Thursday, Mar 25, 2010
Goverment panicking?
Moneyweek: The government's stamp duty giveaway won't prop up house prices
If you needed any proof that this Budget was all about the election, you just need to look at the main headline-grabber – the doubling of the stamp duty threshold to £250,000 for two years.
This is very political. For one thing, the stamp duty change comes in from midnight tonight. No wonder. The government must have panicked on witnessing the recent slide in mortgage approvals and the corresponding falls in house prices. The recent dip in the market corresponds almost precisely with the end of the recent stamp duty holiday. The Chancellor must be hoping for another rebound in the market to keep voters calm.
Posted by waitingtobuy @ 02:06 PM (2292 views) Add Comment
34 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. str 2007 said...
Has it occurred to anyone that this tax cut is aimed at BTLers who might want to unload their portfolios to the unwary.
Politicians portfolios for example.
2. str 2007 said...
Also note the Money Week comment at No. 8 below the article from a Mr King. Wouldn't it be wonderful it it was Swervym Mervyn himself.
3. luckyjim said...
I'm surprised this has been received so negatively, even by the cynics on here.
Firstly, anything that gives FTBs a small advantage has got to be a good thing. They are the ones who have really lost out through HPI.
Also, many have pointed out that 1% won't make much difference. If you're thinking of the overall house price maybe not, but it is quite significant in terms of how much you have to save before you can buy. If you are struggling to save for a deposit, having to find another 1% up front makes things significantly worse.
Yes there is an argument that they should not buy now anyway, but the government is hardly likely to encourage FTBs to wait for a crash.
4. str 2007 said...
Hi LJ
I understand where you're coming from LJ, but frankly I think everyone is now sick to the back teeth with politicians and their tricks and scams.
I've just been on the school run where I saw Sandra Ridley Lib Dem MP getting ejected from the school grounds by the headmaster trying to hand out her propoganda. BTW a NIMBY with no understanding of housing policy and also with the highest expenses around my way with £160k expense claim.
I've heard of intelligent people deciding not to vote for the first time in their life.
5. happy mondays said...
luckyjim said...Firstly, anything that gives FTBs a small advantage has got to be a good thing. They are the ones who have really lost out through HPI.
You have got to be joking, a one bed flat round my way will cost in excess of £120,000, how & more importantly why should someone be conditioned oops sorry encouraged to borrow so much for so little, only to keep the ponzi scheme alive..?
*but the government is hardly likely to encourage FTBs to wait for a crash. Are you saying that our government will keep things from us & keep pushing people to get in debt up to there necks just to save there own sociopathic selves?
Hopefully in years to come sooner rather than later, some of our so called leaders will be brought to a court of law with other powerful egotistic t*ats & put on trial for manipulating the masses, feeding us bullsh*t,taking us to illegal wars, robbing our children of a future!
http://www.youtube.com/watch?v=AvDPweOW8So
Running Riot , cocksparrer
6. luckyjim said...
Happy Mondays
Have you forgotten to take your meds again ?
7. happy mondays said...
LJ, funny you should say that, i find it hard to swallow the bullsh*t pill prescribed by our government!
8. 51ck-6-51x said...
I do not agree with the article premise (I do agree that "The real problem is that what first-time buyers really need is exactly what the government doesn't want – lower house prices." and that "artificially propping up the housing market ... just distorts the market and delays the inevitable.").
Anyone mulling over whether to buy a house for £250K will suddenly have an extra £2.5K in their deposit funds available (similarly @ £125K, an extra £1.25K) - this may be "a drop in the ocean" but it is these marginal changes that tip some people from not buying to buying. For some people it may even mean they are suddenly in a more favourable position with lenders (as they cross one of the magical minimum deposit lines) and thus feel much more secure about their monthly payments.
When push comes to shove marginal changes can have large effects.
9. inbreda said...
strikes me that it is FTBs that have been a) priced out and b) more recently not lent to by the banks. IMO this has distorted the HPI stats because of low sales volumes, and a higher proportion opf those sales being made up of wealthy people with more money than sense and "home swappers" i.e. the people to whom it is entirely irrelevant what the actual price of their house is.
I think that the raising of the SD threshold will do two things - increase the number of sub 250k sales and decrease the number of million+ sales. i.e. I think it will artificially distort the figures to show lower house prices. With a higher volume of sales. Which will make people suddenly shy of buying.
In other words I think it will be a very temporary blip - if it is a blip at all
10. luckyjim said...
666,
Spot on. How many times have we seen posters on here dismissing government steps as feeble or insignificant and then, a few month later, those same posters complaining that the market is only being propped up by the governments measures.
Even if it only influences sentiment, this change will affect prices. Buyers are under no pressure to lower their prices. The promise of more FTBs entering the market is is only going to encourage them to hold out for the price they want.
11. luckyjim said...
inbreda
The HP indexes are supposed to be mix adjusted so a surge in the lower end of the market should not lower the overall figure.
Also, the increase for million pound plus homes doesn't come in for another year so even that will push up demand in the short term as buyers 'rush' to beat the increase.
12. Loneranger said...
LJ @11.
Your last comment has shed some light on this governments cynical attempt to 'unlock' the housing market their feeble economy is based on. Anyone with an ounce of common sense will agree, by unlocking both the FTB market and the 1m+ market this will in turn unlock the middle of the housing chain. Thus, all this government is concerned with is the housing market, they are not interested in creating real long term job growth, just pure speculation.
What a mess!
13. tenant super said...
This was also significant I think... Support for Mortgage Interest will remain at 6.08pc for a further six months. The period for which this interest rate would apply had already been extended until June 2010 in the pre-Budget report in December 2009.
14. rumble said...
"anything that gives FTBs a small advantage has got to be a good thing. "
" the government is hardly likely to encourage FTBs to wait for a crash"
-- So the gov is encouraging FTBs despite the possibility of a crash, and that's got to be a good thing?
" If you are struggling to save for a deposit, having to find another 1% up front makes things significantly worse. "
-- If you're struggling to save up the deposit to such a degree that 1% matters, should you really be buying a property? Buy an ice cream and chill out.
15. tenant super said...
I wonder whether extending the rate was so that if the Tories win, they'll be in office for a while and bedded in before prices crash again?
However, whenever we here wonder whether the real purpose of X policy is actually to achieve Z (rather than the official stated aim of achieving Y) I become doubtful when the plot becomes quite complex.
I know that no government wants a house price crash but I can't help having doubts that stamp duty relief is just so politicians and other BTLs can flog their own properties. Maybe they really want to help FTB but are just being really thick about the whole thing (the housing situaton in general) But then politicians aren't 'stupid' in an absolute sense. I'm starting to think the whole thing is is a collection of psychological phenomena ... mass-delusion rather than conspiracy. Folie à deux that has become a folie à mille!
16. 51ck-6-51x said...
rumble said, "If you're struggling to save up the deposit to such a degree that 1% matters, should you really be buying a property?"
"should" does not matter ;p
17. rumble said...
FTBs shouldn't be helped. Help is interference, and there is no free lunch. If this policy converts an FTB from not buying to buying, they will be living on a financial precipice, and when it hits the fan they'll need more than a shower. They should buy when they are ready. Did I miss the bit in the bible where god produced a tablet specifying the target age for an FTB? All this charitable bleeding heart social interference nonsense simply makes a frikkin mess, but everyone has a solution to everything, even when there isn't a problem, they can improve on the market balance. Gone puking...
18. tenyearstogetmymoneyback said...
str 2007 said "I've heard of intelligent people deciding not to vote for the first time in their life"
We were discussing this at work. What we really need is a "None of these thank you" option on the Ballot paper.
19. Pete. S said...
As a first time buyer looking to spend about 225k the thought of not having to pay 2.25k on stamp is quite appealing! However, I agree with many of the statements on here. It would be better (for ftb's) for the government to let the housing market take it's own course. There are already too many builder 'incentives' keeping prices artificially high. Most new builds round my area are asking for astronomical prices and they simply wouldn't sell if it wasn't for the buy 70% deals (the govs own homebuy scheme is also to blame). I'd love to see these schemes scrapped allowing house prices to return to their true affordable rate.
20. rumble said...
Is there any point to abstention? It's no great act of defiance. The politicians don't care about non-votes, they care about votes. Abstention across the board perpetuates the status quo, therefore counteractive. Surely better to cast an outsider vote and mix things up. No?
21. mr g said...
If you can't bring yourself to vote Labour with the aim of getting these incompetent half wits back in so they have to clean up their own sh*t and enjoy the spectacle of them squirming when the markets say enough is enough, then vote for any of the minor parties as a protest.
22. luckyjim said...
rumble
You might as well say that the government should not encourage people to put save for their pensions because it's a bad time to be investing.
As for whether 1% will have an impact, look at this way -
For any given level of savings, the amount of money a FTB can potentially borrow has just increased by around 10%.
But, just to be clear, if the housing market is strong over the next few months you will hail it as a genuine recovery - nothing do do with this change, right ?
23. uncle tom said...
This measure had one simple and cynical objective - to stop the softening of the market, already seen this year, taking hold before the election..
~~~
In a strange way, I rather hope that the election is followed by a Lib-Lab coalition...
It will destroy the LibDems for being stupid enough to prop a failed Labour admin (and I believe that they ARE stupid enough to do that...)
It will ensure that GB gets to face the armageddon that he has worked so selfishly to defer until after the election.
It will give the Tories a little time to recognise that George Osborne is a complete electoral liability; and pull together a better team for the next election, which won't be that far down the line; as a Lib-Lab team in the second dip of the recession will soon descend into a spat over who takes the blame..
24. rumble said...
Pension = house? Depends on the form of the pension, and government encouragement should always be ignored.
" the amount of money a FTB can potentially borrow has just increased by around 10%" -- more borrowing, the usual medicine, circumstantial pretense.
" if the housing market is strong over the next few months you will hail it as a genuine recovery - nothing do do with this change, right ?"
-- I will not hail it as a genuine recovery.
25. Chilli said...
A while ago I had this brilliant idea! How about starting a single issue party with one concept in mind!
And that is to change the voting system so that each party has to indicate how much their electoral budget cost on the ballot paper.
Of course if I was voted in with a decisive majority I could change the constitution (I don't think we have one...) or whatever so that whatever followed could not undo the measure.. and then call for another election... I'm not really qualified for being a politician. If something sucks I generally say so... and I have been known to hold a job from time to time.
Who would vote for me?
And btw.
rumble.....
RUMBLE ON!!!!!
26. tenant super said...
UT @ 21...
"It will destroy the LibDems for being stupid enough to prop a failed Labour admin "
that was my only concern with the "Give Labour the bed they've cr@pped on" plan. Or rather that the Libs would insist on a switch to Proportional Representation as a condition of the coalition and we's be stuck with a lib-lab centre left coalition forever and ever and ever and ever ...
27. quiet guy said...
@Luckyjim
"For any given level of savings, the amount of money a FTB can potentially borrow has just increased by around 10%"
You've highlighted a good point that the extra cash for FTBers has a multiplier effect on the buyer's budget but you appear to be assuming a 10% deposit - fine in previous years but isn't that a bit optimistic today? (I make the potential extra borrowing at about an extra 4% for a 25% deposit.)
http://activepropertyservices.co.uk/blog/first-time-buyers-still-need-a-50k-deposit
10% deposits are probably still quite rare at the moment.
28. Random said...
I'm a first time buyer.
We don't have a 50k deposit. All these articles saying you need this as a minimum deposit is complete nonsense. You can get a decent interest rate on 15% deposit.
House prices go up and down. That's life. They may crash tomorrow or go up in value in three years. If we can afford the house that is all that matters. Telling people not to buy because there will be a crash will cause a crash.
For us a mortgage on a two bedroom house is only £150 a month more than renting a crappy shoe box one bedroom flat. Renting is dead money. You have absolutely nothing to show for it and have a crappy landlord. You can't do anything to the property to make it home.
Any help for a first time buyer is most welcome to me. Overnight I now have an extra £1.5k in my pocket. That's awesome. It means we can either buy more things for the house, pay an extra £1.5k off the mortgage or keep it in the bank.
29. nubbers said...
Pension? Many people buying into the housing market now won't have any money left for pensions, especially when interest rates recover.
30. phdinbubbles said...
The end of the stamp duty holiday brought about a small blip in the house price trend - a trend that started early Autumn when the rally started petering out. Given that the rally was supported by BTL (as evidenced by the dwindling proportion of FTBs in the mortgage figures) and this measure doesn't support BTL then it's surely not going to make much difference.
If this months haliwide figure are similar to last month* then it will do more to remove support by making BTLs delay purchase (and the small band of potential FTBs as well) than the support given from FTBs induced by this carrot and stick. I suspect if the government had done this a couple of months ago it would have been more likely to make the short-term difference they're clearly looking for.
*But then again anything could happen because houses are bought by the great british public who are clearly mental.
31. britishblue said...
UT @21. One of the most sensible comments I have seen for a very long while!
32. This comment has been removed as it was found to be in breach of our Blog Policies.
33. Strip said...
I have read this site now for a few months but think you are missing the point!
As a BTL of 3 properties and a home owner, I have no problems if prices crash. I hope they do.
At present I can buy property for £50k and rent for £6k pa. Even mortgaged to 80% LTV they payback on a 7% 5yr fixed mortgage.
I am aware there are risks (its an investments I expect there to be risk), price fall further (great more buying opputunities), government changes housing benefit (they still have to pay something otherweise all the BTL will be empty and the councils will have homeless people all over the place, - no government will let that happen), interest rates rise (the rent/interest coverage is massive, I reckon most of my properties can hold there own at 14% rates), after that I accept I'll have to partial fund them out of wages (so problem its an investment).
There is only so far properties can fall if other elements are not changed, what you guys are waiting for are so many factors to change that you have got to admit its going to be unlikley.
I am not saying the recent HPI is ideal and agree a correction is underway, but if they continue to fall much further yeilds (in some areas)will become stupid (not complaining as will happiliy expand portfolio).
Just my point of view!!
34. tenyearstogetmymoneyback said...
Strip
You are either in Detroit, or buying deerillict properties and renting them out as Canabis farms.
My landlords return is 2.7% before expenses. It is going up as the property has dropped at least £18K in the last 18 months :-)
(based on Land Registry data for other houses in the same road).