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George Osborne Is Reinflating House Prices - And We Couldn't Be Happier

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Telegraph article, with hat-tip to Alan on the news blog section:

George Osborne is reinflating house prices - and we couldn't be happier

Despite the appalling weather in most parts of Britain, something remarkable has started to happen to our national mood.

We are, believe it or not, beginning to feel significantly happier about the state of the economy. Detailed consumer polling reveals that pessimism is in decline, employees are more confident about keeping their jobs and homeowners believe that the value of their properties are rising again. This is a hugely important but largely overlooked shift, albeit one which is failing to translate into improved voting intentions for coalition parties.

YouGov, the pollster, produces three key indicators of the state of economic confidence, all of which tell the same story. The share of the public that believes that their financial situation will stay the same or improve has increased from 31pc to 50pc since January 2011; the proportion that says it is getting worse has collapsed from 64pc to 44pc.

A prosperity index – which gauges feelgood factors, buying intentions, perceived living standards and whether individuals expect their employers to increase or reduce staffing levels – has risen to its highest level since David Cameron became prime minister, after reaching a trough in January two years ago. A household economic activity tracker index, which covers immediate consumer behaviour, business activity, future prospects, house price expectations and job security, has also reached the highest reading since the last general election.

Remarkably, the decline in pessimism is taking place across the country and income groups and affecting renters as well as homeowners. Londoners remain more optimistic, but the improvement is broad based.

On the face of it, the mood change is surprising, given that real wages are still falling, the budget deficit remains gargantuan and the economy faces monumental problems that will take years to resolve. We are no longer at immediate risk of another recessionary dip, but a GDP growth rate of 1pc or so, a plausible number for this year, remains shameful by the standards of previous recoveries.

There is an answer to this conundrum, but it is depressing: Osborne’s strategy to reinflate house prices is paying off. This week’s Royal Institution of Chartered Surveyors survey showed the highest level of new house buyer enquiries for three years, while the Council for Mortgage Lenders’ figures were equally upbeat. Directing subsidised credit towards the housing market, as the Help to Buy and Funding for Lending Schemes are doing, is an absurd, reckless policy which suggests Osborne has learnt nothing from the sub-prime crash.

But while it is a gamble that will end in tears, it is rekindling homeowners’ animal spirits, and these still account for 65pc of households. A mere 8pc of people now expect homes in their areas to lose their value over the next year; most of the remainder believe they will go up and remain stable, in another dramatic shift in sentiment.

It’s not all mere bubblenomics, however. The public is right to be more optimistic about the private sector labour market, which has produced a stunningly large number of jobs in recent years, and voters are also being more realistic about the impact of the cuts, which are more limited and gradual than the rhetoric would suggest. The share of voters who believe that they are being affected by public expenditure reductions is declining, and workers are much less worried about losing their jobs. The price of oil is also down, which always helps.

Needless to say, this improvement in sentiment shouldn’t be exaggerated. The public remain far less optimistic than during the good years, and rightly so. We are stuck in a new normal of paltry GDP growth, with dire implications for long-term living standards and the ability of the state to spend on healthcare and pensioner benefits. Plenty of people remain downbeat, and the erosion of real take-home pay, high inflation and taxes, clobbered saving, subdued growth, elevated youth unemployment and soaring rents are an issue for millions.

Everything could still unwind if the eurozone crisis flares up again, and, of course, the foundations for the present mini-recovery are extraordinarily flimsy, focusing on increasing private sector debt rather than exports, making a mockery of Osborne’s pledge to rebalance the economy.

But, despite these caveats, the shift in the way millions of people are thinking about the economy is both real and critically important to the political situation. It is one reason why Ed Miliband’s poll ratings have plateaued and why his lead is so small; his and Ed Balls’ alarmism about jobs and cuts no longer convinces anybody apart from his core base. Labour’s embrace of pre-Blairite class warfare rhetoric, combined with its strategy to criticise without presenting a meaningful alternative, is flopping miserably.

Yet this boost in confidence has also spectacularly failed to translate into increased support for the Tories. Their strategy to sit tight and ride the recovery’s coat-tails represents yet another strategic blunder. This is turning into a voteless recovery for Cameron, who is starting to look ever more like John Major, a prime minister defeated despite five years of growth following our exit from the European Exchange Rate Mechanism.

Of course, circumstances are very different today. The public’s optimism is rising, but it remains angry, doesn’t thank the establishment for the slight economic uptick, is worried about immigration, craves authenticity and increasingly backs Ukip. The share of voters citing the EU as a major issue is also increasing, and personality and non-economic issues are helping to determine allegiances.

Nigel Farage has the highest net rating of any political leader, according to ICM’s polling, which puts his party at 18pc, against just 28pc for the Tories and 34pc for Labour. The prime minister’s poor leadership skills, contempt for his base, arrogance and loss of control of his party will make it even harder for him to convince the public that he deserves to be rewarded for the modestly improving economy.

One intriguing hypothesis is that the slight recovery may even embolden more people to vote Ukip, an unknown quantity, rather than stick with the Tories, Lib Dems or Labour. Cameron’s gimmicky attempt to enshrine into law a referendum in 2017, two years after the election, is unlikely to impress the public in any noticeable way.

It needn’t have been that way. Had the Coalition pursued shock and awe supply-side tax policies and ushered in radical reforms to boost investment, house building and incentives to work, a genuine recovery could have been engineered, and the benefits would have been so large that they would have been bound to deliver electoral gains.

It was James Carville, Bill Clinton’s election strategist, who argued that when it comes to grabbing votes, “it’s the economy, stupid”. All of the indications are that this strategy – one of the core components of Clinton’s successful defeat of George Bush Sr in 1992 – won’t work in the UK in 2015. It’s politics all right, but not as we used to know it.

Allister Heath is editor of City AM

No comments at the link, surprise, surprise.

http://www.telegraph.co.uk/finance/comment/10056926/George-Osborne-is-reinflating-house-prices-and-we-couldnt-be-happier.html

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Telegraph article, with hat-tip to Alan on the news blog section:

No comments at the link, surprise, surprise.

I followed your link - 325 comments at the time. You have to wait for the Disqus part to load.

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Making the older boomer-benefiting floating voter happy at the expense of the rest. At some point, a new political party will sease on this and try and engage the young and prioced out. But not for a few years, until the old die off and the young increase in number - oh, and until the young stop being so apathetic and reluctant to vote.

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Making the older boomer-benefiting floating voter happy at the expense of the rest. At some point, a new political party will sease on this and try and engage the young and prioced out. But not for a few years, until the old die off and the young increase in number - oh, and until the young stop being so apathetic and reluctant to vote.

Amazing how quick things are moving on a Europe referendum, now the Tories are worried about losing.

Imagine a huge-build up of HPC political pressue, that sees SMI, QE, FLS, HTB all unwound in a month...

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Making the older boomer-benefiting floating voter happy at the expense of the rest. At some point, a new political party will sease on this and try and engage the young and prioced out. But not for a few years, until the old die off and the young increase in number - oh, and until the young stop being so apathetic and reluctant to vote.

In the new feudal system I suspect there will always be a divide between an asset rich older generation and a penniless younger generation. Deceased will be replaced by an even wealthier generation below bolstered with their 650k tax free inheritances.

Edited by crashmonitor

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Im particularly happy at how the price of beef is going up.

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flat,550x550,075,f.jpg

This looks like some bizarre sinister looking fairground attraction right out of the 1930s. But googling it reveals that it is popular in Australia. Certainly not seen one of these in the UK.

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Im particularly happy at how the price of beef is going up.

Complemented by a strong performance from Bisto Gravy Granules. The price has improved strongly from 72p two years ago. Seen in Tescos yesterday.....offers around £1.25.

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Not just beef. Lamb is also going up at a shocking rate.

That's not good.

Baa-d, in fact. Although I wouldn't be surprised if they were just fleecing ewe.

Edited by SeeYouNextTuesday

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For 99% of the population this IS the economy. You borrow money on the strength of your bubble house price. You spend it on imported goods at ten times their world price in bubble-rent shopping malls. There is nothing else, it's all been exported. This is the economy.

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Conversely I'm happy about the HPC (Hog Price Crash). Pork / Bacon is back to 2004 prices in many places.

I have been feeling growing resentment all week about this so will post this here.

I bought some M&S chorizo sausages this week. Ruddy disgusting they were. No good with a fried egg and some baked beans. Just a generally yucky taste IMPO. Be warned. Back to the Co-Op I go.

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I have been feeling growing resentment all week about this so will post this here.

I bought some M&S chorizo sausages this week. Ruddy disgusting they were. No good with a fried egg and some baked beans. Just a generally yucky taste IMPO. Be warned. Back to the Co-Op I go.

I think you are supposed to thinly slice chorizo and add it to salads and cheese????

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I think you are supposed to thinly slice chorizo and add it to salads and cheese????

Or grab it from the fridge, unwrap and eat. If you can consume enough to be considered 'dinner' before the fridge starts beeping a warning that the doors open then that's considered a double win for time management imho.

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I have been feeling growing resentment all week about this so will post this here.

I bought some M&S chorizo sausages this week. Ruddy disgusting they were. No good with a fried egg and some baked beans. Just a generally yucky taste IMPO. Be warned. Back to the Co-Op I go.

Er...the M&S chorizos are real chorizos. Not supposed to have them with egg and beans; sliced and individually fried maybe. The reason the Coop ones taste OK is that they probably have more filler than meat+peppers!

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  • 242 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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