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Caveat Mortgagor

Is The Housing Market Headed For A Profound Change?

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http://www.channel4.com/news/is-housing-market-headed-for-profound-change

Thursday 14 October 2010

The Conservative party is quietly redefining home ownership, writes Gaby Hinsliff, in a way which could help first time buyers but hit those relying on rising house prices to fund their lifestyles.

Margaret Thatcher revolutionised home ownership - are the Tories about to do it again? (Reuters)

The one big idea for which many Labour politicians secretly envy Margaret Thatcher is the right to buy for council tenants.

It defined her belief in aspiration, spawned a class of grateful new Tory voters and captured political imaginations - albeit while decimating the social housing stock.

So it's appropriate that, as she celebrated her 85th birthday this week, her party was once again quietly redefining home ownership. Grant Shapps, the housing minister, gave a speech to the Housing Market Intelligence conference urging a period of house price stability and of treating homes not as investments but as somewhere to live. More significantly, he sided decisively with first time buyers (who need prices to fall) over established homeowners (banking on prices rising).

That might not sound dramatic, but it has significant implications.

House prices are softening again, prompting fears of a property double dip as unemployment rises.

That forces all parties to confront a choice they ducked at the election: do they want to shore up prices, as the last government did with stamp duty holidays and moves to curb repossessions? Or do they not, which could mean letting the market correct itself while keeping interest rates low to ease mortgage-holders' pain?

We face a period of house price stagnation at least. That's toxic for those reliant on soaring home equity to fund comfortable middle class lifestyles. Gaby Hinsliff, former Political Editor of the Observer.

The coalition now seems to favour this second, less interventionist approach.

The concern for first time buyers however seems at odds with this week's main news, a reform of university funding which would see students graduating with bigger debts. David Willetts, now Universities Minister, has himself previously argued that one reason young people delay buying is that student loan repayments restrict their freedom to borrow.

One unexpected consequence of bigger student debt may therefore be fewer young buyers.

However this conflict is resolved, Shapps's call for an end to property booms and busts suggests we face a period of house price stagnation at least.

That's toxic for those reliant on soaring home equity to fund comfortable middle class lifestyles, or on property as a pension. But it helps what a recent report estimated were the 100,000 people a year priced out of buying between 2006-09, an aspirational constituency not unlike Thatcher's upwardly mobile council tenants. If Shapps really means it, a significant rebalancing could be coming.

Edited by Caveat Mortgagor

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Solution:

Stop LIAR LOANS. This includes ALL stupid & unsustainable mortgages over 3.5 x REAL non-liar salaries, interest only mortgages, 100/125% mortgages. Maximum 85% LTV.

Force EA's to pass qualifications, including those in ethics & honesty. Long prison sentences for ANY fraudulent activity.

Change the City [& Wall Street] from being a casino to a utility providing pure value financial services - i.e. no rip-offs & fraud.

Build more houses - i.e. end the planning scam.

Just some of the changes that NEED to happen.

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I find it ironic that Maggies birthday was the same day as miners were being saved.

Absolutely, she would never have spent that much money rescuing the lower orders ;)

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It seems to me that government intervention (heaven help us) will be needed.

The main thing that is needed now is a big housebuilding program with houses being built specifically for FTBs - and no poxy flats either. Minimum 2 or 3 bed terraces with a decent size garden.

These houses should be built for fixed prices and only sold to FTBs with a restrictive covenant on them that subsequent sales can only be to FTBs - no BTL investors to be allowed anywhere near.

Doing this would, over a generation, bring the market back to reality - without a house price crash and depression.

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Solution:

Stop LIAR LOANS. This includes ALL stupid & unsustainable mortgages over 3.5 x REAL non-liar salaries, interest only mortgages, 100/125% mortgages. Maximum 85% LTV.

Force EA's to pass qualifications, including those in ethics & honesty. Long prison sentences for ANY fraudulent activity.

Change the City [& Wall Street] from being a casino to a utility providing pure value financial services - i.e. no rip-offs & fraud.

Build more houses - i.e. end the planning scam.

Just some of the changes that NEED to happen.

Raising interest rates to the figure they should be to stop the booming inflation would do it.

Sounds like a lot of doublethink from the Tories.

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Absolutely, she would never have spent that much money rescuing the lower orders ;)

"But it went too far. If children have a problem, it is society that is at fault. There is no such thing as society. There is living tapestry of men and women and people and the beauty of that tapestry and the quality of our lives will depend upon how much each of us is prepared to take responsibility for ourselves and each of us prepared to turn round and help by our own efforts those who are unfortunate. And the worst things we have in life, in my view, are where children who are a great privilege and a trust—they are the fundamental great trust, but they do not ask to come into the world, we bring them into the world, they are a miracle, there is nothing like the miracle of life—we have these little innocents and the worst crime in life is when those children, who would naturally have the right to look to their parents for help, for comfort, not only just for the food and shelter but for the time, for the understanding, turn round and not only is that help not forthcoming, but they get either neglect or worse than that, cruelty."

.....

"This is why my foremost charity has always been the National Society for the Prevention of Cruelty to Children, because over a century ago when it was started, it was hoped that the need for it would dwindle to nothing and over a hundred years later the need for it is greater, because we now realise that the great problems in life are not those of housing and food and standard of living. When we have[fo 3] got all of those, when we have got reasonable housing when you compare us with other countries, when you have got a reasonable standard of living and you have got no-one who is hungry or need be hungry, when you have got an education system that teaches everyone—not as good as we would wish—you are left with what? You are left with the problems of human nature, and a child who has not had what we and many of your readers would regard as their birthright—a good home—it is those that we have to get out and help, and you know, it is not only a question of money as everyone will tell you; not your background in society. It is a question of human nature and for those children it is difficult to say:"You are responsible for your behaviour!" because they just have not had a chance and so I think that is one of the biggest problems and I think it is the greatest sin."

Sounds like a right bitch eh?

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It fits with his 'avoid increases' and 'avoid falls' by supporting the market with low rates today and will rise when house prices start to lift off again, dampening any increase.

And if one thinks selflessly for a moment, this is the best outcome anyone could hope for given the mess Labour made of things.

A house price crash now will cause a depression.

A house price correction of 20% back in 2003 would have been no problem at all because relatively few people were up to their necks in debt then.

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And if one thinks selflessly for a moment, this is the best outcome anyone could hope for given the mess Labour made of things.

A house price crash now will cause a depression.

A house price correction of 20% back in 2003 would have been no problem at all because relatively few people were up to their necks in debt then.

Suggest a way a housing market crash could be allowed to happen whilst avoiding a depression. If you cant see any such way, please show your working out!

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Suggest a way a housing market crash could be allowed to happen whilst avoiding a depression. If you cant see any such way, please show your working out!

20 year stagnation with mild wage inflation.

Problem is a generation will never own a home.

Alternative is a depression, social unrest etc.

The generation that will never own a home need to make their plight known - but they won't.

Edited by Let's get it right

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Not again. Some posters saying "Build more!" Putting aside the fact that even more development would make Britain an even more depressing place to live in why don't some people seem to not grasp the point that there isn't a housing shortage? It was all down to too much credit, not too few houses.

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A house price crash now will cause a depression.

But certain areas of the UK such as the North East, Wales, Northern Ireland will very quickly see falls of 30-40%, should we keep these prices inflated.

Or is it only if the South East and London gets falls of this amount that we enter a depression?

IMO we're already in a depression with very high inflation and very low growth.

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20 year stagnation with mild wage inflation.

Problem is a generation will never own a home.

Alternative is a depression, social unrest etc.

The generation that will never own a home need to make their plight known - but they won't.

I would like to pick your brains for your thinking, but I dont think I was clear enough. Why would a crash in the housing market cause a depression? At what rate do you think prices could fall (either nominally or just real terms) without causing a depression?

I guess what I am angling at is, if the political will existed, would it be possible for the housing market to significantly rebalance without a depression? If not, why not?

Edited by Caveat Mortgagor

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I think people are reading all sorts of things into a speech that said absolutely nothing. And certainly no hints as to policy.

Just as likely to support price levels at the boom levels of today in my opinion.

EDIT: My guess for instance is they will add house prices into cpi so that they can keep rates low and support hard working homeowners. There I've said it.

It fits with his 'avoid increases' and 'avoid falls' by supporting the market with low rates today and will rise when house prices start to lift off again, dampening any increase.

Agreed re reading too much into his speech.

It ain't exactly rocket science or a big departure from before, pointing out that houses are homes not speculative investment.

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I think people are reading all sorts of things into a speech that said absolutely nothing. And certainly no hints as to policy.

Just as likely to support price levels at the boom levels of today in my opinion.

EDIT: My guess for instance is they will add house prices into cpi so that they can keep rates low and support hard working homeowners. There I've said it.

It fits with his 'avoid increases' and 'avoid falls' by supporting the market with low rates today and will rise when house prices start to lift off again, dampening any increase.

Add house prices to cpi +1 that is the{only} way they are going to be able to dilute the increase in cpi when vat has been increased .If they are added to cpi at around the turn of the year we will know there game plan is as the quoted post has suggested ,Boy George requested that Mystic merv add HPI to cpi figures if my memory serves me wright? have the government not just asked for a report/review on how the house price indices are compiled,did they not stress test the banks for a 50% drop in house prices methinks that's a recipe for a plan ,could be totally wrong though

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I think people are reading all sorts of things into a speech that said absolutely nothing. And certainly no hints as to policy.

Just as likely to support price levels at the boom levels of today in my opinion.

Come off it, it's a complete change of tone.

People used to be ridiculed on this site for saying "The Govt won't let it happen [a crash]" - but they were right. The current administration at least has the sense to get out of the way of the inevitable and to position themselves to gain political capital by saying "This is what needed to happen and we think it is necessary for the long term health of the economy."

Sooner or later the swing votes are tipped in favour of the FTBs, and so the cycle turns.

(Time for a more cheerful avatar, HAM?)

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Alternative is a depression, social unrest etc.

Better to have a short sharp depression that 20 years of stagnation. Anyway prices cannot remain stable - simple market positive feedback mechanics of a speculation bubble wont allow it (and will ensure that we do get a crash at some point).

Edited by goldbug9999

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http://www.channel4.com/news/is-housing-market-headed-for-profound-change

snip...

That forces all parties to confront a choice they ducked at the election: do they want to shore up prices, as the last government did with stamp duty holidays and moves to curb repossessions? Or do they not, which could mean letting the market correct itself while keeping interest rates low to ease mortgage-holders' pain?

The article has missed how it works here. Interest rates were and are being kept low to shore up house prices. If they keep them low to 'ease mortage-holders pain', that is likely to stop the market from correcting. We need normal interest rates back again to purge the housing malinvestments from the economy. My opinion is that the UK won't experience meaningful economic growth until the housing market has corrected.

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Better to have a short sharp depression that 20 years of stagnation. Anyway prices cannot remain stable -

Correct

Prices will always move , they will move up or down but never remain stable.

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"But it went too far. If children have a problem, it is society that is at fault. There is no such thing as society. There is living tapestry of men and women and people and the beauty of that tapestry and the quality of our lives will depend upon how much each of us is prepared to take responsibility for ourselves and each of us prepared to turn round and help by our own efforts those who are unfortunate. And the worst things we have in life, in my view, are where children who are a great privilege and a trust—they are the fundamental great trust, but they do not ask to come into the world, we bring them into the world, they are a miracle, there is nothing like the miracle of life—we have these little innocents and the worst crime in life is when those children, who would naturally have the right to look to their parents for help, for comfort, not only just for the food and shelter but for the time, for the understanding, turn round and not only is that help not forthcoming, but they get either neglect or worse than that, cruelty."

.....

"This is why my foremost charity has always been the National Society for the Prevention of Cruelty to Children, because over a century ago when it was started, it was hoped that the need for it would dwindle to nothing and over a hundred years later the need for it is greater, because we now realise that the great problems in life are not those of housing and food and standard of living. When we have[fo 3] got all of those, when we have got reasonable housing when you compare us with other countries, when you have got a reasonable standard of living and you have got no-one who is hungry or need be hungry, when you have got an education system that teaches everyone—not as good as we would wish—you are left with what? You are left with the problems of human nature, and a child who has not had what we and many of your readers would regard as their birthright—a good home—it is those that we have to get out and help, and you know, it is not only a question of money as everyone will tell you; not your background in society. It is a question of human nature and for those children it is difficult to say:"You are responsible for your behaviour!" because they just have not had a chance and so I think that is one of the biggest problems and I think it is the greatest sin."

Sounds like a right bitch eh?

Thanks for posting that - you know in 25 years I don't think I've ever seen the full quotations. I think she'd be sick to the stomach though at the way the housing bubble has cored out the real, sustainable and value adding economy of the UK.

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I think people are reading all sorts of things into a speech that said absolutely nothing. And certainly no hints as to policy.

I can't read a whole lot into it either, apart from the fact he's trying not to say anything. He can't possibly please FTB's, BTL's, and homeowners at the same time if he does say anything. I think the bit about a period of stability means he'd like house prices to stagnate for a decade or so, against a background of say 3% inflation, so that most of the required correction happens in real but not nominal terms.

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Its good that the Tories are trying to support the FTB interests (properly without using price boosting co-ownership schemes), and that they seem to understand the importance of FTB's in the buying chain, and the 'home not investment' aspect however they don't seem to understand the stupidity of MEWing, it doesn't fund ANYTHING its just a loan that has to be repaid.

The only people who benefit from high house prices (apart from VIs) are those downsizing, and MEWing is a very expensive and risky way of getting the money early if that is your next step.

People moving up the property ladder also benefit from lower prices, they seem to have missed out on this vote winner.

Edited by Ride_on

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  • 145 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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