Newsnight tonight: Housing

ukcarper

I don't think prices would fall if more house were built and the lending was available for people to buy them with smaller deposits. I believe there is sufficient pent up demand to prevent it.

I'm also sure that a model could be made to enable houses to be built and let out at reasnoble rents but thier seems to be no desire by the present government to do this in fact they are going in the other direction by increasing right to buy.

Graham_Devon

The Persimmon boss hits back!!!

http://www.thisismoney.co.uk/money/markets/article-2178990/MIKE-FARLEY-INTERVIEW-Loans-young-buyers-key-housing-revival-says-Persimmon-boss.html

‘The industry has the capacity to build more houses,’ he explains, ‘but we are not going to build houses we can’t sell. So it comes back to the old question about mortgages.’

For the commercial housebuilders, this is where the problem lies. Of course, relaxing planning laws and making it easier and cheaper to build houses would help.

But if no one can buy them, because they do not have a big enough deposit to persuade a bank or building society to give them a mortgage, the builders would soon go bust.

Wouldn't take too much notice of him, their profits are rising handsomely, and he's basically asking for more schemes.

Wookster

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.

Well this really misses the point. Buying houses doesn't add to productivity. Building them does. The focus must be on building more houses rather then trying to reflate the bubble that got us into this mess.

the_flying_pig

Graham_Devon wrote: »

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?

I completely agree that there should be more council housing.

There’d be plenty of contracts available for various ‘privatesector’ companies, who would definitely build the houses & probablymaintain them thereafter.

But rather than builders being paid by BTL landlords puttingdown [say 25%] deposits & borrowing the rest from banks, they could be paidby government borrowing the lot.

Government debt is obviously, other things being equal, abad thing, but vastly worse is a commitment to fork out to BTL landlords intoperpetuity.

Government can borrow at exceptionally low rates, less than1%. But the gross yield that private landlords get, even in the frothiest areas like centralLondon, is north of 3%. So government’s interest payments on a £100k council housewould be less than £1k a year, whereas payments to a BTL landlord would benorth of £3k a year.
Really a no-brainer, especially taking a long-term view, takinginflation into account, where debt repayments wouldn’t increase in line withinflation whereas BTL payments would.
Now, this is a bit simplistic obviously, since:(1) with BTL, maintenance & so on comes out of landlords’ pockets; and (2)some of the money paid to BTL landlords come back to government through taxpayments.
But equally gross yields canbe quite a lot higher than 3%, especially in cheap areas, and it’s seeminglydifficult to stop HB tenants from gravitating towards relatively high-quality &expensive housing stock in a way that wasn’t possible under the council housing-led system.

ukcarper

Wookster wrote: »

Well this really misses the point. Buying houses doesn't add to productivity. Building them does. The focus must be on building more houses rather then trying to reflate the bubble that got us into this mess.

How do you propose they do that

I keep getting told that the bubble was caused by liar lones 125% and high salary multiple mortages. If that is correct lending with prudent salary multiples shoud not inflate bubble.

ukcarper

the_flying_pig wrote: »

I completely agree that there should be more council housing.

There’d be plenty of contracts available for various ‘privatesector’ companies, who would definitely build the houses & probablymaintain them thereafter.

But rather than builders being paid by BTL landlords puttingdown [say 25%] deposits & borrowing the rest from banks, they could be paidby government borrowing the lot.

Government debt is obviously, other things being equal, abad thing, but vastly worse is a commitment to fork out to BTL landlords intoperpetuity.

Government can borrow at exceptionally low rates, less than1%. But the gross yield that private landlords get, even in the frothiest areas like centralLondon, is north of 3%. So government’s interest payments on a £100k council housewould be less than £1k a year, whereas payments to a BTL landlord would benorth of £3k a year.
Really a no-brainer, especially taking a long-term view, takinginflation into account, where debt repayments wouldn’t increase in line withinflation whereas BTL payments would.
Now, this is a bit simplistic obviously, since:(1) with BTL, maintenance & so on comes out of landlords’ pockets; and (2)some of the money paid to BTL landlords come back to government through taxpayments.
But equally gross yields canbe quite a lot higher than 3%, especially in cheap areas, and it’s seeminglydifficult to stop HB tenants from gravitating towards relatively high-quality &expensive housing stock in a way that wasn’t possible under the council housing-led system.

I could see that system working but do you think the present government or any other government would do it.

CLAPTON

just think

a BTL landlord will change a light bulb for about £1; the council will change a light bulb for over £100.

the_flying_pig

ukcarper wrote: »

I could see that system working but do you think the present government or any other government would do it.

Yeah, dunno. Is it a national accounting thing?

Money borrowed to build houses shows up as debt on the government's balance sheet, whereas obligations to pay private landlords for ever to satisfy the same housing need, even though it's much more expensive over time and government has no real way of getting out of footing the bill, doesn't.

Not really my area.

the_flying_pig

CLAPTON wrote: »

just think

a BTL landlord will change a light bulb for about £1; the council will change a light bulb for over £100.

Was that an argument why BTL would cost the taxpayer less than state owned housing?

If so it was amongst the most risible contributions ever made to this forum, up against some fairly stiff competition.

PaulF81

Running_Horse wrote: »

But if house prices fail to rise, will the builders just abandon their developments as they did post 2007? The whole building boom thing seems predicated on scarcity prices. Once price begin to fall, they will just restrict availability...again.

They won't have that option if land is released for self build or to small independent house builders.