Housing minister Grant Shapps has said that the Government needs to build more than 200,000 homes a year.
Speaking on the Radio 4 Today programme, he said that building more homes is the only way to prevent further rises in rents and meet housing need.
He outlined the Government’s three-pronged approach to stimulate house building, including reviving Right to Buy, releasing Government land on a ‘build now and pay later’ basis, and reforming the planning system.
Shapps said: “We think there has to be a couple of hundred thousand new homes created each year – something in that kind of order.
“Overall, you have to get all things working in tandem – there is not one single thing you can do to solve a housing crisis that has been building up over years and years.”
Shapps said more details will be released next month when the Government publishes its housing strategy.
Separately, speaking at the Housing Market Intelligence Conference, Shapps’ parliamentary private secretary Jake Berry said that the Government’s house-building plans would be scuppered if it was forced to pull the plug on its controversial planning reforms.
Berry said that to get the economy moving, Britain must get building.
Comments
Not sure you'll see this before this thread vanishes into the ether... You could buy a house back then because they were at a much cheaper price than they were today. That's a simple fact and there's no need to pat yourself on the back. It's not about being financially savvy etc, but having been born at the right time.
Very few 26 year-olds can afford to buy at today's prices. Were you 26 now, you would be in the same position. In fact, you would probably be a HPCer or at the very least banging on the door of BOMAD. Even then, given today's youth unemployment, you'd probably be in a precarious employment situation. And while we're at it, were you 26 in 1914, you'd have been fighting at the Battle of the Somme and house prices would have been the least of your concerns. It's all relative.
If I were saving to buy a thousand tubs of margarine next year, then I would be very concerned about the current rate of inflation (of margarine - which is currently something like 8% a year). My savings are purely to buy a house - therefore the inflation rate I am concerned about is that of houses. Currently that is at -2.5% and falling.
It is houses that are losing value when compared to general prices, not my savings that are losing value relative to house prices.
It has been an interesting discussion though. So far I've helped you understand how interest rates impact currency values, the difference between house prices crashing in nominal versus real terms and how inflation is a general term that needs to be broken down into its components when saving for something...
; )
Rant, your savings earning 3% and your 2% payrise is still smaller than the 5.5% inflation rate, so you are still going backwards. Plus you are paying money out on rent, despite the fact that the property has no mortgage, you are paying for someone elses pension plan so that they can sit at home, while you do all the work!
Once you buy a property, the price you paid is fixed forever and all you need to worry about then is clearing the mortgage. Prices may rise or fall, it matters not and when you own a property, inflation becomes your friend as long as you keep getting those payrises! Paying off the monthly mortgage gets easier & easier, whereas people in rented have rising rents year on year to keep pace with inflation. My father was telling me that in the mid 70s, he was delighted to be earning £3000 per year.
Now I know that you are in rented, saving to buy a house, it makes sense why you want prices to fall and interest rates to rise, but I also feel that once you have bought something, you will change how you feel and want prices to rise & low interest rates.
Back to my father again. He told me to buy a house as soon as I can afford it. Thankfully I listened to him and bought my first house at age 26.
I think FTBs who do their research have lost the urgency to "buy now before missing the boat". The amount of data online actually makes it easier and easier to do that research.
Others may point to the low mortgage rates at the moment as making this an ideal time for FTBs. Money borrowed at whatever rate still has to be paid back with interest though - it would still be better to borrow as little as possible. Very few people expect these interest rates to last the duration of a 25 year mortgage either.
I think rising rents are more likely to force the situation of those waiting for (and finally seeing) drops in prices.
rant: Your response is noted - and to be fair to you, what you say makes a lot of sense.
If it works for you, then fine. But for every 'rant' there are hundreds - THOUSANDS, even - every month who disagree and put their money into property.
They don't read this site mate. And it is THEM who the Fun Boy Agents etc turn their attentions to, not those who simply won't buy 'on principle'.
And to be fair to them - THAT makes a lot of sense as well...
It's the former family home of a retired couple, who've moved out. This is their only income beyond the state pension, so I'm not technically paying off someone else's mortgage. But yes, I could in theory be doing so.
Returned to Blighty in Spring '08. Since then, I've been adding to the savings month by month. With house prices coming down at the same time, the size of mortgage I'll ultimately need is continually decreasing. When that situation changes, then I might consider it the time to buy.
And as for decorating - I barely know one end of a paintbrush from the other!
rant: Apologies in advance for the caps, mate. I've said before that they should enable bold on the site in order to accentuate words or phrases... ;o)
"...given that I'm saving to buy a place, the pay rise, the small fall in house prices and the interest on my savings added together have already offset any rent I've paid this year."
Okay, mate - so you've lived 'rent free' for a year. That's a good deal. You will call it a GREAT deal, no doubt.
HOWEVER, a year down the line, you are still paying someone else's mortgage instead of your own.
I seem to remember you saying that you have been playing the HPC roulette table for some time now. Not sure when you returned to Blighty - but say it was 2007. By 2015, had you bought you would have been one third of the way to being an outright homeowner - possibly even closer... To date, you have paid off a third of SOMEONE ELSE'S mortgage(s) - and you own ZERO PERCENT of property.
Okay - the house you bought would be 'worth' less today that when you bought it. I have two words for that -
SO WHAT?
You are living in it; enjoying it; decorating it to YOUR colourscheme not the Landlords; not conscious that a S21 could land on your doormat every month-end... etc etc. And IF and WHEN you come to want to move on, then you sell your home for whatever it is worth - and you buy the next one for whatever IT is worth.
That's how I see it.
The Halifax, Nationwide and Land Reg seem to point to house prices being down by about 2.5% over the last 12 months.
That's nowhere near crash speed (during one crash in Hong Kong, prices dropped 60% in a matter of weeks).
Personally, I've had a mighty 2% pay rise this year. My savings are earning 3% in the bank.
Having said all that, given that I'm saving to buy a place, the pay rise, the small fall in house prices and the interest on my savings added together have already offset any rent I've paid this year.
If this combination continues until around 2015, then I'll be content enough. By that point, the Halifax data would point to house prices being 50% down from their peak in real terms.
Only HPC guys can claim that house prices are down 30% if you use the Halifax data (Showing the widest swing) and then try to factor in inflation!
I didn't hear anyone claiming that prices were rising by 14% per year, minus inflation during the boom years.
Did you play around with the Nationwide Calculator? They tell a different story, which is why HPC people never mention them I guess!
"Do you really think someone who buys a house for £200K and sells it nine years for £201K has made a profit?"
The owner is still able to repay their mortgage and walk away without making a loss with a grand towards their legal fees, so they haven't made a loss either. Sure against the price of petrol and the number of times they can fill up the car when they have sold, they will have made a loss, but should they buy another house, which most do, they will have done well. Especially when you compare the losses they would have made had they been living in rental accommodation with rent prices rising. They on the other hand have been enjoying lower mortgage payments and have been clearing the loan giving themselves greater equity in the property when they do decide to sell up.
I accept that prices are not rising at the moment, but they are not really falling either, unless you factor in inflation, but the fall is much smaller than it would be against those living in rented, paying off someone elses mortgage by a factor of 125% per month/ year. (Buy to let mortgages are only given if the rent is 125% of the mortgage payments)
Clearly you haven't read my last post at all:
UK house prices, ADJUSTED FOR INFLATION are now down 30% as according to Halifax data.
http://imgur.com/VKKnv
Do you really think someone who buys a house for £200K and sells it nine years for £201K has made a profit?
From the same Halifax data, house prices are now IN REAL TERMS back to their level of nine years ago.
http://imgur.com/zaFzn
"House prices are already down 30% from their 2007 peak, according to Halifax."
Rubbish!
Have a look at this graph (Expanded view second one down): http://www.economicvoice.com/halifax-house-price-index-shows-half-percent-drop-in-average-house-prices/50024390#axzz1bdsrRZTL
The Halifax thought that prices were the highest in 2007 at £200k and are now the lowest at around £162k. This is the biggest swing of the lot, but that is still only 19%, so even using your own bank (The Halifax) your quote of 30% drop is still wrong!
I have just checked on the HPC website and they are only quoting Halifax to claim a 19.34% drop so not sure where your 30% fall came from!
Now have a play around with the Nationwide House Price Calculator here: http://www.nationwide.co.uk/hpi/calculator.asp
Start buy leaving the drop down menu on UK, type £100,000 in the property value box, change Valuation Date 1. to 2007 & Quarter to Q3 and hit the Calculate button, what do you get? A fall of 9.52%!
You HPC boys like to tell everyone you were right and that house prices would fall by 35% and essentially it has only fallen 10%, which is a minor correction, that's all.
(HPC owner Johnathan Davis was stating a 35% fall up until 2008 when this was revised to 40-50%)
Put it this way, on the way up, prices were rising by 14% each year alone, so a drop of only 10% is nothing considering the state of the economy.
If it wasn't for the credit crunch and banks reluctance to lend, house prices would be much higher than they currently are, because the demand for private property is still very high and becoming greater as rent prices continue to rise.
House prices are always sticky up. They have a tendancy to go up quicker than they go down, because vendor's always want more than the market value. Only when their back is against the wall do they consider lowering their asking price!
"Looking forward - is the economy going to pick up enough for house prices to start rising, or go back into recession and bring about further reductions. I know which I consider more likely."
Perhaps this is wishful thinking on your part Rant or are you a glass half empty kind of guy. One thing I know is that you spend an awful lot of time on this site trying to talk house prices down and you suggest anything and everything that the government (Or anyone else) should do to make prices fall. I wonder why??? Vested interest perhaps. ;-)
House prices are already down 30% from their 2007 peak, according to Halifax. The reason why this hasn't been widely reported or celebrated by the HPCers is because half of that drop has been through inflation. As everyone can no doubt agree, salaries have not been rising above inflation, so FTBs can't take advantage anyway (it's only the investment types who have really lost out, or those who have held back from selling because they want to achieve the full asking price etc).
The 30% is an average across the country. Certain regions (Northern Ireland, North England) are pushing that average up. However, other areas appear to have been little impacted. This is especially true in London. Here, foreign money is having a massive effect supporting or even pushing up prices. That's because measured in many other currencies, London prices have gone down 20% ish with the devaluation of Sterling. British people are being priced out of buying property in their own capital city thanks to artificially low interest rates.
So that's where things seem to be - a stalemate. Prices haven't come down enough (or salaries gone up) to really help the FTBs or the HPC lot to engage in smug 'told you so mode'. Meanwhile, the house price bulls can't point to recent price rises or much of a return to double digit % growth each year.
Looking forward - is the economy going to pick up enough for house prices to start rising, or go back into recession and bring about further reductions. I know which I consider more likely.
"That is plenty of time, especially when it is coming at the price of denying younger families a chance to get on the housing ladder. "
How can you say that. With iterest rates at an all time low, and house prices some 10% lower than they were at the peak, it is cheaper to pay for a mortgage than it is to pay rent. All a young family needs is a job (Makes sense), a clean credit rating (Only fair) and a 5% deposit. (I.e. The Yorkshire BS) Okay they can't get 125% mortgages anymore, but they were wrong to begin with and were one reason why the bubble inflated as high as it did.
The main reason young families are not buying right now is fear of the future. They are being sensible and waiting to see if this recession gets any worse and whether they will have a job next year or not! You can say that about any recession. People should be sensible and only think about buying a house if they are financially secure for the foreseeable future. Until they are, they should play it safe in rented or at home with mum & dad.
Are you saying that the government should have let all our banks fail in 2008? What would have happened to the savings of all these prudent savers when only the first £25k or £30k was protected by the government? What would have happened to any money in everyone's bank current accounts. How could they draw money out to pay for food, petrol etc.
The interest rate is not at 0.5% to help homeowners that over extended themselves in 2006 & 2007, it is at 0.5% to put money into the pockets of every homeowner with a mortgage to keep money circulating through the economy. It is there to keep lending rates low to help businesses cope with a difficult trading climate and it is low to devalue the pound allowing our exports to remain competetive and make our imports more expensive, so we buy British where we can, supporting British industry and dissuade us buying imports keeping our money in this country.
While it is unfortunate that the bankers got greedy lending money to sub-prime buyers who had no chance of repaying their loans, the system of mortgage backed securities worked fine and could have continued safely for generations had they not gone too far. Sure they needed a bail out and I too am angry with them, but it's not my fault or anyone else who bought a house in 2007, or indeed the fault of the savers. We just happen to be in the same country at the same time and it looks like the savers are getting a raw deal over the homeowners. You shouldn't however think "Nasty homeowners", "Nice savers".
I think what this might boil down to is this. In 2005, 2006 & 2007, I used to pop into the HousePriceCrash website and read all these angry posts from anti-home owership people who kept saying that the market was going to cash and by up to 35% and they would laugh when it does.
Some were also saying that they were saving hard in their rented homes waiting for the day when they could buy a house at a fraction of the price! Year after year they kept saying the same thing and eventually they were right, it did happen. (I'm sure the world will end eventually and others will be right there too!!) Anyway, rather than these HPC members being able to pick up their home for next to nothing with their savings, suddenly mortgages were impossible to get, their rents went up and their savings started to lose ground against inflation!!
The homeowners on the other hand saw the value of their properties fall by 10%, but less than was expected (It is only a paper loss unless you sell anyway), they saw the mortgage costs fall to virtually zero and any buy to let investors (The most hated by HPC members) saw their rental income increase by 30%!!
The HPC guys, while smug that they were eventually right about a bubble bursting, had no way of buying that cheap house they had always dreamed of.
We already are in a depression!
What amazes me is the lack of research people do when making the biggest financial purchase of their lives. It was obvious to anyone with half a brain that the UK property market was in a massive bubble by 2007.
Those who bought into that, either through greed or naivety are soon going to be bleating for help - government assistance for the overindebted, the banks to lend more money so others can take on their debts etc. Actually, that's already happening.
People need to be held accountable for their financial decisions. Too many bank bailouts, the Support for Mortgage Interest scheme etc are undermining this basic concept of a functioning economy and society.
As a country, 'WE' are not in period where 'OUR' debts need to be paid down. The financially feckless and imprudent are at that stage, ie those too daft to borrow wisely or, worse, who did so thinking it would make them more than the odd buck or two. They are a sizeable minority in this country, but they are a minority.
Why should the whole economy be dragged down to help them? So they are free to not learn from their mistakes and repeat their actions again later? Where is the sense of individual responsibility?
The steps that have been taken are prolonging the economic agony. They are also profoundly unfair. People who bought property ten years ago and are not asking for assistance are getting a huge discount on their mortgages too anyway. That is being paid for by prudent savers (who in many cases who rely on the income from interest to top up a state pension).
If many people are financially hungover, they shouldn't have gotten drunk in the first place. The overly indebted and financially irresponsible have had three years of low interest rates to get their personal finances in order, at the expense of those who opted to stay out of this fiasco. That is plenty of time, especially when it is coming at the price of denying younger families a chance to get on the housing ladder.
As an aside, by the way, I don't see an understanding in your posts that higher interest rates lead to a stronger £ and cheaper imports. That's not a point for discussion, it's a fact.
Very funny Rant, but PeeBee's point makes a lot of sense!!
I once felt like you in the late 1980's when house prices went through the roof. I vowed never to buy a property and had dreams of living on a narrow boat! Now look at me! 25-years on owning 5-properties worth £800k and only a £245k of mortgages across all 5 !!
Things sometime look bleak, but the journey through life changes for good and bad sometimes. I was lucky that I bought two properties in the early & mid 90's and made some equity, but I bough one in 2006 and two in 2007, so made a loss on these three. Overall, I'm probably breaking even, so no big deal.
Okay back on topic!
Because much of our inflation is down to imports, the government will not reduce inflation by putting interest rates up, they will only risk sending our economy into a recession or depression! Oil and gas are not luxuries that we can choose not to buy, we need them and even if we refused to buy oil or gas, do you thing that the energy suppliers would drop their prices so that we would buy it again, thus reducing inflation, no of course not. They would simply sell oil and gas to other countries or reduce supply to keep up with demand.
You see, in a global market, the anti-inflation tools become less effective.
We are in a period whereby we need to reduce our debts. The hangover phase if you like. Many home owners are paying off credit cards, paying down mortgages with over-payments, which is made possible with lower interest rates. This is a good thing and the only losers are the savers, who have money in the bank anyway and are not going hungry!!!
What you are looking for is more pain on people who have mortgages so that more will default giving more repossessions and will less buyers able to raise a mortgage, this should bring the house prices down, which is what you ultimately want !!!
Forget it, it's not going to happen and you are using the "Poor old savers" argument to justify an interest rate hike.
You need to accept that raising interest rates will not stop inflation caused by fuel import prices.
BARRATTS SEEK CLARIFICATION OF BLAST SITE STATUS
Following the freak asteriod impact that wiped out much of southern England recently, Barratts has asked the interim United Nations-lead government whether the entire impact site can now be classified as brown belt.
"Obviously this event has opened up new possibilities for us," explained a Barratts spokesperson. "We are seeking permission to build a range of modern, family homes on this site which will be available from £399,000. Given the location, we anticipate high demand from post-apocalyptic hunter-gatherers as they scavenge in the vicinity for anything that is remotely edible."
rant: "My generation has been dealt a very poor hand with the current economic climate - sky high rents, little chance of ever buying a house and more unemployment than older people are facing. From that point of view, a crash and a reset will at worst bring them the same limited opportunities they have now. It might however bring about a much more positive future though for them / us."
Mate - it COULD be argued that either a full-on war; a global plague; or even the inevitable mega-meteor strike may bring the results you desire. A smaller population = more available housing; more employment. Any one of these would also almost certainly prolong the 'life' of the planet as we know it - so maybe one of these would be a more apt (however drastic they may seem...) solution to the ills of 2011 and beyond?
There are more than one kind of 'reset', I would suggest, to achieve the same outcome. And it isn't always Governments who have the last say...
(For the record, I won't be voting for any of them...)
That's where you and I differ Chris - you think the economy can be sorted out without there being a crash. I don't think it can be - interest rates are going to have to go up sooner rather than later. Households are being squeezed by the imported inflation from today's low interest rates as it us - building up pressure for a crash that higher interest rates haven't brought about.
Yes, there are innocent people caught up in all of this who were just trying to get on with their lives. There are also a heck of a lot of greedy people who jumped in, looking for a greater fool to buy their overpriced property from them. Now that appears less likely to happen, they are screaming for help from the government and Bank of England. I will not shed a tear for them.
My generation has been dealt a very poor hand with the current economic climate - sky high rents, little chance of ever buying a house and more unemployment than older people are facing. From that point of view, a crash and a reset will at worst bring them the same limited opportunities they have now. It might however bring about a much more positive future though for them / us.
And, yes, If I am putting across points that are in my interest, I am doing the same as you are ;)
I forgot to add something else. As we agree that it is important that either the savers or the borrowers have money to support local businesses and the local economy and we just differ on who that should be, then think about this.
More money has been borrowed than is sitting in banks from savers.
Mortgage interest rates are always higher than saving rates.
So if the BOE puts interest rates up by only 1%, the amount of money being sucked out of the hands of the UK population will be far greater than the amount of money pumped back in through savers.
I hate to say it again Rant, but your one sided views seem to say more about your personal situation than your grasp of economics. You are clearly frustrated, which is why you constantly post here and they are always on the same theme. You are anti-home ownership, anti-borrower and pro-govenment tax involvement to influence things in a direction that suits you.
"An economy that rewards indebtedness over prudence will go nowhere."
You seem angry that people have taken out mortgages to buy a home, which is something that is quite normal and has been for decades. Financial credit enables people to leverage themselves up to a better place. Think of it like an aeroplane and the space shuttle. An aeroplane can fly up to 60 thousand feet, but does it gradually over an hour of flight, yet burns only a fraction of the fuel used by the space shuttle to reach that height in less than 2-minutes. A mortgage takes 25-years to clear, but while it is being cleared, the family have a roof over their heads.
If I was in government and had to make the choice of raising interest rates, but hurting families with mortgages in the process, or leaving interest rates low, which angers savers who see little return on their savings, but who after all have lots of money already and are not going hungry, I know what I would do.
If you were in government and had to make that call, you would do exactly the same. Once we are through this mess and the economy started moving forward again, I would start increasing interest rates again, but right now it's steady as she goes captain.
Here are a few of our best exports:
Pharmaceutical and Bio-techs (Glaxo Smith Kleine, Astra Zeneca etc)
Defence/AviationIndustry (BAe, Rolls Royce Engines etc)
Food and Drink Industry (Diageo, Unilever etc)
Communications - (Vodafone, O2, BT etc)
As for savers giving money to banks for them to use for investment purposes, that's rubbish. An investment bank buys and sell stocks (Short selling) and can make billions of pounds over night, making any money invested by savers look like pocket money. Tell you what, lets all put all of our money in the bank tomorrow and watch what happens!!!!! The country will grind to a halt that's what.
Money is like the blood of an economy, keep it from moving and the body/ economy will die! Savers expect to be rewarded, because it is a system they grew up with, but it is outdated and they need to learn to use it differently. In 2004 I had £7000 of savings earning a little interest, but not enough to live on, but instead of letting it sit there, I used it to start my own business and this money got the business off the ground! 7-years on we have generated nearly a million pounds of turn over and employ some staff, helping the economy. We have paid hundreds of thousands of pounds in taxes to the govenment keeping hospitals open and some people in benefits. Our can do attitude has turned this small pot of money into a big pile of money that has helped us and helped this economy.
"Of course, higher interest rates would give this country's savers extra money to spend in the shops etc, thus creating jobs." Rubbish. Savers by their very title avoid spending money because as you say, they are "Prudent". They only spend the interest from their savings on the basics to survive. We are seeing old people withdrawing their savings and buying small houses to rent out as this would given them a higher return on their money! In doing so, they are also providing accommodation for families unable to buy. This is a win, win for all concerned.
What is this wonderful making and exporting thing you refer to? British manufacturing has long been surpassed in quality and price by those from other sources. There is not enough jobs in UK manufacturing for this sector to lead us out of recession.
We do however IMPORT most of our energy, which is paid for in devalued Pounds. Ergo, the steep rise in inflation we are seeing at the moment. Put interest rates up, the Pound increases in value and imports become cheaper. It's a radical theory that can be found in pretty much every business and economics text book.
Savers expect their prudence to be rewarded by lending their money to the banks for the bankers to make profits from. I find this much more economically sensible than those who rely on money growing on trees courtesy of never ending house price inflation.
Of course, higher interest rates would give this country's savers extra money to spend in the shops etc, thus creating jobs. This would offset the lost income of those who have to pay more on their mortgages through higher interest rates. An economy that rewards indebtedness over prudence will go nowhere.
Rant, the government strategy is to devalue the pound, making our exports more attractive to others, which will bring inward investment, yet anything we wish to import ourselves will be more expensive, so consumers will look to buying British. This is quite a clever plan if you ask me.
Unfortunately, to devalue the pound, they need to keep printing money (QE) and this is inflationary, especially when we need to import a lot of oil & gas.
Raising interest rates will kerb inflation to some degree, but in a global market, I do not see it working how it used to. Can someone please explain how raising interest rates will make people stop spending their money and lower inflation. Currently, prices must rise because oil & gas are rising, so everything in our shops costs more to make, more to harvest & more to transport.
People are already cutting out everything that is non-essential, so squeezing their finances further will achieve very little, other than raise their credit card balance.
As for the savers moaning about interest rates, this makes me mad. This is another system of supporting ones self that is out dated and needs scrapping. Why should sticking some money in the bank and expecting enough interest from this capital to support ones self, while the money just sits there doing very little. Sure the bank uses this money to lend to someone else, but it should be out there in society being spent in local shops, so that these business owners can hire staff, which creates jobs. People should reduce their dependency on further borrowing and pay down debts. Savers should use their money to live or invest it in other ways. Like setting up a business and really making their money work for them. Find someone with skills, enthusiasm and invest some money with/ in them and lets grow this country out of this mess.
Expecting a living out of savings, which were probably accrued from the property market at one time or another anyway, needs to end. Banks have got other ways of getting money to lend out. They don't just rely on savers.
By the way, many people out there are not benefiting from low interest rates. 4-of my 5-properties are still in their 5-year fixed periods with interest rates around 6% and we soldier on. The people out there that are benefiting are not necessarily about to get repossessed either, should interest rates rise. They are perhaps finding life a little more bearable in these tough times and are still able to spend some money keeping shops and other businesses open and this is what you fail to understand! You seem to think that the only people likely to lose out are over-stetched homeowners who should have never been allowed to buy a house in the first place, but you are wrong. If interest rates went up, anyone with any mortgage (And that makes up most homeowners) would suddenly have less spare cash to spend down the shops, putting millions more people out of work and the spiral down continues!
She'll probably be on the line to fund that bailout - she might not realise.
Daughter no.1 is on the way here. I've already decided that I'm not buying her a doll's house at these prices though.
Try telling my daughter that :0)
There's a rumour that the BOMAD is likely to need a bailout soon...
Yes - the condems could have taken action as soon as they got into power. You rightly point out the reason why they have a vested interest in keeping house prices high. Unfortunately their kids will not be priced out either as they are still prime candidates to be assisted by the BOMAD. If this was not the case there may be some appetitie to tackle the problem of affordability for future generations.
A five year political cycle would be long enough to make progress. The Condems should have taken action as soon as they got in power and then blamed the last bunch as the economy went through the painful but necessary correction
Of course they didn't because whilst in opposition they never spotted the problem and still haven't grasped it fully yet (notice Cameron, having seen today's inflation numbers in advance, began bleating yesterday for lower fuel bills - try raising interest rates instead to stem the imported inflation).
The other take is that several senior members of the cabinet are in their 40s - they've been handed a stack of equity whilst moving up the property ladder and their kids are too young for their parents to realise they are priced-out. They can't see the damage that today's house prices are doing.
R&R -Unfortunately a crash while in power is political suicide. So kicking the can down the road might mean it didnt happen on your watch and this is always the situation our leaders default to. Due to this I fear we are heading for economic situation similar to the one experienced in Japan. Indeed this may even the long term plan, It will allow people to slowly adjust to there homes no longer being cash generation machines and and graudually accept a lower standard of living.
I've lost thousands of Pounds of interest on my savings for a problem I didn't cause. My generation are being denied the chance to buy homes at salary multiples that existed just ten years ago. People are putting their family plans on hold and being booted out of their rented properties at a whim's notice courtesy of this country's poor tenancy rights.
The priced-out generation are losing their jobs too - where's the SMI for those in rental accommodation?
Don't for one second pretend that it is only homeowners that are paying the price for this completely avoidable mess. With record low mortgage interest rates, they've had it easier than most.
Those who have benefitted from high house prices like to wheel out the 'supply and demand' argument because it's simpler to understand. It also eases their conscience about the massive transfer of wealth they have been handed at the expense of the generation below them.
As someone else has said here, you could build three bed semis over every blade of grass in this country. Price them at an average of £250K and it will solve nothing. Print some funny money, hand it to the banks and scream at them to lend it at people wont make any difference to people who are scared of losing their jobs and are unwilling to take on ruinous amounts of debt.
The supply and demand argument also suggests that once the economy is sorted out, house prices will return to double digit % growth each year and that this will be completely sustainable.
The truth of the matter is that loose lending is far more responsible for why this country is in such a mess. The supply and demand argument conveniently ignores this, because it means today's level of house prices can be detached from the wider economic picture. Wrong, wrong and wrong again. There cannot be a recovery when the next generation are spending over 50% of their disposable income on either rent or a super-size mortgage.
However, to get the recovery started, we have to let the crash happen in the first place. Much better to have an awful 18 months to two years and rebuild from the ashes, rather than drag this out over two decades, Japan style. The alternative, which is being pursued now, is having inflation squeeze houshold budgets rather than mortgage payments. The long-term outcome for house prices will be the same, but the consequences for the economy of choosing this route will be far more severe.
@rantrave
You seem to ignore the misery that would be heaped upon those currently in homes you say they can no longer afford. Why on earth would you wish to see 300,000 families turfed out of their homes just so you can watch prices fall until they are at a level that suit your needs? I am pretty sure that the 300,000 people to whom you refer are not those responsible for the state of the economy yet they are the ones who would suffer if state help was withdrawn.
I have read many of your posts in the past and think you have made some valid points but this was not one of them.
So less government involvement - end the Support for Mortgage Interest Scheme which is currently keeping over 300,000 housholds in property they can no longer afford...
How about letting those banks, whose cheap lending got house prices and this country into the mess they're in, go bust.
While we're at it, lets end govt pressure on lenders to be kind to those who are behind with their mortgage payments.
You might be on to something here - less government involvement could indeed make a big step towards a return to affordable housing.
"Solution is simple, tax land banks that are being unbuilt on. Builders shouldn't horde land to keep land prices high. Taxing land banks will force large builders to sell land to smaller builders bringing prices down and produce more homes"
There are plenty of building plots about and the smaller builders are still not buying them to build on! We have had a plot for over a year now, with outline planning consent to build 9-properties on. Why are they not buying then, I hear you ask?
Smaller builders are not cash rich like the big boys. Many of them have struggled to break even with property they built near the peak of the market and in order to buy more land to develop, they need a massive 50% deposit to borrow money from the banks. Then they need more money to build the properties, again with another 50% deposit, before they can even think about selling them!
They are also scared to build in these uncertain times because they could get caught again, unable to sell what they have built, yet still have to pay the banks back every month. They are not stupid, lie low and wait for conditions to improve!
This taxing culture has got to end! Why stupid people on here feel that everything is down to the government to sort out!!! Tax builder land banks, cap benefits etc. Way too much government involvement. Builders will not build property if these buildings are likely to stand empty unsold and unwanted.
The plain and simple truth is that the government has sold most of it's council stock, so people now unable to buy, need somewhere to live & rent. If most of the rental property is in private hands, private landlords will charge as much as they can get away with. Supply & demand. These landlords got into property for financial reasons, not because they are charities wanting to help the poor people, so now they will reap the rewards. If the government is feeling flush (Which is isn't) it can commission the builders to build more council stock and remove some of the demand for rental property. Then property rents will start to fall.
Or it can re-capitalise the banks and get them to start lending again. Many tenants will then choose to buy instead of rent again, driving rents down, but property prices back up!
Until this difficult financial cycle has run it's course and the global economy starts to improve again, I fear that little will change and we just need to ride this mess out.
I am sorry Mr Shapps. You can build even 200 million houses a year, but if they are priced at £250000 on average, they will stay un-sold, just like the other properties currently on the market.
Hear, hear! Cheaper rents and cheaper housing is great news for everyone including estate agents who get to sell these new 200,000 houses each year. It's a win win win situation all round. Lets hope selfish NIMBYS are not allowed to get in the way of this.
PeeBee fair point! I am sorry and will report myself for abuse!!!
Anna: I am somewhat confused. Please enlighten me as to WHERE Brit1234 made this smidgeon of sense you refer to?
PeeBee, Brit1234 made a little sense for first time, (little!! note) and you rubbish him or her!!!
"Solution is simple, tax land banks that are being unbuilt on. Builders shouldn't horde land to keep land prices high. Taxing land banks will force large builders to sell land to smaller builders bringing prices down and produce more homes."
Oh, Brit1234 - how keen you are to display how little you understand...
LOVE the grammar, by the way! Top of the class.
If anyone is wondering why more houses do not get built by small developers, simply get your hands on a copy of the latest building regs (all volumes), and try and make an appointment with a planning officer.
You quickly see that the barriers the government put in the way of the free market are such that it is no free market at all.
Solution is simple, tax land banks that are being unbuilt on. Builders shouldn't horde land to keep land prices high. Taxing land banks will force large builders to sell land to smaller builders bringing prices down and produce more homes.
Correct problem - there are alternative solutions out there:
Cap housing benefit / end the SMI scheme / put interest rates where they need to be to fight inflation (so, north of 5%) / have all repo'd property put to market in six months / make any site that has been landbanked for more than 18 months subject to extra tax.
These steps would highlight that the only area where there are real shortages is the South East. Instead of building on greenbelt there, create incentives for businesses to relocate to other areas of the country. A large part of that could have already been done by using the £75bn QE money to improve infrastructure in the Midlands and North England.
Good to see the govt finally has the desire to tackle this problem. Would be great to see them trying to understand why this problem has come about.
...yet there are over 750,000 empty properties in the UK???