Thursday, October 10, 2013

Osborne reveals the true aim of Help to Buy

Osborne reveals the true aim of Help to Buy: to inflate house prices

"Hopefully we will get a little housing boom and everyone will be happy as property values go up," the Chancellor reportedly told the cabinet.

Posted by pete green @ 10:53 PM (4765 views)
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50 thoughts on “Osborne reveals the true aim of Help to Buy

  • Who’d have thunk it

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  • Desperate stuff from the morally bankrupt left. I read that article this morning. It was acknowledged to have been a joke (or a quip as they put it).

    I haven’t voted for many years but I ‘d far rather have this lot that the intrinsictly dishonest lefty ghouls who drum up this sort of rubbish.

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  • mark wadsworth says:

    Yes of course that’s why they are doing it, we all know that. Whether he said it or not doesn’t really make any difference.

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  • “We” all know nothing of the sort. Even on here people have expressed otherwise.

    In my opinion it’s a well meaning (but slightly misguided) attempt to allow private buyers to compete with btl types. The government think there will be a housing boom anyway because of supply and demand imbalances and a growing economy. They therefore hope that their policy will help a few people escape from the ‘renter for life’ trap that is currently being sprung by the btl and corporate buyers.

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  • if they want to help ftbs…raise rates to 5% encourage saving so banks can lend to viable businesses

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  • @flashman, its the government who cause the supply and demand imbalances with their restrictive planning policies. They could give self builders the right to build tomorrow if they wanted to. Not ideal, but a workable solution tot he crisis.

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  • taffee and khards: there is merit to both of your suggestions. I can’t really know what they are thinking but I imagine they think this scheme is an emergency measure to help people compete with btl while they BELATEDLY scramble to put in place a mass building program. The problem is that even as they scramble the situation gets worse.

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  • A better solution would be to allow councils to buy land, after a proper planning process) at the unimproved value (say +30% as a compensation) then lease it to developers. the leases would then help pay for a proportion to be held by council/housing associations for social housing and to offset council tax. So everybody wins except for landowners expecting windfall gains.

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  • @taffee
    Nothing gives FTBs more confidence than the FTBs from the last 2 years having to default as they go into negative equity!
    I do however agree that interest rates need togo up to keep house prices under control but it has to be measured and fair to those who have just purchased as well as those who are ready to buy.

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  • It’s best to stick to solutions that wouldn’t first require the creation of a parallel universe. I’m not going to waste my time, or yours discussing why it couldn’t possibly work. I build a house once every year or so and if I even got a sniff of a scheme like this, I’d do something else with money. I think there should be some system of moving this sort of stuff to another section of the blog. I think they do something similar on the other part of the blog?

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  • @flashman your parallel universe is Hong Kong – they raise a huge amount of their revenue via long term leases of land, and as a result can have a top rate on earned income of 18%

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  • Please can someone explain why the Help to Buy Scheme and other government backed scams allow purchasing up to 600k if they are mainly designed to help FTB’s and/or those with low deposits. How many FTB’s were ever able to afford 600k as purchases especially when average house prices are 170k and in 300k in London? Why should FTB’s or those with low deposits be able to buy a house, if high house prices are encoraged and expected then surely these people should save more or get better paid jobs [sarcasm]? Also, if you have 30k deposit then you should buy an averagely priced house, 170k or 300k in London. You will not need help then because you will have at least 10% deposit and access the normal mortgage market. This is subprime lending and a bribe to housebuilders to make them release some of their landbank and build. An electioneering tool.

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  • If any area has planning permission then someone is going to build a house, I am sure there are many eager investors so that would be great flashman you can concentrate your capital and entrepreneurial zeal on being a ‘job creator’ instead of wasting it on property development, which is better left to lesser mortals.

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  • Mombers you LVT types always triumphantly cite Hong Kong when it suits you. When people point out that they have property booms and busts like everyone else, you drop them like a hot coal and claim that its because they don’t have full LVT.

    Hong Kong is where it is today because of the fabulous industry of the people who live there and because of its geographical advantages.
    Tax systems or their preferred brand of rice have very little to do with it.

    I am all for people talking about anything they wish but I think they should do what they do over on the other side of the blog. Distractions like LVT and gold could have their own section where people could discuss it all they want.

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  • I should “spend my zeal on being a job creator”

    What a joke. When I build a house, I employ up to 20 people and put money into the local area via their wages and via all the fees and taxes paid to the council. I also buy an enormous amount of materials most of which are made in Britain. Jobs are thus created in the manufacturing plants and in the building merchants. I put my hand in my own pocket and receive no subsidies. I bear all the risk and I receive all the reward (make no mistake, I do it for profit). When I finish the job I have profit to spend in the economy and Britain has another sorely needed house and a ton of tax receipts.

    The post @12 is a prime example of bitter wrongheadedness and it’s so often the people who demonstrate such a deep misunderstanding of what actually happens in business and the economy who insist on telling the rest of us that they have the solution.

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  • Anyway, I’ve got to do some work now. I think they’ve made my point for me. Always encourage silly people to talk. It’s a lot easier that way.

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  • Flashman – just to dismantle your straw man – your talents are best suited to employing people in other ways – other can employ those 20 builders and do a pretty good job. Wealth & Job creation at its most efficient wot wot old chap

    back to Hong Kong. If we look at the two phenomenal moments in the growth of the real economy in Japan they where in the late 19th century and in the 50’s and 60′ when japan had a large proportion of the monopoly of land removed from the productive economy. This is also true of Singapore and Hong Kong, though various public policies that took the burden of the monopoly of land off the productive economy. Now we see the correlation, of course we can argue as to its causality, but my thesis is that the removal of the private burden of land and natural resource monopoly is what freed up the talents and hard work of those people.

    This can be said of Germany in its reconstruction and in the most advanced economies. Their seams to be not only correlation, but primal causality in unburdening private enterprise from the monopoly of land (and other natural resources).

    Of course this is counterfactual to your opinion so you can dream up whatever excuses you want, I await what tortuous straw man you try and construct to rebut my observation.

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  • Flashman – just to dismantle your straw man – your talents are best suited to employing people in other ways – other can employ those 20 builders and do a pretty good job. Wealth & Job creation at its most efficient wot wot old chap

    back to Hong Kong. If we look at the two phenomenal moments in the growth of the real economy in Japan they where in the late 19th century and in the 50’s and 60′ when japan had a large proportion of the monopoly of land removed from the productive economy. This is also true of Singapore and Hong Kong, though various public policies that took the burden of the monopoly of land off the productive economy. Now we see the correlation, of course we can argue as to its causality, but my thesis is that the removal of the private burden of land and natural resource monopoly is what freed up the talents and hard work of those people.

    This can be said of Germany in its reconstruction and in the most advanced economies. Their seams to be not only correlation, but primal causality in unburdening private enterprise from the monopoly of land (and other natural resources).

    Of course this is counterfactual to your opinion so you can dream up whatever excuses you want, I await what tortuous straw man you try and construct to rebut my observation.

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  • Pete Green – don’t get me started on wealth creation… city folk like to talk about wealth creation because it sounds good. Reality is wealth just moves around in a big game, and the winners are those that figure out how to make their share go up. But their share going up means someone elses goes down. That’s not wealth creation that’s wealth re-distribution.

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  • My above post seams to have lost a bit – I was also saying the most advanced economies in Africa such as Botswana and the former libya. As a large majority of their tax base came from resource and land rents so alleviating taxation from labour and capital so its economies advanced and as thus the two countries demonstrated this by having the highest educational attainments, lowest crime rate, lowest relative poverty levels, child mortality etc etc.

    Off course I am living in a parallel universe and none of this is real…..

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  • I forgot of course Taiwan which actually has a Land Value Tax. This came about because of Sun Yat Sen, who was a devote of Henry George and Land Value tax.

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  • Botswana and the “former Libya” !!! Comedy gold.

    Let’s ignore the oil and diamonds money and mourn the passing of the “former” Libyan regime and the worsening human rights situation in Botswana. If only we could be more like them

    Case dismissed.

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  • mark wadsworth says:

    Flash, as to your nonsense about LVT discouraging new construction, where on earth do you get that idea from? It does not bear scrutiny.

    A builder (rather than a land speculator) has to pay £1 million for land for ten houses, that costs him £70,000 a year in interest payments to the bank. If the LVT on that site were £70,000 then the upfront cost of the land (and the risk to the builder) is minimal, and instead of paying £70,000 interest to the bank he pays £70,000 LVT to the council.

    How come we expect builders to pay full market value for workers, bricks, timber etc, but say that it is better for the value of the planning permission to be captured by third parties?

    “When people point out that [Hong Kong] have property booms and busts like everyone else, you drop them like a hot coal and claim that its because they don’t have full LVT.”

    You know perfectly well that HK govt gets half its revenue from auctioning leases, taxes on property companies, stamp duty and so on. This is of course a pale shadow of LVT, but illustrates the general point.

    And you ought to know perfectly well that the value of long leases respond to interest rate changes and rent changes in the same way as freeholds, there’s your boom-bust. But HK still weathered the recession much better than most places, there was barely a dip in 2009 or 2010.

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  • @26

    @ first sentence. I said nothing of the sort. I responded to the post @9 by saying that I wouldn’t put my money into building a house if I caught a whiff of a scheme like that. I was talking about myself personally and he wasn’t specifically talking about LVT in its entirety. There are several component parts of the profit than can be made from building a house. I specialise in two particular components and that ‘scheme’ would effectively take one of them away or at least hamper it. I would work my capital elsewhere. My money, my choice.

    Yes, I know a little about Hong Kong. I didn’t bring Hong Kong up. I just observed that the LVT camp has a tendency to cite HK as a glowing example and then disown it when the boom and busts are mentioned. In my opinion you lot shouldn’t use it because as you say its just a pale shadow of LVT. In a way you just did what I’m talking about because you disowned it as pale shadow (in relation to the boom and busts) and then kind of inferred that it had weathered the storm better because of it. Just saying

    Hong Kong weathered the storm better than most because it’s part of a country and region that carried on growing during the recession and because the people are the hardest working I’ve ever seen. Very little to do with LVT, pale shadow or otherwise

    I sometimes effectively speculate on land when I buy a plot and/or a house to develop. I do this because I prefer to buy things that other developers think is a hopeless case (they’ve either had a bad result in pre-planning meetings or they can’t see something I see). Its risky. On the last one I had a long drawn out (understatement) punch up with planning and a number of villagers writing in against my application. After I built it, the planning officer said it was very nice and there were no complaints from the village. It was a scrubby wasted piece off land and according to the 20 billion planning guidelines, planning permission should never have been granted. In fact I was categorically told that planning permission would be refused. You might say that my planning gains were unearned but I sure as hell think they were. There’s are many shades of grey in real life. Economic theory often struggles to capture them all.

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  • mw and pg – Here’s a snippet from Manhattan under the Dutch in the 1650s. Business leaders were developing a municipal government and New Amsterdam underwent development – paved roads, brick houses with tiled rooves replaced wood/thatch, trees and gardens were pruned etc. Farmers with pigsties and chicken coops and owners of vacant lots on prominent roadside postions were taxed to encourage them to improve their properties. Flash’s ‘scrubby wasted land’ pretty soon didn’t exist.

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  • Come on Icarus you can surely do better than that. I did it in a wealthy Surrey village in 2012. All the properties were already very nice indeed and there was no apparent land available to develop until I spotted something that others didn’t see. Every inch of the village was as pretty and developed as the inhabitants could make it. No tax could make them do better. Your squalid chicken village from 400 years ago has absolutely has no relevance.

    @ everyone else: I knew we’d see the true face of of this stuff, if I pushed the right buttons. Pure envy, spite and a desire to control everything and everyone.

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  • @Flashman good to hear where you are coming from. My view is that you are worth every penny. I certainly couldn’t do it, just doing renovations on my one house is enough to stress me out to my limit.

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  • Flashman your starting to sound like libertass. LVT is a real libertarian policy recognising what is social and what is private and what is monopoly. Taxing labour and capital is the hight of ‘silly socailism’, which I think is wrong.

    A land value tax would turn all landowners eager to develop every inch of their land to its best use and not just rely on the genius of a few privileged and uniquely gifted individuals like your good self. Society is so desperate for the talents of people like yourself we need to encourage more of it… wot wot

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  • Only in blog world would you find someone misguided enough to describe building a house as a grubby little deal. In the real world its considered a worthy endevour. People employed, families supported, profits made, local economy stimulated and a much needed new home created. It’s no wonder that people outside this blog have such a low opinion of hpc’ers. Most of us are not remotely like this but the lunatic fringe gets us all tarred by the same brush.

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  • mountain goat. Thanks. I do of course do it for profit but I find it absolutely invigorating. I once wrote an article for the economic voice describing how I do it. I don’t use an architect or a contractor so its just me and a bunch of workers using techniques I mostly picked up by watching people abroad. The mud and wet becomes a part of your life but I still get a thrill out of driving past my finished houses and seeing a family there. After a career behind a desk it’s really nice to do something so physically vigorous and tangible. If anyone is interested I’d be delighted to give you an few pointers on how to build yourself a home for far less than the standard established costs. If I can do it anyone can. I couldn’t wire a plug ten years ago.

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  • flashy if you were not so blinkered you would remember in post after post I have supported house building – and I think developers should be rewarded for their hard work. My only gripe is that speculators bet on the unearned value of that monopoly and I want more people to become developers like yourself (in a responsible way) and be rewarded by a fair price for their efforts, in the improvements they make, in a true free market.

    But because you make a straw man, to fit your assertions, of my augments you find it impossible to have a proper discussion, a bit like young libertasss

    If you stopped telling everyone how misguided they are you might learn something.

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  • By the way flashman I have managed a number of small and even medium sized construction projects, and with my own hands installed plumbing, electrical systems, computer networks, solar panels and did all the planning applications myself as I know how to use CAD systems and fill in forms etc etc.- but since that challenges your view that all LVT supporter are nerdy bloggers I am sure you will dismiss that, call me a liar etc etc

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  • [email protected]:29PM “If anyone is interested I’d be delighted to give you an few pointers on how to build yourself a home for far less than the standard established costs.”

    I’d be very interested (yes, really).

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  • Well, that must be the shortest business break on record.

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  • flash – I mentioned the 17th century to show that the principle was alive and working long ago. One purpose of LVT is to increase the cost of sitting on vacant lots for spec purposes. In Oz early in the 20thC NSW used LVT to free up land for settlement and to clear up and rebuild slums in Sydney. At that time Brisbane used an aspect of LVT – rents on Queensland’s mineral resources – to reduce other taxes and it attracted a lot of business thereby. When it was decided to build Canberra as the capital they were determined that taxpayers’ investment there shouldn’t create an ‘unearned increment’ in private property for miles around (as the building of Washington DC did). The plan was for increased land values to pay the government for the its original investment (speculators got the upper hand and kyboshed that plan).

    What d’you think about the issue of private gain that’s due to increased land values stemming from public investment?

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  • Cornish, I think there is a method of sending a private messages through this website (people have talked about it over the years). I would be delighted to walk you or anyone else through the process. It can be done for far less than the published norms.

    In this country building is dominated by the large building companies. It doesn’t have to be this way. In the three biggest countries in Europe (other than ourselves), 60 percent of houses built are self builds and the percentage in the US is 40 percent. I’d encourage anyone who is thinking of buying a house to at least consider self build as an option. It’s a way of building in equity from the get go.

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  • Icarus: I’ve just had a Thai and a skinful so I’ll be absolutely candid. I really can’t be bothered with economic theories. I once had to bother with them to pass a few exams but that was the last time they were any use to me. They are all too simple to capture reality. Adhere to any one in particular and you’ll be more wrong than you’re right

    Private gains from public investment? Private people are the public. If you start taxing luck you might as well start taxing people with pretty wives. Why not tax people who don’t get mugged? They probably benefited from public spending on a police force. It’s all Scooby Doo kitchen table nonsense.

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  • I realise that flashy is a bit short at times, but since when did anyone on this site object to people building houses to make a living?

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  • sibley's b'stard child says:

    Flash, inexplicably there are two separate registrations for the blog and main site. As you’re not on the latter you won’t be able to use the private messenger service.

    Easiest way around it is if Cornish lists his email address here for you to contact him.

    It doesn’t have to be his main, he can always set up a separate account purely for that exchange.

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  • Flashman is running in the 15.50 @ Newmarket today @ 100/1. He gets everywhere!

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  • Flashman is running in the 15.50 @ Newmarket today @ 100/1. He gets everywhere!

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  • Flashman is running in the 15.50 @ Newmarket today @ 100/1. He gets everywhere!

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  • Sibs, thanks. I was wondering how that was going to work!

    Flash, you can contact me on: [email protected]

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  • I thought a by-product of the exercise might be to enrich Osborne’s mates. From the telegraph:

    http://www.telegraph.co.uk/news/uknews/royal-mail/10373868/Hedge-fund-investing-in-Royal-Mail-employs-George-Osbornes-friend.html

    From the article…”A hedge fund that employs one of George Osborne’s closest friends and best man is among the City institutions set to make millions from the privatisation of Royal Mail”. Best man, actually!

    It goes on to shine a light on knighthoods for Tory donors in the same company. Criticism indeed…and from the Torygraph too (not the Kaiser report).

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  • @41 – Come on Flash, you can do better than that. What’s ‘theoretical’ about things that actually happened? And the distribution of ‘luck’ in land deals is highly dependent on public policy.

    Good on you for spotting that piece of land with potential that others didn’t see but that seems to be more a story of bureaucratic blindness than a reason to oppose LVT.

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  • 100/1

    I’ll have some of that. Each way bet placed

    sibs, thanks for that. Genuine offer if anyone is interested

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  • ‘Stays the trip and goes there in good form’ says trainer Richard Fahey about Flashman’s chance.

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  • I heard that horse was prone to rearing at the stalls and throwing its rider.

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  • Icarus, I didn’t use it as a reason to oppose LVT. I got the reactions I hoped for. One showed a mindset and the other failed in its attempt. I’m not hoping to persuade the three or four ardent supporters but I know if I play rope-a-dope, one or two of them will stick their chins out and do the work for me.

    Next up is the actual numbers.

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