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House Price Crash Forum


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About phil7

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  1. Interesting article that raises doubts over the official line defending QE as much needed stimulus for our ailing economy. Can it be that QE is really only intended to correct our financial institutions' balance sheet exposure ... This lets me to believe that the government is sticking to Plan A because it actually is working just as it was meant to be. It’s main objective is to recapitalize the banking sector. The question then is; how far away are our banks from recapitalizing their balance sheets, and what will happen then? http://www.publications.parliament.uk/pa/cm201213/cmselect/cmtreasy/writev/qe/m18.htm Here's the executive summary ... The entire article can be viewed here: http://www.publications.parliament.uk/pa/cm201213/cmselect/cmtreasy/writev/qe/m18.htm
  2. Monetary policy in the UK is stuck in a catch 22. QE is not necessarily bad - it is misdirected and gravitates around property. The solution needs to be more sophisticated, perhaps even radical, a debt jubilee. Here is how a debt jubilee could work: Give every legal person in the UK a choice: Either half residential UK mortgage debt Or double UK cash savings deposits Funding for this one-time only debt jubilee comes from new money issued by the BoE (QE) underwritten not by government/public debt but by bank/corporate debt to be repaid through a time bound levy on financial institutions in form of a new financial services tax on shareholder dividends, employees bonus & salaries. Crucially, a sales tax of 50% on the selling price of residential property, payable by the seller to the buyer, is introduced without exception. This fund will be credited to the buyer as long as he’s the owner occupier and was a UK resident (primary residence) on the day of the jubilee announcement. Otherwise the fund goes to the BoE to be taken out of circulation (= QE debt paid off). Stamp duty remains payable by the buyer on the entire purchase price. A similar system is introduced to rentals. This has three big advantages: interest rates can increase again but house prices wont need to correct (avoiding all the bad consequences). the economy will grow again - people have more spending money in their pocket it is fair It may take a while to work out the details (especially how to avoid the build up of another asset bubble in the short term until a proper fiscal reform is introduced). Could this do the trick ...?
  3. It beggars belief that this country supports all those crazy property buyers, who chose to participate in a ponzi scheme of enormous proportions, while punishing the prudent and innocent (those who did not partake and decided to rent, and of course the next generation). Fact is, the price of our homes needs to come down across the line. The high cost of living harms our economy. In some areas, such as London, buying/renting was expensive 10 years ago. Now it is a joke. It is one thing to support all those owner occupiers who got carried away when they purchased their home. Ok, give them access to subsidized interest rates so they can keep their homes should they struggle to pay back those colossal back braking mortgages under free market conditions. But don’t lend a hand to all those greedy BTL investors. They must bear the harsh consequences of their stupid ‘get rich quick’ antics. A home should never be a high yield investment unless it involves substantial re-development. And taking out a mortgage and expecting someone else (tenant) to pay for such an ‘investment’ is immoral and utterly unsustainable. Give would-be investors incentives to invest in the economy and make it less attractive to buy existing property stock at any price with the expectation to roll over costs to tenants and on top of that yield considerable capital gains. And if the BTL Landlord cannot find a tenant so what, the property remains empty until a tenant is found; the mortgage costs are insignificant and other forms of investment are seemingly unattractive in light of future capital gains to be had. This needs to end and those quick buck BTL Landlords need to learn a lesson. But how? We all understand the pickle our banks are in. Any significant market correction will mean banks will go bust. It will take time to sort out this problem; only time we don’t have. Social injustice provokes unrest. We all have seen the pictures of rioting Londoners in August 2011. This needs to be avoided by all means. Here is how; control BTL yields by introducing the following temporary regional legislation (e.g. by council and binding until the BoE increases interest rates back in line with inflation): 1) Rents in a specific region are frozen at the rate of the initial tenancy where the initial tenancy commenced after Jan. 2008 and was continuous thereafter. 2) Suspend all tenant eviction court orders in a specific region unless on ground of rent arrears or substantial breach of contract. This will effectively create a time limited secured tenancy and a cap on rents that will only impact BTL, not owner occupiers, limited to a specific region such as London perhaps. Banks and their balance sheets (ultimately the reason for the present situation of intervention) will not be affected because this cannot trigger the much feared market correction (it is a regional policy). It rather takes the pressure off the investment market in terms of capital gains by capping the otherwise considerable returns BTL can make. Sure, temporary Landlords may decide to not rent out at all, given the risk of a sitting tenant occupying a family home, and yes this could add to the housing shortage. But this should be the exception. After all, there are mortgages and other costs to pay and only the fewest of landlords can or want to afford an empty property for long, especially if the prospect of capital gains is taken out of the equation. Let’s remind those BTLers that being a Landlord carries an important obligation – the provision of a home (shelter) is a basic human right, a right that present legislation has undermined. With this measure first time buyers stand a chance to save for a deposit rather than pay someone else’s mortgage/pension. And with stagnating prices homes will eventually become affordable again. This policy can be rolled out council by council and is quickly reversible too. However, should the BoE decide to upkeep the low interest policy for many more years to come, at least the BTL brigade can no longer take advantage as tenants are now protected until further notice, just as home owners. Social justice is reinstated.
  4. Given the vast amounts of funding that went into the support of the economy since the beginning of the debt crisis, is there a case to argue that the government has unfairly discriminated parts of the population, namely those who did not partake in the secured debt madness? I am thinking of all those who have been hit by artificially low interest rates on savings, or those who were forced into renting to await a much needed cooling of house prices while their landlords benefited from low mortgage rates and sustained house prices. The low interest rates have clearly supported the housing market and benefited home owners, at the expense of both tenants and savers. So is there perhaps a case to argue that there should be a financial compensation made to tenants and savers? And could the government possibly enforce this compensation from financial institutions who caused this mayhem in the first place? Would be interested to hear your thoughts?
  5. Does anyone know how many buy-to-lets have been financed by people remortgaging their family homes to the max in a bid to raise capital to invest in properties? Isn't the strong property demand over the last years down to the buy-to-let market compensating for the lack of 1st time buyers? If those buy-to-let investors have bought on the expectation that rents cover the cost of their 2nd mortgages, and now realize that this isn't sustainable, then the big question would be can they cover the monthly delta with their disposable incomes? If enough buy-to-let investors can't then this will mean that soon a lot of properties will be put on the market which will bring down prices signficantly. Any opinions?
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