Sunday, Oct 01, 2017

No supply side reforms

Buzzfeed: Prime Minister pledges tuition fee overhaul and £10bn boost for first-time buyers

May has come out with additional funding basically the same as Osbourne, so I think that clearly there is no intention from the Tories for supply side reform on housing. I also don't feel that a majority of the electorate is after cheaper housing. Corbyn I feel sure off the idea of compelling councils to purchase property, grant planning permission, and then sell onwards to capture the value, because it would kill two birds with one stone. Increase availability of housing, and also fund his election promises. It seems to me that 100,000 properties a year with planning permission values a conservative estimate of 50K = 5 billion to blow and thats per year. I wonder how the youngsters will vote they seem to be kingmaker.

Posted by stillthinking @ 01:10 AM (6471 views) Add Comment

13 Comments

1. sneaker said...

I just love how every solution to the overpriced housing market is .... to find subsidies to prop it up!

The correct solution to an overpriced market is to let it correct!

If you prop it up all that happens is it rises to the next point of mass inaffordability!

Sunday, October 1, 2017 03:06PM Report Comment
 

2. nickb said...

May's More of The Same 'solution' involves more debt for the young when there is no appetite for it, and kicking the can down the road. Corbyn it seems wants to replace council tax with Land Value Tax. This would help deflate the 'property' (actually land price?) bubble since it impacts on speculative gains and penalises land hoarding. Personally I don't believe the housing crisis is a supply side crisis, so this looks good to me.

Sunday, October 1, 2017 04:05PM Report Comment
 

3. khards said...

This country has relied upon debt expansion and inflation for a long time. This policy is really more of the same

Sunday, October 1, 2017 06:49PM Report Comment
 

4. libertas said...

There will unlikely be a vote for another five years.

Tories seem divided because we have a leftist supporting media. Fact is they are petrified of throwing the towel to Corbyn and nobody wants the PM job until Brexit is done and dusted.

Monday, October 2, 2017 08:35AM Report Comment
 

5. mombers said...

Wouldn't that £10bn be better spent on eliminating stamp duty for downsizers? Much less wasteful to use the existing housing stock more efficiently

Monday, October 2, 2017 05:40PM Report Comment
 

6. stillthinking said...

Hhelp to first time buyers, which is a 20K interest free loan, not an outright bung, is not actually a loss to the government. They get stamp duty 1500 on 200K properties, but all money eventually goes to the government in anycase. So if they can tip some buyer over the edge and 180K of credit is extended, this then eventually goes to the government. Maybe via VAT, maybe via income tax, maybe by one of the many secondary taxes, maybe it takes a few years but all money does end up in government hands.
Even if you buy some tax exempt good, the tax take just skips a transaction.
Consider the following sequence, buy something, somebody is paid, they buy something, somebody is paid (assuming income tax at 25%)
100*0.825=82.5
82.5*0.75=61.875
61.875*0.825=51... etc Goes back to the government pretty quick.

Tuesday, October 3, 2017 01:36AM Report Comment
 

7. stillthinking said...

Hhelp to first time buyers, which is a 20K interest free loan, not an outright bung, is not actually a loss to the government. They get stamp duty 1500 on 200K properties, but all money eventually goes to the government in anycase. So if they can tip some buyer over the edge and 180K of credit is extended, this then eventually goes to the government. Maybe via VAT, maybe via income tax, maybe by one of the many secondary taxes, maybe it takes a few years but all money does end up in government hands.
Even if you buy some tax exempt good, the tax take just skips a transaction.
Consider the following sequence, buy something, somebody is paid, they buy something, somebody is paid (assuming income tax at 25%)
100*0.825=82.5
82.5*0.75=61.875
61.875*0.825=51... etc Goes back to the government pretty quick.

Tuesday, October 3, 2017 01:36AM Report Comment
 

8. mombers said...

@6/7 But what about the demand that is sucked out of the economy by the increase in house prices as a result of Help To Buy? Paying a bigger mortgage for the same home doesn't create any meaningful activity, people just have less to spend on things that actually create value

Tuesday, October 3, 2017 09:07AM Report Comment
 

9. nickb said...

@6/7
You could make the same argument about any government expenditure. But it takes time to accrue as taxation revenue, so in terms of managing a flow volume I think it's an expense, depending on how it is financed. For example, if it is financed by government borrowing, I think it is an expense. Is it financed instead by printing money, e.g. by QE cancelling government debt? As even the mainstream media have commented, when it comes to propping up the housing market, clearly there is a healthy 'magic money tree' that is curiously absent when it comes to maintaining or improving public services.

Tuesday, October 3, 2017 09:49AM Report Comment
 

10. mombers said...

@9 this is government expenditure that does not lead to higher production - as witnessed by the jump in housebuilders shares. They will clearly just be selling the same homes for more money - creating nothing extra. Maybe the shareholders will spend a bit of their ill gotten gains though :-)

Wednesday, October 4, 2017 12:23PM Report Comment
 

11. nickb said...

@10 Maybe that's right, there's certainly no guarantee supply will respond appreciably. I wonder if May's council house building program will dampen stock market enthusiasm for this bung?

Wednesday, October 4, 2017 02:37PM Report Comment
 

12. nickb said...

Oh she only offered to build 5,000 council houses a year! An insignificant gesture...

Thursday, October 5, 2017 10:33AM Report Comment
 

13. letthemfall said...

@4 "Tories seem divided because we have a leftist supporting media."

That'll be the Mail, Express, Telegraph, Times, Sun ....

Thursday, October 12, 2017 12:13PM Report Comment
 

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