Thursday, June 5, 2008

Free money the solution

House prices: Should the Government intervene?

Here's one to get you all smiling this Thursday morning. Some genius proposals from "industry" to revive the market. Most of these boil down to govt giving free handouts. Yes please. But I've got an even better idea. Why not make all houses free? Those of you who are impressed by this flash of industrial brilliance may send a donation to me c/o hpc.co.uk. I'm also available to the govt for consultation (for a modest huge fee).

Posted by letthemfall @ 09:41 AM (1428 views)
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22 thoughts on “Free money the solution

  • cornishman says:

    Free houses. That would mean that we had more money to spend on infrastructure, hospitals, healthcare, research, enjoying ourselves, spending time with our friends and family, hobbies… Things that matter.

    Houses could never be free, obviously – but household expenditure on them could easily be reduced – at no cost to the taxpayer – by freeing up the planning regulations. Simple. We would all then have more to spend on things that matter. Too simple though me-thinks.

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  • I don’t even know why the question is being asked…..besides the govt. hasn’t got any spare money.

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  • Still Renting says:

    In general I think this reflects the governments unhealthy obsession with trying to control everything.

    However, I would support the last suggestion:
    “A reduction in the proportion of ‘affordable homes’ required on new housing sites, which could encourage more housing development because housebuilders make more money from non-affordable homes.”

    So-called affordable homes drive the prices up for the majority of us who don’t qualify for them.

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  • shipbuilder says:

    Of course, let’s spend public money to sustain the unaffordability of houses. Pay money now for the privilege of paying even more on your first or next house. Brilliant idea. I think we can all see who this really serves.

    Some sanity in the comments –

    “Speaking as an FTB I can assure you that it is not stamp duty that worries me, but the idea of borrowing upwards of £200,000 to purchase an asset which is losing value at (at least) 10% p.a. Even if prices were stable I’m also conscious that interest rates *should* rise, which would bankrupt me if I was saddled with this level of debt.”

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  • Governments have intervened before to save lame duck industries e.g. British Leyland, Northern Rock etc.
    But HPwatcher is right – the govt can’t afford it. You will probably find public money being used to snap up the stock of unsold homes at bargain prices to use as social housing for all the unemployed builders.

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  • On past performance, the government would spend a lot of money buying them, then more (far too much) refurbing them to give local businesses some work, then sell them on at a large loss to a property developer who would make a vast profit.

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  • Comical… “because house makers make more profit from non-affordable homes”

    Not now they don’t.

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  • Cheap credit caused the problem, will free credit solve it?

    Cue the distruction of the Middle Class.

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  • letthemfall

    I believe the problem with your suggestion is that it’s : Honest, Decent,Humanitarian,Sensible and Wise.

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  • ps…………and shows the characteristics of a true leader.

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  • montesquieu says:

    My favourite comment from the (mainly sensible) reader contributions:

    ‘Can I suggest Gordon Brown bring back public flogging. They can start with Kirsty Allflop & Fhil Swpencer and move on to the Poxtons Eastate Agents.’

    Tickets anyone?

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  • Cornishman,

    How about free building plots instead?

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  • If they do intervene it should be to assist all taxpayers in the same way the US has just done.
    Not by helping home owners only who couldn’t work out what effect a rise in interest rates may have on their mortgages.

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  • uncle tom

    – nice one! [well if not free, certainly agricultural price/acre].

    Is one of the comments beneath the Telegraph article your’s? Similar comments to some you have made on here previously.

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  • UT – you have hit nail right on the head. Even the name of this website perpetuates the mistaken belief that it is house prices that rise…it isn’t, in the main it is land prices that go through cycles. When I was growing up in Australia, land accounted for 10% of the price of a house. It is a much much larger percentage of the price now. Tighter planning regulation etc. together with loose credit is what causes these massive surges in “house” prices through increasing land values. Ceteris paribus, the cost of materials, of labour etc., are pretty static relative to earnings, so the cost of building the house doesn’t change much, therefore, it is the land that increases in value. It is the owners of the land who garner the lion’s share of the profits of HPI. If we could build wherever we chose there would be much more competition between land owners and we wouldn’t see this ridiculous disparity between the value of land for housing and land for agriculture.

    In a country so completely altered by human habitation over the past few thousand years, I’ve never quite understood this hangup about the green belt…it always seems like some sort of dissimulation to me. Sprawls in cities like Brisbane are marvellous (transport issues to one side)…most houses had a tree or two or three in their yard and looking across the older parts of the city from Mount Cootha it appeared a mass of green (or lavender when the Jacarandas were flowering).. I recall waking up in the centre of Brisbane one morning and counting the number of different bird species in the dawn chorus. I got to 20 and had to give up. We had possums coming into the flat, and in some of the outer suburbs there were koalas. Sure, this isn’t a pristine natural habitat, but given how many people ore on this planet few places are; a much nicer place to live than the newer estates, on the other hand, are wastelands with a much lower diversity of wildlife and little green except for tiny lawns.

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  • letthemfall says:

    Talking of comments in the Telegraph, I see that our favourite politician, Vince Cable, has added his thoughts, as has Grant Shapps, the Cons housing man. The latter is still pedalling the craziest idea of the lot – shared ownership.

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  • I liked this stroke of genius:
    “A reduction in the proportion of ‘affordable homes’ required on new housing sites, which could encourage more housing development because housebuilders make more money from non-affordable homes.” Not sure of the logic there.

    Got it. More big empty houses for squatters : make homelessness history.

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  • holding out says:

    You despair for the future when the next probable governement is proposing using FTBs holding shared equity to prop up the house of cards for a little bit longer. They’re not in power, they don’t need to be seen to be supporting the unsustainable. I can only assume that they’re thick. Thank heavens for Vince.

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  • shipbuilder says:

    In my opinion, what we need is a crash in house prices, a huge depression and at the same time a radical restructure of society. Let me explain, before I am accused of schadenfreude –

    Say we went from 0% to 25% unemployment in a depression – is some people losing their jobs and others keeping them the best solution?
    Why couldn’t the work just be distributed and people work less? Less stress all round, people spend more time with their families, everyone still has money and security (the fundamentals of a healthy economy) etc. etc.

    Part of the problem I see is our acceptance of the mediocre status quo. We have problems in society because we let those running the show get away with doing a sub-standard job. Where are the radical ideas to solve our problems? Where are the thinkers?

    The above is not the only solution – just the one I nicked from Bertrand Russell’s ‘In Praise of Idleness’ that I would recommend reading to anyone.

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  • Right .d’oh ,uncle tom and cornishman are spelling it out like it is: its the rising price of land that causes house price inflation, land which costs nothing to produce and seems to be infinitely expansible inflation-wise.We should aim for a situation where the average land-to-building ratio for houses is no more than 10%, achievable and maintainable by a tax on land values.
    Where is Wadsworth at this important juncture?

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  • cornishman says:

    @ shipbuilder “Where are the radical ideas to solve our problems? Where are the thinkers?”

    The thinkers have been dismissed, one way or another, by the bullies who have all gravitated to the top positions. This seems to be happening everywhere. Just look at our UK government. Where have all the ministers who might have had an original thought gone?

    It happens when the ‘good’ people do not take the trouble to right the wrongs that are being done in the world, because they feel it would not make a difference.

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  • shipbuilder – back in the 70s there were all these predictions of how we would be working 25 hour weeks and having more leisure time. What happened was that family units ended working 80 hour weeks (i.e. both people working). A lot of this extra effort has gone into paying for bureaucracy, increased land values and rents i.e. feeding money up to our masters. Is difficult to work out which was the cause and which was the effect, but we now have a situation where both sexes have to go out to work full time instead of one doing so and the other acts as an economic insurance in the case of financial emergencies i.e. when the main breadwinner becomes ill, or there is some other economic disruption, the other partner can work to keep the roof over the family’s head. There is no slack in current social economic arrangements, so little in fact that many mothers have to go straight back to work very soon after having a child. There was one study I saw reported a little while ago that showed that the average disposable income of a family in the 1970s with only one breadwinner was more than the current disposable income of current families with two working. Moreover, there is the loss of time associated with having two people working, and it is significant – what would have been leisure time in the evening is now spent doing the household chores.

    My partner was recently off work for a few months…what an improvement it made to our lives. Both of us agreed that we were significantly happier. I’d come home, dinner was on the table and the house not a complete tip…and we had the entire evening to ourselves. Sadly, with her student debts to pay off and me saving for a significant deposit, our economic circumstances are such that we do both have to work for now.

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