Help to Buy

The boss of bailed-out Lloyds Banking Group has sounded the alarm over the chancellor's Help to Buy scheme, warning of a house price bubble without broader reforms to the market.

António Horta-Osório, chief executive of the 32% taxpayer-owned bank, said: "It is important that planning permits, building authorisations and social housing projects are [liberalised] so that the increase in [mortgage] transactions does not lead to a substantial increase in house prices."

He told the Financial Times that the £12bn scheme, which offers lenders a taxpayer-backed guarantee for loans to borrowers with deposits as small as 5%, should be focused outside London and the south-east where house prices are rising quickly. In the rest of the UK, he said, "you have nothing close to a housing bubble".

there was a good article from 2010 by some economist predicting exactly a misleading growth picture caused by asset appreciation, reinflated household debt etc, which would probably happen even without this scheme but why not catylyze it anyway

The overall economy of Britain certainly doesn't justify these prices. Bank lending for businesses is flat, but mortgage lending? Hoo-ha, it's soaring up and up and the bulk of it is concentrated in London. It's as if the whole British economy is based on housing speculation in the capital.

David Cameron's government seems to think that is the case. Cameron may be pursuing austerity policies elsewhere in the economy, doing virtually nothing to help subsidise employment or industry, but his government has just started a "help to buy" scheme. The government will guarantee up to 15% of the purchase price of a house up to £600,000 ($960,000), if you have a 5% down payment.

The ordinary uses of the city have been changed beyond recognition. London was never a cheap place to live, but now more expensive property means more expensive everything else: restaurants, cinemas, bars and theatre tickets.As for services, the minimal tax paid by those who have made property into money means that a city whose population has increased by 14% in the last decade can't afford to build new schools. There will be a capacity shortfall of an estimated 90,000 places by 2015. Children won't be turned away from school, but class sizes will grow to untenable proportions.

http://www.theguardian.com/uk-news/2013/oct/20/london-new-york-times-foreign-rich-property

idk if the last paragraph accounts for the differences in local govt between uk and usa but still, it is an extraordinary spectacle to see financialization rebound so quickly after 2008

London's booming housing market is rising at an unsustainable rate, the UK's largest property website warned on Monday, with the average asking price of a home in the capital surging by more than £50,000 last month.

Such is the acceleration in the capital's property market, according to Rightmove, that many buyers will need help from deep-pocketed parents despite the expansion of George Osborne's Help to Buy scheme.

Rightmove said the average asking price in London rose to £544,232 in October from £493,748 the previous month – an increase of more than 10%. Across England and Wales, the rise over the month was a more modest 2.8% to £252,418.

Was kinda thinking of going for this tbh. Am going to be 40 in a couple of years and would like to have paid off mortgage before I retire (but then oh yeah won't be retiring til 70 so I've actually got 7 years to go).

But haven't quite got enough cash yet and the rate prices are going up I prob can't afford anything but a shithole even with this scheme. I'm paying below market rent at the moment cos my landlord hasn't put it up in a few years so prob best to stay put for a while.

This is probably the stupidest and most short-termist of all government policies but it's probably a vote-winner.

http://www.ons.gov.uk/ons/resources/acenturyofhomeownershipandsrenting_tcm77-307202.png

Conclusions from that:

- Thatcher doesn't deserve as much credit for expanding property ownership as she is given, as it's pretty much in line with how things were going before.

- The drop from 2001-2011 is pretty difficult to call (would be interested to see how things look from 01-08 because I suspect the issue is less of price than the availability of credit)

- It's still amazing to me that two-thirds of the people in this country can afford to own their own place. At current prices, how much money is tied up in property that could be circulating elsewhere in the economy?

- Wahey another asset boom driven by cheap credit what could possibly go wrong? Except this time everyone at all levels knows that the government is ultimately liable for the risk.

Help To Buy could have been an interesting tool to attract people and businesses to economically depressed areas.

I'm not sure how sustainable it is for companies to have their staff increasingly squeezed by London rents / mortgages or undergo 90-minute commutes.

There's a point at which people can't afford to live in London and can't afford to commute to it five days a week. I'm surprised more isn't really being done to draw some of the pressure off by encouraging firms to move elsewhere.

There's a point at which people can't afford to live in London and can't afford to commute to it five days a week. I'm surprised more isn't really being done to draw some of the pressure off by encouraging firms to move elsewhere.

Talking to some of the young (as in early 20s) people who work with me, who have come from outside the UK, their view of the UK economy and London is unbelievably rosy... they wouldn't work anywhere in the UK outwith London though.

this makes a lot more sense in ireland than it does over there i guess? but even then there would need to be significant reform of the market regs first

At current prices, how much money is tied up in property that could be circulating elsewhere in the economy?

This isn't really how it works though is it? Your deposit "circulates" cause the bank has it. And ditto for your monthly payments. And every time you re-mortgage or use your house as a cashpoint, claiming possibly illusory rises in value, that's money in your pocket that you spend.

How many times does the average person re-mortgage their house though?

I mean the point stands that the more people are paying in monthly repayments (or concurrently rising private sector rents) the less they have to spend on anything else. Assuming wages aren't going to be rising in line with living expenses any time soon, the only way round that is more credit card lending, and the whole circus starts up again (except the banks still aren't lending to businesses).

At the same time though, the number of people who can't afford to buy and therefore have no incentive to save is increasing. That probably has an impact on the amount of discretionary spending being done. There is still a lot of money circulating in London and it's not all being thrown around by the wealthy.

Lots of people tightening their belts and saving for a deposit wouldn't aid the impression of a recovery.

There's also not much incentive to save given your money is worth less a year later due to interest rates being lower than inflation

Is it just me (clearly getting older and more cynical) but this constant battering of the housing market is just getting, well BORING! I know this has been going on for as long as I can remember, the only reason being is that a large percentage of UK adults own a property therefore have an interest in how their investment is likely to perform, therefore the media think it sells. We had a constant barrage when the banks were in trouble, with the doom and gloom of house prices and the inevitable repossessions that were “definitely” (don’t remember seeing that happen!) going to follow, now what do we have, yep it’s a “housing bubble”!

http://www.huntersfranchising.co.uk/just-bored-of-reading-it-to-be-quite-honest/686/

enjoying the anthropomorphization of 'the housing market' and how poor old housie marks has taken a right kicking from know-nothing shitlads who don't appreciate her munificence

coming soon: Drug Dealers Monthly magazine decries government anti-drug programmes

I am not sure who first came up with the “bubble” line but am guessing he/she are pretty gutted right now as suddenly it’s the new in word

18th century satirists to thread

http://www.standard.co.uk/business/business-news/surveyors-call-for-urgent-action-over-housing-supply-as-help-to-buy-fuels-soaring-demand-8934156.html

now with twee tv adverts

Cunliffe said the housing market could have a "soft landing" as houses became less affordable and lenders tightened up the conditions for granting homes loans. "But other outcomes are very possible and the financial policy committee [FPC] will need be both vigilant and ready to act."

He said the risk was of "a major overshoot in prices and buildup in debt followed by a sharp correction with negative equity and an overhang of debt for many households", adding: "Unfortunately, there are more precedents in UK for periods of a rapidly growing housing market to end in this way."

The FPC was set up by George Osborne with a view to preventing the economy being destabilised by the sort of asset price bubbles that emerged before the crash of 2007-08. Cunliffe said the decision about what to do about the growing momentum would be its top priority in the months ahead.

Figures from the Nationwide building society showed annual house price inflation at a seven-year high of 10.9%. Cunliffe said: "There is good reason to believe that a ... combination of strong demand, weak supply and expectations of a rising market could lead to a period of sustained and very powerful pressure on house prices in the UK."

Earlier this week, Threadneedle Street announced stringent stress tests designed to ensure that lenders could absorb a 35% drop in house prices, a fall that would be unprecedented in the UK. Cunliffe said the Bank was worried that more and more people were getting into debt that could pose a risk to the economy's year-long recovery.

not like this is mostly attributable to htb though it makes it seem yet more ridiculous when absurd levels of asset appreciation are now more of a barrier to home ownership than borrowing constraints