Scathing attack on help to buy

Graham_Devon

Not just wrong, it's moronic!

George Osborne's scheme to boost the housing market through state mortgage subsidies has been dubbed one of the "most stupid economic ideas" of the past 30 years by a leading City commentator.

Albert Edwards, who heads the global strategy team at Soci!t! G!n!rale said the chancellor's flagship Help to Buy programme was artificially inflating property prices and driving young people deeper into "indentured servitude".

The chancellor said in the budget that the government would provide lenders with a guarantee of up to 20% of a mortgage in an attempt to provide potential buyers with a big enough deposit to purchase a home. If a borrower defaults on a loan, the taxpayer will be liable for a share of the losses.

Edwards – a high profile City strategist renowned as a market doomsayer – said the scheme was artificially propping up the market and preventing prices correcting to affordable levels. First-time buyers need cheaper homes, not greater availably of debt to inflate house prices even further, Edwards said. "This is madness."

Meanwhile, Mervyn King has been wheeled out and he's stated the scheme should NOT be extended in January due to some of the issues raised above.

The housebuilders federation on the other hand hails the scheme as a absolute success, based on 4,000 reservations. however, they don't tell us how many have actually completed.

But why is Help to buy such a problem? Well...

"Young people today haven't got a chance of buying a house at a reasonable price, even with rock bottom interest rates. The Nationwide Building Society data shows that the average first-time buyer in London is paying over 50% of their take home pay in mortgage repayments – and that is when interest rates are close to zero."

In a research note, Edwards said it made him "genuinely really angry" that burdening young people struggling to pay off student loans with more debt was seen as the solution to the problem of excessively expensive housing."

Why are houses too expensive in the UK? Too much debt. So what is George Osborne's solution for first-time buyers unable to afford housing? Why, arrange for a government-guaranteed scheme to burden our young people with even more debt! Why don't we call this policy by the name it really is, namely the indentured servitude of our young people.

Being discussed on 5live at the moment, and it seems the absolute majority sum up help to buy as "help to prop".

Lots more in the article. The man speaks pure sense.

www.guardian.co.uk/business/2013/jun/04/george-osborne-help-to-buy-moronic

grizzly1911

Graham_Devon wrote: »

Not just wrong, it's moronic!

Meanwhile, Mervyn King has been wheeled out and he's stated the scheme should NOT be extended in January due to some of the issues raised above.

The housebuilders federation on the other hand hails the scheme as a absolute success, based on 4,000 reservations. however, they don't tell us how many have actually completed.

But why is Help to buy such a problem? Well...

Being discussed on 5live at the moment, and it seems the absolute majority sum up help to buy as "help to prop".

Lots more in the article. The man speaks pure sense.

www.guardian.co.uk/business/2013/jun/04/george-osborne-help-to-buy-moronic

I think this is key bit:-

Why, arrange for a government-guaranteed scheme to burden our young people with even more debt! Why don't we call this policy by the name it really is, namely the indentured servitude of our young people.

Yep debt slaves going for the dream.

Sampong posted a link to BBC newsnight last night.

Not just Albert Edwards(Societe Generale) but as you point out Mervyn King, BOE, IMF Treasury Select Committee - House of Commons and the OBR all questioning it.

On newsnight a Conservatibve Minister/MP(?) was cited as only being interested in creating a building boom but couldn't be bothered who buys them. IMO the consequences of short term political actions.

wotsthat

Graham_Devon wrote: »

Lots more in the article. The man speaks pure sense.

No, he's a bit of an idiot.

He's worth a google - he's currently predicting that S&P will fall 75% & gold will reach $10,000/ oz. As long as he's the first port of call when the media are looking for a 'controversial bear' I don't think he much cares about whether he's right or wrong.

Sensible people will measure success in terms of new housing supply. If it doesn't make a difference on that front it's failed.

Sampong

Yeah this story made newsnight last night;

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

The Tory was spluttering a bit.

The guy from the Housebuilders Federation argued "for"............ funny that.

Graham_Devon

wotsthat wrote: »

No, he's a bit of an idiot.

He's worth a google - he's currently predicting that S&P will fall 75% & gold will reach $10,000/ oz. As long as he's the first port of call when the media are looking for a 'controversial bear' I don't think he much cares about whether he's right or wrong.

Sensible people will measure success in terms of new housing supply. If it doesn't make a difference on that front it's failed.

Appears to be the only "sensible" people we have at the moment then are the architects of the scheme, builders and VI's.

Thrugelmir

Graham_Devon wrote: »

Meanwhile, Mervyn King has been wheeled out and he's stated the scheme should NOT be extended in January due to some of the issues raised above.

Best to quote what precisely he said. Not what the media intepretated that they thought he said. As there's a considerable difference.

grizzly1911

Thrugelmir wrote: »

Best to quote what precisely he said. Not what the media intepretated that they thought he said. As there's a considerable difference.

I guess it depends what frame of mind he was in as to whteher he really meant what he thought he may of said.

Appears to change with audience.

wotsthat

This is what Mervyn King said a couple of weeks ago...

http://www.bankofengland.co.uk/publications/Documents/inflationreport/conf150513.pdf

I think in terms of Help to Buy, I understand why people want to do things in the short run. What is most important is that down the road, when we get back to normality, we do not end up with a system of permanent taxpayer guarantees for mortgages. That would be a very dangerous path, the Bank of England has always made that clear, and I think we made it clear when we were being asked about the position of the United States, where it's still the case, the United States haven't found a way to back out of the problems of implicit taxpayer guarantees to Fanny Mae and Freddie Mac which have turned into explicit ones.

So I don't think anybody wants to go down that path, and that's why the Chancellor has asked the Financial Policy Committee to opine on whether or not it would be sensible to extend the scheme, if a government three years down the road wishes to do so. And we don't yet know what conditions will be in three years' time, but I think what is very important is that we don't see this as a permanent feature of the landscape. And I don't think anyone, certainly not the Chancellor, has suggested that.

Seems entirely sensible and reasonable.

I don't think Mervyn is going to be challenging Albert Edwards to be the headline writers 'rent a bear' of choice.

Graham_Devon

wotsthat wrote: »

I don't think Mervyn is going to be challenging Albert Edwards to be the headline writers 'rent a bear' of choice.

Really? I think we all assumed he was...

Do you agree with any of the points in the article? Forget about the person and how once said something which didn't happen. Do you not see anything in the article to be of any truth?

wymondham

Been thinking about this recently. All Osborne has done is to mask the problem really hasn't he - if houses were affordable then people could buy them without gimmicks.

It reminds me of a tale years back. I know this is IT related but its the same mind-set. When a very well know software manufacturer had a problem with its server software crashing often, instead of looking to why it did it and correct it, it made it boot up quicker! Problem masked.

wotsthat

Graham_Devon wrote: »

Do you agree with any of the points in the article? Forget about the person and how once said something which didn't happen. Do you not see anything in the article to be of any truth?

The guff from Albert Edwards has no value other than headline grabbing.

There seemed to be some balanced criticism of the scheme at the base of the article.

If the scheme doesn't lead to an increase in supply then it'll be 'parked' like others that went before.