Mark Wadsworth: Interesting statistics in yesterday's Evening Standard

Thursday, 28 April 2011

Interesting statistics in yesterday's Evening Standard

14 comments:

Lola said...: "...the number of first time buyers has slumped by three-quarters..." Seems fairly rational to me. Why would you put a deposit into a house if you thought prices were going to fall?; 28 April 2011 at 09:57
View from the Solent said...: "Many others are finding ways to help themselves - by saving harder or waiting longer"

Wow! What an exciting innovation. Do you think it might catch on?; 28 April 2011 at 10:03
Mark Wadsworth said...: L, the full article is full of tales of young couples who have managed to 'get their foot on the property ladder' by paying north of £200,000 for a two-bed flat.

VFTS, that's a nice bit of Homey propaganda there: "If young people want a house they should save up like we did when we were young".

The fact is, most homeowners who bought more than 15 years ago had to save very little towards a deposit; their mortgages paid themselves off (much cheaper than renting, house price gains etc); and the people dis-saving like made are the baby boomers who are now doing mortgage equity withdrawal.

Y'see, argument number 87 in favour of LVT is that people will be encouraged to save up in the good years to be able to pay the LVT should they lose their jobs in the bad years. Under current rules, people are paying too much income tax in the good years and none in the bad ones and have saved very little (why would you, when your house is 'doing the saving for you' - all at the expense of future generations)?; 28 April 2011 at 10:11
Lola said...: MW - Yeah, thought it might be....; 28 April 2011 at 10:45
Electro-Kevin said...: This comment has been removed by the author.; 28 April 2011 at 10:48
Mark Wadsworth said...: EK, the £250m divided by 600,000 is a princely £416.66 each (presumably £833.33 for a couple?).

The Lib-Cons cheerfully admit that the £250m will only 'help' house builders shift 10,000 units of slow moving stock onto gullible youngsters.; 28 April 2011 at 10:51
Electro-Kevin said...: A shortfall of 600,000 buyers.

£250m divided by 600,000 = not very much in deposits.

But all the same - why artificially inflate a market when the best thing to do is let it drop ?; 28 April 2011 at 10:52
Electro-Kevin said...: Yup. Realised my mistake and deleted it. (Correction added at 10.52)

Blimey ! You're quick off the mark ! It was barely there for 30 seconds before I realised my howler.; 28 April 2011 at 10:53
Steven_L said...: On my numbers I'd need a £100k deposit to buy anything worth owning down here.

But I could invest that £100k in good quality stocks or income funds and use the dividends towards my rent instead.

I reckon in 10 years the divis would be more than covering it and the capital would have been exposed to worldwide GDP growth rather than Uk GDP growth.

I don't have £100k, but if I did it would be a no brainer.; 28 April 2011 at 10:55
Mark Wadsworth said...: EK, the maths of it are completely insane, as we can clearly see, it's easy to get confused.

"why artificially inflate a market when the best thing to do is let it drop ?"

Putting "bankers rule the world" conspiracy theories to one side, it's basic UK electoral logic, established over past forty years or so:

a) If house prices are going up, you get re-elected.

b) If house prices are going down, the other lot get elected.

The only exception to this was John Major in 1992, who didn't even bother trying to prop up hosue prices (top man he was too!), but the bankers (who rule the world) made sure that the Tories stayed out of power for 13 years as a punishment.

Murdoch (another over-powerful monopolist and corporatist) only started backing the Tories once it looked like a house price crash was in the offing.; 28 April 2011 at 10:58
TheFatBigot said...: I'm not sure the electoral argument has much going for it.

40 years ago was 1971. Heath was in. The next election was February 1974. House prices weren't a significant factor then or in October 1974. A bubble was starting but was so small it was irrelevant in the "who runs the country" election of February and the October follow-up.

By May 1979 the last thing on anyone's mind was house prices, the country was in a complete state after the unions' games over the previous year and the IMF's interjection before that. 1983 was all about the start of the Thatcher reorganisation of the country, Foot and the Falklands' effect.

1987 was the first election in the last 40 years in which it could be said that house prices were an important factor. There was a bubble element due to Nigel Lawson's manufactured boom. No doubt this gave the Conservatives some votes, but I don't recall increased house "values" having anything like the popular impact they achieved 15 and more years later.

1992 saw John Major returned despite the biggest housing crash in the lifetime of those then voting. He had the advantage of being against the moron Kinnock, but house prices were not part of the debate. No one was suggesting that 1989 values were anything other than artificially high so the crash was seen as reality asserting itself.

By 1997 the bubble had not reinflated and Labour was not suggesting that it should be elected because it would increase house prices.

So 1992 and 1997 don't fit the theory.

The recent bubble was hardly underway by 2001.

2005 is a different matter. The supposed end of boom-and-bust combined with massive withdrawal of fictitious equity generated meaningless additional GDP and created an illusion of increased wealth. 2005, and only 2005, can be cited from the last 40 years as an election won by house prices.; 29 April 2011 at 00:57
Mark Wadsworth said...: TFB, thanks for that summary, but yes it does:

House price bubbles burst in:
1973
1979
1989
2008

Changes of govt (from Lab to Con or vice versa):
1974
1979
1997
2010

It is only 1992 which breaks the pattern and further, I didn't say that the absence of a bubble means you get kicked out, I said that a bubble bursting gets you kicked out.

So 1992 is the only exception, but seeing as the media is controlled by the big corporatist-monopolists (i.e. Murdoch) who is on the same team as the HO elite, is it any surprise that they backed Major in 1992? They backed him because Kinnock would've been worse.; 29 April 2011 at 10:26
Tim Almond said...: I think the other thing is that HO has become even more pronounced over time as homeownerism has grown.

The last 2 booms were definitely worse. The deregulation of financial services under Thatcher brought about higher LTVs which raised prices more sharply and under the pension tax changes under Brown and lax regulation brought about the massive boom/bust that he said wouldn't happen.

I don't think it's about the bankers running things. It's that people enjoy the illusion of wealth in a boom and once the proverbial hits the fan, they blame the government (which is somewhat deserved as the government takes the credit for the boom).; 29 April 2011 at 14:36
Mark Wadsworth said...: JT: "people enjoy the illusion of wealth in a boom"

Maybe it is as simple as that, which again shows how stupid people are - high house prices make the vast majority poorer not richer (a net gain to the bankers must be a net loss to everybody else). Iit's only sell-to-renters and downsizers who really win, and those who have no children or grandchildren to be priced out/burdened with debt.; 29 April 2011 at 16:23

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