Friday, May 25, 2007
Newsnight's "Do we need a housing market crash?"
BBC Newsnight: Newsnight's "Do we need a housing market crash?"
In case anybody missed...........the Newsnight programme on "do we need a housing market crash?". The politicians predictably tried to pass the blame to each other - the Labour minister says that Tory councils restrict planning - the Tory spokesman says its a government strategy failure - Yawn! Two things struck me while watching this programme. 1. Stephanie Flanders' comment about the current bubble merely "transfers resources from people who would like to have owned houses in the future to those that own them right now......or from people who don't vote to people who do". 2. the estate agent's assertion that their job is to get the "most amount of money" for their clients. As I see it, current wannabe homeowners have left themselves without a voice, and are getting screwed as a result.
34 Comments
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1. royston said...
If buyers had professional agents in the way that sellers do, we would be in a stronger position to influence prices. If political parties saw us as a coherent voting block, they would we willing to offer policies to win us over. We are the politically apathetic generation and we are paying the price for our apathy in high house prices. I want to see a major political party to adopt a policy initiative to tax BTL. Right now, none of them will do it because they will loose the votes of the BLTers and the business community and won't gain any voting blocks because we don't vote collectively.
2. Papabear said...
I was looking forward to this program last night but found it a bit dissapointing. Most put forward the tired old argument - "there aren't enough houses so that's why prices are high" - without explaining why in that case rents are stagnant. The woman from pricedout rightly pointed out that any new houses built will be snapped up by BTL "investors" (read: speculators) and that FTBs can't compete against them. The Lab and Con politicians were pathetic trying to score points off each other. The estate agent was predictably annoying by basically arguing: if you can't afford to buy where you'd like to live, go live somewhere where you can afford (Outher Hebridies, anyone?) and told us how back in 1981 he took a gamble and bought a studio in Brixton as he coldn't afford anything better (failing to mention that now even studios in Brixton are probably around £200K and much more expensive in terms of average earnings than in 1981). I remain convinced as I have been for years now that we are in a huge speculative bubble and a crash would benefit the vast majority of people in the UK (FTBs as well as owner occupiers)!
3. Lovingit! said...
Stupidest thing I've heard in ages.
Are you suggesting that first time buyers are supposed to suddenly out number those who have bought?
It's the same on every single issue. The 50-60 age group vastly outnumbers the 25-35 age group. When it comes to a vote the result will always benefit the 50-60 demographic and hurt the 25-35s.
The "politically apathetic" generation have just got fed up of playing with loaded dice.
4. royston said...
Anyone interested in starting a new political party? - the BRHP (Britishperson's Right to Homeownership Party)
5. royston said...
BRHP policies:
1. Tax BTL
2. One Home per Family
6. Orwell said...
Remember Roy...
To each according to his means from each according to their needs...
Or was it the other way around?
7. Trough2010 said...
That seems like a fair common sense policy that could be easily be implemented. But there's still a fair bit of lobbying to be done before we such a tax become reality.
8. Tara747 said...
I'll vote for you royston!
9. Scott said...
Why stop there Royston. More policies should include caning in schools, death penalty for murder, tougher immigration and deportation, more police powers, more prisons and longer sentences, no NHS for self induced druggies/obese people/smokers. You would get millions of votes.
10. Colly said...
All very well saying that we are politically apathetic (the younger generation), but currently the baby boomer generation has about 4 times the voting power of anyone my age due to their numbers.
11. This comment has been removed as it was found to be in breach of our Blog Policies.
12. george monsoon said...
Sorry but I dont subscribe to the point of view that politicians are targeting voters by handing them the wealth and leaving the "apathetic" generation out of the picture.
This does not make sense on so many levels.
Either way, I won't be voting next time. there is no party I would even consider voting into office.
I predict that the 20 - 45 year olds (the MAIN workforce of this country - and - the main TAX revenue for government) will (by a vote of no confidence) force a dramatic change in political attitude.
My main argument to support this theory, is the Internet. Until recently, censorshit laws have prevented public access to privileged information and discussion. Now we have the internet and people are allowed to uncover the uncensored truth behind the political lies, through discussion boards (case in point) and other valid sources around the world. Who was it that said "its good to talk" ?
13. george monsoon said...
Royston, you have my vote.
14. mike said...
seconded
15. Randomkevlar said...
George, I remember a quote from someone that said if less than 40% (can't remember the exact percentage) of the registered voters do not vote, or spoil they ballot no govenment can be formed as no mandate has been given by the population. To this end I normally take great pleasure in spoiling my ballot paper. Does anyone know if this is true?
16. Ticktock said...
1. Capital controls on speculative funds
2. Stirling to be backed by gold/silver reserves rather than fictional House prices
3. The restoration of a real democracy with no involvement of US voting 'technology' or Mckinsey global consultants.
4. The Re-Nationalisation of essential public services
5 Withdrawal from EU.
6. Witdrawral from Iraq, Afganistan, Yugoslavia, etc. etc. etc.
7. Apologise to Iraq, Afganistan, Yugoslavia etc. etc. etc.
8. Ban foreign ownership of British media
9. Restore the right of British culture to flourish - Including those elements that increase health costs for US insurance rackets.
10 Blair to handed over to the Iraqi resistance with no special reqirements regarding his treatment.
and of course. 2nd home owners and BTL investors to be taxed till crushed, and then publicly humiliated for their anti-social behaviour.
17. royston said...
Lovingit!,
I think you are missing the point. You don't need to be a majority, you just need to be a well-organised, vocal minority. Look at how centre-stage and politically powerful the gay community is today. Surely you're not suggesting that the majority of British people are gay?
18. Genepool said...
Good point Royston,
Stand aside Stonewall, here come's Ownwall ...
19. Lovingit! said...
Royston,
I can see what you're saying but it's not really a comparable issue.
The gay community is powerful on an issue where they are competing with another even smaller minority (conservative christians).
If it were possible for 50-60 year olds to own equity in gay sex then you can rest assured the gay community would be having a much harder time getting access to it.
20. Renting For Now said...
But what will people do if there's no BTL? My (self-employed) work has involved 5 moves in the last two years - so renting has been a better option rather than paying agents' fees, surveyors and stamp duty each time. If there's no BTL and one home per family then mobility will be much more difficult - how will the rental market work?
NB I do not own a property - sold up in late 2005 as I thought prices were overvalued then!
21. Orwell said...
I have already blogged on Becky's entry below:
The best comment Becky, is that by Dr. Ian Spooner:
Yes, we do need a substantial crash in house prices - the euphemistic "correction" - to rectify this boom having run 3-4 years longer that it should have.
Most real estate professional, commentators and economists knew the "corection" should have taken place several yaers ago, when prices had already escalated unhealthily but within the pattern of all boom-bust cycles.
This extended and socially divisive boom occured because of artificially low interest rates and "cheap money" emanating from the USA despite the USA beaing terminally broke and living off the rest of the world to the tune of drawing in $3 billion foreign capital per day.
Low interet and business hungry banks, in the majority of countries, created a plethora of virtually negative interest loans, mortages and re-finance your house deals that fuelled this boom, put borrowed money in peoples' pockets, fed the "feel good factor" and kept the populace happy.
As house price rose above all previous ratios and country after country vied for "the most expensive house price: income level in the world" many professionals and commentators tentatively suggested this was not a good thing and was leading to possibly the biggest bust ever.
Conspiracy minded theorists argue that governments create debt burden deliberately to keep the population timid, malleable, content with consumer rubbish and fearful of losing their mortages and credit ratings. May be something in that but most recognise the looming dangers of social unrest and economic hardship. Everyone over 35 remembers negative equity, previous crashes. Trouble is those younger than that think the fairies will always give them money at almost nil interest, that the paper gain of $1000 a day on their house is a natural right, that it'll go on forever.
What did governments do when they should have been getting out of the negative real interest trap? Nothing. They had "painted themleves into a corner" with electorates gorged on "free money" and feared the outcome; the ever higher mountain of debt, the repossessions and the social unrest created both by the high prices and inevitable when rates eventually rise and prices crash.
It is now happening in the USA, they have "Bitten the bullet" in very small bites; quarter point rises almost monthly, gently-gently but prices are already tumbling.
It is time the banks, mortgage companies, credit unions, shonky no doc, low security and refi-mortgage sharks were stopped from making fortunes from innocent borrowers. Time for sensible rates of interest (which would reduce the lenders need to lend to so many at low rates) affordable houses across the spectrum
and the re-adjustment that might still restore equity to society.
Take the heat off housing and once the dust subsides people MIGHT find they can actually converse about something else, live for something else, learn they are a great deal richer than the small minded- property obsessed sub-human they have been for so long.
And governments, always ready to claim praise for the effect in their own countries of what are often worlwide trends might actually educate their peoples this time, point out in unison that this WAS a global madness and share the blame for letting it happen. That's a way of getting "un-painted from the corner" without all the blame.
TOUCHE
22. Gav said...
If the new tide of first time buyers use their heads then they will stay at hotel mum & dad as long as they can, rather than rush out to rent somewhere as soon as possible like lots of them do. Theres no point paying for somebody elses pension by renting (paying for) their other properties, then winging that you can't get on the ladder because of the BTL brigade. At the end of the day people not being able to wait to leave home is one of the fuels for BTL and a large drain on your income. I decided to stay at hotel mum & dad unlike most people I know, now I'm in the position to pay cash for a house rather than wondering if I can get a few grand together for a deposit. You can't have it both ways, if I'd moved out years ago I'd be in the same sorry state.
You can't rely on the governament to correct house prices, it just isn't going to happen.
23. Kenhay said...
Well said Royston et al. We are forming the Sensible Party in Plymouth and need other branches!
BTL, and Holiday Homes (second houses) are a result of blatent capitalism. These are business activities and could be taxed particularly via a "windfall" proposal. They induce housing shortages and push up prices. At the same time no-one has a right to home ownership, just somewhere to live!
I own my own house and have bought my business premises since I need both. However, I am 53 and spent all my life getting here ( I still owe agreat deal in mortgages!). At the start, when I first got married I lived in a squat! My point is that FTB should work hard at getting a starter home (perhaps just a flat) but we older people need to ensure that these are available and within reach.
As a job I run 24 IFAs active in the mortgage market. Some of these people have chosen the BTL route themselves-hardly setting a good example!
We really need a correction in the market to bring people to their senses. Rising house prices do nothing except for the elderly trading down or releasing equity (neither of which would be required if they saved for retirement instead of busting a gut to stay housed)!
Let us give the young people something achievable to aim for without handing it to them on a plate. Control house prices and get the youngsters to accept their responsibilities. Our society is already too divided and too surely based on money for common sense to prevail unless we all act.
24. Afrobaggie said...
George,
You should use your vote rather than not vote. Spoil your ballot paper instead, write 'I don't think that any of the above are worthy of my vote'. A more democratic way than either voting for a minority party or not turning up!
25. confused76 said...
Roston
count me in!
26. mrmickey said...
Giving minority groups more of a say in society is about weakening the political power of the majority, it's got nothing to do with creating a more equal society.
27. Darren said...
A comment on the bbc website
"I'm an estate agent. The majority of the properties that I sell below £200,000 are to investors. If the prices fell, the investors would simply hoover up more properties.
I seem to recall that up to about 20 years ago it was illegal to have a mortgage on more than one house. If the buy to let brigade was out of the equation I would expect house prices to stabilise at the lower end of the market, and maybe some of the hysteria go out of it too. At the end of the day a home should be somewhere to live in, not to speculate over."
I think it's time to face it, prices just may not come down, i don't think a crash will help. Most ordinary people just will not be able to afford to buy a home, something fundamental has changed this time. That's it I give up.......
28. Orwell said...
Everyone over 35 remembers negative equity, previous crashes. Trouble is those younger than that think the fairies will always give them money at almost nil interest, that the paper gain of $1000 a day on their house is a natural right, that it'll go on forever.
What did governments do when they should have been getting out of the negative real interest trap? Nothing. They had "painted themleves into a corner" with electorates gorged on "free money" and feared the outcome; the ever higher mountain of debt, the repossessions and the social unrest created both by the high prices and inevitable when rates eventually rise and prices crash.
It is now happening in the USA, they have "Bitten the bullet" in very small bites; quarter point rises almost monthly, gently-gently but prices are already tumbling.
It is time the banks, mortgage companies, credit unions, shonky no doc, low security and refi-mortgage sharks were stopped from making fortunes from innocent borrowers. Time for sensible rates of interest (which would reduce the lenders need to lend to so many at low rates) affordable houses across the spectrum
and the re-adjustment that might still restore equity to society.
Take the heat off housing and once the dust subsides people MIGHT find they can actually converse about something else, live for something else, learn they are a great deal richer than the small minded- property obsessed sub-human they have been for so long.
Yes some people have amazingly short memories! Bring back the days on BBC when there was only talk about how much houses had lost in value that month. Far more soothing!
29. millard said...
George: Bob Hoskins, BT ad early 90's at a guess.
30. inbreda said...
They are transferring the wealth (via property) to the older generation, knowing that soon they will start dieing off. Then they collect the inheritance tax.
Houses don't actually increase in value - one house is still only worth one house (if you look from the point of view of what a house is for - living in)
But the government will take a huge amount in tax when they are passed to the younger generation.
The younger generation will have to work for years to pay this tax.
31. Orwell said...
Interesting take from the Newsnight blog:
If house prices crash then banks will ask for larger deposits (based upon how far they think prices will go down). Until things bottom out, anyone will less than a big deposit (say 30%) won't be able to get a mortgage. No first time buyers will mean positive feedback and a much deeper reduction in prices than many expect
I hadn't thought about that - it will make the crash all the more heavier!
32. Whenohwhenohwhen said...
I'm for Royston! Or, the Sensible Party in Plymouth. Join forces chaps!
33. Kaitain said...
"I'm an estate agent. The majority of the properties that I sell below £200,000 are to investors. If the prices fell, the investors would simply hoover up more properties."
The flaw in the logic here is that the BTL investors would only hoover up the properties if the prices were 200k or below AND RISING. They will buy them on the way up, but they will not buy them on the way down. Why would you rush in to buy a commodity whose value you thought would continue to fall? Moreover, one of the reasons BTL-ers have been able to buy is because they're able to leverage a combination of low interest rates and a high value for their existing capital. If prices are falling, the BTLers' capital valuation will be falling, and interest rates are likely to be rising. This estate agent has used ceteris paribus reasoning where it isn't applicable.
34. Fedupwithhouseprices said...
Kenhay
I have noticed that you have a footballl manager in your area who snaps up all the property bargains and develops them then rents them out or resells. He is mega greedy as this is his sideline and he is putting property prices up in your area big time. It's no wonder you are making a stand! This is happening far too much and the government are doing nothing to stop it!