The Real Reason House Prices Are Rising - Why Help To Buy Is A Good Idea

cepheus

George Osborne's Help to Buy is 'moronic, says respected analyst

The Chancellor’s attempt to help people buy their first home is “a moronic policy” that “stands head and shoulders” above other economic mistakes, a leading analyst has warned.

But Mr Edwards said the policy risked stoking house prices higher even though they were already “extremely overvalued”.

“I believe it truly is a moronic policy that stands head and shoulders above most of the stupid economic policies I have seen implemented during my 30 years in this business,” he wrote in a research note this week.

“UK house prices, and in London most especially, have never been allowed to correct to 'affordable’ levels. First-time buyers need cheaper homes, not greater availably of debt to inflate house prices even further. This is madness.”

Sampong

http://www.bbc.co.uk/iplayer/episode/b02mc1f9/Newsnight_05_06_2013/

Interesting piece on Newsnight last night about help to buy. First feature, 00:10 in.

grizzly1911

Sampong wrote: »

http://www.bbc.co.uk/iplayer/episode/b02mc1f9/Newsnight_05_06_2013/

Interesting piece on Newsnight last night about help to buy. First feature, 00:10 in.

Thanks - I missed that.

Nice to see Hamish aka John Wrigglesworth from LSL being so pro the initiatives not that he has any VI of course.

The house builder spokesman made the point that the crisis in supply had been building fro over 20years which dove tails with the collapse in council/social house building. The private sector has never filled the gap left. I must say he didin't seem to care about what might happen to teh people who actually buy the property or what migght happen to the market down the line.

He also talked about all the extra jobs, extra taxes generated now, by creating debt if people cannot afford to service that debt as incomes fall in real terms how is that short term benefit going to paid for long term?

Nicola Horlick makes the point about HPI being a real issue and for too much income being spent on housing. Also wehen the props are removed x years down the line people will feel disgruntled as they relaise their "investment" may well leave them in negative equity.

I thought the Conservative spokesman summed it up nicely a "housing dream" - sadly not reality.

CLAPTON

we need to build more houses

there may be several ways to do that but maybe a combination of more land zoned for developement, a land value type tax so land with building permission has higher tax than that without, a reduction on existing infrastructure levies and 'affordable' housing costs, reduced (or abolished stamp duty) and of course sensible mortgaage leading policies so people with say 10% deposit can get decent mortgage deals (without tax payer subsidy or guarantees.)

IveSeenTheLight

Thrugelmir wrote: »

Does it require the Government to control rents? Or will market forces eventually take their toil.

Let's consider this.

If the Government introduced Rent Controls to the point that there was an insufficient Rental Yield for the Investment, most likely invested would sell up and invest elsewhere.

This would likely cause prices to stagnate / fall slightly, however a bigger impact would be rents which as a smaller percentage of the overall market, would see pressure for rents to rise as the demand outweighs the supply.

Whatever way you look at it, there needs to be more property or society needs to consider more people share each house to reduce the demand.

Graham_Devon

IveSeenTheLight wrote: »

Let's consider this.

If the Government introduced Rent Controls to the point that there was an insufficient Rental Yield for the Investment, most likely invested would sell up and invest elsewhere.

This would likely cause prices to stagnate / fall slightly, however a bigger impact would be rents which as a smaller percentage of the overall market, would see pressure for rents to rise as the demand outweighs the supply.

No it wouldn't.

If you sell your rentals, you have to sell them TO someone. in your scenario you assume rental demand by those unable to buy houses would stay the same....and you create a load of new people out of thin air buying houses to live in.

It doesn't tally. Demand from the static pool of people stays the same. If you want to sell your house to people, you will be selling to those who currently rent.If they couldn't afford to buy it from you, and you can't afford to rent it out to them any longer, then that's a bit tough on yourself really.

I'm sure landlords after all the low interest rates and HPI gained over the last few years have some spare capacity. If they don't, I'd be surprised, but it would be entirely their fault. They would be levereged up to the max.

System

CLAPTON wrote: »

a land value type tax so land with building permission has higher tax than that without,

I don't get that. Surely the way to encourage something is to lower the tax, not raise it?

Or do you mean there should be a high tax on building land that is NOT built on?

Thrugelmir

cepheus wrote: »

George Osborne's Help to Buy is 'moronic, says respected analyst

The Chancellor’s attempt to help people buy their first home is “a moronic policy” that “stands head and shoulders” above other economic mistakes, a leading analyst has warned.

But Mr Edwards said the policy risked stoking house prices higher even though they were already “extremely overvalued”.

“I believe it truly is a moronic policy that stands head and shoulders above most of the stupid economic policies I have seen implemented during my 30 years in this business,” he wrote in a research note this week.

“UK house prices, and in London most especially, have never been allowed to correct to 'affordable’ levels. First-time buyers need cheaper homes, not greater availably of debt to inflate house prices even further. This is madness.”

So why haven't his bearish views been published before? On any topic.

michaels

cepheus wrote: »

“UK house prices, and in London most especially, have never been allowed to correct to 'affordable’ levels. First-time buyers need cheaper homes, not greater availably of debt to inflate house prices even further. This is madness.”

I don't understand this. House prices by definiton are the price at which houses are bought and sold. If they are not 'affordable' then by definition buyers can not buy them so the transactions can not hppen...but they are happening.

Someone please explain.

mystic_trev

Pity she didn't have her eyes open when she wrote the article!;)

Nice jumper though