Tuesday, Jul 07, 2020

Front running the government

Torygraph: Stamp Duty holiday to kickstart economy to be unveiled by Chancellor

I think i said on some article i posted and i know people here are on this site for over a decade because of interest in economics, but actually, its true. The only thing you can do is front run the government because the whole thing, the entirety, is administered. House prices clearly looking squeaky, so government is intervening on pricing. Is this a market?

Posted by stillthinking @ 11:52 PM (2405 views)
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21 Comments

1. nickb said...

on its own this may cause a blip but unlikely to make a large difference over time. In theory, should not the extra money available to buyers wash into the price, so the tax you would have paid instead goes to the seller? Effective stamp duty on a 300k house was about 1.7%, so around £6K. Prices will likely blip up compared to what they would have been but the buyer is not really affected... because you aren't paying that amount of SDLT.

Wednesday, July 8, 2020 03:30PM Report Comment
 

2. magnifico said...

Watch out! kitchen sink approaching. Desperate attempt to support an industry that is not an industry. Will it work in the medium term? I very much doubt it.

Wednesday, July 8, 2020 06:36PM Report Comment
 

3. libertas said...

I think they will find that these tax holidays bring in more tax, we are over-taxed. I think they will find if they put the taxes up that the economy will collapse again its on life support. I suspect these tax cuts become permanent and that we will never be able to pay off this debt unless if they bring forward the hidden technologies, like life extension, space tech, free energy, cures for cancer, etc. If we don't have a major advance now governments are going to collapse. Armstrong reckons that they will try to issue perpetual bonds and predicts a collapse of Socialism by 2032.

Rishi should have only done tax cuts, not these stupid vouchers for double glazing, etc. We really need Trumpian style tax reform whereby investment in capital is depreciated immediately against tax rather than over a number of years and I do think VAT needs abolishing, it is too complex and cumbersome. If governments exit Socialism by 2032 maybe they can survive but any that relies on big government spending rather than tax cuts and deregulation will collapse under unrepayable debt over the next decade.

Wednesday, July 8, 2020 08:59PM Report Comment
 

4. tenyearstogetmymoneyback said...

The key question is what happens on 1st April 2021?

I wonder if Rishi Sunak is making the same mistake that Nigel Lawson made in 1988 by pre-announcing a drop in MIRAS tax relief. The week before the benefits were going to drop their was a mad rush to buy. My neighbours sold their house in about 8 hours. Once the deadline had passed almost everyone stopped buying, being unable to afford last months asking prices and the whole market started to stagnate and slide downwards, continuing to do so for at least seven years.

Wednesday, July 8, 2020 11:13PM Report Comment
 

5. nickb said...

@libertas
The consolidated UK govt (ie including the bank of england) as the issuer of the currency can never be in a position not to be able to pay debts denominated in that currency. What do you think QE is, if not buying back government debt by printing money? Maybe they will trash the exchange rate, but even that seem unlikely with everyone else engaging in money printing. As for the rest, what are you smoking? Free energy? Have you heard of thermodynamics? It's the science of energy. Suggest you acquaint yourself with the first and second laws. They are among the firmest laws in physics. Now you can doubt physical science, but then how are you going to travel to and populate Mars?

Thursday, July 9, 2020 10:24AM Report Comment
 

6. libertas said...

Libertas is Planning4acrash just checked out Rightmove sold prices. Volume down massively in March, obviously, prices up. Duurrr, of course, they choked supply and pumped in loads of cash, we were all expecting price collapse but could we see price inflation? In my postcode sales dropped to two, prices soared because people with money and gusto chased a limited supply.

Even if more people put their homes on the market now, the lack of a chain means that many of these cannot sell and are waiting for a chain to occur, so supply will be reduced to a very small number in chains plus those selling to rent and probate. Prices could go through the roof. A supply collapse led form of hyperinflation.

If correct, prices will normalise or fall once chains re-form but this could take years. Property sales are like domino runs, you need a purchaser and a seller to move with the exception of sell to rent, sell to combine households (dating is reduced), sell to emigrate and probate. It also costs money to sell, making it worse with the economic collapse.

Plus, rates on private interest rate swaps are now firmly negative, expect BOE rates to go to -0.1 very soon.

Friday, July 17, 2020 12:25PM Report Comment
 

7. landofconfusion said...

@6. libertas No offense but I've often found your comments to be a bit...unhinged from reality. But in this case we actually agree; volume down, prices up. Quick example: a house in my target area recently came up. It was an ex-granny mid-terrace with a siht garden and no offroad parking, priced at my maximum. That's 'wow' territory. But the disappointing thing is it isn't that far from almost all the other prices I've seen recently. In fact the only positive I've seen in recent months is that although they're selling, even at those prices they aren't going very quickly. And interestingly that includes auctions.

Saturday, July 18, 2020 06:03PM Report Comment
 

8. nickb said...

@6, 7
Meanwhile for those of us who prefer data to anecdotes, the available MOM stats show falls. Volume is down, yes, this reflects reduced supply and demand. There remain very few 90% and virtually no 95% mortgages, so how can prices go other than down?

Saturday, July 18, 2020 08:07PM Report Comment
 

9. landofconfusion said...

@8 Transactions are low and the MoM stats suspicious. I could look at the weather data by checking up on the Beeb's website. Or I could just look out the window. One of those will be both relevant (to me) and accurate, the other not so much.

But that's not to say I don't hope you're right.

Sunday, July 19, 2020 12:32AM Report Comment
 

10. nickb said...

>I could look at the weather data by checking up on the Beeb's website.
Sure but it's a terrible analogy. You can';t look out of the window and see all of the completed sales prices on a mix-adjusted basis.

Sunday, July 19, 2020 09:07AM Report Comment
 

11. landofconfusion said...

True but I can follow at all sales within my acceptable commute distance, do this for a couple of years and then when a potentially major disruption occurs I can "look out the window" and see if the weatherman, who is employed by a VI, says things which matches my local reality. And so far he seems to have got it wrong.

Of course I should probably add I'm weary of the wishful thinking which seems to pervade this site. "This is it" has become such a trite phrase.

Sunday, July 19, 2020 11:14PM Report Comment
 

12. nickb said...

>I can follow at all sales within my acceptable commute distance,

Really? I thought the price paid on a transaction this month will be released by the land registry in anything up to three months' time. How do you get it before then?

Monday, July 20, 2020 12:29PM Report Comment
 

13. landofconfusion said...

I don't. I said I can "do this for a couple of years" - past tense and in the event of a significant or potentially significant crash I can always use my mouth and ask. And so far around here offers have been around asking, which is presumably why I've seen some price rises, although I will freely admit that this doesn't necessarily mean people can actually raise the cash. Strange though to see prices rising in what some people are suggesting is a distressed market.

Capacity to pay drops so prices rise?

Monday, July 20, 2020 11:50PM Report Comment
 

14. nickb said...

@13 so how many price points are you looking at to come to this conclusion? One thing that is happening according to LSL Acadata is that FTBs have less purchasing power with the disappearance of high LTV (95% and most 90%) mortgages. This means composition of trades has changed towards larger houses not starter homes - which are more expensive. Hence the importance of mix adjusting in the surveys. More complicated than looking out of the window but also more accurate, Under 500k and there will also be the temporary stimulus of the stamp duty bung.

Wednesday, July 22, 2020 09:14PM Report Comment
 

15. landofconfusion said...

I use all the points I can get access to and around here starter homes or rather flats are not much cheaper (£30-£50kish) vs. the 3-bed family. And from experience a lot of people seem to be like me - renting before skipping the 'first rung'.

But yes, it's possible that starter/BTL homes have fallen and everything else has risen; I haven't been looking as that 's not what I'm after. But then that begs the question of how long can this contango go on for? And if it's the 'bung' which is doing it how did the market know so far in advance? I mean, only recently have I seen any signs whatsoever of acceleration as opposed to the usual gradual drift upwards.

Wednesday, July 22, 2020 11:59PM Report Comment
 

16. nickb said...

@15 so where is 'here'? I'm in Reading. The latest stats here (Acadata) were -6% MOM but based on a pathetically low sample size since trades were down 90% in May compared to Feb. Talk to an estate agent and they will tell you it's all go, and things are going for asking price and more, but I'd have more confidence in even the most dubious survey. Looking out of the window, the neighbour has his house on for the last month, decent place, and hasn't received an offer within 5% of asking price.

Thursday, July 23, 2020 12:14AM Report Comment
 

17. landofconfusion said...

SE England. And according to your source:


"The South East had the highest annual regional rate at 4.5%
Cardiff topped our conurbation league with 4.6% annual growth in April
Around a quarter of unitary authorities in England & Wales set new record average prices in April"


But now the data isn't reliable because of "a pathetically low sample size since trades were down 90% in May compared to Feb."? Or do you still prefer a "dubious survey" over rising asking prices, asking the (soon to be former) owners and getting outbid on properties?

The truth is there will always be regional disparities and without unbiased, concrete data it's hard to know the overall picture. But certainly from my experience in the area I'm looking the Acadata survey seems to be more or less correct. But with the LR's data being withheld and yet more bungs being pushed we will probably now never know for certain.

I wouldn't bet on a HPC just yet though, despite what many on here are suggesting.

Thursday, July 23, 2020 07:25PM Report Comment
 

18. nickb said...

The 4.5% is a year on year figure and therefore also affected by what was happening this time last year, in addition to the sample size issue. The figure from this source for MOM for England is negative. It's called spin. Try reading the whole report.

Friday, July 24, 2020 12:24PM Report Comment
 

19. nickb said...

The LR data are not being withheld btw, you can download them from its website, there are just relatively few data points for April and even fewer for May. So the ONS decided not to release its usual mix-adjusted HPI index.

Friday, July 24, 2020 12:32PM Report Comment
 

20. landofconfusion said...

Thanks, I didn't know the LR had only suspended some data. And looking at it it shows the SE as a whole as...rising, by 0.7 MoM in March. And looking at the MoM for Acadata shows +0.9%. Incidentally both of these include a mix of housing types.

So consistent with what I'm seeing.

Also looking at it, it seems the NE, East Midlands, the London extension known as Cambridge (East of England) and London itself have seen some falls with London unsurprisingly hit the hardest. And I say unsurprisingly as is a rather frothy market and certainly in the last few years has been skittish w.r.t. bad economic news.

Should be interesting to see what the next month's figures look like.

Tuesday, July 28, 2020 04:42PM Report Comment
 

21. nickb said...

All those sub-national stats for May subject to very low sample size so difficult to see anything clearly at that level. Statistically the larger the area the less noise is associated with the number, which (other than the fact that it is negative...) would justify more confidence in the figures for England, Scotland and Wales. But those are still small enough to be very noisy. The LR data are also incomplete because of the usual 3 month lag. So it will be interesting to see what the eventual numbers are for April May and June. I also wonder what traditional "leading indicators" are saying such as "time on market", new buyer versus new seller registrations at EAs etc, though these are likely disturbed by the lockdown.

Wednesday, July 29, 2020 12:03PM Report Comment
 

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