Generation buy is about lower prices 'across the board'

padington

Says Tory speaker on daily politics ( get it on iplayer ). Seems there is now an aim to get 'lower house prices, over time, across the board'.

Which I think means one day ( but not in London ) whilst letting people on 50 - 70k get 20% free money to buy in London.

Sounds all a bit, crap. Firstly it's disingenuous, the government doesn't want house prices lowered otherwise housing would be counted in the inflation targets
( surely ?).

Secondly people on 50 - 70k certainly shouldn't be Subsidised by the state ( should they ?).

Generali

padington wrote: »

Sounds all a bit, crap. Firstly it's disingenuous, the government doesn't want house prices lowered otherwise housing would be counted in the inflation targets
( surely ?).

House prices aren't in the CPI because CPI is a standardised measure used across Europe and during initial discussions it wasn't possible to agree on the best way to measure house prices and their impact on the price level (for example, do you measure mortgage costs, imputed rent or actual house prices?). As it was not possible to get agreement on that item but the Euro needed to go ahead, it was agreed to ignore house prices in the CPI until further discussions could be had.

The RPI, the BoE's original target, has house prices included.

padington

Generali wrote: »

House prices aren't in the CPI because CPI is a standardised measure used across Europe and during initial discussions it wasn't possible to agree on the best way to measure house prices and their impact on the price level (for example, do you measure mortgage costs, imputed rent or actual house prices?). As it was not possible to get agreement on that item but the Euro needed to go ahead, it was agreed to ignore house prices in the CPI until further discussions could be had.

The RPI, the BoE's original target, has house prices included.

Thanks , So if 'lower house prices across the board' is a genuine new goal we should be seeing a massive repositioning of how we react to the RPI then ?

Generali

padington wrote: »

Thanks , So if 'lower house prices across the board' is a genuine new goal we should be seeing a massive repositioning of how we react to RPI then ?

Not really. Mortgage payments (an indirect measure of house prices) are 2.9% of the RPI so a fall in mortgage payments of 10% would only reduce the RPI by about 0.3 percentage points.

I think people overestimate the extent to which housing is a large cost for a lot of people. Don't forget, about half the OO houses are mortgage free so any change in mortgage costs doesn't impact on those people at all, at least not directly. For every house that has a 95% mortgage secured against it there will be a place that has a few grand left to be repaid.

Generali

Oh, BTW I agree that people earning double or more the average income shouldn't be receiving a state subsidy for housing. In fact I don't think that people should be receiving a subsidy for housing at all.

If we are going to provide welfare benefits, give people an amount of money that we think it is reasonable for them to live on and let them decide how to spend it. If they want to live in a hovel and spend the money on other things or live in a lovely place and live off beans on toast I think they should be left to get on with it.

padington

RPI seems so low, if it does truly include the housing given the rise of house prices ?

http://www.economicshelp.org/blog/5720/economics/inflation-stats-and-graphs/

http://www.marketoracle.co.uk/images/2015/Feb/uk-house-prices-momentumn-2015.gif

... Or does it simply include the rate of mortgage payments ?

Because to me, the cost of something should be about the price to buy with cash, not the cost of obtaining credit.

Generali

padington wrote: »

RPI seems so low, if it does truly include the housing given the rise of house prices ?

http://www.economicshelp.org/blog/5720/economics/inflation-stats-and-graphs/

... Or does it simply include the rate of mortgage payments ?

Because to me, the cost of something should be about the price to buy with cash, not the cost of obtaining credit.

The housing component of the RPI includes the following:

• Rent
• Mortgage interest payments
• Depreciation
• Council tax and rates
• Water and other charges
• Repairs and maintenance charges
• Do-it-yourself materials
• Dwelling insurance and ground rent

So it doesn't include house prices directly. However, remember that the RPI is meant to measure changes in the cost of living and house prices aren't really part of the cost of living directly.

Changes in asset prices are difficult for central banks to deal with and so usually go into the 'too hard' bucket. It is notable that mortgage lending has been clamped down on across the world by regulators, Governments and the banks themselves. The UK Government's attack on the BTL sector is very notable. I don't think that people have grasped what the full impact is going to be but, assuming the rules don't get changed they will mean a huge shift in the structure of the UK housing market.

padington

Generali wrote: »

The housing component of the RPI includes the following:

• Rent
• Mortgage interest payments
• Depreciation
• Council tax and rates
• Water and other charges
• Repairs and maintenance charges
• Do-it-yourself materials
• Dwelling insurance and ground rent

So it doesn't include house prices directly. However, remember that the RPI is meant to measure changes in the cost of living and house prices aren't really part of the cost of living directly.

Changes in asset prices are difficult for central banks to deal with and so usually go into the 'too hard' bucket. It is notable that mortgage lending has been clamped down on across the world by regulators, Governments and the banks themselves. The UK Government's attack on the BTL sector is very notable. I don't think that people have grasped what the full impact is going to be but, assuming the rules don't get changed they will mean a huge shift in the structure of the UK housing market.

How do you imagine things will change over the next five years ? HPI flatlining on average? Two year boom, three year bust ? Large increase in owner occupation, large decrease in BTL landlords ?

Generali

padington wrote: »

How do you imagine things will change over the next five years ? HPI flatlining on average? Two year boom, three year bust ?

I'm not sure TBH. It would be interesting to look at the structure of the BTL market and see just who is likely to be impacted and to what extent and, most especially, where they own.

I don't think the change in BTL regulations is going to have a huge impact until they actually come in. At that point things could get a bit messy for a bit as people look to sell.

There will be all sorts of things under the hood of BTL. For example, MEWing peaked at almost 10% of GDP in the UK in 2005-7 if memory serves. I wonder what happened to that money?

If people were MEWing on a BTL in order to finance more properties (the Wilson model) or simply to finance consumption then they may well (or of course may not) have an unpaid CGT liability that will need to be paid if the BTL is sold. My fear is that these regulations will tip people into a position where they can't afford to hold on to the BTL place but can't afford to sell either. Then what do you do?

Remember, house prices only really fall when there are forced sellers. Without forced sellers what tends to happen is people just sit it out as they won't sell the house for "less than it is worth" (laughable phrase). The BTL rules could mean lots of forced sellers. Or not of course. It's impossible to say without understanding more than I about the actual structure of who has been lending what to whom.

It will be interesting to watch the whole thing play out and if I had a BTL in my name rather than a company's then I'd be very tempted to sell into the current market strength and sit things out. The trouble is, what the heck do you do with the money then....?

padington

Generali wrote: »

I'm not sure TBH. It would be interesting to look at the structure of the BTL market and see just who is likely to be impacted and to what extent and, most especially, where they own.

I don't think the change in BTL regulations is going to have a huge impact until they actually come in. At that point things could get a bit messy for a bit as people look to sell.

There will be all sorts of things under the hood of BTL. For example, MEWing peaked at almost 10% of GDP in the UK in 2005-7 if memory serves. I wonder what happened to that money?

If people were MEWing on a BTL in order to finance more properties (the Wilson model) or simply to finance consumption then they may well (or of course may not) have an unpaid CGT liability that will need to be paid if the BTL is sold. My fear is that these regulations will tip people into a position where they can't afford to hold on to the BTL place but can't afford to sell either. Then what do you do?

Remember, house prices only really fall when there are forced sellers. Without forced sellers what tends to happen is people just sit it out as they won't sell the house for "less than it is worth" (laughable phrase). The BTL rules could mean lots of forced sellers. Or not of course. It's impossible to say without understanding more than I about the actual structure of who has been lending what to whom.

It will be interesting to watch the whole thing play out and if I had a BTL in my name rather than a company's then I'd be very tempted to sell into the current market strength and sit things out. The trouble is, what the heck do you do with the money then....?

Hmmmm.... Food for thought. I personally feel that it's the UK's time to shine. The enterprise culture is finally here. People are innovating, networks growing, soft power booming. With that I forsee good times ahead and when things are good, house prices tend to rise and whilst they do, lots of BTL landlords will stay in game. I also think there is some incredible upside potential still with London property and the South East as the world wobbles around us but we offer a relatively safe space and incredibly fun place to park funds in a growing market.

London is an AMAZING place now. The cultural activities are so endless and so so more ground breaking than anything I've seen elsewhere, I think we're entering a golden era.

Saying that we are going to be slashing junior doctors wages etc so there might be trouble ahead as Osbournes cuts finally start clanking into place, which could well take the legs out of any move forward and emerging markets could cause us problems we didn't even see coming let alone the ones we did, whilst the BTL changes is going to be a large dampner but I think there is lots of dry gun powder yet to be brought to the table from Osborne with tax cuts etc that will help stoke enterprise. Companies seem to be running in our direction to make camp at the moment ( including large property investment firms from the east ) and I can only see that get better.

However only time will tell I guess.

Crashy_Time

padington wrote: »

Hmmmm.... Food for thought. I personally feel that it's he UK's time to shine. The enterprise culture is finally here. People are innovating, networks growing, soft power booming. With that I forsee good times ahead and when things are good, house prices tend to rise and whilst they do, lots of BTL landlords will stay in game. I also think there is some incredible upside potential still with London property and the South East as the world wobbles around us but we offer a relatively safe space and incredibly fun place to park funds in a growing market.

London is an AMAZING place now. The cultural activities are so endless and so so more ground breaking than anything I've seen elsewhere, I think we're entering a golden era.

Saying that we are going to be slashing junior doctors wages etc so there might be trouble ahead as Osbournes cuts finally start clanking into place, which could well take the legs out of any move forward and emerging markets could cause us problems we didn't even see coming let alone the ones we did, whilst the BTL changes is going to be a large dampner but I think there is lots of dry gun powder yet to be brought to the table from Osborne with tax cuts etc that will help stoke enterprise. Companies seem to be running in our direction to make camp at the moment ( including large property investment firms from the east ) and I can only see that get better.

However only time will tell I guess.

:rotfl::rotfl: Do you drive somewhere to buy your drugs man, or does the dealer come to you?