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25% Drop in London Property coming? (SCMP)

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25% Drop in London Property coming? (SCMP)

This report may shock some Asian buyers

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

 

The view from Hong Kong.

 

A great line from the Undertaker, below (post #12):

"One thing that represents all that was bad about the New Labour social engineering project it was housing benefit.

The idea that by not working you should be better off than working was central to their mad ethos."

Good News: the mad experiment is ending. Upshot: that that may drive down yields for BTL investors.

 

Falling rents (if we see them), combined with a rising number of forecasts of sharp drops in property prices are not going to help keep the newbuilding sales bandwagon on track. At present, something like 65-70% of new London properties are being sold to foreigners, who are being told to snap up London properties "while the pound is down, and prices are still below 2007 highs."

 

houseew.jpg

 

Even the sleepy buyers halfway around the world will wake up eventually, that buying property in London is no longer a "clever idea." Today's SCMP Property section brought the sort of report that may become increasingly common. How long before people show up at the property shows waving these articles? (I might do that myself at a show this weekend, just to see what the reaction is.)

 

LENDING CURB seen further depressing London Market / Richard Warren in London

 

Notes:

London property prices will fall in the next two years because of mortgage scarcity and the public budget cuts announced by the British government in its spending review last week, analysts say.

 

Consultancy Capital Economics forecasts that residential property prices will drop 13 per cent next year and 12 percent in 2012.

 

"The market remains overvalued and there is a need for the gap between prices and incomes to come back down," said Ed Stansfield, the chief property economist at Capital Economics. "The spending review will have an effect on sentiment, and finally, there is a lack of mortgage credit. If anything, banks are tightening rather than loosening their lending criteria."

 

+ Gross Mortgage lending expected to be Pds.150mn this year, less than half of Pds. 362 mn lent in 2007

+ Off plan buyers are at risk on properties being completed in 1-2 years time

+ Experts asking "What's in it for the buyer in a falling market"

+ Off plan buyers may struggle to get a mortgage at a valuation they can accept

+ Some buyers of properties from 2006-7 are being sued by developers for failing to complete

+ British developers are able to sue buyers in Hong Kong

 

In a statement, BDEV said, "Berkeley's policy is that off-plan buyers should honour their contracts."

 

Lawyers say, "The law is clearly on their side." (the developers side)

 

Developers can keep the deposit, and have the right to sue for the rest.

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25% Drop in London Property coming? (SCMP)

This report may slow the Asian buyers

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

 

Even the sleepy buyers halfway around the world will wake up eventually, that buying property in London is no longer a "clever idea." Today's SCMP Property section brought the sort of report that may become increasingly common. How long before people show up at the property shows waving these articles? (I might do that myself this weekend, just to see what the reaction is.)

 

LENDING CURB seen further depressing London Market / Richard Warren in London

 

London property prices will fall in the next two years because of mortgage scarcity..."

 

And an interest rate rise would help things along. See telegraph article

 

Andrew Sentance, a member of the Bank of England's monetary policy committee, said he was in favour of lifting interest rates.

 

"There is a bit of a mismatch between what's happening with inflation and growth, which we have heard about today, and the level of interest rates," he said.

 

"I am in favour of gradually moving interest rates up from their very low level which I think can be done without disrupting business or consumer confidence."

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And an interest rate rise would help things along. See telegraph article

A poll of economists by Reuters (1 Sept) estimated the first rise to be June next year and for rates to creep up to only 1.5% by the end of 2011. To give a feel for how rate rise pressure has eased recently, the same poll conducted in spring estimated rates would rise to 2% by the end of 2011.

 

However, one controversial economist has warned inflation is in danger of taking hold and that the MPC will be forced into a series of rate rises, taking the bank rate to 8% by 2012.

 

Sentance has now voted four times for rate rises. He explained in a BBC Radio 4 Moneybox interview that he wanted rates to rise steadily - rather than having to deliver a shock later on.

 

Read more: http://www.thisismoney.co.uk/news/article....s#ixzz13Z7QPvVR

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25% Drop in London Property coming? (SCMP)

This report may slow some Asian buyers

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

 

houseew.jpg

 

Even the sleepy buyers halfway around the world will wake up eventually, that buying property in London is no longer a "clever idea." Today's SCMP Property section brought the sort of report that may become increasingly common. How long before people show up at the property shows waving these articles? (I might do that myself this weekend, just to see what the reaction is.)

 

LENDING CURB seen further depressing London Market / Richard Warren in London

 

Notes:

London property prices will fall in the next two years because of mortgage scarcity (Note: haha- don't mention the overvaluation) and the public budget cuts announced by the British government in its spending review last week, analysts say.

 

Consultancy Capital Economics forecasts that residential property prices will drop 13 per cent next year and 12 percent in 2012.

 

Foreign buyers are more concerned about the value of their houses in their native currency rather than sterling.

 

House prices in London are down 30% based on sterlings drop against other currencies and therefore probably look good value to rich foreign buyers who don't really need a mortgage.

 

If the pound were to have a surprise plummet I could see the London market taking off as buyers take advantage of ultra cheap (in currency other than sterling) prices.

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Foreign buyers are more concerned about the value of their houses in their native currency rather than sterling.

 

House prices in London are down 30% based on sterlings drop against other currencies and therefore probably look good value to rich foreign buyers who don't really need a mortgage.

 

If the pound were to have a surprise plummet I could see the London market taking off as buyers take advantage of ultra cheap (in currency other than sterling) prices.

That is how the properties are being SOLD.

Buyers are told, that prices are "cheap", because:

 

+ Prices are below 2007 levels (yes, the housing indices are)

+ Sterling is lower (GBP hit $2.10, is now near $1.55 - $1.60)

 

But what they are not being told is:

 

+ The newbuilding prices they are seeing are not cheap

+ At Pds. 500-600 psf in areas like the Docklands, Collingham, Hackney, Blackheath they are paying prices that have never been acheived before, so in what sense are they "cheap"? (this is non-prime property at prime prices)

+ People who live in those areas are not buying, since 70% of new properties are going to foreign buyers - locals prefer secondhand

+ The rental assumptions are fabrications, based upon what a buyer would need to achieve a 5% or higher return. There are not loads of high quality tenants waiting to rent in these areas at such prices

+ Management fees are high in the UK, sometimes 4-8x what you would pay per square foot in HK, or Singapore

+ UK Council taxes are high too

+ The UK government may move to tax capital gains and rental incomes on such property in the future

 

What the buyers are not telling the agents is:

 

+ If terms are: 10% + 90% at completion: The 10% deposits are probably the limit that the vendors will get, since the buyers will just refuse to pay the rest, and the builders will have to sue them

 

IS SEE A BIG PROBLEM COMING in the future, as these properties move to completion. Valuations could be 20% or more below the original price, and the foreign buyers will not want to come up with the rest of the money. Many properties will get sold at a loss for the developers and they will find it very hard to pursue the "dead beat buyers."

 

In fact, the buyers are being probably being lied to about the state of the market, the quality of the areas (most foreign buyers are buying off plan, and have not visited the areas), and the prospects of achieving decent a rental return. Such representations are made verbally by the agents, and not by the vendors, so it will be very hard for the buyers to take legal action on these "broken promises". Instead, they will find themselves being chased by the vendors, if they break their promise.

 

I find the whole thing to be abusive, and predatory, and it reminds me of the packaging and sale of toxic debt in Asia from 2005-7. If and when things go bad, it will be tough for UK based developers to sell property in these types of shows in 2012-13 and afterwards, since the "word of mouth" will be that UK property is over-priced and a rip-off. That's all IMHO, and we will have to wait a few years to see if this is accurate.

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I read today that 65% of all private sector rental income comes from housing benefit. If this is really true, the rental market is anything but a free market. With the planned cuts rents should fall substantially.

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I read today that 65% of all private sector rental income comes from housing benefit. If this is really true, the rental market is anything but a free market. With the planned cuts rents should fall substantially.

65%?

That is truly a shocking figure if it is true !

Then, the entire BTL brigade would be like a sunset industry, surviving on government support. Yee gads !

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This was the link I found:

 

http://www.insidehousing.co.uk/news/housin...6512084.article

 

I may have misunderstood as I cannot seem to find the reference anywhere else.

 

Housing benefit accounts for £5.3 billion - 65 per cent - of landlords’ rental income.

 

If it is true, then it really is a scandal. I wonder how many buy to lets Boris Johnson's friends have?

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This was the link I found:

 

http://www.insidehousing.co.uk/news/housin...6512084.article

I may have misunderstood as I cannot seem to find the reference anywhere else.

If it is true, then it really is a scandal. I wonder how many buy to lets Boris Johnson's friends have?

EXCERPT

Chancellor George Osborne announced a £500 cap last week at the Conservative Party conference. The cap would be for a combination of benefits, such as jobseekers allowance and housing benefit. The Treasury confirmed housing benefit would be the payment cut if the combined total came to more than the cap.

 

The Treasury estimates the cap will affect around 50,000 families, who will lose an average of £93 a week.

 

Housing benefit accounts for £5.3 billion - 65 per cent - of landlords’ rental income. Many have started modelling the impact of a drop in housing benefit income on their business plans.

 

Let's see: a reduction from £593 to £500 a week, pushes annual rents down from: £30,836 to £26,000 per annum

 

If we multiply that by 50,000 properties that's £241 million of lost rental income per annum for BTL landlords - a big hit.

 

Looking at it another way...

 

====== : Old yield : New yield

Rental Inc : £30,836 to £26,000

Property- : £165,000 : £165,000 - Average UK House price

Yield ----- : 18.69 % : 15.75 %

 

(Obviously, these expensive Rents, were on homes more valuable than the average - !!

A £26,000 cap per annum seems more than generous. Why should benefits takers be living in something

MORE VALUABLE than the average UK home. I think a £350 or £400 cap makes sense.)

 

If these lower rents "set the pace", and drive down yields across the country, there will be many unhappy LL's.

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EXCERPT

Chancellor George Osborne announced a £500 cap last week at the Conservative Party conference. The cap would be for a combination of benefits, such as jobseekers allowance and housing benefit. The Treasury confirmed housing benefit would be the payment cut if the combined total came to more than the cap.

 

The Treasury estimates the cap will affect around 50,000 families, who will lose an average of £93 a week.

 

Housing benefit accounts for £5.3 billion - 65 per cent - of landlords’ rental income. Many have started modelling the impact of a drop in housing benefit income on their business plans.

 

Let's see: a reduction from £593 to £500 a week, pushes annual rents down from: £30,836 to £26,000 per annum

 

If we multiply that by 50,000 properties that's £241 million of lost rental income per annum for BTL landlords - a big hit.

 

Looking at it another way...

 

====== : Old yield : New yield

Rental Inc : £30,836 to £26,000

Property- : £165,000 : £165,000 - Average UK House price

Yield ----- : 18.69 % : 15.75 %

 

(Obviously, these expensive Rents, were on homes more valuable than the average - !!

A £26,000 cap per annum seems more than generous. Why should benefits takers be living in something

MORE VALUABLE than the average UK home. I think a £350 or £400 cap makes sense.)

 

If these lower rents "set the pace", and drive down yields across the country, there will be many unhappy LL's.

 

These changes are being heavily resisted by Labour and Boris Johnson. If I were a socialist, I would be arguing for the Government to bring in regulations on the amount of rent that could be charged. Yet labour seem to be doing their best ot keep this con going. Its the equivalent of the Common Agricultural Policy. If 50000 people or whatever moved out of their houses who is going to fill them? The average wage in Britain is around 25000 per year.

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These changes are being heavily resisted by Labour and Boris Johnson. If I were a socialist, I would be arguing for the Government to bring in regulations on the amount of rent that could be charged. Yet labour seem to be doing their best ot keep this con going. Its the equivalent of the Common Agricultural Policy. If 50000 people or whatever moved out of their houses who is going to fill them? The average wage in Britain is around 25000 per year.

I repeat my question:

Why should anyone in the UK be subsidised to be able to rent something more valuable than the average UK home?

 

If you say: It is because they live in an expensive neighborhood, then I ask, Why?

Why should the taxpayer get hit with a high cost so some benefits-taker can enjoy a nicer neighborhood.

 

They can move somewhere cheaper, and spend their freetime (they may have plenty) improving the neighborhood.

It is irrational IMHO to do anything else than this.

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I repeat my question:

Why should anyone in the UK be subsidised to be able to rent something more valuable than the average UK home?

 

If you say: It is because they live in an expensive neighborhood, then I ask, Why?

Why should the taxpayer get hit with a high cost so some benefits-taker can enjoy a nicer neighborhood.

 

They can move somewhere cheaper, and spend their freetime (they may have plenty) improving the neighborhood.

It is irrational IMHO to do anything else than this.

 

I could not agree more. If there is one thing that represents all that was bad about the New Labour social engineering project it was housing benefit. The idea that by not working you should be better off than working was central to their mad ethos.

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It's certainly turning into a big issue and getting lots of press now.

 

I seen Cameron on PMQ yesterday and he seems committed to pushing the change through. I see this as the first big test for the coalition.

 

Although with some Tory and Lib Dem backbenchers voicing concern i can see a climb down coming, in which case Cameron should just call a snap election.

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It's certainly turning into a big issue and getting lots of press now.

 

I seen Cameron on PMQ yesterday and he seems committed to pushing the change through. I see this as the first big test for the coalition.

 

Although with some Tory and Lib Dem backbenchers voicing concern i can see a climb down coming, in which case Cameron should just call a snap election.

 

Has anyone done an opinion poll on this yet? I imagine Cameron would be getting strong backing on this.

 

If there is a lot of trouble in the commons I think you are right. I cannot see how anyone could face the country arguing that you should get more for being on benefits than working and actually winning the election.

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And an interest rate rise would help things along. See telegraph article

 

 

The Telegraph article ignores the likely effects on growth of cutting public spending in the midst of an economic downturn. The assumption that the private sector will somehow take up the slack is fantasy with no basis. Large parts of the private sector depend on the public sector, much of the construction industry for instance. I suspect the economy will be in the doldrums for a long while yet. Thanks George. Without the growth I can't see the inflation happening.

 

What I CAN see happening is likely falls in property prices as a result of a stricken economy and lack of credit. Followd by a fresh boom unleashed when the economy recovers and people become able to pay again, and the full scale of the housing shortage manifests itself.

 

Both of these cycle stages offer great opportunities to flexible property developers, traders and investors.

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The Telegraph article ignores the likely effects on growth of cutting public spending in the midst of an economic downturn. The assumption that the private sector will somehow take up the slack is fantasy with no basis. Large parts of the private sector depend on the public sector, much of the construction industry for instance. I suspect the economy will be in the doldrums for a long while yet. Thanks George. Without the growth I can't see the inflation happening.

Getting rid of these wasteful and unfair spending programmes will be good for the long term health of the economy,

but they may bring some painful (and needed!) adjustments in asset valuations (property prices, in this case.)

 

I think Cameron sees that it is better to get this pain over-with, rather than trying to prop up prices, and maintain

a system that helps benefit-takers (& BTL investors!) to live better than productive, taxpaying members of society.

 

I certainly hope he can win this battle.

 

I am not in the UK, so I am wondering if the press reportage on this is mentioning that Labour gained from wasteful

housing benefits, since many of these people were life-long Labour supporters.

 

If I could redesign the system, I would only let those vote who are net taxpayers. The present system just encourages

people to vote for those who promise more goodies that are paid for by somebody else.

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These changes are being heavily resisted by Labour and Boris Johnson. If I were a socialist, I would be arguing for the Government to bring in regulations on the amount of rent that could be charged. Yet labour seem to be doing their best ot keep this con going. Its the equivalent of the Common Agricultural Policy. If 50000 people or whatever moved out of their houses who is going to fill them? The average wage in Britain is around 25000 per year.

 

U, do you think these folk will move out?

I doubt that.

Some will, but most will just force their landlords to agree to lower rents, I reckon

 

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I don't have a problem with the principle of balancing the books, the timing is what is wrong IMHO. Both businesses and countries need credit at times. Nothing wrong with that. Cutting spending in a downturn and expecting the private sector to take up the slack is cloud-cuckoo-land.

 

I guess we'll judge the results by how well UK performs over the coming years compared to other countries who chose to spend their way out of the crisis. Possible we'll all end up back at roughly similar levels, but UK having endured a lot of extra self-imposed hardship. That was my impression of what happened post-Thatcher anyway. There is something essentially sado-masochistic about Conservative ideology IMHO.

 

 

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As someone who pays tax and rents in the private sector I see this as fantastic news, it feels like the first time a government has done anything that will help people of my class/economic position.

 

I would like it to go further, I would like the government to progressively taper HB down to the point at which many Landlords start having to sell and combine this with allowing a massive private house building program and mandating a public house building program.

 

As a voter it is my thought that one of the governments first duties is to manage the housing supply and immigration so that there is adequate housing for all the population.

 

 

Back to housing benefit cuts it would be great to see what level the market would actually find if government interference was changed to favor the productive worker rather than the parasitical Landlord.

 

I wonder how many labour MPs have positioned themselves in BTL, often through abuse of the expenses system. I think this would explain their strong support for the status quo.

 

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As someone who pays tax and rents in the private sector I see this as fantastic news, it feels like the first time a government has done anything that will help people of my class/economic position.

 

I would like it to go further, I would like the government to progressively taper HB down to the point at which many Landlords start having to sell and combine this with allowing a massive private house building program and mandating a public house building program.

 

As a voter it is my thought that one of the governments first duties is to manage the housing supply and immigration so that there is adequate housing for all the population.

I agree - that policy would make sense.

But Labour was after Votes, and trying to apply commonsense.

 

As I wrote in a FS article back in mid-2007:

+ 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.

. . .

When Gordon Brown was chancellor, he and his economy made a dangerous pact with two devils. And he was rewarded with a ten year "miracle" of high growth. One was the debt devil, where banks and their customers were persuaded to borrow money on more and more aggressive terms. Of course, this triggered a rise in house prices, which then fed upon itself, in a "virtuous cycle" of higher prices allowing more borrowing. As property stalls, this may be followed by a vicious cycle, of lower prices, requiring more debt repayment, default, and tightening which then leads to even lower property prices. In such an environment, people will slow their spending in order to make mortgage payments, and put their finances back in order. But this is a gradual process, which make take years to return to a safer balance between income and debt. Many over-stretched Peakees may find themselves losing their homes and their BTL portfolios. As this happened, these people can be expected to look for someone to blame. The new PM will then seek to shift the blame away from himself, and onto others. An obvious target will be the super-rich, who have been one of the causes of the big jump in property prices, particularly in London.

 

The other devil that Brown shook hands with, was growth in the public sector. This put more people on the public sector payroll. The UK economy now employs an incredible 25% of working males, and over 50% of working females. This government-mandated spending was another key pillar of Brown's "miracle." Naturally, he will not want to slim down the public sector in a recession. So he will have to find tax revenues to pay all those public sector salaries. He will not find it easy to squeeze more tax revenues from the Peakees, who will be in severe stress. And business taxes will likely decline in a time of recession. Putting new taxes on the rich, and ending at least some of their favorable tax treatments may prove very hard to resist.

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

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Were you aware of the conservative government's plans to make getting planning permission even harder by allowing third party appeals AGAINST successful applications for up to 6 months? Also to reclassify urban land attached to houses as no longer brownfield?

 

The first in particular has been called a NIMBY's charter. THIS is how they manage the housing supply. By restricting it to appease NIMBY voters.

It was done to catch votes as no one likes developments near their homes. BUT the fact is we do need a LOT more new homes or after the current fall, house prices will simply bounce back and rise higher than ever when credit becomes available again. Simple law of supply and demand. If you want to see house prices come down and stay down, you have to ease the planning laws, and I have yet to see the govenrment brave enough to do that.

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Were you aware of the conservative government's plans to make getting planning permission even harder by allowing third party appeals AGAINST successful applications for up to 6 months? Also to reclassify urban land attached to houses as no longer brownfield?

 

The first in particular has been called a NIMBY's charter. THIS is how they manage the housing supply. By restricting it to appease NIMBY voters.

It was done to catch votes as no one likes developments near their homes. BUT the fact is we do need a LOT more new homes or after the current fall, house prices will simply bounce back and rise higher than ever when credit becomes available again. Simple law of supply and demand. If you want to see house prices come down and stay down, you have to ease the planning laws, and I have yet to see the govenrment brave enough to do that.

That is possible, Rich.

 

But I have a different view. I think we will see a serious Downturn in demand:

 

+ Austerity will bring big job cuts in the UK, including London, especially in the Public sector

+ The government will be far less generous with housing and other benefits

+ Some immigrants who "came for the handouts" will go back home

+ Hard times, will force people to live together, and reverse the trend of declining household sizes

 

_42264590_household_size_203.gif : My forecast would be very different

 

Put all these together, and there may be a huge reduction in Demand. Personally, I think there is plenty of Supply in the UK, and as the housing bust gets rolling, people will be amazed at how persistent the new trends are.

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Getting rid of these wasteful and unfair spending programmes will be good for the long term health of the economy,

but they may bring some painful (and needed!) adjustments in asset valuations (property prices, in this case.)

 

I think Cameron sees that it is better to get this pain over-with, rather than trying to prop up prices, and maintain

a system that helps benefit-takers (& BTL investors!) to live better than productive, taxpaying members of society.

 

I certainly hope he can win this battle.

 

I am not in the UK, so I am wondering if the press reportage on this is mentioning that Labour gained from wasteful

housing benefits, since many of these people were life-long Labour supporters.

 

If I could redesign the system, I would only let those vote who are net taxpayers. The present system just encourages

people to vote for those who promise more goodies that are paid for by somebody else.

 

I agree completely regarding the voting system, I would add retired people who have paid a certain level of tax should also be allowed to vote. I really think this would help give us strong dependable governments that do not pander to the lowest echelons of society.

 

As for would people move out when they cut HB? I agree most would not, except in areas like Mayfair, and Knightsbridge. It is the landlords who are really going to suffer. Thats why the landlords associations are so against it. If hb people would simply be replaced by decent tenants paying the same rent, then the landlords would all be for it. The reason they are so against it, is that it will hit their bottom line.

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...It is the landlords who are really going to suffer. Thats why the landlords associations are so against it. If hb people would simply be replaced by decent tenants paying the same rent, then the landlords would all be for it. The reason they are so against it, is that it will hit their bottom line.

EXACTLY.

The existing unfair system has benefitted LL's at the expense of taxpayers,

and to the harm of FTB-ers who have had properties pushed up by excessive rents ramping up home prices.

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What we're seeing now has a huge impact on where housing goes next.

 

In London there are many areas that the average working person on the average (but above median) income can't hope to afford to live in.

 

The public sector rental HA support has undermined a true market environment by setting a baseline at the 50th percentile against current market rates and a drop to the 30th alongside the new caps on different sized properties makes a huge impact.

 

Add to this the loss of 490,000 public sector jobs that are unlikely to be replaced by private sector employment.

 

What this does is a number of things:

 

1) It forces average rents down - this both in part forces some of those on Housing Support out of the areas they are in. Both freeing up property in some of these areas but more importantly lowering baseline rents. Those losing jobs may also be forced to renegotiate rents or move.

 

2) Consequently it makes renting more affordable - this is a really key element. Lower average rents from government support make the whole rental market shift downwards, this has the unintended impact of making renting a better option than buying at still inflated house price levels.

 

3) Therefore it puts downward pressure on house buying - why look to buy now in areas of London like Camden or Islington when you know that those on benifits will be having rents they can afford slashed and will either move out or have to negotiate lower rental prices with LL. This either creates more stock to rent or lowers rental value expectations - both deflationary to housing prices.

 

4) Alongside rises in food, energy prices etc. benifits cuts bottleneck affordability - what i mean by this is that lowering Housing Support as well as other benifits when there is inflation in essential consumables. There is a more defined and lower tipping point between enough to live on and not enough. If inflation in essentials contiunes whilst we are slashing benifits we'll end up with a lot of dissatisfaction, probably more cases of neglect, theft, potentially some riots - we're squeezing those who rely on the state and expressing their pain is an easier option than training and/or finding a job against all those recently redundant. Having nothing and earning nothing becomes less greater than or equal to poverty.

 

5) Job demand is going to go sky high - we have a curious system called JSA in the UK to support those without income. JSA works on the basis that people are actively (and can prove) they are looking for work. The problem is that even if people don't want to work (and are just doing it to appease the system) they have to attend workshops and go to interviews. On the one hand we will have almost half a million people without jobs in the public sector (mainly by attrition) and on the other we have a system whereby all those unemployed seeking work need to be going to interviews etc. It might makes the figures we see of 100's competing for a single job in some areas rocket even further. 1000's competing for some jobs will not be unheard of.

 

6) Potentially return of ghetto areas - in the UK there are still a few no-go areas but the reality is the social situation is a lot better than in used to be in many parts of the country. We may see a return to the bad old days of parts of cities which become no-go areas due to gangs, violence, theft etc.

 

7) Potentially a rise in the crime and the black market - are we going to see rises in meth usage in the UK? are we going to see increasing drugs/alchohol issues as these policies set in? we will see more thefts with items being sold of backs of vans/ebay etc.?

 

8) The rise of the disaffected youth - between all the above is the younger generation of 16-24 yr olds who not only will have huge financial burdons of getting an education but huge job competition afterwards.

 

What i'm trying to convey is that if you work your way through these new policies there could be some severe unexpected consequences that might takes years to come to pass.

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