Government must do more on affordable housing

HAMISH_MCTAVISH

Graham_Devon wrote: »

Just boosting lending as we've been doing for the past 4-5 years hasn't done anything to solve any problems so far. !

Except of course, that we haven't really done anything to boost lending at all.

You can rattle off the names of the various ineffective, token gesture, publicity stunt, schemes all you like.

But as lending has not increased in any material way, then you can hardly describe them as a "boost".

Just 0.38% of mortgages issued last year were at 95% LTV. And that includes the ones from the schemes.

Just 1.8% of mortgages issued last year were at 90% or greater LTV.

The average FTB had to raise a 20% to 25% deposit last year in order to access funding.

Which is why the builders quite rightly note that mortgage funding is the biggest barrier to entry, and they can't build what they can't sell.

Even the UK treasury has admitted that there is a need for more lending at higher LTV-s, and in the article I posted the main obstacle to that happening was clearly mentioned, ie, bank capital withholding that makes them retain 6 times more capital for a 5% deposit mortgage as they used to.

If you take an example from "round my way", you can buy new build detached houses all day long for between 200K and 300K.

You can buy plots of land with planning consent all day long for between 35K and 60K. And I suspect it is the same in most of the UK, outside the minority of really expensive areas in the south.

Even if the land price dropped by 50%, there would be little difference in the price of new builds. And given we need to build 300% of the houses than we do today to meet new housing need and catch up with the housing shortage, a 10%, or even 20%, fall in price isn't going to make any noticeable difference at all.

Lets say we build 100K houses a year. Now lets say prices fall by 15%, so the same lending gives us 115k a year.

We need 300K a year. How do you propose to bridge that gap without more lending?

You need more lending Graham, not some regurgitated and discredited meme from hpc about land tax.

IveSeenTheLight

Graham_Devon wrote: »

Quite annoying that the whole "it's the lenders fault" is appearing in the media. It's far more than that. How did builders cope before the boom of the last decade!?

Just 98,000 houses were built in 2012.

A study of barrats FTBs has for the first time stated lack of housing is their biggest problem and not mortgage finance.

Something to consider

Generali wrote: »

There's a story about a visit by a senior Soviet Union official to the USA during the Cold War. He was taken to a supermarket and asked what, to him, was a perfectly reasonable question upon seeing shelves full of food in a way that would have been unimaginable to a normal USSR consumer at the time:

"Who is responsible for ensuring the supermarket has bread to sell?"

IMHO, the shelves are full because nobody has that responsibility. Someone grows wheat, another mills it, yet another sells the flour and makes the yeast and makes the bread and makes the plastic bags it goes in and drives the lorries and chicks the checkouts...........................

So who is responsible for making petrol the right price?
So who is responsible for making the right number of houses at a right price?
So who is responsible for making the price of money right?
So who is responsible for you getting a job, educating your kids, caring for you, providing you with health care.....?

Do you want to take responsibility for yourself or hope that the man in Moscow can get bread to your local supermarket?

Graham_Devon

Depends how you measure the boost Hamish.

If you are measuring it against a level of lending previously set, then yer, you could say it's not working as it hasn't overtaken the height of lending.

If you are measuring the boost against what lending would have been without all this stimulus, then I reckon it's given lending a boost.

N1AK

HAMISH_MCTAVISH wrote: »

Even if the land price dropped by 50%, there would be little difference in the price of new builds. And given we need to build 300% of the houses than we do today to meet new housing need and catch up with the housing shortage, a 10%, or even 20%, fall in price isn't going to make any noticeable difference at all.

Lets say we build 100K houses a year. Now lets say prices fall by 15%, so the same lending gives us 115k a year.

We need 300K a year. How do you propose to bridge that gap without more lending?

I think most of the anti-more-borrowing camp aren't suggesting that borrowing isn't an immediate issue but that throwing money at borrowing alone will cause a counter-productive house price boom.

If the government put together a package of measures that included building 250k+ houses a year and some additional money for borrowing then I'd accept it as a decent compromise solution.

Personally I'd rather than the additional lending came in the form of a loan from the government to FTBs to help increase the deposit rather than to encourage higher LTV ratios. For example allowing FTBs to match their deposit with a government loan linked to inflation (perhaps always allowing £5k and capped at £15k). Then to get a 20% deposit on a £150k property you'd need £15k rather than £30k.

Harry_Boyle

Devon's busy today. I wonder how much the NHS/taxpayer is paying for his time today?

wotsthat

Graham_Devon wrote: »

Depends how you measure the boost Hamish.

If you are measuring it against a level of lending previously set, then yer, you could say it's not working as it hasn't overtaken the height of lending.

If you are measuring the boost against what lending would have been without all this stimulus, then I reckon it's given lending a boost.

Measuring against peaks and troughs usually isn't that enlightening. If you look at the BoE's trends in lending http://www.bankofengland.co.uk/publications/Documents/other/monetary/trendsjanuary13.pdf

Chart 1.4 show lending to individuals over time. It's clear that the measures intended to provide a boost have had limited (if any) impact. That's not because peak lending hasn't yet been achieved but because lending has remained flat despite the schemes you listed.

You can't say lending has been boosted because it would have been lower without the stimulus. For a start builders aren't going to build extra houses because there would have been even less money without the boost and secondly it's difficult to measure what lending would have been without the stimulus so becomes subject to opinion rather than data.

shortchanged_2

HAMISH_MCTAVISH wrote: »

Even if the land price dropped by 50%, there would be little difference in the price of new builds.

Are you for real Hamish?

Seeing as the price of land is the essential driver of house prices as it is that which is the most volatile aspect of house prices, how can you say that there would be very little price drop in a new build if average plot prices dropped from say £100K to 50K?

wotsthat

shortchanged wrote: »

Are you for real Hamish?

Seeing as the price of land is the essential driver of house prices as it is that which is the most volatile aspect of house prices, how can you say that there would be very little price drop in a new build if average plot prices dropped from say £100K to 50K?

Taylor Wimpey paid an average of £33k for their plots. (2011 accounts)

grizzly1911

wotsthat wrote: »

Measuring against peaks and troughs usually isn't that enlightening. If you look at the BoE's trends in lending http://www.bankofengland.co.uk/publications/Documents/other/monetary/trendsjanuary13.pdf

Chart 1.4 show lending to individuals over time. It's clear that the measures intended to provide a boost have had limited (if any) impact. That's not because peak lending hasn't yet been achieved but because lending has remained flat despite the schemes you listed.

You can't say lending has been boosted because it would have been lower without the stimulus. For a start builders aren't going to build extra houses because there would have been even less money without the boost and secondly it's difficult to measure what lending would have been without the stimulus so becomes subject to opinion rather than data.

I interpreted what Devon saying as:- the degree of lending and house price boom was a false peak that shouldn't have happened. Trying to measure anything against that would be against a false expectation and would inevitably fall well short.

I agree that evaluate anything against what might have happened had the measures not been taken is wholly subjective and what if?

Interestinglink thanks.

wotsthat

grizzly1911 wrote: »

I interpreted what Devon saying as:- the degree of lending and house price boom was a false peak that shouldn't have happened. Trying to measure anything against that would be against a false expectation and would inevitably fall well short.

I did too and agree.

However there's no point trying tell builders they should be building more when there's been a non-existent boost to lending. It's been flat since 2008.