Tuesday, March 13, 2012

Is the HPC dream over? Is it time to buy?

You can't buck the market: David Cameron's NewBuy scheme will push house prices up

''Hopes of lower house prices, as market forces require vendors to become more realistic, may be dashed by a new Government bid to make house prices more affordable....the Government mortgage guarantee may increase demand, propping up house prices and preventing them from becoming more affordable.''

Posted by hpwatcher @ 06:00 PM (2922 views)
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22 thoughts on “Is the HPC dream over? Is it time to buy?

  • Bit fed up now with the country being completely mental. Any chance it’ll stop soon?

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  • Wow, I think Ian Cowie needs to be put under witness protection programme for daring to use the words “Hope”, “Realistically”, “Dashed” and “Propping up house price” in a mainstream conservative newspaper.

    Now, when is BBC going to changes its tune too? No chance?

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  • More spin from the government supported housing industry. Guarantee does not actually make houses more affordable.

    We are still in the largest housing bubble in the World. Low interest rate policy did not lead to a surge of first time buyer interest over the past few years because prices are simply beyond reach for many first timers.

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  • Is the HPC dream over? Is it time to buy? My answer is definitely no (unless buying at bargain basement price via auction)

    This scheme (IMO) will wither on the vine the same as those introduced by the previous Government.

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  • mark wadsworth says:

    I don’t get it. Who’s trying to buck the market here? The government or the people who simply can’t afford to buy or don’t want to take out a crippling loan? Those people ARE the market.

    As Jack C says, New Labour used to launch similar schemes every six months or so and it had no impact, the take up was measured in tens, not even in hundreds and certainly not in thousands or hundreds of thousands.

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  • New Buy Scheme won’t push up house prices. It will actually do the opposite. Incentive is for new builds. It will get builders out and FT Buyers into the market for new build properties. So what will happen to the huge stocks of unsold ‘old’ sub-£250K properties? Market will see supply increase, with buyers chasing new builds, unable to get into old properties. Prices will have to drop to encourage mortgage providers to bring out new low deposit products. And when the bottom rung creaks…

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  • House purchase loans down 25% in January compared to December

    There were 35,600 loans worth £5.3bn taken out for house purchases in January, a fall of 25% by volume and 24% by value compared to December 2011.

    SOURCE http://www.mortgagestrategy.co.uk/house-purchase-loans-down-25-in-january-compared-to-december/1047868.article

    The above might be worth a post in it’s own right as it contains a lot of useful stats but I’ll leave it to others to judge.

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  • Only of benefit to those buying newbuilds. Vendors of existing FTB properties will have to compete more (ie, lower prices).

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  • As several commentators have already said:

    “if this programme does anything at all, it will divert scarce mortgage funds from existing houses to new builds”.

    OK, who is going to buy the existing houses so the people on the bottom rung can go up the ladder? Every 95% loan means one less 85% loan, or maybe two less 65% loans…. Any mortgage advisors out there? Does this seem a logical statement?

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  • As several commentators have already said:

    “if this programme does anything at all, it will divert scarce mortgage funds from existing houses to new builds”.

    OK, who is going to buy the existing houses so the people on the bottom rung can go up the ladder? Every 95% loan means one less 85% loan, or maybe two less 65% loans…. Any mortgage advisors out there? Does this seem a logical statement?

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  • mark wadsworth says:

    Alan: “Every 95% loan means one less 85% loan, or maybe two less 65% loans…. Any mortgage advisors out there? Does this seem a logical statement?”

    As ever, I’ll defer to Jack C, but it’s worse (better) than that. A bank’s assets (that means mortgages to you or me, only idiots claim that when a bank lends money it incurs a liability to the borrower) are risk weighted, the maths is convoluted, but basically a bank with capital of £100 nowadays has a choice between making one 90% loan of £90 or three 50% loans of £50.

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  • The main problem I see with this scheme is, what does it do to fix “the ladder?” If the intended target of this scheme – the traditional sort of FTB – goes for it then surely they will be in these first homes for at least 3 years and probably, more often than not, 5 years plus. Even if they do, modestly, increase in value (which I don’t think they will) over that time and the owners want to buy the next rung up, that will be, in the vast majority of cases, at least 3 years on from now. So are people on the 2nd, 3rd, etc. rung being told “just hang on for another 3 to 5 years or so and you might be able to find a second-stepper who’ll take your overpriced place off your hands”?

    To me, the only angle from which this scheme makes any real sense is as a government favour to VI building and property lobbyists and party political donors. Sorry if this sounds like crazy conspiracy theorist thinking but it geniuinely is what I think.

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  • markj69 str05 says:

    will @3…. you sum it up well, although casting the net a little too narrow: ‘….because prices are simply beyond reach for many first timers.’ You should also include the majority of people with property, otherwise why else would BOE IR be so low? Fear of a catastrophy.

    The simple question that really does need to be asked and answered is what is an acceptable salary vs house price ratio? 3, 4, 5, 6 x salary???
    History seems to indicate 3.5 to 4 x as an approx’ ratio. So ask the question and do the maths. Avg salary £25k, avg’ property £160K = 6.4 times salary. So if wage inflation is static, and house prices being protected, then it must be deemed 6.4x is reasonable.

    Unaffordable for most. Even if lending ratios were to rise to this level again. But that is part of what caused this problem.

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  • markj69 str05 says:

    HOUSE PRICES ARE TOO HIGH.

    We do not need help obtaining more debt. We need the prices to be realistic.

    So, Mr Cameron, what is a realistic salary/price ratio? Care to comment?

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  • This from yesterday’s DCLG House Price Index (which may have gone unnoticed):-

    Prices for new properties were 8.8 per cent higher on average than a year earlier whilst prices for pre-owned dwellings decreased by 0.4 per cent.

    That looks like one eye watering instant depreciation, waiting in the wings, for any exploitable ‘property novice’.

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  • Is that 8.8 per cent higher due to larger loans becoming available?

    I wonder.. If the banks tried an experiment where they would lend anyone a million to buy a static caravan / mobile home, would this really push all mobile home prices up to a million?

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  • bidin'matime says:

    This scheme is good news for us waiting for HPC, for all the reasons mentioned above: scarce funds going into new builds instead of existing properties must drive prices down. The only winners are the builders (and the rest of us to the extent that it keeps people off the dole). I just feel sorry for the young people who get caught up in this and become ‘mortgage prisoners’ due to being unable to (a) remortgage to a better deal and (b) sell and move on.

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  • mark wadsworth says:

    Markj69: “So, Mr Cameron, what is a realistic salary/price ratio? Care to comment?”

    He did, here:

    http://www.beaconfinancialtraining.co.uk/david-cameron-encourages-lenders-to-increase-mortgage-lending-1609.html

    The Prime Minister stated:

    “In a way the pendulum has now swung too far the other way. If you are a single person, you are earning a decent salary, you go to the bank or building society, you are actually quite a good risk, they won’t give you 80 per cent of the value, they won’t give you four times your salary. So we are working with them to try and say, look of course we don’t want to see the unsustainable boom of the past, but we’ve got to get proper lending, respectable lending going again.”

    So he appears to think that house price 5 times wages and mortgage 4 times wages is perfectly reasonable.

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  • I lost out in 2003 by taking note and listening to comments on this site and rented, never again, buy a house and get on with your life, a house is for life and since 2003 I RENTED FOR 5 FLIPPING YEARS!!!! What a waste of my time and money paid out/lost in rental payments. This site is mainly HPC wannabes sorry but there you go, get realistic, they will not plunge!

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  • In the old days tories came from industry, now they just come straight from Oxbridge, they have no idea how markets work.

    If you want to make housing affordable you have to tackle the demand side of the equation, raise interest rates, tax 2nd homes, restrict B2L. Less demand vs. rising supply = affordable homes.

    But I agree with most commentators this will come to nought. The banks are still deleveraging so their is no extra money here.
    If they really want to encourage house building, start taxing landbanks. Then they’d have to build and sell even at a loss (loss due to them overpaying for their land and not because house prices are too low).

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  • markj69 str05 says:

    Nice find MW.

    So, avg’ salary = £25k. This equates to an avg’ house price of £125k. Sounds good to me. 22% drop in house prices expected. Plus an overshoot!

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  • My guess is the 8.8% rise for new builds is down to a shift from cheap(ish) city centyre appartments to more expensive shoe box family housing.

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