Shaun Richards:UK establishment pushing house prices up

[Sancho Panza]

Shaun nails it as ever.He's normally the epitomy of polite restraint but actually lets rip a bit today.His commenters are a relatively erudite bunch(quite a bit of cross pollination with HPC I suspect) and worth a read if you have the time.

 

Shaun Richards 23/11/17

'Yesterday we got the conformation we expected that the UK establishment cannot stop itself from meddling in the housing market with the intention of pushing house prices up. The various readings that the house price was turning highlighted by actual falls in the London area was always going to focus their minds. Thus the headline proposal in the Budget was this. From City-AM.

The government has used the Autumn Budget to abolish stamp duty for first-time buyers on purchases of up to £300,000.

First-time buyers will also receive a stamp duty holiday for the first £300,000 on purchases up to £500,000.

Launching the policy, the chancellor said 80 per cent of first-time buyers will pay no stamp duty as a result of the change.

Firstly let me wish those who are about to buy for the first time good luck with their windfall although not everybody sees it like that as this from the chief economics  correspondent of the Guardian Aditya Chakraborrty indicates.

Jack up your asking price to show him how stamp duty really works.

However sadly it will not end there as we know that such moves tend to boost house prices and of course this is the reason the policy is announced. For the government can claim it is helping first time buyers and boost house prices for property owners in a win double for it. If we think more deeply then poorer areas will see little benefit at all as the £125,000 limit for zero rate Stamp Duty was enough but areas with higher prices will see benefits and I note the way that the gains were given to those paying up to £500,000. That will benefit first time buyers in London ( albeit not some of central London) which makes me wonder if it is an attempt to stop or slow this? From the Evening Standard on London house prices.

Savills anticipates prices will fall 1.5 per cent in 2017 and a further two per cent in 2018, before stagnating in 2019

Things are usually really bad when an estate agent predicts price falls!

How much will house prices rise?

I put in a maximum public service effort yesterday on social media to point out that the first rule of OBR ( Office for Budget Responsibility) club is that the OBR is always wrong. Some seemed to learn but others parroted its claim that house prices will rise by 0.3%. So let us move on knowing that it will not be that as we mull that the gain can be up to £5000 so some prices will probably rise by that and of course some desperate to buy might leverage via a mortgage and be able to pay even more than that. There will be a small downwards effect above £500,000 as there is an extraordinary marginal tax rate where £1 costs £5000 on the other side.

The BBC seems oblivious to the continual failures of the OBR too.

It also estimates that it will result in only an additional 3,500 first-time buyer purchases…….The policy will cost the Treasury £3.2bn over the next five years.

There is a further irony about this which is that Stamp Duty was one of the few areas where we seem able to raise tax rates and revenues. Partly of course due to the fact that housing benefits from capital gains tax exemptions for the main home.

Term Funding Scheme

Just a reminder that house prices will be pumped up by the extra £25 billion of this that the Bank of England requested on Monday and will therefore presumably supply before it ends in February. This works in several ways as you see banks get funds at or close to Bank Rate as opposed to going to savers which is both easier and cheaper than the 1.1% ( plus costs) they have to pay for new deposits from individuals according to the Bank of England. This means that the banks can mix between wider margins and lower mortgage rates than otherwise. The lower mortgage rates boost business volume compared to otherwise and of course via their impact on house prices improve the mortgage book of the banks.

Supply

There was a by now familiar refrain that we must build more houses which has been proclaimed by every Chancellor this century. From the BBC.

£44bn in overall government support for housing to meet target of building 300,000 new homes a year by the middle of the next decade.

I am sure you have already spotted that for housing demand it is jam today whereas for housing supply it is jam tomorrow! Indeed it is hard to avoid the thought that by the middle of the next decade the odds are that the current Chancellor will be long gone. Indeed according to Yes Prime Minster if you want to kick things into the long grass you announce an enquiry.

So I am establishing an urgent Review to look at the gap between planning permissions and housing starts.

It will be chaired by my Right Honourable Friend for West Dorset.

And will deliver an interim report in time for the Spring Statement next year.

Some care is needed as it takes time to plan and build houses and flats but we find yet again that demand and consequently house prices come first. On past track records the houses may not ever be built.

Universal Credit

It is clear that some of our poorest people have been affected by the clunky way that Universal Credit has been introduced. So I welcome the effort and money put forwards in the Budget to help with this and fixes if not all at least some of the problems.

Growth downgrade

The obvious cherry to pick for the headline writers has been the economic growth downgrade given to the UK. However this is based on the productivity forecasts of the OBR which have been well take a look for yourselves.

Anyone surprised by the downgrade in UK productivity… chances are it continues to get downgraded (and this isn't just a UK-specific problem). OBR can only keep lowering in the absence of any positive catalysts #Budget2017 pic.twitter.com/luj6863Uvp

— Viraj Patel (@VPatelFX) November 22, 2017

 

Oh and remember they were saying that UK borrowing will be higher this year than last? From the Budget Speech.

Today, the OBR confirm that we are on track to meet our fiscal rules:

Borrowing is forecast to be £49.9 billion this year; £8.4 billion lower than forecast at the Spring Budget.

Comment

So we received a giveaway Budget of which a lot of the giveaway was focused on the housing market. Again. Whilst some will initially gain the problem is that next time around the house prices that are being boosted will be even more unaffordable and thus more “Help” will be needed in a cycle which is so far endless. Existing home owners can continue to listen to some Hot Chocolate.

You win again

The problem is that for all the talk of rebalancing the UK economy we continue to lean towards the housing market. So whilst I welcome the efforts to boost productivity and technology they may find they are swimming against the tide. Still at least the extra maths teachers may help us in measuring productivity which may yet turn out to be the problem that never was. Also the technology issue needs to be in the right areas. I understand that one needs to provide stations to encourage use but my area has seen a considerable number of charging points for electric vehicles built in the last year or two but they are so rarely actually used.'

[Wayward]

"However sadly it will not end there as we know that such moves tend to boost house prices and of course this is the reason the policy is announced. For the government can claim it is helping first time buyers and boost house prices for property owners in a win double for it"

Absolutely right...a cynical scheme much like HTB.  I never imagined in my wildest dreams years ago that the UK could be governed by such duplicitous and shameless degenerates.  Where is the modern day Orwell?

[Thorn]

On 11/24/2017 at 6:04 PM, Wayward said:

Where is the modern day Orwell?

Feels like there's just some of us left. 

Living in "I'm-alright-Jack-Land".

Can't wait for the first Workhouses to be opened.

[winkie]

Of course the establishment require ever rising land security prices.....they require the security of land to pump evermore secured debt into the economy.......at the end of the day personal built up equity will pay for the future rainy day....therefore less for the state to have to cover and pay, more to regurgitate back into the future economy......then it is gone.

 

[blackhole]

Don't forget those who are literally priced-out.  These "offerings" won't help at all, but create Labour voters. 

Conservatives love their Labour voters :-)

Why else did Thatcher give away council housing through right-to-buy, after all.

Edited November 25, 2017 by blackhole

[winkie]

45 minutes ago, blackhole said:

Don't forget those who are literally priced-out.  These "offerings" won't help at all, but create Labour voters. 

Conservatives love their Labour voters :-)

Why else did Thatcher give away council housing through right-to-buy, after all.

The thing is at the time she did not give them away.....they were a liability an ongoing  cost.....the cash up front was better than a trickle of rents and the continued maintenance, new roofs, painting, new boilers etc.....take the money and run.....

Edited November 25, 2017 by winkie

[Arpeggio]

2 minutes ago, winkie said:

The thing is at the time she did not give them away.....they were a liability an ongoing  cost.....the cash up front was better than a trickle of rents and the continued maintenance, new roofs, painting, new boilers etc.....take the money and run.....

I've no doubt you are correct. With modern technology and materials now though I'd hope it would not be an ongoing liability once built.

[winkie]

I would think like most governments (and often big business for that matter) it would be more of short-term thinking/profit today rather than long-term thinking.....the future will have to look after itself.

[dgul]

2 hours ago, winkie said:

The thing is at the time she did not give them away.....they were a liability an ongoing  cost.....the cash up front was better than a trickle of rents and the continued maintenance, new roofs, painting, new boilers etc.....take the money and run.....

One interesting thing about right-to-buy was that it did sort-of have the desired effect on the estates -- vast council estates which were once in a bad state are now okay.  And not in an improved state because of the maintenance of the houses, but because of the 'pride' (or, perhaps, vested interest) people had in taking care of the area, both the grounds of the property itself, and in the state of the communal areas.

People who were brought up in areas which were pretty scummy, are now going on about how important it is to mow the verges.

But, for the generations to come, this effect has been lost.  These children will grow up with insecure tenancies, with transient schools, friends and prospects.  And, most of all, with no ties to the state of their local area.  Now, the scumminess of the council estate will be a bit more difficult, as the landlord will mandate 'mowing the lawns' or, more likely, will shove the cost of an occasional gardener on the rent.  But, the loss of the link to the community will remain.

Yet another area where we've all been sacrificed for the banks, yet we won't really know about it for another 20 years.

Edited November 25, 2017 by dgul

[macca13]

So NHS gets £335 million.. 

term funding scheme £25 billion

stamp duty £3.2billion

WTF these people are pure evil, NHS chiefs have said there will be cutbacks.. people will die.. 

housing greed has no boundaries.. 

[Fence]

Nailed it in three figures.  Nice.  Summed up like that, it would upset a lot of people.  Evil.

Edited November 26, 2017 by Fence

[adarmo]

5 hours ago, macca13 said:

So NHS gets £335 million.. 

term funding scheme £25 billion

stamp duty £3.2billion

WTF these people are pure evil, NHS chiefs have said there will be cutbacks.. people will die.. 

housing greed has no boundaries.. 

Just to challenge the numbers slightly,

TFS is a loan and therefore not a cost so we shouldn't really compare it. 

SDLT of £3.2bn can't be over one year (like the NHS figure I think is) because it would cater for 640k lots of £5k and last year FTB activity was about half of that. 

Do you have a link to those numbers?

[Si1]

7 hours ago, macca13 said:

So NHS gets £335 million.. 

term funding scheme £25 billion

stamp duty £3.2billion

WTF these people are pure evil, NHS chiefs have said there will be cutbacks.. people will die.. 

housing greed has no boundaries.. 

Oh I dunno. Over 55s gain the most from high house prices and also lose the most from an underfunded NHS. They voted for this trade off.

[winkie]

1 hour ago, Si1 said:

Oh I dunno. Over 55s gain the most from high house prices and also lose the most from an underfunded NHS. They voted for this trade off.

It is only underfunded because there are so many new expensive drugs now available, many to be taken for life, new procedures and operations.....yes, and because of this people are living longer so require and or demand evermore care, new drugs and procedures......

[Eddie_George]

Quote

Shaun nails it as ever.He's normally the epitomy of polite restraint but actually lets rip a bit today.His commenters are a relatively erudite bunch(quite a bit of cross pollination with HPC I suspect) and worth a read if you have the time.

Shaun is the only economist I hold in any stead. I too find his blogs restrained, so in his podcast or video interviews (or even his tweets) he's much more opinionated and shows his frustration with the system. 

Edited November 26, 2017 by Eddie_George

[Arpeggio]

45 minutes ago, winkie said:

It is only underfunded because there are so many new expensive drugs now available, many to be taken for life, new procedures and operations.....yes, and because of this people are living longer so require and or demand evermore care, new drugs and procedures......

NHS is largely an arm of private drug companies. Disease and illness has to be seen as a highly advanced dangerous and crafty enemy that needs the equivalent of a platoon of expensive Tanks directed at it.  Say something like "Beetroot, Blueberries and more lower blood pressure." and you get laughed at like you are poking a stick against an army. Like this man who suggested surgeons washed their hands.

 

1 hour ago, Si1 said:

Oh I dunno. Over 55s gain the most from high house prices and also lose the most from an underfunded NHS. They voted for this trade off.

That's what I thought too.

[Habeas Domus]

The Government will allocate £2.8 billion of additional resource funding for the NHS in England:

• £335 million of this will be provided this year, to help the NHS to increase capacity over winter
• £1.6 billion will be provided in 2018-19
• £900 million will be provided in 2019-20

So the 335 Million is only for the next 4 months, equivalent to 1 billion extra per year.

To put these numbers into perspective the NHS has 1.5 million employees so £1 billion is an extra £666 per employee. If you translated all of the money into pay rises it might equate to about a 0.2% rise. I wouldnt be surprised if they save more money than that by virtue of not having to pay the wages of all those nurses they currently can't recruit due to brexit.

[nothernsoul]

Heard someone at work, post budget, complain that everything is about houses in this country. Take away the first time buyer smoke and mirrors cover and its just another tax cut on an already overinflated, already undertaxed asset, compared to wages or vat. The fair way to do it would have been to put the tax on to the seller,  or introduce a small cgt tax, or make up that lost 3bn revenue in some other way on property. 

The point is every man and his dog can now see how privileged the property market is in the uk. The big question, is this budget the final desperate attempt to prop prices up, or does it signal a resolution by the elite to go further? 

[Thorn]

2 minutes ago, nothernsoul said:

Heard someone at work, post budget, complain that everything is about houses in this country. Take away the first time buyer smoke and mirrors cover and its just another tax cut on an already overinflated, already undertaxed asset, compared to wages or vat. The fair way to do it would have been to put the tax on to the seller,  or introduce a small cgt tax, or make up that lost 3bn revenue in some other way on property. 

The point is every man and his dog can now see how privileged the property market is in the uk. The big question, is this budget the final desperate attempt to prop prices up, or does it signal a resolution by the elite to go further? 

The props have worked so far, but as durhamborn's thread points out, the consumer is tapped out - so even if government tries to tempt more to take on massive debt, it may fail.

I agree about the first time buyers.

Without them all I see are boomers swapping houses and very few people who talk as if they have faith in buying right now.

[Millaise]

57 minutes ago, Arpeggio said:

Like this man who suggested surgeons washed their hands.

That's brilliant. Our increased life expectancy has mainly come about from very simple things like the above,  better nutrition, cleaner water supply, better care during childbirth, inoculations,  and centrally heated homes. All very cheap and simple things to implement. As in the link, arrogant medics can't accept this and insist it is their cripplingly expensive chemical and surgical interventions that are responsible.

[Fence]

3 hours ago, Si1 said:

They voted for this trade off.

Exactly how?

[Dorkins]

29 minutes ago, Millaise said:

That's brilliant. Our increased life expectancy has mainly come about from very simple things like the above,  better nutrition, cleaner water supply, better care during childbirth, inoculations,  and centrally heated homes. All very cheap and simple things to implement. As in the link, arrogant medics can't accept this and insist it is their cripplingly expensive chemical and surgical interventions that are responsible.

Many childbirths involve "cripplingly expensive chemical and surgical interventions". Without an emergency C-section my son would have died before he was born, and maybe his mother too.

My aunt was hit by a boy racer who lost control and came flying off a dual carriageway into her stationary vehicle, she would have died without massive emergency surgery leaving a motherless child.

You're absolutely right that many of the best things in life are very cheap - clean water, vaccines, a varied diet - but there is a place for acute medicine.

Having said that, I'd very happily stop overtreating terminal cancer patients in their 50s-80s. No point spending the final months or years of your life in and out of hospital going through grim chemo/radiotherapy/surgery, just give them whatever you can to manage pain and tell them to make the most of the time they have left.

[maverick73]

Got to prop up the new builds... and keep the market driving forward... So how many first time buyers take the bait is dependable on the incurred debt they currently have... its a gmick, prices are just going stagnate ir drop until its aligned to the current avg. wage ?

[Millaise]

31 minutes ago, Dorkins said:

Without an emergency C-section my son would have died before he was born, and maybe his mother too.

Aunt...she would have died without massive emergency surgery leaving a motherless child.

I agree with you. Mechanical intervention, especially in an emergency involving a previously healthy person, is a definite benefit, and it is less witch doctory and more like engineering. It is one of the few cases where the prime cause can be identified and fixed, rather than the symptom being treated by allopathic therapy. There were 26000 serious injuries but only 1800 deaths in 2016 from RTAs: the survival rate from that alone is worth about a an extra year on average UK life expectancy.

[macca13]

18 hours ago, winkie said:

It is only underfunded because there are so many new expensive drugs now available, many to be taken for life, new procedures and operations.....yes, and because of this people are living longer so require and or demand evermore care, new drugs and procedures......

New drugs.. nope same old drugs re patented.. when it runs out drugs are supposed to be free for anyone to manufacture keeping prices low.. guess what,, they’ve found a way to re patent old drugs allowing them to jack prices. Take a drug for thyroid, been around for years, but it’s still owned and manufactured by one pharmaceutical company allowing them to jack the price 1000% to the NHS.. will the government intervene.. nope.. funny that! 

https://hbr.org/2017/04/how-pharma-companies-game-the-system-to-keep-drugs-expensive

It’s more greed and more corruption, life has a price.. these scum prove that..

https://www.google.co.uk/amp/s/inews.co.uk/essentials/news/health/nhs-drug-firm-price-hike-treatment/amp/

 

 

Edited November 27, 2017 by macca13