Give The Falling Property Market A Push

[Tired of Waiting]

I agree that some properties owner will not like HP going down. For some, HPC means a chance to upgrade. It is not just residential property as well, for commercial properties users, Prop PC will lead to lower rents. Those at the top of the ladder and BTLers obviously don't like HPC but it is unclear how many % of Tories voters are in that categories and how many are in the categories where they will benefit from a HPC.

Probably fairly to say that those at the top of the property ladder (according to their aspiration/circumstances) and those in negative equities would not want a HPC, for others,

it is not a problem really.

Like your OECD/Propeerty price & competitiveness article (being revived today)

Yes, I remembered that OECD article/thread when I read your FT article. The mind boggling thing is how come this obvious root-cost of everything = property, has not been seen for what it is, COST for so long - a decade! Brown was a lunatic. But the whole nation went with him! It was like collective ... lunacy!

[Traktion]

Yes, I remembered that OECD article/thread when I read your FT article. The mind boggling thing is how come this obvious root-cost of everything = property, has not been seen for what it is, COST for so long - a decade! Brown was a lunatic. But the whole nation went with him! It was like collective ... lunacy!

Not meaning to be a pedant, but it's the cost of land. Property is relatively cheap to build, once you have the land to build it on.

This is why we need to relax the planning laws and consider a land value tax.

[Tired of Waiting]

Not meaning to be a pedant, but it's the cost of land. Property is relatively cheap to build, once you have the land to build it on.

This is why we need to relax the planning laws and consider a land value tax.

Not pedantic at all. I agree 100%. Our over-restrictive planning laws are the main long term cause of our property problems.

.

Edited August 5, 2010 by Tired of Waiting

[Misanthrope]

Against type the pseudo-socialists built a monster which they thought would bring a modicum of wealth to those without. This, they thought, would be great for the economy and create a never ending virtuous circle of prosperity for the future - the immortal end of 'boom and bust'

Of course, a so called 'Labour' Government built it for a succession party ( the so-called Torys) to retain it. Which is their very joy of joys -the great retention of wealth at the expense of others. Both parties created the base for the very thing the British do best - s**t on one another. And leave present and future poorer - even poorer.

Of course, the necessity for a coalition, threw a spanner in the works - The Liberal Democrats!

Why are they important?

Because, perversely, they are your only hope.

I have no Party affiliation.

[easy2012]

Not meaning to be a pedant, but it's the cost of land. Property is relatively cheap to build, once you have the land to build it on.

This is why we need to relax the planning laws and consider a land value tax.

Oh not pedantic at all. In areas like central north oxford, berkshire, London, a plot of land is a good area can cost £400k with a rebuilding/build (as in the price of an unbuilt plot with planning permission or sale price minus rebuild cost) cost of £200k while there are plenty of land around those areas. This is madness.

LVT - good idea but I haven't seen a complete policy papers written on LVT. Most LVT articles written are on surface and lack full details. Even the main LVT proponents on HPC are proposing different versions of LVT (think a LVT based on around 50% of the rental value is probably closest to what that can work in the real world). Also, LVT winners and losers aren't clear cut - again, I call for the LVT proponents to produce such a table. I would go for a straight forward property tax as I think building is an intrinsic part of a 'property'. The main LVT argument is that tax on building discourage development, which I disagree as long as the tax is relatively small (<2%).

Under current system home improvement will cause properties to move up the council tax band when sold but I don't think that put anyone off. Even a 7% rate of interest, so if borrowed at 100%, means a 7% tax (typical rate before credit crunch) doesn't put people off from improving their home.

[Si1]

Yes, generalisations are usually misleading. I agree that most BTLers were probably Labour supporters.

something about truly deeply hoping that money grows on trees and at the same time WANTING to be cleverer than all the others. And of course, deep down, absolutely hating true wealth creation with a passion.

[Tired of Waiting]

something about truly deeply hoping that money grows on trees and at the same time WANTING to be cleverer than all the others. And of course, deep down, absolutely hating true wealth creation with a passion.

That's a good list.

[Tired of Waiting]

Oh not pedantic at all. In areas like central north oxford, berkshire, London, a plot of land is a good area can cost £400k with a rebuilding/build (as in the price of an unbuilt plot with planning permission or sale price minus rebuild cost) cost of £200k while there are plenty of land around those areas. This is madness.

LVT - good idea but I haven't seen a complete policy papers written on LVT. Most LVT articles written are on surface and lack full details. Even the main LVT proponents on HPC are proposing different versions of LVT (think a LVT based on around 50% of the rental value is probably closest to what that can work in the real world). Also, LVT winners and losers aren't clear cut - again, I call for the LVT proponents to produce such a table. I would go for a straight forward property tax as I think building is an intrinsic part of a 'property'. The main LVT argument is that tax on building discourage development, which I disagree as long as the tax is relatively small (<2%).

Under current system home improvement will cause properties to move up the council tax band when sold but I don't think that put anyone off. Even a 7% rate of interest, so if borrowed at 100%, means a 7% tax (typical rate before credit crunch) doesn't put people off from improving their home.

I think the main problem is the scarcity of building permits. In most of Britain land without planning consent costs less than £10k/acre. With planning consent for houses an acre goes up to millions of pounds.

And the food security argument is bogus, as less than a quarter of our land is used fo agriculture. Most land is used for low yield pastures. Very inefficient.

[Tired of Waiting]

Against type the pseudo-socialists built a monster which they thought would bring a modicum of wealth to those without. This, they thought, would be great for the economy and create a never ending virtuous circle of prosperity for the future - the immortal end of 'boom and bust'

Of course, a so called 'Labour' Government built it for a succession party ( the so-called Torys) to retain it. Which is their very joy of joys -the great retention of wealth at the expense of others. Both parties created the base for the very thing the British do best - s**t on one another. And leave present and future poorer - even poorer.

Of course, the necessity for a coalition, threw a spanner in the works - The Liberal Democrats!

Why are they important?

Because, perversely, they are your only hope.

I have no Party affiliation.

I think you are over estimating them. I think reality is even worse!

In 2003 Brown's goal was to be the next prime minister. The "country" was not his main concern, nor even "bring a modicum of wealth to those without". His concern was with the 2005 election. RPI was overshooting the inflation target, due to rising housing costs, and the the BoE was going to raise IR in 2004. That would slow down the economy, and reduce Labour's chances of wining the 2005 election, and Brown's of becoming Prime Minister.

All very logical. Brown's solution? Remove housing costs from the inflation index, and that will stop the BoE from raising IRs. Very simple.

There are question whether Brown knew at the time that this index tampering would create this housing bubble, or the size of it, or the consequences for the financial system, or for the real economy, or for millions of people.

The more he foresaw, more of a b@stard he was. The less he foresaw, more of a moron he was. Open question.

.

Edited August 6, 2010 by Tired of Waiting

[eric pebble]

I think you are over estimating them. I think reality is even worse!

In 2003 Brown's goal was to be the next prime minister. The "country" was not his main concern, nor even "bring a modicum of wealth to those without". His concern was with the 2005 election. RPI was overshooting the inflation target, due to rising housing costs, and the the BoE was going to raise IR in 2004. That would slow down the economy, and reduce Labour's chances of wining the 2005 election, and Brown's of becoming Prime Minister.

All very logical. Brown's solution? Remove housing costs from the inflation index, and that will stop the BoE from raising IRs. Very simple.

There are question whether Brown knew at the time that this index tampering would create this housing bubble, or the size of it, or the consequences for the financial system, or for the real economy, or for millions of people.

The more he foresaw, more of a b@stard he was. The less he foresaw, more of a moron he was. Open question. .

ABSOLUTELY SPOT ON ANALYSIS.

THAT ***T BROWN should be dragged into the dock - and made to explain himself - and - he is guilty BEYOND DOUBT - Shot at dawn. :angry: :angry: :angry:

[Tired of Waiting]

ABSOLUTELY SPOT ON ANALYSIS.

THAT ***T BROWN should be dragged into the dock - and made to explain himself - and - he is guilty BEYOND DOUBT - Shot at dawn. :angry: :angry: :angry:

Thank you Eric!

Yes I was really very happy with that post too. And a bit surprised by how well it came out actually! I think my hate for Brown helps me "focus" when I write about him. Good. I'm proud of that post. I think it is in my top 10, if not my best ever! I mean it!

Thanks again,

ToW

[Tired of Waiting]

Oh not pedantic at all. In areas like central north oxford, berkshire, London, a plot of land is a good area can cost £400k with a rebuilding/build (as in the price of an unbuilt plot with planning permission or sale price minus rebuild cost) cost of £200k while there are plenty of land around those areas. This is madness.

, madness, I tell ya!

I agree.

LVT - good idea but I haven't seen a complete policy papers written on LVT. Most LVT articles written are on surface and lack full details. Even the main LVT proponents on HPC are proposing different versions of LVT (think a LVT based on around 50% of the rental value is probably closest to what that can work in the real world). Also, LVT winners and losers aren't clear cut - again, I call for the LVT proponents to produce such a table. I would go for a straight forward property tax as I think building is an intrinsic part of a 'property'. The main LVT argument is that tax on building discourage development, which I disagree as long as the tax is relatively small (<2%).

Under current system home improvement will cause properties to move up the council tax band when sold but I don't think that put anyone off. Even a 7% rate of interest, so if borrowed at 100%, means a 7% tax (typical rate before credit crunch) doesn't put people off from improving their home.

Just liberalise planning.

.

Edited August 7, 2010 by Tired of Waiting

[The Masked Tulip]

Thank you Eric!

Yes I was really very happy with that post too. And a bit surprised by how well it came out actually! I think my hate for Brown helps me "focus" when I write about him. Good. I'm proud of that post. I think it is in my top 10, if not my best ever! I mean it!

Thanks again,

ToW

Yes, focus the hate... focus it... Join the dark side...

[Dave Spart]

HPI affects the price of everything.

The only reason HPI was kept out of the inflation figures for so long was to allow a credit bubble to occur, letting banks make mega profits. Now the bubble has burst the cronies of the vested interests move to ensure those banks are kept float whatever it takes and the banks still make mega profits.

Loans on property are among the biggest any bank can ever make so that's why every 18 years we have a boom and bust in housing and why the banks will never blow a bubble in bubble gum.

Banks have a vested interest in causing ever higher property prices. Trades Unions have a vested interest in causing ever higher wages.

One 'good'. One 'bad'. Go figure.

[Tired of Waiting]

HPI affects the price of everything.

The only reason HPI was kept out of the inflation figures for so long was to allow a credit bubble to occur, letting banks make mega profits. Now the bubble has burst the cronies of the vested interests move to ensure those banks are kept float whatever it takes and the banks still make mega profits.

Loans on property are among the biggest any bank can ever make so that's why every 18 years we have a boom and bust in housing and why the banks will never blow a bubble in bubble gum.

Banks have a vested interest in causing ever higher property prices. Trades Unions have a vested interest in causing ever higher wages.

One 'good'. One 'bad'. Go figure.

The banks' owners, the shareholders, lost virtually everything. (Look at the 10-years Lloyds chart, below.) Banks' directors, on bonuses, got away with some millions each, but the losses were much, much greater, in dozens, or hundreds of BILLIONS. Overall, it was a disaster.

Back in 2003 Brown did not foresee the size of the disaster he was sowing. He obviously knew he was tampering with the index, and wanted to avoid a cooling down of the economy in 2004, but he did not understand the full consequences of it.

Well, to be honest, very few people did foresee that the USA-UK financial system would break. But that is because very few people had access to the systemic data, the overall picture, including banks books. These are not public information. But the FSA, the BoE and the Treasury have access to this information, and should have seen it coming. But because each one, in this new 3-parts structure (created by Brown), was looking at a different thing, they failed.

The crisis was not "planned". It was a monumental cockup. And Brown the B@stard was in the very centre of it. (The b@stard!)

Edited August 7, 2010 by Tired of Waiting

[(Blizzard)]

, madness, I tell ya!

I agree.

Just liberalise planning.

It would help, in the short term, but it isn't the solution. The land price ultimately depends upon the ability of people to pay, because the supply of locations - say land within 10 miles of central London, or land close to the M60 - is fixed. Sure, you can have a one-off increase in the supply, by bringing in new locations some fraction of which will be close substitutes for existing locations, but it won't change the long-term outcome by much.

People will always end up paying as much as they can possibly afford for housing, because there is no competition able to produce the same location for a lower cost. If no-one but Tesco could produce food, we'd all be slaves for their minimum calorie gruel allowance, just as we are now all slaves to the landowning class (or government as they are sometimes known).

The real solutions are:

1. Restrict lending for the purpose of buying houses.

2. Land value tax.

3. Abolish land ownership.

1 and 2 require government intervention. In my opinion 3 is the preferred solution, since it reduces government oppression, removes the power of landowners, and increases personal freedom. It also, of course, ends all (government) planning restrictions. However, in practice, 2 and 3 would have more or less the same outcome.

(There is a solution 1a. which is to leave lending to the private sector. Stop giving privileges to banks, and allow them to fail when they make bad loans.

That's so obvious I thought it didn't deserve to be on the list really.)

[Tired of Waiting]

It would help, in the short term, but it isn't the solution. The land price ultimately depends upon the ability of people to pay, because the supply of locations - say land within 10 miles of central London, or land close to the M60 - is fixed. Sure, you can have a one-off increase in the supply, by bringing in new locations some fraction of which will be close substitutes for existing locations, but it won't change the long-term outcome by much.

(...)

Land is only scarce in central London and a few other city centres. I am not talking about city centres, of course.

Less than a quarter of British surface is used for agriculture, crops. Most of the land is used for pastures! As you probably know, that is a very low yield, very inefficient use of land. 1 cow needs an acre, or 1 hectare? More than enough land for 10 spacious family homes.

This crisis was caused by a combination of demand over-boosted by too much credit, and supply over-restricted by planning.

And even regarding London. Its greenbelt is around 15 miles from the city centre. (See map below.) IIRC, I read recently (1 or 2 months ago?) that if we allowed London perimeter to expand by juts 3 miles, London area would increase by 60%. That was a big surprise. I've just tried to Google that article, but I couldn't find it. So, I had to do the math. I don't know the data they used, London current size, so I'll even give a lot of safety margin, and exaggerate it. From a few maps, London is less than 30 miles across = diameter, or 15 miles radius. So, current area is: 15 x 15 x 3.14 = 706.5. Now lets increase the radius, in 1 mile steps:

16 x 16 x 3.14 = 803.84 area

17 x 17 x 3.14 = 907.46 area

18 x 18 x 3.14 = 1,017.36 area

These bring an area increase of:

803.84 / 706.5 = +14.7%

907.46 / 706.5 = +28.4%

1,017.36 / 706.5 = +44%

Surprising, no?

Land is much less scarce than people (and the BBC) think.

Edited August 7, 2010 by Tired of Waiting

[(Blizzard)]

Land is only scarce in central London and a few other city centres. I am not talking about city centres, of course.

Less than a quarter of British surface is used for agriculture, crops. Most of the land is used for pastures! As you probably know, that is a very low yield, ...

Yes, I agree. The shortage of land argument is a shallow lie.

It won't solve the problem though. Land became stupidly expensive in the US as well, and the US has plenty of empty space for building houses.

It is the feudal system that makes land expensive - politics not economics.

[Tired of Waiting]

Yes, I agree. The shortage of land argument is a shallow lie.

(...)

It is the feudal system that makes land expensive - politics not economics.

Exactly! I agree 100%.

It won't solve the problem though. Land became stupidly expensive in the US as well, and the US has plenty of empty space for building houses.

I read some time ago that the UK has the worst housing stock of any developed country - actually, (I just remembered) it was Nick Clegg who quote that, before the last election. And for reasons of work, research, and family members abroad I do know 5 other developed countries quite well, and my personal experience confirms that. Our housing stock is.. shameful, in amount, living space, quality, everything. Embarrassing. Actually, in many cases, it is really primitive, by comparison.

Yes, finances - the amount and price of credit - do have a much stronger short term (a few years) influence on property prices, land prices included. But in the longer term, the supply of housing is the strongest structural, root cause. The laws of supply and demand also reign over the housing sector. We had demand boosted by cheap and abundant credit, and supply blocked by planning. No wonder prices went up.

[eric pebble]

Land is only scarce in central London and a few other city centres. I am not talking about city centres, of course.

Less than a quarter of British surface is used for agriculture,..........////

Land is much less scarce than people (and the BBC) think.

Hey!! Good stuff ToW!!!

Edited August 7, 2010 by eric pebble

[Tired of Waiting]

Hey!! Good stuff ToW!!!

Cheers EP. Let's hope the Con-Lib will liberalise planning.

Did you know that it costs just £60 to £90 / sq ft to have a house built? But thanks to planning restrictions, building plots are very rare and very expensive, even in the countryside, with thousands of acres of pastures around! Madness. The local planners side with 1 cow, against 10 families...

[eric pebble]

Cheers EP. Let's hope the Con-Lib will liberalise planning.

Did you know that it costs just £60 to £90 / sq ft to have a house built? But thanks to planning restrictions, building plots are very rare and very expensive, even in the countryside, with thousands of acres of pastures around! Madness. The local planners side with 1 cow, against 10 families...

TOTALLY agree with you ToW. Just look at Google maps switched to "Satellite view" - and it confirms the fact: Only 9% of the land is actually built on!!

[Tired of Waiting]

TOTALLY agree with you ToW. Just look at Google maps switched to "Satellite view" - and it confirms the fact: Only 9% of the land is actually built on!!

And I think it is probably even less than that. Even if you include parks, gardens, etc. But it has been virtually impossible for me to find reliable data on that. They are all span in favour of the "green belt" malarkey, in a supposedly "ethical" agenda, conservationist (imagine Elgar playing in the background).

[Tired of Waiting]

http://www.ft.com/cms/s/0/ad4dec10-9f32-11df-8732-00144feabdc0.html?ftcamp=rss

(need registration to read). I think the writer is spot on.

Now an FT EDITORIAL (!) agrees with this columnist, and goes even further, saying that not to realise that cheaper housing is a good thing is MADNESS !

Don't believe me? Here: http://www.housepricecrash.co.uk/forum/index.php?showtopic=149005&view=findpost&p=2664359

.

Edited August 13, 2010 by Tired of Waiting