needle Posted January 7, 2006 Share Posted January 7, 2006 Ok this is up for discussion - The current HPI is an artificial construct and a direct tool of NewLabour policy. By creating rampant HPI the government has encouraged speculation in the BTL market. Creating this speculation led directly to an increase in the number of properties to let and a modest decline in the rents captured (due to increased competition). What this, in effect, describes is the government pushing responsibility for social housing onto the market. Many of the people renting in the private sector were/are candidates for social housing - now they rent from the private sector (with some government assistance). The gov has therefore avoided the capital cost of building and maintaining large swathes of housing, saving themselves millions and having thousands housed at the expense of private capital. The banks and the private investor take all the risk. A very British Coup indeed. Quote Link to comment Share on other sites More sharing options...
bubbleturbo Posted January 7, 2006 Share Posted January 7, 2006 Ok this is up for discussion - The current HPI is an artificial construct and a direct tool of NewLabour policy. By creating rampant HPI the government has encouraged speculation in the BTL market. Creating this speculation led directly to an increase in the number of properties to let and a modest decline in the rents captured (due to increased competition). What this, in effect, describes is the government pushing responsibility for social housing onto the market. Many of the people renting in the private sector were/are candidates for social housing - now they rent from the private sector (with some government assistance). The gov has therefore avoided the capital cost of building and maintaining large swathes of housing, saving themselves millions and having thousands housed at the expense of private capital. The banks and the private investor take all the risk. A very British Coup indeed. Perhaps, but what happens now. Property prices are so high that the investors yields are rubbish and often do not cover the mortgage. There is very little chance of the capital appreciation which has been seen. The money will go out of property to get better returns elsewhere. As this happens, demand will fall and supply will increase, as has been seen. This will push values down, which creates a vicious circle. Add to that, the worsening economic picture and the occurance of globally raising interest rates over the last few years. etc, etc. Quote Link to comment Share on other sites More sharing options...
Guest Posted January 7, 2006 Share Posted January 7, 2006 A very British Coup indeed. Perhaps, but what happens now. Assuming the context of the first poster's message to be true, if prices fall, the government still get their way. ie: what happens now doesn't actually matter. It had indeed occurred to me that this might just be a cunning New Labour means of 'refreshing' Britains towns and cities by clearing old brownfield land and building new developments. (Manchester is a clear case in point here). Quote Link to comment Share on other sites More sharing options...
Viterbi Posted January 7, 2006 Share Posted January 7, 2006 The origins of HPI go back to around 1995ish. It was not the creation of Labour but of the financial service sector for offering easy access to credit such as BTL mortgages. Quote Link to comment Share on other sites More sharing options...
2005 Posted January 7, 2006 Share Posted January 7, 2006 yes... this is exactly what they are doing. Stimulating a large supply of cheap (not yet but they will be), affordable housing with the private sector taking all the risks. IMO many of these flats will be social housing within the next decade. Quote Link to comment Share on other sites More sharing options...
AgeingBabyBoomer Posted January 7, 2006 Share Posted January 7, 2006 (edited) Don't agree, the HPI is a global, not uniquely British, phenomenon. NuLab are just follwing the Fed, and their commitment to Bretton-woods II, as well as the injection of liquidity follwing the dot com crash. (or at least that is my counter-theory) The consequences of this, whilst possibly unforseen at the time, are clear now. Question is how do they get out of this one? ABB Edited January 7, 2006 by AgeingBabyBoomer Quote Link to comment Share on other sites More sharing options...
Mushroom Posted January 7, 2006 Share Posted January 7, 2006 This has been discussed before in various threads. Some are wondering if unsold newbuild blocks of flats will be picked up cheaply by HAs as some have said happened in the last crash. Now whether this is part of a NuLabour strategic masterplan? Who can find the "smoking" document? Quote Link to comment Share on other sites More sharing options...
Guest Riser Posted January 7, 2006 Share Posted January 7, 2006 The origins of HPI go back to around 1995ish. It was not the creation of Labour but of the financial service sector for offering easy access to credit such as BTL mortgages. HPI goes back to 1995 in this cycle but we have seen two other periods of unsustainable HPI before then, both of which resulted in a crash, this time will be no different. Inflation adjusted Nationwide HPI going negative was the sell signal for this cycle. SELL signal for housing market Quote Link to comment Share on other sites More sharing options...
MrToca Posted January 7, 2006 Share Posted January 7, 2006 If there's a "crash" then won't the serious property investors just hold onto the existing properties and snap up the bargains to be had? Or am I being too simplistic? Even if you'd bought at the peak before the last "crash" you would still be sitting on nice gains today if you were able to ride it out (a big point, I know, but you should have risk management plans in place to cope with interest rate rises, etc.). If you do have to jump ship then that should be possible if you've been sensible in your approach. Because the market does not have a great deal of liquidity, prices don't drop by, say, 20% overnight. And, if you bought BMV, you should be able to get out if you really have to before things get too bad. Sorry if I'm repeating previous threads. I'm a newbie here and may well get shot down. But my view is that there's money to be made whatever the market, if you play it properly. Kind regards, Stuart Quote Link to comment Share on other sites More sharing options...
2005 Posted January 7, 2006 Share Posted January 7, 2006 Don't agree, the HPI is a global, not uniquely British, phenomenon. NuLab are just follwing the Fed, and their commitment to Bretton-woods II, as well as the injection of liquidity follwing the dot com crash. (or at least that is my counter-theory) The consequences of this, whilst possibly unforseen at the time, are clear now. Question is how do they get out of this one? ABB It isn't what GB did - it is what he didn't do. He could have regulated mortgages better, he could have put a stop to interest only mortgages with no attached investment vehicle/self certs etc. He could have taxed BTL more heavily making it unattractive. Now before I get jumped on I am not saying he should have done any of these things - just that he could have done if he wanted to stop HPI getting out of hand. Quote Link to comment Share on other sites More sharing options...
underpressuretobuy Posted January 7, 2006 Share Posted January 7, 2006 Ok this is up for discussion - The current HPI is an artificial construct and a direct tool of NewLabour policy. By creating rampant HPI the government has encouraged speculation in the BTL market. Absolutely not. You can tell simply because this is a global bubble. How has Gordon Brown's behaviour been responsible for the property bubble in the U.S.A. or in Australia? Quote Link to comment Share on other sites More sharing options...
AgeingBabyBoomer Posted January 7, 2006 Share Posted January 7, 2006 It isn't what GB did - it is what he didn't do. He could have regulated mortgages better, he could have put a stop to interest only mortgages with no attached investment vehicle/self certs etc. He could have taxed BTL more heavily making it unattractive. Now before I get jumped on I am not saying he should have done any of these things - just that he could have done if he wanted to stop HPI getting out of hand. Agreed, but it's not just GB, it is the government finance ministers fo the US, Australia, New Zealand and all the other countries experiencing HPI as a result of post 2000 economic decisions. As I say, the consequences are clear for all to see, and evasive action could have been taken. The fact that, collectively, nothing has been done to stop it leads me to believe that this is their desired outcome, or that they have no other way to mitigate their problem than by getting the home owning public to foot the bills. I don't think any other chancellor of any other political persuasion would have done anything else. (IMO) ABB Quote Link to comment Share on other sites More sharing options...
winkie Posted January 7, 2006 Share Posted January 7, 2006 yes... this is exactly what they are doing. Stimulating a large supply of cheap (not yet but they will be), affordable housing with the private sector taking all the risks. IMO many of these flats will be social housing within the next decade. Quite agree. Quote Link to comment Share on other sites More sharing options...
Mushroom Posted January 7, 2006 Share Posted January 7, 2006 Now I make an assumption, although I may be wrong, that none of us here are privy to the conversations, the "nods and winks" that go on behind closed doors and at intimate dinner parties where minutes are not taken but where I am sure that decisions that affect us all are taken. Therefore I doubt that we will ever be able to know for sure why we are in the situation we find currently find ourselves with regard to houseprices. What does worry me is that whilst many of us here ridicule such as the Chancellor, I'm sure that the advisors he and others have on tap are not at all stupid and will have explained in great detail the possible outcomes of his decisions. Of course whether he has heeded such advice is a different matter. Afterall, it's only the next GE that counts to the political animals. It's that old question again, cockup or conspiracy? Quote Link to comment Share on other sites More sharing options...
the_duke_of_hazzard Posted January 7, 2006 Share Posted January 7, 2006 If there's a "crash" then won't the serious property investors just hold onto the existing properties and snap up the bargains to be had? Or am I being too simplistic? Even if you'd bought at the peak before the last "crash" you would still be sitting on nice gains today if you were able to ride it out (a big point, I know, but you should have risk management plans in place to cope with interest rate rises, etc.). If you do have to jump ship then that should be possible if you've been sensible in your approach. Because the market does not have a great deal of liquidity, prices don't drop by, say, 20% overnight. And, if you bought BMV, you should be able to get out if you really have to before things get too bad. Sorry if I'm repeating previous threads. I'm a newbie here and may well get shot down. But my view is that there's money to be made whatever the market, if you play it properly. Kind regards, Stuart You sound very sensible, Stuart, but most recent entrants to the B2L game are simply not business-minded. There is money to be made, of course, but it's getting harder now. Your essential point is correct; good investors who've survived will prosper by buying low in the coming drop, but if they've survived it probably means they've had their head screwed on from the start. Quote Link to comment Share on other sites More sharing options...
Realistbear Posted January 7, 2006 Share Posted January 7, 2006 (edited) IMHO Gordon's "economic miracle" was a way to prevent a recession occuring after the dot.com bust. Al Greenspan, whom Gordon followed, thought that by reducing IR and encouraging a housing boom that something would be created out of nothing. An way to build wealth based on artificially high house prices from which MEW would fuel a starving economy. It worked....for awhile. The economic cycle will have its way...eventually. The dot.com bust/recession we were meant to have a few years ago has just been delayed a while. Edited January 7, 2006 by Realistbear Quote Link to comment Share on other sites More sharing options...
the_duke_of_hazzard Posted January 7, 2006 Share Posted January 7, 2006 (edited) [edit - dupe] Edited January 7, 2006 by the_duke_of_hazzard Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.