F T Editorial - Arguing For Lower Housing Costs

[Tired of Waiting]

FT Editorial

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"House priced out

Published: August 10 2010 20:27 | Last updated: August 10 2010 20:27

Common sense suggests it is a good thing when basic amenities become more affordable and a concern if they are priced out of reach. Not so in housing. Rising real estate prices are cheered even when they mean the young have to spend more of their life at work in order to acquire a home. This week’s news of slipping UK house prices was greeted with dismay.

The softening housing market – the Royal Institution of Chartered Surveyors has reported its first negative reading in a year – may well be a symptom of wider malaise in the economy. But the case is far from clear-cut. The second quarter’s outstanding growth rate and record export spurt suggest the economy may be doing just fine. House price weakness may have more to do with banks tightening mortgage terms and a rush to sell before the higher capital gains tax rate takes effect.

Even if the house price slide does mean the recovery is petering out, it is surely insane not to greet it as good news in its own right. The UK is hardly blessed with an excess of homes. It has suffered a noxious mix of gushing mortgage credit and a straitjacket of planning constraints. The resulting price boom put home ownership out of reach for a growing share of the population. In 2008, the median house in England cost seven times the median annual income, nearly double the ratio a decade earlier.

Price falls are good. More houses are needed. Grant Shapps, housing minister, recognises this. He wants to encourage councils to allow development by reallocating some of their funding from Westminster to match council tax raised on new houses. This is not by itself a bad idea. The opposition’s objection – that it will leave less money for councils deciding not to build – misses the point that incentives work precisely because they reward those who respond to them and penalise those who do not.

But the bonus scheme does not do enough. It smacks of bribing councils not to use the beefed-up powers to veto development the government gave them by scrapping Labour’s housing policy. What if councils think new developments hurt their constituents’ house prices more than extra government money makes up for?

The government is right to support local decision-making, but it must do more to make localism work. Councils need greater tax-raising powers to reap the benefits of development. And the government should say what it will do if homeowners prefer to use local power to kick the housing ladder away under them."

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Edited August 11, 2010 by Tired of Waiting

[The Masked Tulip]

If you go to the front page of the Western Mail - walesonline.co.uk - they have some nonsense on their frontpage which has been there for weeks about confidence returning to the housing market.

I wonder if EAs will be busy with loads of panicking sellers tomorrow?

[Tired of Waiting]

If you go to the front page of the Western Mail - walesonline.co.uk - they have some nonsense on their frontpage which has been there for weeks about confidence returning to the housing market.

I wonder if EAs will be busy with loads of panicking sellers tomorrow?

I hope so! And the pile of unsold stock in agents books is going up. Have you seen that RICS' chart about it? I put it on a new thread yesterday.

And about this FT Editorial, I am SOOO happy with it, and actually so relieved! I was starting to doubt myself! Re. the economy being necessarily linked to house prices. I always thought that you could, and should, "decouple" them. And that is exactly FT's point: "the case is far from clear-cut." And Germany is the best example - very cheap properties, and a highly competitive economy.

And the FT also reminded its readers (not too may, I know, but I do hope the economics journalists read it - Stephanie Flanders, that Peston, that "Pim something" person, etc. Particularly the part

"Common sense suggests it is a good thing when basic amenities become more affordable (...)"!

(...) if the house price slide (...) it is surely insane not to greet it as good news in its own right.

Actually, going even a little emotional here... < sniff >

"The UK is hardly blessed with an excess of homes.

It has suffered a noxious mix of gushing mortgage credit and a straitjacket of planning constraints. "

"Price falls are good."

"More houses are needed."

God almighty, did I write that myself?!

Again:

Actually, going even a little emotional here... < sniff >

They got it! Finally! The whole malarkey! It is all there!

EDIT: Actually I am a bit surprised by HPCers not noticing this news / thread. Perhaps the tittle is too... mild?! I don't get it.

Edited August 11, 2010 by Tired of Waiting

[Traktion]

TOW, I just think most readers are stuffed full of bear food after yesterday!

It is good news and it is what we've been saying here for years. Maybe mainstream economics is starting to catch on?

[easy2012]

FT Editorial

_____________________________________________________________________

"House priced out

Published: August 10 2010 20:27 | Last updated: August 10 2010 20:27

Common sense suggests it is a good thing when basic amenities become more affordable and a concern if they are priced out of reach. Not so in housing. Rising real estate prices are cheered even when they mean the young have to spend more of their life at work in order to acquire a home. This week’s news of slipping UK house prices was greeted with dismay.

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Sensibility seemed to be returning to the land...

[Caveat Mortgagor]

I like this article in the Guardian.

http://www.guardian.co.uk/money/2010/aug/10/falling-house-prices-blame-media

Falling house prices? Blame the media

When house prices rise, estate agents and surveyors say it's about demand. When house prices fall they blame the media

* Patrick Collinson

* guardian.co.uk, Tuesday 10 August 2010 13.29 BST

House prices are falling for the first time since last July, according to the Royal Institution of Chartered Surveyors (Rics). The reason? Maybe it's excess supply coming on to the market; maybe it's the lack of mortgage finance; or maybe it's fear of job losses in the public sector. Or maybe it's my fault.

Yes, that's right. I work for "the media" so therefore I am personally responsible for the level and direction of house prices.

Here are a selection of surveyor comments, from Glamorgan to London via Yorkshire and Gloucestershire, in response to the latest Rics survey:

"Media hype is definitely affecting potential purchasers' expectations regarding prices falling over the next few years, with lower offers being made as a result"

"I worry that press comment may depress confidence"

"Providing the media does not get negative, there is no reason for a dip. Bricks and mortar are attractive investments as always"

"Doom and gloom in the media is resulting in low valuations. A bit of positive talk and the market would pick up"

It goes on and on. Firms in Colchester, Worcestershire and Walsall comment:

"Media prediction of 20%-40% housing slump is not helpful"

"Media commentary is affecting buyers' confidence"

"We have noticed over the last 2/3 weeks that the market appears to be quieter. This may well be ... a result of the continual media speculation"

Perhaps a firm in Slough sums up the mood of many surveyors when it writes:

"If the property market is left to its own devices, it will gently rise over the next 12 months. If the media scare the public with headlines, this will become a self-fulfilling prophecy"

What appears to unite all the above commentators is the belief that house prices can never fall. They must rise for ever and ever. Only a few wicked people in the press knock the market off its one and only true path.

These are the people who embraced every daft TV programme which, over the past decade, told buyers to binge-borrow and buy whatever they could. They convinced themselves the market was an unstoppable force, and for years they were right.

But this unstoppable force has now met an immovable object. It's called the banks. They are no longer lending money willy-nilly to anybody knocking on their doors. They want huge deposits, and they will now even check whether you might have the resources to repay the mortgage. How extraordinary.

The conclusion to be reached after 10 years of madcap lending is that house prices are not a function of demand, but are simply a function of how much money the lenders are willing to advance. Almost everything else is immaterial.

With few signs that the banks are loosening the purse strings it is difficult to imagine how prices can advance much further. And "a bit of positive talk" will make not one jot of difference.

[TeddyBear]

It is good news but it's an FT editorial so probably not about to spread into the national consciousness. Let's hope it's a start and not a one off...

[Tired of Waiting]

TOW, I just think most readers are stuffed full of bear food after yesterday!

It is good news and it is what we've been saying here for years. Maybe mainstream economics is starting to catch on?

Yes, yesterday was brilliant.

But by a huge coincidence, look what I wrote yesterday, in that Radio 5 thread:

I think the only point that we couldn't get across yet is why high property prices are bad for the economy as a whole - it increases the costs of everything, for people and companies. It increases the costs of living, and the production costs. Everything.

if some day the country gets that, then, politically and culturally, we will "lock in" low property costs, as Germany and Switzerland have done.

The FT editorial is starting to align the national interest with lower housing costs, as a good thing. This is the most important long term point. It is deeper than yesterday's Radio 5 programme. And only yesterday I had very little hope that Britain would ever be able to see that. See:

(...)

That message (high property costs are bad for people, and companies), is the most important, but also the most difficult, after years of people feeling richer as their houses went up in prices. That will be a hard one to crack.

I think, perhaps if we start saying "housing costs", instead of "house prices", it could help. It reminds people that we all need housing, like shelter: basic need, major part of the cost of living. Perhaps then some would snap out of it, and see it from this other angle, as cost, like food and petrol: better when cheaper, not dearer!

Less than 10 hours later, the FT, no less, and the EDITORIAL no les, comes up with that!!! Un-fecking-believable!!!

Now, next, in the next 5 or 10 years, I hope people will enjoy having more affordable houses, and the country's political and economic elites, and the media, learn the lesson, and do like Germany and Switzerland, and manage better this sector. I just hope the country learns the lesson this time.

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Edited August 11, 2010 by Tired of Waiting

[Tired of Waiting]

Sensibility seemed to be returning to the land...

Exactly!

So surprising! I am not used to it.

It feels weird.

But good!

And fearful - that it will be short lived...

Let's hope not!

[Tired of Waiting]

It is good news but it's an FT editorial so probably not about to spread into the national consciousness. Let's hope it's a start and not a one off...

True. That is my main concern too.

Well, actually, we know that the FT has no chance of going directly into the national consciousness. But it does have a strong influence on the elites - economic, political, and cultural. And also on the specialised media and policy makers (think tanks, academia, etc.)

Usually, sensible ideas do spread, in a quasi-Darwinian way. On the other hand, people resist even to logic when it is against their interests and emotions. And since virtually all in the elites own properties, this "common sense" idea may go extinct again (sorry, bad metaphor).

[Brave New World]

You got to remember that with the FT it is the old adage with it that it is the paper you read to find out what is going to happen before the masses.

A lot of decesion makers read it which will not encourage the fear stage in the sheeple but will sure as help start to help change mindsets of those that think they matter.

The drip drip affect in the media is building! Just imagine it during those long winter evenings!!!!

[Tired of Waiting]

You got to remember that with the FT it is the old adage with it that it is the paper you read to find out what is going to happen before the masses.

A lot of decesion makers read it which will not encourage the fear stage in the sheeple but will sure as help start to help change mindsets of those that think they matter.

(...)

Exactly. That is my hope.

Actually, I hope most UK economics journalists read this editorial. That could be a powerful "multiplier".

Maybe we could point this editorial to them? Sending it to their blogs?

[Brave New World]

Exactly. That is my hope.

Actually, I hope most UK economics journalists read this editorial. That could be a powerful "multiplier".

Maybe we could point this editorial to them? Sending it to their blogs?

Yes some HPC PR work!!!!!

Could this article be a bell weather in meeja attitude change!

[Tired of Waiting]

Yes some HPC PR work!!!!!

Could this article be a bell weather in meeja attitude change!

I've just sent that article by email to some economics/business journalists. But I don't know if they actually even read emails from "lowly members of the public"...

Oh well, I've tried, done my bit.

Wait, I've just got some replies:

"Out of Office AutoReply: I'm out of the office and am checking emails only sporadically.

:angry:

Two like that, both from the BBC (Peston and Flanders). Holiday?