Bulls argue with the Bears, but why don't Builders share the same confidence?

Sampong

OK we can all observe that the debate on this board is between the bulls and the bears.Reading between the lines the Bulls seem to be Landlords and Property speculators, and many of the Bears are people who want prices to fall for various reasons, one being they are sitting on a pile of cash and would be happy to pounce in a crash.

Spain's Property market is hitting the news, expats who want to sell are unable to at any price, many developments remain empty and/or unfinished.......property just isn't selling and as someone pointed out in another thread Spain don't need to build any more houses for the next 100 years.

We have a different situation - a massive shortage of housing and this fact takes centre stage in much of the debate on here and is often quoted as an argument why house prices will continue to rise in the short term (I don't think that anyone disputes they will rise long term!).

OK so we debae that there is a massive shortfall of housing, there is a massive demand........ we need more houses....

So why don't the builders share the same confidence? Why aren't they building? Surely if there is a demand they should be building?

Perhaps there is a subtle difference between "demand" and "need" or "desire". Many people that need or desire a property feel that it is out of there reach and therefore don't take action and don't contribute to "demand".

HAMISH_MCTAVISH

Sampong wrote: »

as someone pointed out in another thread Spain don't need to build any more houses for the next 100 years.

Well, they will inevitably build some houses, as much of what was built will turn out to be in the wrong place to meet demand of the future.

Just as Ireland, with their 20% surplus of houses, which is equivalent to a 25 year supply even if you housed everyone on the social housing waiting list, will do the same.

But yes, it's true that the primary reason for their crash is a massive oversupply of housing.

And it's also true that the UK has a massive undersupply of housing.

We have a different situation - a massive shortage of housing and this fact takes centre stage in much of the debate on here and is often quoted as an argument why house prices will continue to rise in the short term (I don't think that anyone disputes they will rise long term!).

No, I think you've got that one wrong.

Prices are unlikely to either fall or rise in the short term beyond the minor fluctuations we've seen over the last 3 years.

But the fact that prices have been more or less stable for 3 years, and are likely to remain so, in the middle of the worlds biggest financial crisis in a century, with endemic mortgage rationing, and with high unemployment, is proof enough that we have a housing shortage.

OK so we debae that there is a massive shortfall of housing, there is a massive demand........ we need more houses....

So why don't the builders share the same confidence? Why aren't they building? Surely if there is a demand they should be building?

How?

Perhaps you've heard of the credit crunch?

Mortgage markets are, as even the council of mortgage lenders admit, completely "dysfunctional".

Builders won't build what they can't sell.

And buyers can't buy as long as mortgage markets remain dysfunctional.

The bears on here seemed to have some crazy idea that mortgages would be restricted, yet builders would keep on building houses anyway that nobody could get a mortgage for, oversupplying the market and driving down prices.

But that was just crazy nonsense.

What actually happened was mortgages got restricted, and building dropped back down to match those restricted levels.

So we have a rapidly growing population, and the lowest house building numbers since the 1920's.

Unsurprisingly, rents soared to new record highs, and most people now have to pay more to rent a house than they would to buy it, but they're forced to continue as they can't get a mortgage.

Adding to lifetime housing costs for Generation Rent, and forcing them to enrich their landlords.

Perhaps there is a subtle difference between "demand" and "need" or "desire". Many people that need or desire a property feel that it is out of there reach and therefore don't take action and don't contribute to "demand".

Of course there is a difference between "need" and "demand".

We have a huge amount of housing need, but the people who need houses can't get a mortgage, even though they can clearly afford to pay one as their rent is already higher than a mortgage even at 5%. So the demand is diverted to rented houses. So rents soar to record highs while house prices remain stable.

And the housing crisis gets worse and worse by the day.

ILW

I still believe an undeveloped land tax would get things moving a little.

Similar to the way retailers work.

If stock is costing you money to keep, you figure out a way of shifting it.

HAMISH_MCTAVISH

ILW wrote: »

Similar to the way retailers work.

If stock is costing you money to keep, you figure out a way of shifting it.

And similar to the way retailers work, if you are forced to sell the stock too cheaply you won't stay in business for long.

A tax on landbanks will either get passed straight on to the consumer, or less land will have planning permission applied for.

Neither one of which is helpful if you're looking for lower house prices.

ILW

HAMISH_MCTAVISH wrote: »

And similar to the way retailers work, if you are forced to sell the stock too cheaply you won't stay in business for long.

A tax on landbanks will either get passed straight on to the consumer, or less land will have planning permission applied for.

Neither one of which is helpful if you're looking for lower house prices.

I was looking at more houses, not necessarily lower prices. A land tax may mean a little of each.

Speculatively hoarding land does nobody any good.

Thrugelmir

Sampong wrote: »

So why don't the builders share the same confidence? Why aren't they building? Surely if there is a demand they should be building?

Insufficient demand for units at current price levels.

So builders have focussed on building fewer units but larger in size and quality. As there's the sector where demand currently is.

CLAPTON

a land value tax would lower the price of land as the cost of holding land would rise

it would discourage people buying land unless they had a clear paln
to build

and it would encourage those that hold the land to either develop and sell or sell to a developer

in some ways no different from every retailer or manufacturer who have to make judgements on how much stock to hold; too little and you lose sales too much and it's costing you too much

unlike normal stock however land is not transferrable; land in kensington is not equivalent to land in Nottingham so all the more reason why the should be specific action to encourage efficient use of the valuble resource

abaxas

Just enforce council tax at point of PP.

Job done.

Graham_Devon

Sampong wrote: »

So why don't the builders share the same confidence? Why aren't they building? Surely if there is a demand they should be building?

Put simply, they don't have to.

They can sell and buy land turning a profit for the business.

They can lean on the the taxpayer to come up with incentives to get buyers buying their stock. The taxpayer never benefits from this, only the builders. The taxpayer, infact, only faces losses, as aswell as providing an incentive, we also become guarantor.

While this is happening, they can turn a healthy profit, as can be seen in their yearly financials.

It's not like Tescos, B&Q, Woolworths etc, where they rely on the customer coming to them to buy something and having to compete with other stores. It's a cartel at the moment, and the builders can build just enough to create a profit, and also create the need for more subsidies from the taxpayer.

It's win win when you can make profits, keep them all, have the taxpayer as guarantor and also twist the arm of the taxpayer for more from them, and less from the business. Especially when you include social housing.

If the taxpayer had given everyone 25% off their total items when they shopped in Woolworths to keep woolworths selling stuff, there would have been uproar. Woolworths wouldn't have had to compete in this scenario. They could whack their prices up 10% compared to all competitors and still have the customers flocking. Like the scenario, builders don't have to compete for the customer, it's pretty much given to them.

The housebuilders are onto a good thing right now. The less they build, the worse the problem becomes. The worse the problem becomes, the more the taxpayer will stump up, and the less risk the builders have to take. You make the problem worse, you up your take.

CLAPTON

abaxas wrote: »

Just enforce council tax at point of PP.

Job done.

indeed; essentially that's the idea of the land value tax

Pobby

Might have been a good thing if G Brown had kept his word regarding not letting the housing market get out of control again. Much more affordable housing. I like that. Less going out in housing benefit. Seems a winner.

Maybe that might have been the key to a more relaxed housing market.

Interesting to see the huge amounts of new build my way. Built in ghastly areas, part of the gentrification of run down areas. Sadly the council cannot put in the infrastructure so they remain pretty forsaken and none of the shops underneath are occupied.