational pensions schemes closed down all the money which would have gone into them went into puffing house prices .
“I have no problems with the government helping bridge the gap for people with too little savings to make the large deposit for a first home.”
I thought you were a free marketeer ?
Let prices fall to levels banks will lend against them with lower deposits .
The reason why banks require a bigger deposit is because they know houses are overpriced by a similar amount and provide insufficient security for high loan to deposit ratios .
“Banking Regulators have lurched from allowing or encouraging banks to lend far too much against each home, to letting them lend too little.”
Over their lifetime people will end up paying the lions share of the fruits of their labour to their mortgage lender in interest .
Are you the only one who doesn’t see this as a problem ?
High house prices are an economic disaster . They crowd out the rest of the economy .
“Government has not been a great landlord, and is itself so hugely overborrowed that it is not in a good position to borrow to build Council houses on a big scale.”
Not true .
The bottom line is that for a huge part of the electorate almost all of their take home pay will be appropriated by the financial sector collecting interest from either them or their landlord .
The challenge is stopping the financial sector robbing society of so much of that they earn that there is nothing left for their old age .
Consequently it would be better if the state deducted more and it was effectively kept it in escrow away from the Govt of the day so it was available for later in life – eg a partially funded state pension investing in mainly UK infrastructure including social housing .
Reply There is one thing worse than high and gently rising house prices, and that is collapsing house prices. Getting from here to a better place requires careful management, not another crunch and crash.
August 16, 2013
John ,
Thanks for your reply .
They don’t have to collapse so much as fall gradually .
August 16, 2013
Where I live Simon, if you want a roof over your head as most of us do, you can rent or buy and there is very little difference in the monthly cost.
In some areas it is cheaper to buy.
The benefit to buying is at the end of 25 years your “landlord” gives you the deeds and you become the owner.
A renter never stops paying and has nothing to show at the end for all the rent paid.
August 17, 2013
That is fine for someone in their 30’s on a good wage
How many lenders are going to lend to a first time buyer in their mid forties or someone who becomes divorced at a similar age and find’s they do not have enough equity and have to start again from scratch .
There are all sorts of reasons why people will end up in rented accommodation and when their money runs out in old age society will end up picking up the tab .
High accommodation costs are a disaster for all parts of the economy except the finance sector .
August 17, 2013
So the answer seems to be, build more housing (especially homes at the lower end of price level) and to encourage as many as we can to buy a home.
We are seeing the start of an increase in house building at long last.
There is nothing wrong with renting, it suits some people as you have illustrated.
So we need a large competitive rental sector which we are developing.
In old age those who rent will still be looked after by the State as they are now and have been in the past.
Even better would be if they were looked after by their families.
August 16, 2013
The answer be not to ‘concrete over’ our green and pleasant land – but, dare one say – to become more continental (Scottish even !) in our housing habits…
Living in flats be the norm for much of the rest of urban Europe – no on e would ‘bat an eyelid’ – whatever their class. Over here though – it be seen as some kind of failure ? – unless you have a house in some other place.
Question – particularly for policy wonks (know what tha means Johnny ?!) – could not some financial / fiscal incentive be devised to incentivise apartment dwelling ? Those of us without children, without a spouse, without pets – would be most suited to such – and would consequently take up less land !
Reply Flat dwelling is the norm in much of central London – you need to be mega rich to afford a whole house. Outside London where land prices are lower houses are more the norm, and why not? I do not see the need to intervene to encourage flats.
August 16, 2013
But some of us ‘provincials’ would welcome a ‘nudge’ in the flats direction !
August 16, 2013
“Living in flats be the norm for much of the rest of urban Europe – no on e would ‘bat an eyelid’ – whatever their class.”
Continental apartment houses were built to serve the same constituencies as the terraces of England; for some reason, Continentals preferred to live on one floor and let somebody else maintain their green spaces; it does make for more attractive urban environments.
August 17, 2013
Daft flat should be a legal term as houses converted into flats where never intended to be occupied like this and 200k to live above fast food shop should tell you it is time to leave that area and for many this does leading to the amount of blokes in my local pub 50 miles from London saying pretty much the same (etc ed).
August 18, 2013
‘Daft Flat’ (house conversion) – agreed, ‘Duff Flat’ (above shop) – depends upon the shop (a takeaway – ugh), but, purpose built flat… ?
August 18, 2013
Purpose built daft flat with no car or bin parking built one room flat so small as to need scaled furniture purchased on a lease and heated by electricity on the 10th floor. It’s your ‘choice’ as is your minimum wage job to pay for it.
August 16, 2013
The problem is not too much demand it is too little supply. Over the last century house prices have gone up 4 fold compared to the RPI which proves that at least 3/4 of housing prices are government parasitism – a mixture of not allowing builders to build, imposing immense expenses on paperwork (builders spend more on lawyers than bricks) and the house by house approval system stopping us having mass produced modular houses.
Thus if Cameron is serious, rather than just deliberately stocking up a new houseprice “boom” before the election, he should be addressing the supply side not stocking demand.
August 16, 2013
The supply side is low because builders only want to build homes for the wealthy because they’re worth the most money. They have little interest in building cheaper housing.
August 16, 2013
Not near me Uni where my local city centres have seen many new developments of reasonably priced flats as well as some affordable housing..
My local authority has gone into partnership with housing associations and has built some good new starter homes.
We just need many more such schemes.
August 17, 2013
They fitted seven ‘houses’ in former car showroom at the end of my street. My house as a former council house, has three bedrooms two double and a single not a box room, bedroom front garden, sixty foot garden, garage and large communal parking area at the rear. The conversion to housing benefits to private landlords was progress? It interests me to wonder how it is being planned to get this house from me as I have now paid for it, and back into the system or at the very least into the hands of the middle classes, by some form of taxation or repossession as London spreads out. Paranoia?
August 18, 2013
Well Baz, if you have bought it then it is your property and you need have no fears
However if you were renting the landlord could ask you to leave after the required period of notice was served.
Becoming a property owning capitalist makes you a free man.
August 18, 2013
It makes me my own landlord allowing me to control my own destiny Accommodation is always the problem and many forget this.
August 16, 2013
Mr. Redwood,
The crux of the problem is contained in your second paragraph. While the population continues to rise at an unsustainable rate, there will be a shortage of housing.
The Government’s moves to subsidise buyers is merely an attempt to cover up the underlying problem, which it is too craven to tackle. As you say, there is a Parliamentary majority in favour of uncontrolled borders for EU members. Your claim to oppose it is empty rhetoric, for the Conservative Party has no power to change things and your leader is in favour of the status quo.
We are now within six months of open access to Roumania and Bulgaria and all that has been done is to use tax-payers money to pay for mobile posters about illegal immigrants.
When will Members of Parliament stop talking about palliatives and begin doing something?
John Wrake
reply Over 100 Conservative MPs have been tryign to do something re the EU all Parliament, and we now have the promise of a negotiation and a referendum to come.
August 16, 2013
The housing shortage in some areas is simply exacerbated by the lack of employment opportunites in others where housing is plentiful.
It would be good if Government policy actually understood why this drift to the south east can not be ameliorated
August 16, 2013
JR,
Your argument seems to be: “home ownership is desirable for various reasons, ergo we should subsidise it”. You could say the same for food, electricity, music and a million other things.
A general accepted principle in economics is that subsidies are only justified in order to deal with market failure: i.e. the failure of the free market to produce the optimum quantity of something. So where’s the market failure?
FAR AND AWAY THE BIGGEST obstacle to wider home ownership and better quality homes is GOVERNMENT: in particular restrictions on planning permission which according to a Policy Exchange work adds about 25% to the cost of houses. See:
http://www.policyexchange.org.uk/images/publications/making%20housing%20affordable%20-%20aug%2010.pdf
Reply My approach is based on various policy strands. Clearly limiting numbers of migrants is important on the demand side. But getting more homes built in popular locations is important on the supply side. Of course I do not normally favour subsidy or government intervention – this time limited deposit intervention has been necessitated by other government/ regulatory intervention to stop banks lending enough to allow people to buy these homes. I have often set out how I would have more competitive banks wohich would of course remove the need for these interventions.
August 16, 2013
Ralph Musgrave ,
I think your first paragraph warrants further examination .
Subsidised beer …. mmmm …. who do I vote for ?
August 16, 2013
Not expanding affordable housing is a backdoor way to curb inward migration – which I would support. I can not remember a time when either the political left or the building industry have not been complaining about a lack of house building. There is no lack of housing – if you want to see what a real lack of housing looks like go to India or Africa. The people sleeping on the streets in the UK is in the hundreds and many of those are drug or alcohol addicts. There is plenty of property both to buy and rent.
August 16, 2013
It’s like comparing Britain in the middle ages to Britain now. You propose to do nothing as there are people in India living in worse conditions and the ones on the street are addicts anyway and do not deserve accommodation? If you live five to room then I suppose you are not homeless this is true. Not real are we Julian? Who is no doubt a one post wonder from an expensive part of London.
August 16, 2013
The most acute shortage of affordable homes for both to buy and to rent is in London, particularly in those areas which are already fully built up. Why then are foreigners allowed to purchase property for investment there? Sensible countries with space problems have draconian rules to deal with foreigners who wish to create housing shortages and bubbles by meddling in their housing markets; such rules can restrict the quantity, type of property, or location. Meanwhile spivs are able to create further shortages by knocking large properties together to create homes fit for (very rich people of questionable probity ed). Why are people who are not English and not working or earning a sufficient wage still allowed to select where they can live at taxpayers’ expense? Why do we stick to outdated rules about minimum living standards for people accomodated at taxpayers’ expense? People need a roof over their heads to survive the winter in England, unlike where many came from, but that does not justify giving them any more than that at our expense. There are a very large number of people living in London who cannot afford to live there without substantial taxpayers’ subsidies even when working; their employers are earning profits and getting cheap domestic help subsidised by taxpayers as the debt incurred by this irresponsible government continues to mount. Increasing the number of people who cannot survive without taxpayers’ subventions is economic madness, especially when much of it is related to the high cost of living in places like London as well as the total failure to restrict immigration of every sort. Go to Beijing, Delhi, Tokyo and see mainly Chinese, Indians, Japanese. These countries’ capitals and countries must be terminal decline surely without the essential enrichment and (arrival of new people ed) that we have been told is the only way to create a modern successful economy.
August 16, 2013
Indeed, that is the really bizarre thing about this – the government continues to prop up the housing market in so many ways, but simultaneously undermines indigenous British workers’ ability to buy houses through their tax + NEST + student loan policies. This really is screwing the worker bees to help the banks to make more interest and asset gain realization.
August 16, 2013
Reply to John Wrake.
Precisely! 100 Conservative M.P.s can do nothing, because they are a minority and their votes are a waste of time. The promise of a re-negotiation is undeliverable and the promise of a future referendum is irrelevant, even if the promiser means it.
Many M.P.s are apeing the actions of rabbits caught in headlights and no amount of squealing will preserve them.
Winston S. Churchill had a comment, often scrawled on a file about important matters. It read “Action this day”.
When the fabric of this nation is under threat, as it is at present, it is simply not good enough to rely on time-honoured procedure to meet the need and limit the response.
John Wrake.
Reply I am glad we live in a democracy, where we need to win votes to change things. We have achieved a big shift to a position where both a renegotiation and a referendum is on the agenda. Why not be pleased about that whilst pushing for more and faster? Shouting just to leave the EU when such a position gets no-one elected does not bring the day nearer.
August 16, 2013
Mr Redwood.
That article is so confused and contradictory it is difficult to know where to start deconstructing it. Luckily many other commenters have already had a go at it, so saving me the bother.
And you are advocating subsidies for homeownership. That is simply insane.
Overall, between this thinking from your party and failures of King Brown balls and and now the Eds Show, we are doomed. Good Grief.
August 16, 2013
That S word again. That’s why people will turf your party out with Labour and Libdem. You’re all for subsidies now!
August 16, 2013
I suspect there are plenty of spare houses in the UK because they’re are in areas with no jobs, thus no one wants to live there. Unless industries are encouraged to set up somewhere other than London this will not change.
People were initially promoting renting because on the continent renting is a cheaper alternative to having a mortgage. However when buy-to-let landlords started charging rents at the same level as a mortgage people objected because this arrangement had all the detriments of renting with none of the benefits.
August 17, 2013
Uni
The other main reason mortgages and rents are very similar in monthly costs is due to the record low level of interest rates.
But I understand blaming “wicked” landlords is a great and old tradition for those of a left leaning politic.
I don’t see much difference in rents being charged by Local Authorities nor Housing Associations.
August 16, 2013
I agree that for the majority house ownership is preferable. However, the way to make that more possible is to have lower, affordable prices. Once the dometic capacity to provide funds for mortgages is exhausted additional funds are secured by borrowing abroad via the wholesale markets: it was exactly this that bridged the customer funding gap during the boom to the tune of £800bn according to the Bank of England’s estimates. The consequence is that the interest and capital are paid abroad to the ultimate lenders, instead of recirculating in the domestic economy. Short term booms based on using rising house prices as an ATM have unpleasant consequences: the debt is real.
Property bubbles are like cancers. Catch them early, and the treatment is easy and only affects a few cells/buyers (restricting new mortgage lending). Leave things to fester, and many more are affected, some much more severely, and the treatment becomes more invasive and painful, with radical surgery (repossessions) and chemotherapy (large increases in mortgage rates) needed. Injecting further strains of cancer cells by lending at high LTV and/or low rates to certain groups (BTL for Funding for Lending, those who qualify under Help to Buy) is precisely the opposite of the necessary therapy.
Of course we should try to avoid a precipitate collapse in house prices and the consequent banking crisis, but the surest way of increasing that risk is to reinflate the bubble. Markets fall most sharply after a blow-off peak, creating downward momentum that pushes prices down much faster than would otherwise occur. Instead, we need to encourage those with debts that would be unsustainable at higher interest rates to take advantage of low rates now to pay back as much as they can, or to step off the housing snake before it bites them. That would substantially reduce the risk to banks as prices correct.
Banks are still lending far too much on each mortgage they grant, albeit they have not made so many loans since the boom, especially to first time buyers.
August 16, 2013
Off-topic, I haven’t seen this reported in the UK mass media:
http://www.spiegel.de/international/germany/anti-euro-party-alternative-for-germany-faces-violent-threats-from-left-wing-activists-a-916531.html
“Hard Knocks for Anti-Euro Party”
“In recent weeks, AfD campaigners have received threatening phone calls, been subjected to verbal abuse and – in some cases – physical attacks.”
(comparison of how nasty this is left out ed)
The German “Green Youth” who are highlighted as being at the forefront of this (conduct ed) are cousins of the Young Greens in the UK, both of their parent national parties being affiliated to the European Green Party:
http://en.wikipedia.org/wiki/European_Green_Party#Member_parties
I’ve emailed (UK Green MP Caroline Lucas, who is not in anyway involved in this-ed) to ask her what she thinks about it.
August 16, 2013
Caroline Lucas seems to be a more convincing party leader than Cameron , Clegg or Miliband .
Generally she manages to get her points across without becoming ridiculous like so many uber greens such as Chris Huhne .
Reply She isn’t their Leader any more!
August 17, 2013
Well, I think she herself is a decent enough person, and maybe we’ll find out what she reckons about some of her German colleagues behaving (badly ed).
It really needs to be said, JR, it really needs to be said that the way some of these self-styled “anti-fascists” behave is little different from the way that the fascists themselves behaved during their rise to power.
August 17, 2013
Yes ADS, Caroline Lucas, like Nigel Farage seem very likeable and charismatic speakers.
It is only when you read their manifestos you realise what they really would do if they got power
Bit like the Lib Dems were thought of before they got some power!
August 18, 2013
They are turbo Tories pursuing an agenda that is on par with a (vendetta ed) against the poor using lies and fantasy to do this and when they are caught out correct it the strategy being that the story has already been told to their followers.
Reply Nonsense. Conservatives wish to help more people into work so they earn more, not less.
August 18, 2013
Earn more their employers or themselves John?
August 16, 2013
Interesting article Denis.
Anyone who follows or is a member of UKIP or any other of the growing number of genuine right-wing parties will be familiar with the treatment meted out to them by communists/anarchists/(hard left ed) who masquerade as Greens or Anti-Fascists in Germany (and the UK) at present. Elements of this behaviour have been condoned (by mainstream politicians ed) and set a worrying trend, especially in view of the influence that it may have on the police and judiciary.
August 16, 2013
Goodbye, I’ve had enough of the political censorship on this webshite
August 16, 2013
Reply to John Wrake,
We no longer live in a democracy, as English people understand the word. This country is now an elective dictatorship, where policy is decided, not even by those who claim to represent the electorate, but at the whim of a Prime Minister supported by a Party machine stifling individual views in the interest of retaining power and abetted by members of another Party with a different agenda. Both are powerless to act in Britain’s true interests, since they have given away sovereignty to a foreign power and with an official Opposition having the same agenda.
The evidence is all about us:
No control of our borders.
Subservient to foreign judges operating under a different system of law.
Unable to deport foreign criminals.
Subject to regulations which are not in our interest.
having to borrow money to give away to those who are unaccountable.
Defence forces being run into the ground.
Fewer and fewer citizens playing any part in this so-called democracy, either from apathy or disgust at the current mismanagement.
John Wrake.
August 16, 2013
What has been failed to be mentioned as it is Tory dogma, is that years ago the local councils were the largest landlords. Now the council house have been sold off and have found their way into the hands of large scale private landlords renting these houses back to the state at huge rents and costs that where previously inured by the state in the form of a massive housing benefit bill running into billions. The few buy to let peasants scratching a living are a red herring. What is need is for some of this housing benefit money being used to fund affordable social housing and not funding multi millionaire lifestyles and finding it’s way into offshore accounts and other sovereign wealth funds. Another privatisation lie on par with the rest of the privatisation lies and fantasy. The country is right not to believe for one second any tails of private health benefits for the very same reasons as housing benefits will soon be health benefits. Ram it.
August 17, 2013
I take it then Baz, that you are in favour of the recent cap on housing benefit which is helping keep rents down.
August 17, 2013
Have you any proof it is keeping rents down and is it leading to more costs in other areas such as more unemployment benefits?
August 17, 2013
You should go into politics Baz as you’ve used the classic ruse of answering a question with a question.
August 18, 2013
And you follow the blind political dogma of doing the right thing to save money should be done even if it costs money, but only if it effects the lower classes with no questions being allowed to be asked.
Reply People on higher incomes have taken a bigger hit on benefits, and the richest have lost out the most as planned.
August 16, 2013
Why not just QE money and give everyone some free money instead of just the FIRE sector? Specifying debt paydown-(student debt) or housing deposit if you wish.
Any chance of inflation impacting senior public sector sinecures – index linked pensions or caps reductions in numbers and maximum salaries.
August 16, 2013
What has happened to you? Surely throwing tax payers money into debt pits is against your grain? Can’t you see that this Help to Buy et al, will benefit few, bar the developers and the lenders? This is an outrageous plan to prop up the housing market at the tax payers expense. What is going to happen when the borrowers default of their repayments? Good old tax payer will pick up a slice of the tab again. Sub Prime Mk II is what this is and it will be the final initiative that destroys the banks. Only this time there will be no more money in the BoE because this country is already broke. There are dark days, years ahead and all the current euphoria will turn sour well before the next election. This government should be reducing our huge debt, the world’s second largest and what do they do? Increase it every hour of the day, instead. I think we are going to see a George Soros Mk II appearing soon and that will do no service to the Government nor to our currency. Somebody in Downing Street has to wake up very quickly as they have already run out of money and out of ideas so the next step will be to be run out of office.
.
August 16, 2013
Slightly off topic, but the same principle I suppose, wasting money that is……http://www.dailymail.co.uk/news/article-2394377/800million-consultants-replace-government-staff-redundant.html
zorro
August 17, 2013
Zorro
Yes makes you want to weep !!
We have family members and friends who has seen this happen first hand.
Apparently it can be done because the cost of hireing and fireing often come from two totally different budgets !!!
August 16, 2013
The CON Party might be pledged to bring down immigration but it has no intention of doing what is necessary to achieve that.
We can’t reduce immigration all the time we remain in the EU and with Cameron telling the Indian Government than unlimited numbers of Indian nationals can come and study in the UK AND THEN GET JOBS there won’t even be a reduction in immigration from outside the EU.
People with assets are using buy to let as a way of protecting their savings since the Government decided to make interest rates rock bottom for the foreseeable future in order to bail out people who behaved irresponsible and mortgaged themselves up to the hilt or took on too much consumer debt.
I don’t blame them …. I have savings and if I hadn’t tied a lot of it up in inflation-linked+ bonds, I’d be doing the same. I blame the Government and the Bank of England Governor. They’d rather reward the profligate than those who behaved responsibly.
I loathe this Government with every fibre of my being.
August 17, 2013
Boudicca
Your last two paragraphs sum up how many of us feel, but do remember it is not just this Government.
Past Governments have behaved in exactly the same way.
So we now have proof that the three main political parties, treat those who want to provide for themselves and their families, with absolute contempt.
August 16, 2013
As there is a direct correlation between home ownership and likelihood of voting Conservative, I am surprised the Government is not doing more to help people own their own homes and also levelling the playing field away from buy to let and other landlords and towards owner occupiers. It is unfair that landlords can put mortgage interest payments against tax, whereas owner occupiers cannot. The logic would be to end tax relief on all mortgage interest on domestic properties and instead increase the threshold above which stamp duty is paid.
August 16, 2013
Criticism of government housing policy is fashionable because it is bad policy, as shown a two days ago by Frances Coppola @ http://coppolacomment.blogspot.co.uk/2013/08/the-illusory-housing-recovery.html
She has a chart that “shows the rate of increase of house prices by type of buyer. The evident spike at the beginning of April 2013 coincides with the extension of the Help to Buy mortgage deposit guarantee scheme to existing properties as well as new builds. There is little doubt that this enabled first-time buyers to borrow more and therefore buy more expensive property.” So your pal George seems intent upon fuelling a housing bubble at the first time buyer end of the market!
Coppola’s conclusion will dismay all Conservatives, especially those who accept it.
August 17, 2013
I do chuckle each time I have looked at this thread. The next thread is entitled ‘Markets have a mind of their own’.
But not, according to this government, the housing market. That is there to be manipulated and sustained at all and every cost. The FACT is house prices are unaffordable for the next generation. But no government seems prepared to accept this and let houses find their own, market, price.
August 18, 2013
The phrase net migration is a euphemism and one fraudulently used by the government to mask a much more serious problem.
If 500,000 immigrants arrive from around the world but 400,000 British people leave, then net migration is said to be 100,000.
However, this country would still have half a million (new ed) immigrants.
August 19, 2013
Bazman – have you nothing more to say ?!
August 20, 2013
Err!? No covered that one for now. Lifelogic repeats the same lies without any reply for you.