The Coalition Must Tackle The Shortage Of New Homes

[Kyoto]

This may be like a red rag to a bull in these parts:

http://www.telegraph.co.uk/comment/columnists/borisjohnson/8070153/The-Coalition-must-tackle-the-shortage-of-new-homes.html

People will accept that higher-rate taxpayers should not receive child benefit – a point this column has been making for years. They can see that it is necessary to reform university finance. But if you tell them it is a matter of government policy that their house should effectively fall in value, then you will punch that confidence in the solar plexus – and you will make them less likely to invest, to take on new ventures and new staff.

We are already seeing renewed falls in property values in areas outside London, and the real wobbliness of the market may be concealed by the comparative lack of activity. There are normally about 1 million housing transactions a year in this country. That is now down to 600,000, and if the market falls much further there could be big knock-on effects for the whole system.

The last year of the Labour government was the worst for building new housing for 40 years. And when the economy takes off again, as it undoubtedly will, that shortage of new homes will combine with a growing population to produce the most almighty spike in prices – and young people will be less able than ever to buy a home. Which is why the best way to help those millions in search of an affordable home is not to try vainly to ensure that the present stock of housing becomes more affordable – ie falls in value – but to increase the supply of affordable homes.

[Executive Sadman]

Turn hyde park into a council estate. See how the rich like it on their doorsteps.

[sbn]

Can't we just settle this over a game of Wiff Waff?

[Riedquat]

Trying to stop population growth so there isn't a housing shortage in the future (there isn't now) sounds far too much like common sense for it to happen You don't need to do anything immoral to stop it either, since it's mostly down to immigration and first-generation immigrants having lots of kids (second generation immigrants usually don't). Not putting the breaks on is short-sighted idiocy of the highest order.

[Vested Disinterest]

This seems to be the crux of Boris' rather thin argument:

The notional assets of banks still depend on housing stocks whose value has yet to be tested, and if the housing market tanks, then the financial system tanks, too. People will be unable to get the mortgages to buy new homes, and developers will be unable to get the finance to build them, and the problem of supply will get even worse.

Surely if the really market tanks, people won't need mortgages, houses will be cheap as chips...

And it's not like the mortgage industry never managed to recover from previous house price crashes...

Boris does seem to be spot on politically, desperately/blatantly trying not to piss off the home "owning" middle classes, but seems way off the mark economically.

[thecrashingisles]

Turn hyde park into a council estate. See how the rich like it on their doorsteps.

You seem to be under the illusion that central London is not already full of council estates.

[Thread Killer]

Surely if the really market tanks, people won't need mortgages, houses will be cheap as chips...

And it's not like the mortgage industry never managed to recover from previous house price crashes...

+1

I saw Boris's article in the print edition of the Daily Telegraph, and what drew me to it was its headline:

"Falling house prices are bad for buyers"

Reading further, he seemed to think that if prices crash this will:

1. reduce confidence in the market (correct)

2. and that will reduce the incentive for house builders to build new properties (correct, but it will also reduce pay rates for builders, which increases profits).

3. Population growth in the next 10 years, which he puts at 20% (not sure about that) will increase demand for housing, so

4. Prices will spike upwards again, causing first-time buyers to be priced out of the market.

Of course 3. and 4. are completely wrong, and I am surprised that someone as intelligent and Tory as Boris Johnson should lower himself to uttering such tripe.

[profitofdoom]

+1

I saw Boris's article in the print edition of the Daily Telegraph, and what drew me to it was its headline:

"Falling house prices are bad for buyers"

Reading further, he seemed to think that if prices crash this will:

1. reduce confidence in the market (correct)

2. and that will reduce the incentive for house builders to build new properties (correct, but it will also reduce pay rates for builders, which increases profits).

3. Population growth in the next 10 years, which he puts at 20% (not sure about that) will increase demand for housing, so

4. Prices will spike upwards again, causing first-time buyers to be priced out of the market.

Of course 3. and 4. are completely wrong, and I am surprised that someone as intelligent and Tory as Boris Johnson should lower himself to uttering such tripe.

The flaw in your logic is the fact that most Tories will have considerable wealth in property portfolios and so the vested interest is against falling values.In fact they will do everything within their power to prevent a crash.

[Fromage Frais]

I was reading the news this morning in Tunisia.

450.000 empty properties.

rents rising apparently

population of under 10 million and 20 percent unemployment

Supply does not matter when 10 percent of the population takes the supply off the market.

Prices collapse we all go buy a house, prices rise speculators by them all up

[Tired of Waiting]

This seems to be the crux of Boris' rather thin argument:

Surely if the really market tanks, people won't need mortgages, houses will be cheap as chips...

And it's not like the mortgage industry never managed to recover from previous house price crashes...

Boris does seem to be spot on politically, desperately/blatantly trying not to piss off the home "owning" middle classes, but seems way off the mark economically.

+ 1

Economically a very stupid article, at first impression, contradictory: let's build more, but keep prices up.

Economically impossible! Stupid!

From Boris? Weird.

Then you realise what he is proposing: "Let's just build many cheap ugly council estates, for the hoy paloy, and keep nice middle-class areas expensive and 'exclusive'! "

Sick. Primitive. Feudal.

[billybong]

And they will point out that it was the house price bubble – the demented practice of giving vast mortgages to people with no incomes and no assets – that led to the crash. Better a stagnant housing market, they will say, than another great boom and another great bust. Which is all very well, in theory.

In practice, it looks as if flattening off the housing market is both risky in the short term, and unachievable in the long term. The sad truth is that it is still psychologically essential to the British middle classes to have a sense that our principal asset is gently appreciating in value, or at least that it will over the long term.

You know to be fair to him he's starting to develop a theory of economics. The theory of if it's "psychologically essential to the British middle classes" then that's what counts.

A theory painstakingly developed through years and years of intensive research and study and cross checking data.

Of course "the sad truth" is that his definition of "the middle classes" will be him and his buddies.

[billybong]

The key point you need to remember during this week's spending announcements is that the population of the UK is set to rise by an incredible 10 million over the next 20 years. That is more than the population of Greater London crash-landing on a land mass half the size of France.

....

....

The Coalition has done well to get to grips with immigration.

He must be Lord NuNutter himself.

Edited October 18, 2010 by billybong

[DeepLurker]

I was reading the news this morning in Tunisia.

450.000 empty properties.

rents rising apparently

population of under 10 million and 20 percent unemployment

Supply does not matter when 10 percent of the population takes the supply off the market.

Prices collapse we all go buy a house, prices rise speculators by them all up

+1

Lots of people have thrown their life savings into bricks&mortar.

Due to over-supply, their properties are empty. So what do they do? If they can't find a better investment vehicle, then they stay put.

Result: lots of empty properties combined with sky-high prices.

Interesting to see that this problem is affecting Tunisia as well - I know from experience that it's common in Paris, didn't know about anywhere else.

[BuyInOxford]

+1

Lots of people have thrown their life savings into bricks&mortar.

Due to over-supply, their properties are empty. So what do they do? If they can't find a better investment vehicle, then they stay put.

Result: lots of empty properties combined with sky-high prices.

Interesting to see that this problem is affecting Tunisia as well - I know from experience that it's common in Paris, didn't know about anywhere else.

Where is this oversupply you talk of?

Im looking to buy or rent in the SE or possibly Dorset/Hampshire and if there was this huge oversupply you talk of id be getting a cracking deal on the rental market .... but im not as there isnt an oversupply.

If we carry on importing immigrants, living alone and building at the current rate will there ever be under-supply in your England?

[Stars]

I was reading the news this morning in Tunisia.

450.000 empty properties.

rents rising apparently

population of under 10 million and 20 percent unemployment

Supply does not matter when 10 percent of the population takes the supply off the market.

Prices collapse we all go buy a house, prices rise speculators by them all up

Some people on this site would do well to read your post thoughtfully and try to understand how such a a counter-intutive market situation could exist. Real estate doesn't work like any other market

Edited October 18, 2010 by Stars

[winkie]

+1

Lots of people have thrown their life savings into bricks&mortar.

Due to over-supply, their properties are empty. So what do they do? If they can't find a better investment vehicle, then they stay put.

Result: lots of empty properties combined with sky-high prices.

Interesting to see that this problem is affecting Tunisia as well - I know from experience that it's common in Paris, didn't know about anywhere else.

I thought gold was the fashionable store of value, but yes there is some truth in that people have been buying property and leaving it empty, many are overseas buyers maybe it might be a good idea to discourage this practice so that it hits them in their pockets then these cash rich buyers not wanting to keep their money in cash would advertise for a house keeper/s no/low rent to look after the place, I have seen this happening more overseas maybe it will catch on more here.

[BuyInOxford]

Some people on this site would do well to read your post thoughtfully and try to understand how such a a counter-intutive market situation could exist. Real estate doesn't work like any other market

You dont know anything about this market and neither do i so lets not use it to highlight it as an example.

[R K]

It's pretty clear the Tories want to force the 'poor' out of 'Tory' areas and relocate them all in low quality 'affordable' ghettos where presumably they'll be easier to herd and control and prices can thus be maintained in nice Tory areas.

The poor need to know their place!

[DeepLurker]

Where is this oversupply you talk of?

Im looking to buy or rent in the SE or possibly Dorset/Hampshire and if there was this huge oversupply you talk of id be getting a cracking deal on the rental market .... but im not as there isnt an oversupply.

If we carry on importing immigrants, living alone and building at the current rate will there ever be under-supply in your England?

Erm... my post was a reply to "Fromage Frais", who was talking about 450,000 empty properties in Tunisia.

Does that clue you in as to where this oversupply is?

[BuyInOxford]

Erm... my post was a reply to "Fromage Frais", who was talking about 450,000 empty properties in Tunisia.

Does that clue you in as to where this oversupply is?

Apologies, its late where i am i read it that you believed the oversupply in Tunisia somehow refers to the fictitious oversupply in the UK people on here talk of.

[Stars]

You dont know anything about this market and neither do i so lets not use it to highlight it as an example.

Deeplurker provides the mechanism for you. All you need to do is add a little thunking of your own.

[Tired of Waiting]

This may be like a red rag to a bull in these parts:

http://www.telegraph.co.uk/comment/columnists/borisjohnson/8070153/The-Coalition-must-tackle-the-shortage-of-new-homes.html

More news: http://www.thisislondon.co.uk/standard/article-23888784-squash-house-prices-at-your-peril-boris-johnson-tells-the-coalition.do (There is a new thread about this one.)

[BuyInOxford]

Deeplurker provides the mechanism for you. All you need to do is add a little thunking of your own.

Oh yes the post quoting 450,000 properties was so in depth i feel like im a expert in the Tunisian market and economy.

But are you some how insinuating that there is a oversupply in England? Please enlighten me as i need a little more info to do some thunking.

[Tired of Waiting]

Oh yes the post quoting 450,000 properties was so in depth i feel like im a expert in the Tunisian market and economy.

But are you some how insinuating that there is a oversupply in England? Please enlighten me as i need a little more info to do some thunking.

People, the supply v needs varies enormously in Britain. Yes huge over-supply in parts of the country, with whole streets boarded up. And serious shortages in other regions, mainly in the south.

[BuyInOxford]

People, the supply v needs varies enormously in Britain. Yes huge over-supply in parts of the country, with whole streets boarded up. And serious shortages in other regions, mainly in the south.

Agreed, but much of the property left boarded up is only fit to be knocked down .... i used to live in Benwell, Newcastle this excess of boarded up property is no longer fit for purpose.

Edited October 18, 2010 by BuyInOxford