Newsnight tonight: Housing

Wookster

Graham_Devon wrote: »

Having watched the video the conclusion appears to be that we can't build, because lenders won't lend.

Seems a bit disjointed to me. Doesn't even question prices, or even peoples abilities to borrow and pay back, just suggests the banks won't lend.

This doesn't stack up. We've seen what the government can do and how they can intervene with lending, what with all the various schemes over the past years.

I'm not sure I quite agree with this. I think there is a mix of reasons as to why there is little building and lending will no doubt be one factor of many, restrictive planning laws being a second, and also high land & property prices as well.

The first two are easy to resolve but property/ land prices are much more painful to resolve (in the short term anyway).

ILW

MacMickster wrote: »

So if the major construction companies won't build (whether because of mortgage rationing or a hint of self-interest to protect their margins and the value of land that they have banked), then surely the answer is for the government to direct the next lot of money towards housing associations and local authorities in areas where there is a significant housing shortage.

We need to get Britain building.

#
If that was the case, it should produce a large number of rental properties (will need to have a "never sell" covenant). If rentals are inderctly paid back to the government they could also produce a long term return.
May hit some BTL investors though.

CLAPTON

did the programme actually ask builders why they weren't building?


did the programme ask potential buyers why they weren't buying?

I don't know any builders so I can't ask them but I do know a lot of young(ish) people and I find
-those with 20% deposits have no problem at all getting a decent mortgage (4 x income)
- many however, who do have a deposit, don't want to buy just now for a variety of reasons: some because they think prices will drop, some for generalised insecurity reasons or want to wait and see whats going to happen.

ukcarper

MacMickster wrote: »

So if the major construction companies won't build (whether because of mortgage rationing or a hint of self-interest to protect their margins and the value of land that they have banked), then surely the answer is for the government to direct the next lot of money towards housing associations and local authorities in areas where there is a significant housing shortage.

We need to get Britain building.

With a sizable section who will never be able to afford to buy what is needed is property to rent a reasonable prices for example council houses will this happen I think not.

For Graham would you be happy if the Government made mortgages available to the general public at say a 5% deposit and 4x joint income.

PasturesNew

If a developer builds at a cost of £100k, trousers £50k profit and flogs for £150k .... to a BTL LL on a 5% mortgage, then the LL's interest only mortgage is £625/month.

If the Council/Housing Associations build at a cost of £100k on a lower 3% mortgage (because they'd have access to money closer to the base rate), the interest only mortgage is £250/month.

So why don't they do it?

MacMickster

ILW wrote: »

#
If that was the case, it should produce a large number of rental properties (will need to have a "never sell" covenant). If rentals are inderctly paid back to the government they could also produce a long term return.
May hit some BTL investors though.

Exactly, and if there is sufficient, good quality, rental property out there then along with housing benefit restrictions (again a saving to the taxpayer) this would bring down rents and consequently, to a lesser extent, property values in the area.

High housing costs, particularly in the south-east, caused by supply and demand problems mean that people can't afford to live and work in the places that they are needed. Consequently, at the moment, their wages are being heavily subsidised by the taxpayer in the form of additional benefits, which does not actually ease the supply and demand problem, so continues to drive up property prices and rents. This is effectively a vicious circle for the taxpayer.

ILW

MacMickster wrote: »

Exactly, and if there is sufficient, good quality, rental property out there then along with housing benefit restrictions (again a saving to the taxpayer) this would bring down rents and consequently, to a lesser extent, property values in the area.

High housing costs, particularly in the south-east, caused by supply and demand problems mean that people can't afford to live and work in the places that they are needed. Consequently, at the moment, their wages are being heavily subsidised by the taxpayer in the form of additional benefits, which does not actually ease the supply and demand problem, so continues to drive up property prices and rents. This is effectively a vicious circle for the taxpayer.

Does seem odd that succesive governments seem to prefer to fork out massive amounts of money in housing benefit to private landlords, rather than us the cash to build homes.
Have virtually all MPs of both parties got BTL portfolios?

Graham_Devon

ukcarper wrote: »

For Graham would you be happy if the Government made mortgages available to the general public at say a 5% deposit and 4x joint income.

No, it's too high a risk for the countries finances.

I'm not sure if I put the point across quite correctly. The programme was talking mainly (as I understood it) about social housing.

I took this in terms of housing associations, or even, if they really want to get the country back on it's feet, they could start building council housing again.

This is why I thought the conclusion that we couldn't build because banks weren't lending was a bit weird. We don't have to build houses that banks are required to lend on. We can build decent council homes, and of course, build decent affordable homes which banks can lend on.

If builders won't build because lenders won't lend, and lenders won't lend because people can't generally hit their affordability requirements, then we obviously have stalemate.

Increasing house prices simply isn't the answer here. The populace (those that would be looking to take on the debt to buy) is pretty much saturated with debt. So something surely has to give, something surely needs looking at.

Theses GDP figures could be the catalyst to change. That was my point. If we don't do something, the GDP figures will simply swallow us up into the vortex of Europe, which people not spending and paying off debts, which means GDP goes down, leading to lower spending and more retrenching etc.

Hamish appears to believe he's told us this. But he hasn't. All he's stated is we need to stop cuts and spend more. What I'm laying out here is that you need to spend more in the right areas. Hamish, for instance, has suggested knocking down hospitals, schools and rebuilding them. It's a one off. Spending on a high speed reail system is fine, but it's a one off. Spending on new housing ticks the boxes of so many problems right now I really fail to see why it's not done (of course I understand the pressure from certain groups not to).

I honestly think we'll see more talk of this now. Banks have been holding out, and so have the government. But they can't hold out for much longer, and holding out hasn't fixed the issue, just delayed it. Banks may suggest if houses are built, values iwll fall and more will be in neg equity....but hey, it's likely to happen anyway if we get swalled up by a vortex of !!!!!!.

Surely having people in jobs, creating homes, pulling us out of recession is starting to look a better bet for the banks now?

MacMickster

PasturesNew wrote: »

If a developer builds at a cost of £100k, trousers £50k profit and flogs for £150k .... to a BTL LL on a 5% mortgage, then the LL's interest only mortgage is £625/month.

If the Council/Housing Associations build at a cost of £100k on a lower 3% mortgage (because they'd have access to money closer to the base rate), the interest only mortgage is £250/month.

So why don't they do it?

The landlord in the first example would then need to charge a monthly rental of around £900 to achieve a minimum return on his investment after allowing for costs - in all probability subsidised by the taxpayer through housing benefit.

The Council/Housing Association in the second example could charge £600 per month giving a much better deal all round.

Additionally, unemployment benefits would be saved (and tax paid by) those employed in the construction process, effectively making the building costs even cheaper for the taxpayer.

Graham_Devon

MacMickster wrote: »

The landlord in the first example would then need to charge a monthly rental of around £900 to achieve a minimum return on his investment after allowing for costs - in all probability subsidised by the taxpayer through housing benefit.

The Council/Housing Association in the second example could charge £600 per month giving a much better deal all round.

It's just obvious isn't it really.

What I need to find out now is who is really pulling the strings and who is really stopping this happening. Is it large investors? Builders themselves? MP's?