Channel 4 suggests Govt may be targetting FTB votes

[drbubb]

Is The Housing Market Headed For A Profound Change?

Channel 4 suggests Govt may be targetting FTB votes

======================================

 

QUOTE

Thursday 14 October 2010

The Conservative party is quietly redefining home ownership, writes Gaby Hinsliff, in a way which could help first time buyers but hit those relying on rising house prices to fund their lifestyles.

 

Margaret Thatcher revolutionised home ownership - are the Tories about to do it again? (Reuters)

 

The one big idea for which many Labour politicians secretly envy Margaret Thatcher is the right to buy for council tenants.

 

It defined her belief in aspiration, spawned a class of grateful new Tory voters and captured political imaginations - albeit while decimating the social housing stock.

 

So it's appropriate that, as she celebrated her 85th birthday this week, her party was once again quietly redefining home ownership. Grant Shapps, the housing minister, gave a speech to the Housing Market Intelligence conference urging a period of house price stability and of treating homes not as investments but as somewhere to live. More significantly, he sided decisively with first time buyers (who need prices to fall) over established homeowners (banking on prices rising).

 

That might not sound dramatic, but it has significant implications.

 

House prices are softening again, prompting fears of a property double dip as unemployment rises.

 

That forces all parties to confront a choice they ducked at the election: do they want to shore up prices, as the last government did with stamp duty holidays and moves to curb repossessions? Or do they not, which could mean letting the market correct itself while keeping interest rates low to ease mortgage-holders' pain?

. . .

Shapps's call for an end to property booms and busts suggests we face a period of house price stagnation at least.

 

That's toxic for those reliant on soaring home equity to fund comfortable middle class lifestyles, or on property as a pension. But it helps what a recent report estimated were the 100,000 people a year priced out of buying between 2006-09, an aspirational constituency not unlike Thatcher's upwardly mobile council tenants. If Shapps really means it, a significant rebalancing could be coming.

UNQUOTE

/source: http://www.channel4.com/news/is-housing-ma...profound-change

 

Similar HPC thread: http://www.housepricecrash.co.uk/forum/ind...howtopic=152812

[drbubb]

Is The Housing Market Headed For A Profound Change?

Channel 4 suggests Govt may be targetting FTB votes

====================================

...we face a period of house price stagnation at least.

 

That's toxic for those reliant on soaring home equity to fund comfortable middle class lifestyles, or on property as a pension. But it helps what a recent report estimated were the 100,000 people a year priced out of buying between 2006-09, an aspirational constituency not unlike Thatcher's upwardly mobile council tenants. If Shapps really means it, a significant rebalancing could be coming.

Hmm.

Sounds familiar somehow...

 

From a July 2007 article: THE RICH FEAST IN LONDON HAS LEFT A PROPERTY BUBBLE IN ITS WAKE

 

+ The reigning Labour government did little to discourage the influx of the wealthy, because they saw few immediate negative consequences of this trend. And also, because barriers to this wealth might have brought down property prices in London, causing negative ripples throughout the economy. The other parties, and the Conservatives in particular, remained silent about rising wealth inequality, because of their ideological support for free markets and wealth creation. The middle classes also remained silent, because "trickle-down" in the property market meant that their properties were also rising in value, and on paper, the property-owning middle classes were also getting more wealthy as property prices rose. For those willing to borrow against that wealth, Mortgage Equity Withdrawals meant more spending cash, and more money to invest in other properties.

 

+ Those without property, the First Time Buyers looking to enter the market, complained, but for a long time have found it difficult to find a voice. There was no political discussion and hardly any media outlets for venting their frustration of being left behind. They watched helplessly, as the wealth-generating property engine took off and lifted out of sight. Others, who were more willing to shoulder the risk took on heroic amounts of debt to participate in the rising property bubble. The natural home for those who felt dispossessed by the wealth gap was the Labour party, but that party has been co-opted by praise and political patronage from those who had benefited from Britain's miracle economy. Of course, in hindsight, it was not a miracle at all, but a debt fueled bubble.

 

SO THIS is where things stand now, as the former Chancellor Gordon Brown, who was one of the principal architects of the so-called miracle, has taken over as the new prime minister. He is proud of the decade of strong growth, but few beneficiaries of that growth have been willing to look behind the curtain, and see how it has been engineered. The UK economy is in a debt-bloated bubble, which has well-suited the wealthy, and those many workers and professionals in the City and Estate Agencies that have benefited from the rapid growth in asset values (and debt) which have brought matters to their current over-stretched condition. But so-called miracle has not delivered much at all in the way of increases in the disposable incomes of the average voter

 

/more: http://www.financialsensearchive.com/fsu/e.../2007/0705.html

 

It seems that Labour blew it, and overstayed its backing of the old property-owning boomers.

Would be FTBers do not think Labour is "on their side".

[Concrete Jungle]

Sounds ominously like a rehash of the famous Gordon Brown 'no return to boom and bust, I will not let house prices get out of control'

[pyewackitt]

It seems that Labour blew it, and overstayed its backing of the old property-owning boomers.

Would be FTBers do not think Labour is "on their side".

 

Labour are not on the side of the FTB, nor are the ConLib coalition - both are on the side of the Status Quo.

 

By that what i mean is that neither can advance policy that would directly be visible as 'cooling' the housing market. They might target taxation on second homes or income from rental or tax cuts for FTB (as both have done) but they can't look as if they are directly forcing the market due to the response this would generate in votes from 'middle england'.

 

Let's remember it's not the young generation who can buy homes, nor is it those on the lowest or zero income brackets. But those in their middle and towards retirement ages who have had the opportunity to capitalise on the low prices of a decade and more ago and consolidate a position in one or more property. These people have a feeling of 'wealth' tied into their home ownership, whilst a falling market is better in the long term for the coming generation, those who have viewed housing as 'income' or as a 'pension' would be heavily hit by property cooling measures and would vote reactively accordingly.

 

The ConLib alliance simply cannot afford to allow disaffection with that group right now bearing in mind the massive public spending cuts due to be announced on the 20th. But... the situation might be out of their hands. Imported inflation is rising i.e. food, fuel, clothes etc. whilst housing is roughly static recently (some gains over last 12-18 months now being offset by increasing falls reported). If this situation continues alongside a continued restricted mortgage market the groundwork is set for either a real-terms crash or a nominal fall against other expenses. The value of sterling internationally plays a pivotal part in the impact of inflation.

[drbubb]

Labour are not on the side of the FTB, nor are the ConLib coalition - both are on the side of the Status Quo.

 

By that what i mean is that neither can advance policy that would directly be visible as 'cooling' the housing market. They might target taxation on second homes or income from rental or tax cuts for FTB (as both have done) but they can't look as if they are directly forcing the market due to the response this would generate in votes from 'middle england'.

Year by year, the advantage of "ditching the boomers" increases...

 

Rising property prices are not an unalloyed blessing. Other prices, for things like restaurant meals, and personal services have also risen in the wake of rising rental costs. And for those who have not yet bought (because they were too young to "get on the property ladder" before it rose out of sight), and for those who sold out 2-3 years ago, when property was just beginning to stretch beyond historical levels of affordability, the high prices create stress, and delay important life-decisions, like "settling-down" and starting a family. Many of these people now have a feeling of being dispossessed by the property boom. And the dispossessed, as a percentage of the political electorate is rising in number, as older property-owning folk pass on, and are replaced by new voters as non-property owners reach voting age. They are a force not-yet-exploited, but one that the political parties, are increasingly likely to turn to, to win votes in future elections.

. . .

The Property Peakees would be squeezed, and some squeezed greatly, by lower house prices. Worst hit would be those who bought recently, and those with heavily-geared BTL portfolios. A cynical politician might do his calculations, and decide that these people represent a small number voters in relation to the majority that bought much earlier (and can survive a price correction), and the rising number of Property Disposed who prefer lower prices. If the politicians and their tame economists can blame the price slide on the departing wealthy, then they could pull off another sort of "miracle" of triggering a price slide, while blaming it on others. Everyone needs a scapegoat, especially the most blame-worthy.

[pyewackitt]

Ah but Boris says it's a dangerous move! And with his obvious political nous, skill and enviable reputation and achievements he must be right!

 

http://www.thisislondon.co.uk/standard/art...he-coalition.do

 

Boris Johnson today urged the coalition to leave London's rising house prices alone or risk worsening the housing crisis.

 

He warned the Government that proposals to deliberately "flatten" the market could lead to a sharp spike in prices as the economy improved.

 

The Mayor said that the move would be "risky" in the short term as it would damage the confidence needed for economic recovery. And he predicted that asking the middle classes to "wean" themselves off house-price inflation was "unachievable" in the longer term.

 

'''

 

Writing in his Daily Telegraph column, he said: "If you tell people it is government policy that their house should effectively fall in value, then you will punch that confidence in the solar plexus - and you will make them less likely to invest, to take on new ventures and new staff.

 

"If the housing market tanks, then the financial system tanks too. People will be unable to get the mortgages to buy new homes, and developers will be unable to get the finance to build them, and the problem of supply will get even worse."

 

He added: "The best way to help those millions in search of an affordable home is not to try vainly to ensure that the present stock of housing becomes more affordable - ie falls in value - but to increase the supply of affordable homes."

 

Original article here: http://www.telegraph.co.uk/comment/columni...-new-homes.html

 

Frankly the man is a raving lunatic who should never have been allowed near the machines of power, but i seem to feel that a lot lately...

 

Thing is, he has a point, and he needs to make a point. It is politically important for him to be seen to be against any coalition moves to cool housing as London would take the biggest hit in terms of real prices falls even if not in % falls. If It is felt he is involved in any schemes to attack prices it puts this issue at the centre of any challange from Lib/Lab Mayoral candidates. Whilst there are many my age and younger who would welcome lower prices, London has rocketted so insanely in the last decade that anyone who bought pre-2004 or so will have made huge paper profits and feels very well off.

 

For example back in the late 90's a work colleague bought a large 1 bed garden flat in Camden for about 110k, same place now would be 300-400k easily. That's a lot of equity to be worried about and even a 10% fall represents up to 40k for her. I have other friends who bought a 1 bed in Bayswater back in 2004 for about 200k and have made it into a nice 2 bed. It's now worth about 350k and again their feeling of wealth is all tied into their property (i.e. they dont save much and don't invest beyond a cash ISA). These are early 30's professionals who bought earlyish and would very much side with Boris, I went the other route as i was (and still am) convinved a fall will occur either in real or nominal terms - but explicitly politicising that decision is a very real risk to the coalition.

[libspero]

Ah but Boris says it's a dangerous move! And with his obvious political nous, skill and enviable reputation and achievements he must be right!

 

Apologies, reposted from HPC..

 

What a disappointing article from Boris.. I think being mayor of London has attracted too many slack jawed VI hippies cooing sweet poison in his ear.

 

tell them it is a matter of government policy that their house should effectively fall in value, then you will punch that confidence in the solar plexus – and you will make them less likely to invest, to take on new ventures and new staff.

 

So Boris is suggesting that a person with a fantastic business idea will choose not to make money out of it because their house has dropped in value? What utter Tosh.

 

The truth is quite the opposite. If intelligent people hadn't spent their time making money out of speculating in a single asset class employing practically nobody (bar a few tradesmen and trash TV presenters), they might have been out there investing their time and energy in something productive that we could export.

 

Look at the Germans:

 

Credit to THIS Boris.. he gets it.

 

Look who didn't waste their time for the past 10 years. Look who has the most productive economy.

 

We need to start copying the RIGHT people.. not repeating the same mistakes again and again.. surely that's the definition of insanity!

[pyewackitt]

We need to start copying the RIGHT people.. not repeating the same mistakes again and again.. surely that's the definition of insanity!

 

If you read the rest of the post you should find i was being sarcastic with that opening line...

[libspero]

If you read the rest of the post you should find i was being sarcastic with that opening line...

 

Hi Pyewackitt

 

Apologies for not being clear.. If I'm honest I was using your post about Boris as a spring board to weave in my own post.

 

I appreciate yours was in jest.. I was agreeing with you. Kind of.

[drbubb]

Look at the Germans:

 

Credit to THIS Boris.. he gets it.

...there hasn’t been a property bubble in Germany, unlike the US, the UK, Spain and Italy...

 

(It’s definitely hard to see the German house market overheating with its careful banks and an ownership rate as low as 43%. This compares with 68% in the US, 69% in the UK, 72% in Italy and a staggering 83% in Spain.)

 

That's some difference!

And the ability to move forward without the WEIGHT of a deflating property bubble is a huge competitive advantage for Germany.

 

I think Boris Johnston will find that it will be hard to keep the air in the London bubble once austerity measures hit, and people's need to balance falling incomes against still-high cost begins to work its magic.

 

The only think that is keeping prices up is foreign buying. Once the inevitable tax rises on property come, the foreigners will stop buying. If they start selling all those expensive new properties they have bought (in places like the Docklands), it will put big pressure on London prices.

[THEBIGMAN]

Well clearly one solution is to start buying up all cheap property in Germany. That'll wipe the smug grin off their faces. Perhaps the banks could help more by offering ultra-cheap mortgages for prospective landlords.

[drbubb]

Well clearly one solution is to start buying up all cheap property in Germany. That'll wipe the smug grin off their faces. Perhaps the banks could help more by offering ultra-cheap mortgages for prospective landlords.

Now who tried that trick over 1 decade plus?

[Mabon]

Maybe we should invade Germany and annex their cheap housing.

 

Cmon what they gonna do? Throw snitzels at us?

[Undertaker]

I think the most significant alteration to the housing market in London has already been , the ending of housing benefit over 400 per week. This has artifically kept rents, and as a result prices, high. There are 200000 families who have rents paid over this level. Come April there is going to be a big shock to the system.

 

I met a friend of a friend who had been renting out his flat in west London for 400 per week to a private tenant, but last year moving in social security scroungers claimants who he was getting nearly 900 a week for. I have heard numerous similar stories.

 

If the Government doesn't backtrack, I think rents and hopefully prices are going to get a lot cheaper.

[drbubb]

If the Government doesn't backtrack, I think rents and hopefully prices are going to get a lot cheaper.

That makes sense to me, but it is hard to track London rents from abroad.

== == ==

 

There are many contradictory reports, here is a bullish one:

 

London rents at record levels as buyers fight for mortgages

 

Russell Lynch .. 15.10.10

 

London landlords have pushed rents to an all-time high as frustrated first-time buyers are forced to spend longer as tenants.

 

Rents in the capital have risen by seven per cent already this year to an average of £972 a month, according to latest figures. The average terrace property is renting for £1,162 month, with the average flat costing £916.

 

The increases are being driven by the shortage of housing in the capital combined with a continuing scarcity of mortgage finance, according to LSL Property Services. Potential purchasers are delaying buying their homes while they put together the deposits needed to access mortgage finance.

 

David Newnes, estate agency managing director of LSL Property Services, said: “Landlords have seen tenant demand continue to hit new heights. The mortgage market remains tight and many buyers simply cannot get the finance to get a foot on the property ladder.

 

“And with potential spending cuts on the horizon, and uncertainty over the direction of the economy, many buyers are choosing to remain in rented accommodation for longer.

 

“As a result, demand for rental accommodation is increasing, and supply is not rising fast enough to match it.”

 

The imbalance between supply and demand is particularly acute in London, where rents soared by two per cent last month alone.

 

Across the country as a whole, the cost of renting a home is now 3.1 per cent higher than it was last year and above the previous high reached in August 2008.

 

The rise means an investor buying a buy-to-let property could expect to make a return of 9.2 per cent — an average of £15,592, once both rental income and house price growth is factored in.

 

Many tenants still struggle to keep up to date with their rent. Arrears levels fell slightly during the month, but about 10 per cent of rent remained unpaid.

 

/more: http://www.thisislondon.co.uk/money/articl...or-mortgages.do

 

(Comment from there, on the inaccuracy of the article - typical BTLer-BS?):

 

"The rise means an investor buying a buy-to-let property could expect to make a return of 9.2 per cent — an average of £15,592, once both rental income and house price growth is factored in."

Yields in London are about 5%, but house prices are falling rather than rising, so the overall return is less than zero.

The figure of 9.2% might have been correct a year ago but it's laughably inaccurate at the moment.

- Ben, London, 15/10/2010 13:20

[Undertaker]

That makes sense to me, but it is hard to track London rents from abroad.

== == ==

 

There are many contradictory reports, here is a bullish one:

 

London rents at record levels as buyers fight for mortgages

 

 

 

(Comment from there, on the inaccuracy of the article - typical BTLer-BS?):

 

"The rise means an investor buying a buy-to-let property could expect to make a return of 9.2 per cent — an average of £15,592, once both rental income and house price growth is factored in."

Yields in London are about 5%, but house prices are falling rather than rising, so the overall return is less than zero.

The figure of 9.2% might have been correct a year ago but it's laughably inaccurate at the moment.

- Ben, London, 15/10/2010 13:20

 

I have noticed that the British people tend to be very good at burying their heads in the sand. Many people really believe that the rent prices in London are as a result of demand. I think we are going to have to wait until April to be proven right. Housing benefit was one of the biggest government subsidies of the last regime, as it is withdrawn the market will play more of a role. I wonder why the landlords association is so against the move?