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Realistbear

Big Housebuilders Desperately Subsidizing Overpriced Houses

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http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/8548591/Housebuilders-spend-1bn-on-shared-equity-schemes-to-help-first-time-buyers.html

Housebuilders spend £1bn on shared-equity schemes to help first-time buyers
Housebuilders have turned from building homes to buying them by pumping close to £1bn into the market to support their customers.
Companies including Taylor Wimpey, Persimmon and Barratt have injected huge sums into the market in the form of shared-equity schemes to help customers get on the property ladder.
Details of the massive sums housebuilders have had to carry on their balance sheets came as it emerged the Council of Mortgage Lenders is coming under pressure to ease the supply of finance to first-time buyers by reintroducing 95pc mortgages..../
Despite the success of shared-equity schemes there is concern in the housebuilding industry that money is being diverted away from development.
Industry insiders are worried about the long-term effects of companies carrying these kinds of assets on their balance sheets.
A spokesman for the HBF said: "These figures are released at the same time as the Government is currently talking to developers, lenders and insurers about how lending for first-time buyers can be increased.
It is imperative solutions are found
."

Defaruding shareholders eh? How much longer can the lie continue?

The crash has been delayed by at least 3 or 4 years and the longer they put off the inevtitable the worse it is going to be.

Edited by Realistbear

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They are attempting every trick in the book to prevent a correction.

In doing so they are creating an even bigger bust.

Ministers Comments from Property Market Debate Westminster. Regarding 'pushing' Shared Ownership.

The Government used to call the 'Ministry of Defence', the 'Ministry of War'.

Just as they should call 'Shared Ownership schemes', 'Debt Transfer Schemes'

Edited by Dan1

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They are attempting every trick in the book to prevent a correction.

In doing so they are creating an even bigger bust.

They may or may not be creating a bigger bust. For the record, I think that they are.

However, as long as that bust can be protracted over a decade or two, that may well be their only goal. If so, then it's going pretty much according to plan so far don't you think?

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I really struggle to understand the economics of this: Houses are now smaller, flimsier and built quicker than they have been for about a century. In the last decade and a half, house prices have gone up several fold in real terms whilst, presumably in common with all other private industry, house builders have been working hard to drive down their real-terms costs and have benefitted from importing loads of eastern European labour . Practically every taxi driver I talk to tells of how he used to be a specialist in the building trade but has been edged out by cheap eastern European labour. So the only thing which could account for them needing to charge such high prices is the price of land, which is both surely mitigated both by them buying land banks at lower prices in previous years and by the fact that it is a relatively small part of the overall cost. Turnover is an issue, yes, but they have had 4 years now to adjust to current levels of turnover.

So how come the big builders are not still coining it and how come their part of a shared equity arrangement is not simply a reduction in their profit margins rather than an extension of their debt?

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I really struggle to understand the economics of this: Houses are now smaller, flimsier and built quicker than they have been for about a century. In the last decade and a half, house prices have gone up several fold in real terms whilst, presumably in common with all other private industry, house builders have been working hard to drive down their real-terms costs and have benefitted from importing loads of eastern European labour . Practically every taxi driver I talk to tells of how he used to be a specialist in the building trade but has been edged out by cheap eastern European labour. So the only thing which could account for them needing to charge such high prices is the price of land, which is both surely mitigated both by them buying land banks at lower prices in previous years and by the fact that it is a relatively small part of the overall cost. Turnover is an issue, yes, but they have had 4 years now to adjust to current levels of turnover.

So how come the big builders are not still coining it and how come their part of a shared equity arrangement is not simply a reduction in their profit margins rather than an extension of their debt?

It is quite simple. They are not house building companies, they are leveraged speculative land portfolios which happen to build whatever trash they can sucker the next idiot ftb into.

Edited by OnlyMe

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I really struggle to understand the economics of this: Houses are now smaller, flimsier and built quicker than they have been for about a century. In the last decade and a half, house prices have gone up several fold in real terms whilst, presumably in common with all other private industry, house builders have been working hard to drive down their real-terms costs and have benefitted from importing loads of eastern European labour . Practically every taxi driver I talk to tells of how he used to be a specialist in the building trade but has been edged out by cheap eastern European labour. So the only thing which could account for them needing to charge such high prices is the price of land, which is both surely mitigated both by them buying land banks at lower prices in previous years and by the fact that it is a relatively small part of the overall cost. Turnover is an issue, yes, but they have had 4 years now to adjust to current levels of turnover.

So how come the big builders are not still coining it and how come their part of a shared equity arrangement is not simply a reduction in their profit margins rather than an extension of their debt?

I quite agree, it's bananas that in 50 years of technological and economic progress - when the output of the UK economy has trebled and our standard of living in all other manners has improved greatly - we are now actually building smaller and cruddier houses than we did back in the 1950s. It's all because of the 'cost' of land. For every nasty little new house sold, someone somewhere is taking tens if not hundreds of thousands of pounds in a big windfall.

As I understand it the big builders are sitting on massive land banks that were acquired largely pre 2008 at crazy prices funded by bank debt. If a house costs 80K to build they still have to sell it for more than 180K to brake even. When some poor FTB forks out 180K for a new house they're not buying 180K's worth of bricks, mortar, plumbing and professional architectural and building expertise - they're buying 80K worth of that and handing over 100K to whoever happened to own the land before the builder purchased it.

What we want is the big builders to go bust, their land banks to be redistributed in a fire sale and new building firms to take over so that they can sell a house for closer to what it costs to build. Also we need the governement to start releasing new development land at lower prices. Won't happen, though, will it?

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So how come the big builders are not still coining it and how come their part of a shared equity arrangement is not simply a reduction in their profit margins rather than an extension of their debt?

Um, perhaps because the board members have big bonuses in their contracts and your average CEO, Chairman, Finance Director knows that he or she has 5 years tops in most UK organisations nowadays?

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I really struggle to understand the economics of this: Houses are now smaller, flimsier and built quicker than they have been for about a century. In the last decade and a half, house prices have gone up several fold in real terms whilst, presumably in common with all other private industry, house builders have been working hard to drive down their real-terms costs and have benefitted from importing loads of eastern European labour . Practically every taxi driver I talk to tells of how he used to be a specialist in the building trade but has been edged out by cheap eastern European labour. So the only thing which could account for them needing to charge such high prices is the price of land, which is both surely mitigated both by them buying land banks at lower prices in previous years and by the fact that it is a relatively small part of the overall cost. Turnover is an issue, yes, but they have had 4 years now to adjust to current levels of turnover.

So how come the big builders are not still coining it and how come their part of a shared equity arrangement is not simply a reduction in their profit margins rather than an extension of their debt?

House prices are mostly caused by the willingness of banks to create fantasy money from the bank of bumwad to uy them with.

One major reason most are struggling right now is that everyone played the debt game. They didn't just take their profits and sit on them, they used them as leverage to "invest" even more in land and property.

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I quite agree, it's bananas that in 50 years of technological and economic progress - when the output of the UK economy has trebled and our standard of living in all other manners has improved greatly - we are now actually building smaller and cruddier houses than we did back in the 1950s. It's all because of the 'cost' of land. For every nasty little new house sold, someone somewhere is taking tens if not hundreds of thousands of pounds in a big windfall.

Why is it to do with the cost of land? More, smaller houses will be more profitable no matter what the cost of land, so that's what they'll do. Ditto with building flimsy rubbish. There's no incentive to do otherwise. There never is any incentive in business to do anything other than spend as little as possible, cut as many corners as possible, and sell for as much as possible.

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Why is it to do with the cost of land? More, smaller houses will be more profitable no matter what the cost of land, so that's what they'll do. Ditto with building flimsy rubbish. There's no incentive to do otherwise. There never is any incentive in business to do anything other than spend as little as possible, cut as many corners as possible, and sell for as much as possible.

The price of land does a lot of skew the end prices - to a point where the only thing you can buy is rubbishly built - that is where competition and quality break down as the house itself is no longer the deciding factor - motrgage finance availability and the bubble (in land prices themselves) being the prime mover.

If you are a tramp with no money then you will eat scraps from waste bins. Same thing here - shit is all the public can afford now.

Edited by OnlyMe

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:lol: They never worked out they would be holding more and more equity in the homes they were building. :lol:

So this is how it works. I make an overpriced product that is poor value for money. I lend my customers the money to buy this over priced product . The customer is at risk for any loss in value. The money for the loans comes from tax payer subsidised banks.(paying bonuses for making these loans) When will people wake up to this scam!

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http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/8548591/Housebuilders-spend-1bn-on-shared-equity-schemes-to-help-first-time-buyers.html

Housebuilders spend £1bn on shared-equity schemes to help first-time buyers
Housebuilders have turned from building homes to buying them by pumping close to £1bn into the market to support their customers.
Companies including Taylor Wimpey, Persimmon and Barratt have injected huge sums into the market in the form of shared-equity schemes to help customers get on the property ladder.
Details of the massive sums housebuilders have had to carry on their balance sheets came as it emerged the Council of Mortgage Lenders is coming under pressure to ease the supply of finance to first-time buyers by reintroducing 95pc mortgages..../
Despite the success of shared-equity schemes there is concern in the housebuilding industry that money is being diverted away from development.
Industry insiders are worried about the long-term effects of companies carrying these kinds of assets on their balance sheets.
A spokesman for the HBF said: "These figures are released at the same time as the Government is currently talking to developers, lenders and insurers about how lending for first-time buyers can be increased.
It is imperative solutions are found
."

Defaruding shareholders eh? How much longer can the lie continue?

The crash has been delayed by at least 3 or 4 years and the longer they put off the inevtitable the worse it is going to be.

HEADLINE SHOULD BE TAXPAYER AND SAVERS MONEY USED TO SUPPORT HOUSE PRICES

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not sure how the industry is paying £1bn to support these sales?

actually, they have built the homes, lets say they cost £1bn, and intend to sell for, lets say, £2bn, so on their books they have £1bn in assets (market value less cost), but a cash flow problem as they owe the build costs

so, if they sell them on with a 50/50 deal, they receive £1bn pay the build costs and still have £1bn on their books.

Whats not to like?..from their point of view.

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If the value of a shared equity home falls, who's "equity" takes the hit. The homeowners or the builders, or are the potential losses shared?

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If the value of a shared equity home falls, who's "equity" takes the hit. The homeowners or the builders, or are the potential losses shared?

that depends on the contract.....clearly, as far as the builder is concerned, if its his responsibilty ( ie 50% shared remains throughout) then that will affect his balance sheet more than if the occupier takes the hit.

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  • 311 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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