Tuesday, May 3, 2011

Back to basics

The uncomfortable truth about the housing market

Without easy credit, we see the real state of the market – we don't need clever financing, we need more houses

Posted by dill @ 08:35 PM (3436 views)
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8 thoughts on “Back to basics

  • the number cruncher says:

    Great article – and well done all those HPCers who have already pointed out this fact, I can recall Mr Wandsworth has already done some calculations on this, among others. In fact Its a good call that our Gruaniad writing friend may have been reading this blog.

    Mind you I loose the will to live when I read some of the comments – are people really that lacking in understanding of our economy?

    Luckily I read this little gem from a poster called crinklyoldgit that restored my faith in human nature:

    “Many useful points here. i have been very aware of the problem of the housing market for a while, which I think is deeper than is widely understood or reported.
    I was utterly mystified at the time, by the situation that was left to develop over the last ten years-pre-2008 where young people were effectively progressively excluded from the market in many places by the rising prices, and replaced, in effect by a mixture of naive ‘buy to let’ property dabblers who screwed up badly by miscalculating their liabilities, and Rachmanesque sharks who infiltrated many viable, vibrant communities,and degraded them into bed sit lands, especially in the cities. It was palpably clear to anyone that that situation was seriously bad news for ‘the ‘market’ and socially deeply undesirable, as it suspended or inhibited personal development in an important part of people’s lives- their development or establishment of a stable home life. For a labour government to have played along with this scandal was just a plain unforgivable betrayal.
    Certainly in the UK there is also a real problem with quality and type of house not meeting the aspirations or needs of people in a changing world.
    Quality of housing remains quite poor, even modern housing developments- and the quality of much of the housing stock pre-circa 1990 is lamentable.

    The reality of much of the housing is that it does not come closer to providing a basis for a response to increasing energy costs and successive governments have avoided the problem, apart from tinkering with building standards and have inhibited the improvement of the great majority of the housing stock by the VAT on improvement and masintenance.
    It would have been perfectly simple to differentiate between cosmetic improvement such as new kitchemn units and essential maintenance or structural or improvements which led to improved energy characteristics.

    There are also real problems with the abilities and skills of the construction industry and the ability of people to actually change their situation.

    In fact I am quite pessimistic about the future. I cannot see how people can improve or even maintain their properties in the current financial climate.
    And there is not much (i.e. nil) chance of central or local government initiatives with this bunch of Tory shysters.”

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  • Agree with most of this, but more houses?

    Just where is the money to lend going to come from?

    I see a PROBLEM. Any deflationist still out there? I’m all ears.

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  • As TNC says, its a pretty good comment on the whole but slightly flawed when it comes to the comments on housing stock that use a watershed of 1990. I hold the opinion that the construction standards other than those associated with insulation i.e. energy efficiency have yet to be time proven and believe that there are scandals in the making with regard to ‘modern construction’ standards with regard to both structural materials and the quality of workmanship in most post 1990 developments at the mid to lower end of the market.

    This is hinted at at the end of his comment and I would rather own a pre 1980’s house (semi-detached or otherwise) not sardined onto an inadequately designed estate with decent sized room than any modern ‘executive detached’ hovel.

    My own house built circa 1962 in good old Lancashire as was is not expensive to heat, indeed it is too warm for 8 months of theyear (Mar-Oct) and our only energy bills heat wise are for hot water during these warmer months, although I admit to not being keen on slobbing in front of the TV all night in my boxers and an old tee-shirt.

    Overall a good comment slightly spoilt by a bit of greenwash.

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  • Power to crinklyoldgit! Just love the first part of his comment that ends ‘For a labour government to have played along with this scandal was just a plain unforgivable betrayal.’ People just don’t seem to be giving Labour any stick for f***ing up the quality of so many people’s lives, while allowing others (BTLs and banks) to make utterly obscene profits, then bailing out the latter two when they should have gone bust, by screwing savers.
    As far as housing supply is concerned, many areas are very much affected by holiday home ownership, as well as banks currently hanging on to repossessions. Both issues would be improved by raising interest rates. I did hear a rumour about RBS being about to start offloading repos though, so let us hope that happens soon.

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  • Are journalists not allowed to say that prices are too high because of the credit bubble or what? What about all the buildings that are empty for no good reason, second and third homes, etc. etc. It really is not on to concrete over the countryside. Food security is an issue already, and with energy and population trends as they are it is only set to get worse.

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  • “It really is not on to concrete over the countryside.”

    Nickb – you’re in danger of falling for the great myth about meeting the UK’s housing demand.

    The slight shortage of residential property in this country can be met by building on just one acre in 400, and it’s dead easy to find that amount of previously trashed land lying vacant.

    Yes, there is scope for bringing existing vacant and under-used property into use, but only to a degree, and nowhere near enough to cover the shortfall.

    Much more could be achieved by the simple ploy of encouraging people to retire abroad, liberating property as they do so..

    ..at present there is a slight dis-incentve to do this, especially to destinations outside the EU; but a quick tot up of the costs of healthcare for pensioners in the UK vs those living in the developing world; shows that the UK taxpayer should be falling over backwards to encourage the over 65’s to re-locate to the sun…

    Aside from that though, building homes creates jobs – it’s a great way of re-juvenating a stagnant economy..

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  • UT
    I think you are the one falling for a myth, namely that there are not enough houses. Loads of new build properties are lying empty after the credit bubble topped out. What evidence is there of a “shortfall”?
    Plenty of ways to generate jobs without a destructive building splurge. renovating the existing stock to higher energy efficiency standards is one. The jobs argument could be used to justify a lot of things, wars included.

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  • I’m with Nick. Lenders lend to BTL’ers because they make money but won’t lend to owner occupiers in case they lose their job. Everyone knows houses are way overpriced but as long as lenders lend to BTL then they won’t fall. We don’t need more houses, we need sensible lending and a change in the tax system. But nobody will do that because prices would fall, negative equity would be far worse than the 90’s and whoever makes those changes will never get re-elected. Seriously, what is the point of building more houses? And don’t say to get the economy going; we need more money coming into the country from outside and you can’t really export houses.

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