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Is This Government Prepared To Let House Prices Correct?

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Two things have happened recently that made me think that they might not be so determined to prop up the housing market as the previous government have.

1, CGT. This could potentially cause some downward pressure at least in the short term and less 'investment' in the long term. We could argue about it's exact actual effect if any, but the fact is there is a risk this could do damage. Would a government prepared to pump ridiculous amounts of money into a market risk a policy that could cause it's collapse?

2, George's letter to Merv:

As we have discussed, over the longer term I would welcome your view on how we might accelerate the process of including housing costs in the CPI inflation target....

why would they want an asset class involved in inflation calculations if they were planning for/ expecting the price of those assests to increase?

Any thoughts?

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Two things have happened recently that made me think that they might not be so determined to prop up the housing market as the previous government have.

1, CGT. This could potentially cause some downward pressure at least in the short term and less 'investment' in the long term. We could argue about it's exact actual effect if any, but the fact is there is a risk this could do damage. Would a government prepared to pump ridiculous amounts of money into a market risk a policy that could cause it's collapse?

2, George's letter to Merv:

why would they want an asset class involved in inflation calculations if they were planning for/ expecting the price of those assests to increase?

Any thoughts?

Very possbly.

While the price of everything else goes to the fracking moon of course.

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I don't think we have the measure of this government yet. We need to see the "emergency" budget on June 22nd. I say "emergency" because if it were a real emergency they should have held the budget almost immediately - not two months after being elected.

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I've had a couple of thought about this.

1. if you add house prices to the CPI figure now, then if the massive falls we are expecting happen to occur then CPI will fall and the BOE will be forced to do something to prop everything up to get CPI back on track - meaning no real price falls

2. People on here keep telling us that the torys are rich and working for the elite, well if you had a few million in the bank and the ability to manipulate the housing market so that prices were alot lower then you'd be able to hover up alot of cheap properties... then kick off the next bubble and tripple your money

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I don't think we have the measure of this government yet. We need to see the "emergency" budget on June 22nd. I say "emergency" because if it were a real emergency they should have held the budget almost immediately - not two months after being elected.

They have to go over the books before they can say 'it's worse than we thought' even bigger cuts, even higher taxes.

It would make sense for them to get the pain of HPC out the way sooner rather than later, that way they can blame it on labour.

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Any thoughts?

Assuming that they're pretty smart they'll realise that long term there's nothing they can do to avoid the correction.

Therefore best thing for them is to get the correction out of the way ASAP whilst they can still pin it on Gordon & Co.

Alternative is 3 years of futile support before you go into the next election with Labour crowing about Tory HPC etc.

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They have to go over the books before they can say 'it's worse than we thought' even bigger cuts, even higher taxes.

Or 'it's better than we thought' and smaller cuts and lower taxes?

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1. if you add house prices to the CPI figure now, then if the massive falls we are expecting happen to occur then CPI will fall and the BOE will be forced to do something to prop everything up to get CPI back on track - meaning no real price falls

That's how I see it. Just a means to keep IRs low with a huge rise is costs (except housing).

Houses prices will go down, but deflation would be the trigger for more QE.

Total mess.

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I don't think we have the measure of this government yet. We need to see the "emergency" budget on June 22nd. I say "emergency" because if it were a real emergency they should have held the budget almost immediately - not two months after being elected.

No they wouldn't. As opposition, they had access to insufficient information for a budget. The month and a half is not such a long time to get their heads around the dire figures.

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No they wouldn't. As opposition, they had access to insufficient information for a budget. The month and a half is not such a long time to get their heads around the dire figures.

And that's before you factor in the secret spending committments made in the last few weeks of Nu Labour power.

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Two things have happened recently that made me think that they might not be so determined to prop up the housing market as the previous government have.

1, CGT. This could potentially cause some downward pressure at least in the short term and less 'investment' in the long term. We could argue about it's exact actual effect if any, but the fact is there is a risk this could do damage. Would a government prepared to pump ridiculous amounts of money into a market risk a policy that could cause it's collapse?

2, George's letter to Merv:

why would they want an asset class involved in inflation calculations if they were planning for/ expecting the price of those assests to increase?

Any thoughts?

They can't allow a fast correction, because that would mean bailing out the banks again(all the underwater mortgages would render them effectively insolvent again).

So they'll try and manage a correction that is fast enough to allow things to begin to look better in 5 years, while slow enough to allow banks to stay afloat.

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They can't allow a fast correction, because that would mean bailing out the banks again(all the underwater mortgages would render them effectively insolvent again).

So they'll try and manage a correction that is fast enough to allow things to begin to look better in 5 years, while slow enough to allow banks to stay afloat.

That's a lot of fine-control you attribute to them.

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The market controls house prices.

Government only saps its existential funding from it through punitive legislative measures.

Don't be so naive.

EDIT: Question. Do you see yourself selling your house for the same or less than you paid for it? How is the government influencing your decisions?

Again: Don't be so bloody naive!

Edited by cashinmattress

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I've had a couple of thought about this.

1. if you add house prices to the CPI figure now, then if the massive falls we are expecting happen to occur then CPI will fall and the BOE will be forced to do something to prop everything up to get CPI back on track - meaning no real price falls

That's how I see it. Just a means to keep IRs low with a huge rise is costs (except housing).

Houses prices will go down, but deflation would be the trigger for more QE.

Total mess.

Iirc, it's not house prices that are currently included in RPI, but mortgage costs.

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I think they're going to use decreasing house prices to adjust inflation figures. It's a bit of a win win situation really. Ok, some people will not be happy with the HPD but that can be pinned on the shocking state of the finances. Depreciating house prices will counteract increases in current CPI items. The increase in current CPI items will come back to the government in additional taxes.

Strange how George has already been talking to Merv about adding housing to an already escalating inflation rate. Housing could quite easily withstand 30-40% decrease. It allows FTBers back into the market stimulating movement and not stagnation, IR's to remain low as inflation is in check and redirects investment away from the property market into productive industries. I can see a mirror image of HPI to HPD occuring but in a much shorter time, say five years (funny that). That's the feeling I get with this new government.

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They can't allow a fast correction, because that would mean bailing out the banks again(all the underwater mortgages would render them effectively insolvent again).

So they'll try and manage a correction that is fast enough to allow things to begin to look better in 5 years, while slow enough to allow banks to stay afloat.

It is pretty much impossible to engineer a soft landing. Once people get the idea that house prices are headed downwards, they will wait until they hit the bottom before they buy. People don't buy now if they think they can get it cheaper next month.

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Does the housing market need FTB? No not really, if you are in the market already you can sell and upgrade, down size and BTL etc. But does the country need FTB? Yes, average age of FTB is now 37, getting a bit late if you want to start a family esp. if all you can afford is a one bed with the kitchen in the lounge. Just this week talking to one guy, sick of renting can't afford to buy - off to Canada, early 30s, educated, skilled, and they will now be paying tax in Canada not UK. It's a saving grace that we are lousy at languages or more of the country's wealth generators would leave. This is why we need FTBs and lower housing costs; to create a viable future for the people aged 25 to 50, when they are at their most productive. If they can't even as a professional couple buy a decent place to live then they will leave. This is why the government needs to let the market correct.

There's plenty of people in the market who can't afford to upgrade because the gaps between the rungs of the ladder (keep up at the back there - it's a ladder, init, and you're supposed to work your a*se off to climb it because your wrinklies need you to prop up the value of their assets) are too wide. So they're extending instead as it's cheaper to build than to upgrade, and there's no stamp duty to pay. Also you don't pay extra Council Tax, at least until they get round to revaluing.

Downside of this of course is that the value of the present housing stock keeps rising as a result of improvements, even if a lot of this is in the eyes of the owners. But that's been the Krusty'n'Phil mantra for years, look at the potential. Fine, as long as the people next in line are paid more and more each year so they can afford to buy all these "improved" houses.

I'd hazard the guess that this is one of the reasons why the market is so stagnant. Stamp Duty is a stupid tax which should be replaced by a %age on Council Tax to make up for the lost revenue. Any government with half a brain cell would dump it. I still think this govt will not act to prevent HPI although I doubt they'll do anything overt to promote HPC. Throwing BTLers and second home owners to the wolves is a good idea; they are core Tory voters so they aren't going anywhere, and numerically there aren't that many of them. Considered as a voting bloc they are as disparate as renters.

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It is pretty much impossible to engineer a soft landing. Once people get the idea that house prices are headed downwards, they will wait until they hit the bottom before they buy. People don't buy now if they think they can get it cheaper next month.

Can't be entirely true, or the 2008 crash would still have momentum, and in general crashes would never stop.

Labour did engineer a soft landing, albeit at a terrible cost. (200bn of QE, interest rates at .5% and various other tidbits)

They proved that if you spend enough of the next generations money, you can control the market. Are the Tories more scrupulous? Majors lot were, but that was them, and this is failed banker Cameron. We'll see.

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That's a lot of fine-control you attribute to them.

:)

I did say "Try".

As per other post, if you don't care about the cost, Labour have shown that the housing market can be controlled.

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Guest absolutezero

why would they want an asset class involved in inflation calculations if they were planning for/ expecting the price of those assests to increase?

You mean decrease don't you?

Fiddle the inflation figures to make inflation appear lower.

Inflation suddenly lower than it was under Labour.

Champagne all round.

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Guest absolutezero

The market controls house prices.

And Governments manipulate markets.

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Can't be entirely true, or the 2008 crash would still have momentum, and in general crashes would never stop.

Labour did engineer a soft landing, albeit at a terrible cost. (200bn of QE, interest rates at .5% and various other tidbits)

They proved that if you spend enough of the next generations money, you can control the market. Are the Tories more scrupulous? Majors lot were, but that was them, and this is failed banker Cameron. We'll see.

Labour never engineered a soft landing , weve just seen a bounce as we have in equities and commodities, as you have throughout the history of asset markets, they will always attract bottom fishers all the way down (and sellers who think its the top all the way up) which is what creates the rallies, you will notice all these things have been unable to get back to their highs. these bounces are required to unwind oversold conditions and to draw in more people, it is how markets work , in steps (investment would be a piece of pish if markets moved from top to bottom and vice versa in a straight line and we all be millionaires), you may be able to control the market for a time, but ultimately its impossible to price fix it eternally, it will go where it wants to go and any attempt to price fix it ultimately leads to a quicker more catastrophic move in the direction it wants to go once the price fixer runs out of money because price fixing is malinvestment, if it wasnt the market wouldnt need a price fixer it would go there naturally.

There has been no control in the housing market, a 25% drop in 18 months and a 10-15% rally in 12 months, that is not control, that is record volatility, an orderly market does not have record volatility, it is just a warning as to the size of the bubble and the amount of emotion present in it

Edited by Tamara De Lempicka

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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