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Eddie_George

Property Is A Better Bet Than Pensions, Says Gold-Plated Bank Guru

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The Bank of England’s chief economist, Andy Haldane, has claimed that property is a better bet for retirement than a pension — even though his own pension will pay him nearly £84,000 a year when he retires.
In an interview with The Sunday Times, Haldane also said he does not consider himself wealthy, despite a basic salary of more than £180,000, owning two homes and having the gold-plated pension that will increase in value if he continues to work at the Bank.

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He said: “It ought to be pension but it’s almost certainly property. As long as we continue not to build anything like as many houses in this country as we need to . . . we will see what we’ve had for the better part of a generation, which is house prices relentlessly heading north.”

Either he doesn't understand the effect of credit expansion on house prices, or he's a liar.

http://www.thetimes.co.uk/article/property-is-a-better-bet-than-pensions-says-gold-plated-bank-guru-lfgqx9rwc [Paywall]

Where to start? Scum of the highest order.

Edited by Eddie_George

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Just shows you how detached from reality the metropolitan elite are in this country.

Marie Antoinette was rumored to have said something similar prior to the French revolution, just swap bread for a roof over your head.

As one biographer of the Queen notes, it was a particularly useful phrase to cite because "the staple food of the French peasantry and the working class was bread, absorbing 50 percent of their income, as opposed to 5 percent on fuel; the whole topic of bread was therefore the result of obsessional national interest."

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Either he doesn't understand the effect of credit expansion on house prices, or he's a liar.

Finally, consider the impact of housing tenure. This has undergone seismic shifts over recent years. Charts 22 and 23 show the proportions of UK households renting or with a mortgage. Those under 50 have seen a secular rise in renting and a fall in mortgaged households. Among young adults, these shifts have been dramatic. In 1977, one in four 25-year-olds were renters. By 2014, that fraction had risen to two-thirds. The number of households aged 21 to 25 with a mortgage has fallen by a factor of three.

While these trends in housing tenure are long-lived, the financial crisis has clearly amplified them. Since 2007, the share of renters among those aged between 25 and 34 has risen by 12 percentage points. Among 35-49 year olds, the share of renters has increased by over two thirds. By contrast, those over 50 have seen a much smaller change in housing tenures. These shifts are likely to reflect the combined effects of a rise in UK house prices relative to income and, since the crisis, a reduction in mortgage availability for the young.
Whether someone owns or rents a property need not affect their well-being, other things equal. But when it comes to the UK housing market, other things are rarely equal. The combination of rising demand for rental property, and constrained supply, has led to more rapid rises in rents than in household incomes. As a fraction of household income, rents have doubled since the early 1980s from around 10% to over 20% today. For the rising fraction of households who are renting, this will have eaten into their disposable incomes.
Chart 24 shows a measure of household income which subtracts the amount spent on housing by each household. The conventional measure of household disposable income, using average mortgage costs across households, has increased by 1-2% since 2007. Over the same period, the housing cost-adjusted measure of household disposable income has increased by less than 1%. Once housing costs are taken into account, the improvement in household living standards is even harder to discern.
The impact of housing costs is also likely to have fallen unevenly across different cohorts and regions. Chart 25 show rents as a fraction of income across different regions. What stands out is the much larger than average rent proportion in London and, to a lesser extent, the South-East and South-West. These additional housing costs would good some way towards undoing the over-performance of these regions in disposable income terms since the crisis.
What is true across regions is also true across income and age cohorts. Charts 26 and 27 look at the change in household income and wealth across different housing tenure-types since 2007. Gains in both income and wealth have been far larger for owner-occupiers than for renters. This helps explain the uneven pattern of wealth gains by age since the crisis, as older cohorts are more likely to be owner-occupiers.
Taken together, then, the rising cost of rents, and the rising share of renters, appears to have caused a further erosion of some households’ income since the crisis, particularly renters, the poor and the young. For those cohorts, rising housing costs are likely to have contributed to the sense of this being an invisible recovery. Whose recovery? To a significant extent, those owning their own home.

Whose recovery? Andrew Haldane, 30 June 2016

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What he is saying is don't hold out your hopes on investing in a pension when everything is liable to collapse.....one home that you own and live in has better security than any other income sources. ;)

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Either he doesn't understand the effect of credit expansion on house prices, or he's a liar.

The odd thing is that he can see the effect in commercial property. <_<

The Forum was born out of the commercial property crash of the early 1990s. Between 1989 and 1993, UK commercial property prices fell by 27%. This followed a long period of rising prices, high liquidity, expansive lending and weakening credit standards. These ingredients combined to create a classic pro-cyclical spiral. Higher valuations supported ever-larger loans on ever-finer terms, boosting valuations still further. When that pro-cyclical spiral went into reverse, it left banks, developers and investors all licking their wounds.

Source

Compare that with this.

A shortage of homes for sale and record low borrowing costs have helped boost U.K. house prices to records. Haldane -- who sits on the rate-setting Monetary Policy Committee -- said the central bank has concerns about “pockets” of the market, and cited investment properties as an example.

There’s a “natural temptation, a rational temptation,” given past history, to think that the the only way is up for buy-to-let property values, Haldane said. That will probably remain the case as long as the housing supply remains constrained, he said.

Source: Bank of England Can Only Do So Much on Housing, Haldane Says, Bloomberg, 4 April 2016.

It's all a bit self-contradictory. He acknowledges how changing lending practice play into bubbles, he acknowledges that you have a massive growth in the private rented sector and he acknowledges his colleagues' concern about the growth of buy-to-let investment which is itself a consequence of changes in lending practices. Yet he's always banging on about how it's all just supply and he's always banging on about house prices going up and up forever.

The thing that I find most alarming is that for such a brain box he shows no interest in the granularity. OK, maybe, in fact probably, there are geographical pockets where a lack of physical supply is contributing to higher prices and where that lack of supply would be driving prices higher even if we had constant credit conditions, but there are also plenty of places where you have LHA/BTL interactions and a lack of physical supply is not driving prices because no bugger wants to live there because there are no bloody jobs.

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methode%2Fsundaytimes%2Fprod%2Fweb%2Fbin

Either he doesn't understand the effect of credit expansion on house prices, or he's a liar.

http://www.thetimes.co.uk/article/property-is-a-better-bet-than-pensions-says-gold-plated-bank-guru-lfgqx9rwc [Paywall]

Where to start? Scum of the highest order.

When you have the BOE watching your back then it is unsurprising that property is a better bet than other investment classes. Bidding up the price of non productive fixed assets is not exactly a long term recipe for economic success is it ?

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The odd thing is that he can see the effect in commercial property. <_<

Source

Compare that with this.

Source: Bank of England Can Only Do So Much on Housing, Haldane Says, Bloomberg, 4 April 2016.

It's all a bit self-contradictory. He acknowledges how changing lending practice play into bubbles, he acknowledges that you have a massive growth in the private rented sector and he acknowledges his colleagues' concern about the growth of buy-to-let investment which is itself a consequence of changes in lending practices. Yet he's always banging on about how it's all just supply and he's always banging on about house prices going up and up forever.

The thing that I find most alarming is that for such a brain box he shows no interest in the granularity. OK, maybe, in fact probably, there are geographical pockets where a lack of physical supply is contributing to higher prices and where that lack of supply would be driving prices higher even if we had constant credit conditions, but there are also plenty of places where you have LHA/BTL interactions and a lack of physical supply is not driving prices because no bugger wants to live there because there are no bloody jobs.

As well as putting his foot in his mouth about not understanding pensions a while back, in the full interview he boasts that he knows very little about the details of his mortgage other that it's an offset deal!

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When you have the BOE watching your back then it is unsurprising that property is a better bet than other investment classes. Bidding up the price of non productive fixed assets is not exactly a long term recipe for economic success is it ?

No, I wouldn't say so....eventually people will find the alternative.....shock, horror. ;)

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Haldane has always come across to me as a greasy pole climber rather than a significant intellect.

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Haldane has always come across to me as a greasy pole climber rather than a significant intellect.

From the evidence presented of his understanding of finance, I think he sucked Mervyn's greasy pole to get where he is now.

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Good good. Keep talking rubbish and distract everyone from the killing to be made on pensions via tax relief and shares/instruments we allocate them too.

Funnel them into property, let them pay their entire income to a bank and be a willing slave.

Thanks mate. I'll see you in the Cayman's.

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As well as putting his foot in his mouth about not understanding pensions a while back, in the full interview he boasts that he knows very little about the details of his mortgage other that it's an offset deal!

Sounds about right.

I didn't realise how poorly qualified he is an academic economist. Masters from Warwick. No PhD. I think his star has fallen at the Bank since Carney's arrival. Mind you, he was leading the line for the Bank of England on Systemic Risk from 2005 (link).

A cynic might think that he's got one eye on cushy jobs the other side of the exit door.

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As well as putting his foot in his mouth about not understanding pensions a while back, in the full interview he boasts that he knows very little about the details of his mortgage other that it's an offset deal!

With a 180K salary, offset is a shrewd choice. Just because he is parroting the party line doesn't mean he is thick. It takes a certain mental gymnastics to be able to defend a policy you know is a crock of $hit.

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At his age and given his likely senior position in London dinner party society, I suspect every one he knows has made a killing on property and he sees nothing but intrinsic positive sentiment as far as the eye can see. If you want someone with deep boe and treasury connections telling you the future of the economy, read Roger Bootle, someone brighter and not blinded by the generations.

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Good good. Keep talking rubbish and distract everyone from the killing to be made on pensions via tax relief and shares/instruments we allocate them too.

Funnel them into property, let them pay their entire income to a bank and be a willing slave.

Thanks mate. I'll see you in the Cayman's.

This^^,

Its incredible to think the amount of people who are falling for it.Its highly likely saving into shares via tax relief even as a 20% taxpayer will hugely outperform housing going forward.It just takes inflation to kick in and interest rates to rise,even to 2.5% mid term to kill HPI stone dead.The amount of money in interest alone the banks are sucking out of people is enough to keep them working forever.

Funny enough iv been buying Legal And General lately as i fully expect them to be hoovering up masses of "lifetime mortgages/equity release" customers in a few years.People with no pensions will get a shock when they see that a £130k house gets a lump sum of about £34k in equity release and an interest rate that will see all equity handed to the issuer in around 25 years.People with only housing will end up handing over the equity to insurance shareholders.

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People with only housing will end up handing over the equity to insurance shareholders.

....or selling to live from proceeds.......who will pay the rents when the money is gone? ;)

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10 years of near zero interest rates fracks up the pension market as promised returns to older pensioners are unsustainable.

I think that is the point he is making.

Of course, cashing out on your pension doesnt make you homeless.

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Watch from 22:40 (you may need to turn up the volume to hear the question better):

The question asked was how will rental costs be met. Though the questioner fails to identify that the state will start to have to pay for retirees housing ever more as time move on, that is what he implies.

But don't worry Andy Haldane's solution is just build more council houses 'we at the Bank of England are long economist and short bricklayers'. Or in English though we've no idea how the housing market works or economy its government's fault. His smirk as he ends is very telling.

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Watch from 22:40 (you may need to turn up the volume to hear the question better):

Put the old bloke that asked the question on the MPC, he'd do a much better job.

Haldane refuses to acknowledge that lax lending results in HPI. The man is an imbecile.

He is paid £200k a year and will enjoy a pension of £80k when he retires. He's taking the piss.

Edited by Eddie_George

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