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Firstbuy - How Crap Does Uk Housing Policy Get?

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From http://www.politics.co.uk/comment/housing-and-planning/comment-uk-housing-policy-isn-t-working-$21388055.htm#

Imagine yourself a hard-pressed Treasury official before one of the UK's previous Budgets.

Britain has an ailing industry - it is a poor performer against its international competitors, producing lesser quality and more expensive products than its European counterparts. It invests little in design, is mocked by ministers and is widely seen by consumers as less desirable. It survives mainly because government restrictions keep supply low and prevent more competitive firms from entering the market.

This industry has behaved foolishly - buying too much overvalued stock on short-term debt in the good times and now finding itself in trouble with its lenders and unable to sell its products without risking making a loss.

But - as with all government dependent industries - it is also a formidable lobby, able to use arguments about negative employment impacts to pressure a government concerned about a fragile economy.

The government capitulates and agrees to a scheme. This would encourage consumers to buy the overvalued goods - the government would help provide bridging capital and packages it as a 'helping hand' for hard-pressed consumers. The industry wins handsomely, being paid approximately £25,000 per unit it sells. The consumer takes on a high level of debt and gains an overvalued product, which most independent economists think is overpriced to the tune of several thousand pounds. Prices are kept artificially high - adding further costs to the UK economy.

Is this something from the dying days of the Callaghan administration that no modern government would tolerate? No, unfortunately it comes direct from this week's Budget, a Budget that claimed to be following in the intellectual footsteps of Nigel Lawson.

The industry is UK housebuilding, the consumers are first-time buyers and the government scheme is called FirstBuy - which works along very similar lines.

Jonathan Portes, director of the National Institute of Economic and Social Research (NIESR), said that FirstBuy Direct was a measure that would "exacerbate economic distortions and make things worse over the long run".

Roger Bootle, managing director of Capital Economics, told the Treasury select committee: "I certainly would not have done this scheme to boost the position of first-time buyers. This is simply increasing demand and in the process doing nothing at all to ease the housing shortage in this country."

For those of us concerned about young people's housing plight, the fact that FirstBuy was centre stage to the government's package for first-time buyers is deeply worrying.

FirstBuy has several precedents - notably the HomeBuy Direct scheme from the dying days of the Brown administration. Past experience has shown that these type of policies are dangerously pro-cyclical, in that they tend to suck in marginal buyers at the top of the market. PricedOut know of many young people who have bought into these schemes and are now struggling to sell their properties, some seeing their value plummet by as much as 25%.

The experience of HomeBuy Direct has also been that it put too much power in the hands of the developers - who were often bringing forward the least sellable properties for inclusion in the scheme and selling at above market prices.

With a market that has been as overheated as UK housing this raises real questions about how policy makers view risk - and their responsibility to buyers.

UK housing policy has a gloriously retro dysfunctionality to it. But for many young people in their 20s and 30s this unhappy coalescence of government support and an underperforming private sector is a big problem. It encourages them to take on a very large financial commitment for a risky purchase that is likely to fall in price, and it keeps prices higher than they otherwise would be.

UK housing isn't working, it's time the government was a lot more radical than this.

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Good post, good article.

This is the great divide of those on the property "ladder" and those locked out unless they take on a big gamble on owning a share of a new build flat/house.

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Nicely written article but will it have much of a readership, let alone a readership whose outlook can be influenced?

I appreciate the sentiment, and wish you (and most of us on here) lots of luck in the face of adversity, but this engineer still sees his best chances of a decent quality of life in emigrating as opposed to having faith in politicians to "do the right thing" for the people who put them there.

Edited by The Generation Game

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Nicely written article but will it have much of a readership, let alone a readership who's outlook can be influenced?

I appreciate the sentiment, and wish you (and most of us on here) lots of luck in the face of adversity, but this engineer still sees his best chances of a decent quality of life in emigrating as opposed to having faith in politicians to "do the right thing" for the people who put them there.

What they need to do they never will, thats a social housing building like in the 50s and 60S.

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I think what should be added is the threat to the system of the sheer amount of people who will be dropping out all together, with nothing to work for. Way to destroy a country!

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Good post, good article.

This is the great divide of those on the property "ladder" and those locked out unless they take on a big gamble on owning a share of a new build flat/house.

Better locked out than locked in with a new 4 times joint salary liar loan and 20% extra funding from the builder and the Government.

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Nicely written article but will it have much of a readership, let alone a readership whose outlook can be influenced?

nice to see our view of reality is shared though even if only by a fringe. Hopefully this view will be fairly clearly available for those considering if they should take the loan but considering the number of people who took help from the bank of mum and dad i suspect there will be very many who will gladly take help from the bank of poor bloody tax payer.

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What they need to do they never will, thats a social housing building like in the 50s and 60S.

That's true.

The government is now trying to sell it's remaining Council Houses to councils! Councils are expected to get a mortgage from the banks and pay it off over 30 years, in the case of this LA the government wants 205 million for 5,800 houses. The question is why do the banks need to be involved? Is it because the government needs the money now (next April actually) and because the banks own this country?

Anyway, I'll be changing my name to 'former council dweller' fairly soon, I can't stand these annual 7% rent increases, I'll be buying while I still have the chance. I really don't know how much it will cost me, I'm hoping for 110k tops.

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That's true.

The government is now trying to sell it's remaining Council Houses to councils! Councils are expected to get a mortgage from the banks and pay it off over 30 years, in the case of this LA the government wants 205 million for 5,800 houses. The question is why do the banks need to be involved? Is it because the government needs the money now (next April actually) and because the banks own this country?

Anyway, I'll be changing my name to 'former council dweller' fairly soon, I can't stand these annual 7% rent increases, I'll be buying while I still have the chance. I really don't know how much it will cost me, I'm hoping for 110k tops.

If this is true, then the mortgages are the equivalent of PFI....of course, there is no risk to the bankers, so interest rates for this investment should be near risk free, 0%. It wont be.

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If this is true, then the mortgages are the equivalent of PFI....of course, there is no risk to the bankers, so interest rates for this investment should be near risk free, 0%. It wont be.

Yes, like PFI it is.

According to our council leader they're talking about 5.5%! And yes this is risk free....And where will the money come from? Housing benefit mainly as more and more tenants switch to benefits to avoid rent increases. I'd do so myself but have savings.

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Yes, like PFI it is.

According to our council leader they're talking about 5.5%! And yes this is risk free....And where will the money come from? Housing benefit mainly as more and more tenants switch to benefits to avoid rent increases. I'd do so myself but have savings.

remember watching a sketch from those two old codgers on the telly, the two johns or sumfin....one was a a Railway operator, the other was a financier. The train company was querying the 30% interest rate the financier was charging...it was of course, down to risk said the financier, train leases are very risky.....the retort was that it was government backed and riskless....ensued a circuit of bluff and prevarication as only the two johns can master.

Still Im sure that council has a highly paid negotiator to get the rate down..maybe that nice lady from Suffolk on £210K could help.

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Still Im sure that council has a highly paid negotiator to get the rate down..maybe that nice lady from Suffolk on £210K could help.

It seems that the council has been given the price and interest rate by the government and banks. Apparently the price can go up or down depending on a whim. This is according to the (Tory) council leader!

There are about 200 councils which still own council houses, I guess most of them are in the same situation.

Strangely enough the council tried to sell its housing off to a Housing Association a couple of years ago for 7 or 8k per unit.(tenants said NO!) Now they're having to pay out around 35k per unit! Still cheap though.

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  • 284 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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