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 Britain’s mysteriously robust housing market - Prices have risen and sales resumed despite a weak economic outlook


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HOLA441

 Britain’s mysteriously robust housing market

Prices have risen and sales resumed despite a weak economic outlook

https://www.ft.com/content/95e628f4-615c-40f8-9874-17bd9669cd15

Anyone got reg access for a brief summary ?

Edited by Saving For a Space Ship
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2 hours ago, Saving For a Space Ship said:

 Britain’s mysteriously robust housing market

Prices have risen and sales resumed despite a weak economic outlook

https://www.ft.com/content/95e628f4-615c-40f8-9874-17bd9669cd15

Anyone got reg access for a brief summary ?

Britain’s housing market appears to be defying gravity. Though the country is experiencing its deepest recession on record, prices have remained robust and transactions have resumed. Expectations that interest rates will remain low have helped boost house prices alongside gold, tech stocks and many other assets. But the question remains for how long the UK’s property market can keep resisting economic forces pulling prices down. 

While Britain’s economy shrank by a fifth during the second quarter of 2020, house prices were about 1.7 per cent higher than a year before in July, according to the Nationwide Building Society. Official data is not yet out but transactions also appear to be on the rise: a closely watched survey by the Royal Institution of Chartered Surveyors showed new instructions from sellers and inquiries from buyers were up sharply during July. 

Partly this reflects pent-up demand. Neither buyers nor sellers were able to act when the economy was under the strictest lockdown. House viewings were some of the first economic activity to resume but it takes a lot longer to buy a house than to order a drink from a bar. Many of those who could work from home saved money on their commute and other associated costs while noticing, once again, all the things they did not like about their house. The government too has added to demand by cutting the rate of stamp duty, a tax levied on transactions.

Generally house price drops have been both a cause and consequence of recessions: accounting for inflation, house prices fell by about 30 per cent during the 2008 financial crisis and never regained their pre-crisis highs, according to calculations by the Resolution Foundation think-tank. Consumer confidence is closely tied to the value of what is usually a household’s largest asset. Lower prices can also feed through into lower investment spending: mortgages represent the bulk of banks’ assets and construction is among the most volatile parts of national income. 

Britain’s Office for Budget Responsibility, the country’s fiscal watchdog, forecasts that during this downturn prices will fall 5 per cent this year and 11 per cent in 2021 in its central scenario. Estate agents are likewise forecasting that a bust will follow the boom. The government’s furlough scheme, which replaced 80 per cent of eligible workers’ incomes, comes to an end in October, but as companies have already had to pay some of the costs of employing them since August, unemployment is forecast to rise for the rest of the year. 

The government banned evictions by private landlords early in the pandemic but that is set to end this Sunday. Combined with the fall in incomes, the move will leave a lot of landlords with empty, unprofitable houses. The stamp duty holiday, which has prompted many housebuyers to act quickly, comes to an end in March. 

On the flipside, Britain’s chancellor of the exchequer Rishi Sunak is likely to do whatever he can to stop house prices from plunging. The government has shown its willingness to subsidise the market, whether through the stamp duty cut or the earlier help-to-buy equity loan programme. More affluent areas had been expected to remain resilient — though with even white-collar jobs now facing a higher prospect of unemployment these might yet see similar falls in prices to regions catering to workers in more insecure jobs or to those who rely on high loan-to-value mortgages. House prices may be stable for the moment, but buyers are still plunging into the unknown.

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1 hour ago, Trump Invective said:

The current government can't even plan a few months ahead (who could have possibly predicted that A level results would be due in the summer!?) so any apparently Macheovellian moves are more likely just gross incompetence that hasn't revealed its folly yet.

 

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3 hours ago, nightowl said:

Economic outlook and asset prices aren't the same thing anymore.very surreal.

That's been the case for a long time before the latest crisis - asset prices directly related to the amount of money/credit being pumped into the economy by the Central Banks and stimulus from governments.

'Bad News is Good News' has been the mantra for stock prices for years now - more Bad News from the real world equals good news for those in the financial sector who will benefit from Central Bank and Government response to it.

House prices are more dependent on credit availability and cost than silly things like underlying economic conditions.  Give people access to 'affordable' monthly mortgage repayments and they'll borrow as much as they can.

 

 

 

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1 hour ago, Trump Invective said:

One so cunning I can’t even begin to understand it - Getting people to run out and buy properties at the peak of the market so they can then go and tax the gains when prices fall?

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2 hours ago, LetsBuild said:

One so cunning I can’t even begin to understand it - Getting people to run out and buy properties at the peak of the market so they can then go and tax the gains when prices fall?

Haha yes apparently we've reached a stage where the more expensive houses are the more people want them! 

 

Or, after many years of declining ownership,  they've decided to increase ownership (by making prices rise?) Over a few months to trap people into ...

 

I give up trying to work it out

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2 hours ago, LetsBuild said:

One so cunning I can’t even begin to understand it - Getting people to run out and buy properties at the peak of the market so they can then go and tax the gains when prices fall?

Aha I've got it! Let's remove a tax on property purchases to get people to buy a house that we will then tax at some other point!?!?

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4 hours ago, LetsBuild said:

One so cunning I can’t even begin to understand it - Getting people to run out and buy properties at the peak of the market so they can then go and tax the gains when prices fall?

There's a reason the guy's writing for estateagenttoday and not the FT. Whole thing makes no sense at all. Gains? What gains? 

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