Can The Government Succeed In Propping Up The Property Market?

[Sybil13]

How much can the government successfully do to keep the property market artificially inflated?

Today I have read they are investing £1 billion for housebuilding and that Ministers Consider Scheme to Guarantee Mortgages.

We also know that Darling is out today telling banks to increase mortgage lending, whilst Mr Bean is out singing the praises of QE , and potentially the BOE could print another £150 billion or more. ~(Blanchflower thinks they should).

The IMF has said the UK can't afford another fiscal rescue, and we know the building societies are in trouble , 15 building societies could be forced to merge within the next year or so and at least five others will fail on the lines of Dunfermline Building Society.

Ms Knight BBA was quoted at the weekend saying:

....it was "also worth noting that the only people lending are banks", Ms Knight added.

"Building societies can't do it due to their business model and they can't get access to funds as easily."

It was also clear that many borrowers were becoming "stuck in chains" when trying to buy somewhere to live, she said, meaning banks were "granting more mortgages than are being taken up".

Given that the BOE warned Darling in April Don't Try to Stop the Housing Crash , my question is, CAN THEY?

Or will we finally start to see property prices falling to 2009 values?

[loginandtonic]

when you can invent money i think you can work all kinds of things, so far the cost of brown's election campaign is something like £800bn, and he's still going to lose, but worse the whole country loses because of the mess made with bubblenomics.

its spend today, worry about it after the next GE. it aint rocket science.

just shows how dumb or apathetic Labour think voters are.

Edited July 27, 2009 by loginandtonic

[THE BALD MAN]

when you can invent money i think you can work all kinds of things, so far the cost of brown's election campaign is something like £800bn, and he's still going to lose, but worse the whole country loses because of the mess made with bubblenomics.

its spend today, worry about it after the next GE. it aint rocket science.

just shows how dumb or apathetic Labour think voters are.

The problem is that although he is the worst PM and chancellor thsi country has seen he is totally deluded and power crazy. He will try everything to stay in power. I believe the public is waking up to this. We can only hope.

[Sybil13]

The problem is that although he is the worst PM and chancellor thsi country has seen he is totally deluded and power crazy. He will try everything to stay in power. I believe the public is waking up to this. We can only hope.

Some would say that that is all New Labour has ever done The Expense of New Labour .

....Is there, in other words, a recognisable connection between the politics of New Labour and the fall from grace of individual Labour standard-bearers? The first evidence of this was the emphasis placed by the New Labour project on doing whatever was necessary in order to win power, even if that meant the abandonment of principle. Opinions may differ on whether the junking of much that had been considered to be core Labour values was really required for electoral victory - and no one can doubt that the way in which those values should be applied to the issues of the twenty-first century was overdue for re-appraisal.

But what was surprising about New Labour was the enthusiasm shown, not just for change and renewal, but for the positive adoption of a quite different agenda – one that had hitherto been seen, with its acceptance that the market should not be challenged and that growing inequality was the necessary condition for economic development, as the property of the right. ...

The problem is that if we are in this mess because Labour attempted to give "Middle England " what it wanted , what next?

[Guest KingCharles1st]

The problem is that if we are in this mess because Labour attempted to give "Middle England " what it wanted , what next?

We are in this mess because Brown thought that the Banks would make him a LOT OF MONEY, when in fact they ******ed him over.

[THE BALD MAN]

We are in this mess because Brown thought that the Banks would make him a LOT OF MONEY, when in fact they ******ed him over.

We are in a mess because we have had Crash Gordan in charge for the last ten years and now we have Mandelson (who Brown hopes can keep him in office)!

[cynic]

I'm still uneasy about this.

Even if it were possible to educate UK owners to an understanding of the ills of HPI, they would still come out in droves to vote for the party that gives it to them.

Worrying times.

[Si1]

Can The Government Succeed In Propping Up The Property Market?

short term - yes, more of a cushioned fall than a propping up...

longer term - 10 yrs of pain

but I guess GB is thinking screw it - it's only the lives of the young that he is blighting...

Edited July 27, 2009 by Si1

[Guest KingCharles1st]

I'm still uneasy about this.

Even if it were possible to educate UK owners to an understanding of the ills of HPI, they would still come out in droves to vote for the party that gives it to them.

Worrying times.

Basically, what Labour did was to say- "Hey-you all now have a second free source of great income- it's up you to decide what to do with it."

How could anyone refuse?

[eric pebble]

I'm still uneasy about this.

Even if it were possible to educate UK owners to an understanding of the ills of HPI, they would still come out in droves to vote for the party that gives it to them.

Worrying times.

I agree. It's called "Flogging a dead horse".... And boy, is the UK a dead horse.....

[ralphmalph]

I'm still uneasy about this.

Even if it were possible to educate UK owners to an understanding of the ills of HPI, they would still come out in droves to vote for the party that gives it to them.

Worrying times.

You will have a big problem trying to educate the population against the ills of HPI. A lot of the population have been educated by thier parents that owning a house and HPI are good.

As an example my parents bought thier house in 1973 for 3,000 GBP on a repayment mortgage and sold it for 400,000 pounds in 2005, 397,000K. With historical stats like that you are going to be fighting a big battle to convince people HPI is bad.

[tinker]

short term - yes, more of a cushioned fall than a propping up...

longer term - 10 yrs of pain

but I guess GB is thinking screw it - it's only the lives of the young that he is blighting...

If they cared at all about the young, they would be trying to balance the books and not pull forward future spending. Something to think about the next time they are having their photo opportunities with the young.

Propping up overpriced housing with taxpayers money and offering the siren call of government incentives and guarantees to the foolish, ignorant and impressionable is quite simply...

immoral.

Not that that matters one jot to them.

[the end is a bit nigher]

How much can the government successfully do to keep the property market artificially inflated?

Unfortunately the government is still supported bythe moronic public which also still believes that house price inflation is good.

I had coffee with a friend last week who insisted that her house was worth more than in 2007 and that she had done very well out of it. In the same breath she said that without working tax credits she wouldn't be able to buy food for her family. I'll let the reader work that one out!

[ccc]

You will have a big problem trying to educate the population against the ills of HPI. A lot of the population have been educated by thier parents that owning a house and HPI are good.

As an example my parents bought thier house in 1973 for 3,000 GBP on a repayment mortgage and sold it for 400,000 pounds in 2005, 397,000K. With historical stats like that you are going to be fighting a big battle to convince people HPI is bad.

Totally agree. It is a simple form of brainwashing.

There is a very simple example that I use to show people how fast rising house prices are bad for most. Once explained most get it instantly. However until this is explained to them in simple terms ? They simply believe what they have been told.

High house prices = good.

End of story.

[Si1]

immoral.

Not that that matters one jot to them.

yes. it's almost numbing - I hate it.

[Justice]

when you can invent money i think you can work all kinds of things, so far the cost of brown's election campaign is something like £800bn, and he's still going to lose, but worse the whole country loses because of the mess made with bubblenomics.

its spend today, worry about it after the next GE. it aint rocket science.

just shows how dumb or apathetic Labour think voters are.

This is not a them and us situation it's a good cop bad cop game and the Cons get the chance to play bad cop for the next 4 years why asking people to bend over and take it like a man.

can you not see it ?

[jonboy]

I know that there's been a lot said about toxic sub-prime derivatives etc but, and I'm no expert, I've increasingly been thinking that, as has been said her a thousand times, it's the lenders that own most (much of?) of the property in this country. Is it not these very 'assets' that are keeping their accounts above the line.

Maybe it's these guys who have the most to lose from HPC... and we all know they're too important to fail. The credit crunch was bad enough, if there really was a HPC wouldn't many of these lenders simply be bankrupt?

In my early days on this site I remember the VIs always saying, 'they' won't let it happen, and I used to think (informed here) there's nohing they can do to stop it, now I'm thinking there's nothing they won't do to... slow it down, keep it steady, no nominal falls.

It saddens me to think there will be no HPC, HP Corretion is a long and winding road? !! :angry: The extra rent over the last and next couple of years that I budgeted in to the savings calculaion for not buying yet, and which I have been feeling smug about for the last year, is starting to look a bit like dead money again!

On the upside, I have just signed another year tenancy agreement so we're settled aging now (fingers crossed).

[LuckyOne]

I know that there's been a lot said about toxic sub-prime derivatives etc but, and I'm no expert, I've increasingly been thinking that, as has been said her a thousand times, it's the lenders that own most (much of?) of the property in this country. Is it not these very 'assets' that are keeping their accounts above the line.

Maybe it's these guys who have the most to lose from HPC... and we all know they're too important to fail. The credit crunch was bad enough, if there really was a HPC wouldn't many of these lenders simply be bankrupt?

In my early days on this site I remember the VIs always saying, 'they' won't let it happen, and I used to think (informed here) there's nohing they can do to stop it, now I'm thinking there's nothing they won't do to... slow it down, keep it steady, no nominal falls.

It saddens me to think there will be no HPC, HP Corretion is a long and winding road? !! :angry: The extra rent over the last and next couple of years that I budgeted in to the savings calculaion for not buying yet, and which I have been feeling smug about for the last year, is starting to look a bit like dead money again!

On the upside, I have just signed another year tenancy agreement so we're settled aging now (fingers crossed).

You have hit the nail on the head.

All of the programs like fiscal stimulus, QE, TARP, TALF, PPIP etc are designed solely to allow as many people as possible to continue to pay their debts for as long as possible and to give banks the time to take the inevitable losses from the impairment in the value of their ultimate collateral (property) from earnings from other business lines rather than capital.

This is the ultimate market manipulation. If someone in the private sector had done it, they would go to jail.

The goods news for people who want lower house prices is that these programs cannot change the inevitable outcome. The bad news for people who want lower house prices is that these programs will delay the inevitable outcome by years.

I used to think that the bottom in the housing market will be reached in 2011 or 2012. I am starting to think that it may take until 2015 to 2017 due to all of the state sponsored market manipulation.

Edited July 27, 2009 by LuckyOne

[RufflesTheGuineaPig]

I used to think that the bottom in the housing market will be reached in 2011 or 2012. I am starting to think that it may take until 2015 to 2017 due to all of the state sonsored market manipulation.

The longer it takes, the lower it will go.

[Si1]

yet again, see:

from the full model:

http://www.federalreserve.gov/pubs/ifdp/2005/847/IFDP847.pdf

"The Baby Boom: Predictability in House Prices and Interest Rates"

[dances with sheeple]

I'm still uneasy about this.

Even if it were possible to educate UK owners to an understanding of the ills of HPI, they would still come out in droves to vote for the party that gives it to them.

Worrying times.

In that case they need to vote for the securitization party. It`s over, Liebour and the sheeple are just going throught the motions now, talking up the housing market for politicians/VI`s and trying to cling to 2007 prices for sheeple are just the last spasms as the well and trully f*cked go into terminal shock.

[dances with sheeple]

I know that there's been a lot said about toxic sub-prime derivatives etc but, and I'm no expert, I've increasingly been thinking that, as has been said her a thousand times, it's the lenders that own most (much of?) of the property in this country. Is it not these very 'assets' that are keeping their accounts above the line.

Maybe it's these guys who have the most to lose from HPC... and we all know they're too important to fail. The credit crunch was bad enough, if there really was a HPC wouldn't many of these lenders simply be bankrupt?

In my early days on this site I remember the VIs always saying, 'they' won't let it happen, and I used to think (informed here) there's nohing they can do to stop it, now I'm thinking there's nothing they won't do to... slow it down, keep it steady, no nominal falls.

It saddens me to think there will be no HPC, HP Corretion is a long and winding road? !! :angry: The extra rent over the last and next couple of years that I budgeted in to the savings calculaion for not buying yet, and which I have been feeling smug about for the last year, is starting to look a bit like dead money again!

On the upside, I have just signed another year tenancy agreement so we're settled aging now (fingers crossed).

Some will, but there is nothing they can do to stop this, it seems all down to interest rates now? The lenders will have a business lending to the next generation to buy cheap houses, not so many bonuses, but still an income stream, whereas a bust sheeple is a bust sheeple, no more income stream.

[loginandtonic]

This is not a them and us situation it's a good cop bad cop game and the Cons get the chance to play bad cop for the next 4 years why asking people to bend over and take it like a man.

can you not see it ?

that does cross my mind, because it's a tempting theory, and when the recklessness of the debt is considered it does seem that they expect the tories to have to deal with it as if there were a 'plan' all along - but i like to live in hope we have a genuine democracy and its all about brown trying desperately to stay in power, allow me the comfort of that naivety perhaps

[Sybil13]

I know that there's been a lot said about toxic sub-prime derivatives etc but, and I'm no expert, I've increasingly been thinking that, as has been said her a thousand times, it's the lenders that own most (much of?) of the property in this country. Is it not these very 'assets' that are keeping their accounts above the line.

Maybe it's these guys who have the most to lose from HPC... and we all know they're too important to fail. The credit crunch was bad enough, if there really was a HPC wouldn't many of these lenders simply be bankrupt?

In my early days on this site I remember the VIs always saying, 'they' won't let it happen, and I used to think (informed here) there's nohing they can do to stop it, now I'm thinking there's nothing they won't do to... slow it down, keep it steady, no nominal falls.

It saddens me to think there will be no HPC, HP Corretion is a long and winding road? !! :angry: The extra rent over the last and next couple of years that I budgeted in to the savings calculaion for not buying yet, and which I have been feeling smug about for the last year, is starting to look a bit like dead money again!

On the upside, I have just signed another year tenancy agreement so we're settled aging now (fingers crossed).

We seem to be caught between two worlds at the moment.

I see it on HPC, one thread about how a large % of properties that had gone SSTC back on as chains break down because people cannot get a mortgage or the valuation comes in 25 - 30% below peak .

Then another thread about how properties are up 20% and selling in days!

One thing that everyone seems to be in agreement with is that the number of property completions are so low they are skewing the figures . I read last week:

House prices are officially down 25% from the peak according to the Halifax. The number of homes recorded so far as having being sold in May is just over 14,000. Down from 63,000 in May last year and 106,000 in 2007

Which seems to tie in with an article I read a few weeks ago:

UK house prices (asking) have stopped their recent 'dead cat bounce' according to Miles Shipside and his team at Rightmove. Estate agents now have on average seventy properties each on their books, and are only selling ten per month according to RICS...

However, this RICS contention is not supported by recorded data. With only 35,000 property sales a month, according to Land Registry, and the head count of agents being circa the same this would suggest that agents are in fact only selling on average one property per month.

Of course Merryn Somerset Webb said in her article Stay Away From Property It Has Much Further to Fall

The truth is that all real bear markets tend to offer the unwary investor one last opportunity to lose money. The summer of 2009 is probably that opportunity this time round.

There may well be a quite a big pick up in inquiries, transactions and even prices over the next few months. This will be partly down to the fact that, for those who have cash and want to buy at some point, the housing bear market is getting boring – and partly because a lot of property looks cheap relative to its peak price.

But the basic market conditions are still all wrong for recovery

So should we take heart from the article in the Independent today that said:

Figures from the Bank of England yesterday confirmed that the banks and building societies remain reluctant to lend to any but the most secure of businesses and home buyers. Mortgage approvals barely improved during May, remaining stuck at a little over 43,000 – some way above the nadir of 27,000 last winter, but under half of their normal level. Analysts at Capital Economics said the figures were "consistent with house prices falling at double-digit annual rates".

What I find so very hard to understand however is that Rightmove have been saying for months that deals are being done but at 25 - 30% from peak, yet property is still at 2007 + values on Rightmove! Article after article speaks of "property being more affordable" whilst also SHOUTING FROM THE ROOFTOPS that property is GOING BACK UP BEFORE it has come down!!

EA's must know that chains will fail because people cannot get mortgages and because valuations are coming in at 25% + under peak.

Miles Shipside, RM's Director said a few months back :

"Some sellers are still pricing wishfully high, though it is encouraging that elements of the market have adapted relatively quickly to find a new price floor at a discount of around 25% from peak. "

"Until banks get their own houses in order, the active minority of sellers and agents who have drastically adjusted pricing will remain frustrated by the limited functioning of the financial services sector."

So, after its initial optimism the Rightmove index enforces the realisation that the UK property market recovery hinges on two things: vendor realism and mortgage availability. The latter more than likely hinged on a recovery to the wider UK economy, which in my opinion is also necessary to increase buyer numbers sufficiently to bring vendor realism

With limited funds to lend, rationing of mortgages by raising interest rates and requiring large deposits is likely, as demand recovers with the increased number of sales.

So what is it to be ?

[AteMoose]

yet again, see:

from the full model:

http://www.federalreserve.gov/pubs/ifdp/2005/847/IFDP847.pdf

"The Baby Boom: Predictability in House Prices and Interest Rates"

That assumed there wouldn't be another baby boom and declining birth rates

Since 2004 we have seen a new baby boom caused by immigration, I wonder what the effect of the new boom will be?