Thursday, 22 December 2016

I'm surprised it's still as high as twenty per cent.

From the BBC:

Home ownership among 25-year-olds has fallen by more than half in 20 years, according to council leaders.

A survey carried out for the Local Government Association (LGA) by estate agents Savills showed that just 20% of those aged 25 own their own property, compared with 46% two decades ago...

The Home-Owner-Ist target is zero percent - unless they are helped out by Bank of Mum & Dad taking out a second mortgage on their own home - so they've still some way to go.

The LGA said government needed to tackle the shortage of affordable homes to rent and buy. It says it found that, on average, private renters pay 34% of their household income on rent, while social and affordable renters pay 29%. Homeowners, however, spend an average of 18% of their household income on their mortgage.

False comparison. The average amount paid in mortgage repayments is irrelevant, the question is, what percentage of your income would you have to buy a home today? Probably about the same as if you stayed renting.

But the average size of a deposit to get a mortgage is 62% of annual incomes, or 131% in London.

'Nuff said.

Responding to the LGA survey, a Department for Communities and Local Government spokesman said: "We've halted the decline in homeownership, with the number of first-time buyers up nearly 60%, and over 335,000 households helped into homeownership through government-backed schemes since 2010. Our upcoming Housing White Paper will clearly set out how we plan to build the homes this country needs."

That's the sickening bit. The owner-occupation rate is steadily drifting downwards as planned, and to maintain a 75% owner-occupation rate there have to be around 300,000 first time buyer households every year, not 335,000 over six an a half years. And they chuck in the 'lack of supply' myth just to emphasise how little they really care.


Shiney said...


'The owner-occupation rate is steadily drifting downwards as planned' -

Is it planned? Not sure. I think they are just incompetent.... or is that too kind?

By the way I'm now in BoMaD mode having had to help #1 offspring buy a flat in London.

View from the Solent said...

Don't disagree with anything you've writen, but there is another factor involved. 20 years ago how many 25 year-olds had been in full time education to the age of 21+ and were loaded with student debt?

Mark Wadsworth said...

Sh, it is planned. The aim is that rents and prices should increase as much as possible, knowing full well that the result is either falling owner-occupation rates or much larger mortgages, which in turn leads to financial crises, which in turn leads to bank bail outs.

Sory to hear about BoMaD. I hope you didn't have to remortgage.

VFTS, good point, those student debts can't help, but over 50% of of 25 year olds didn't go to Uni, so have no student debts and we can safely assume that very few of those have bought either.

Bayard said...

"The aim is that rents and prices should increase as much as possible,"

For which the lowest possible interest rates are required. So, happy coincidence or deep-laid plan? I am not convinced that TPTB are organised or competent enough for the latter.

As I keep saying, when the rise in bond yields forces a rise in interest rates, it's all going to go into reverse.

Mark Wadsworth said...

B, rents are unaffected by interest rates.

As to interest rates, with the benefit of hindsight, I think that the high rates of the 1970s and 1980s were a blip, we are now returning to 'normal' as they were for centuries. Maybe up a percent from here, but a Homey government can easily smooth that over with MIRAS or whatever.

DBC Reed said...

Memorable figures for home buying.Should prove useful at dreaded Xmas with the daughter-in-law's Tory parents.
(Don't forget that Sayid Javid is supposed to be producing Housing White Paper in New Year : supposed to have coincided with Autumn Statement.Judging by Liam Halligan's comments in Telegraph and Spectator, this will be a bloodbath.)
The Homeownerist coup was planned.The Tories, having promoted Big Knickers and then having lost control of her, were intent on keeping wages low, but this suppressed effectual demand so getting the awful oiky classes to buy public-sector housing meant that they could promote vigorous house price inflation so the awful oiks could take loans out on "their property" and keep economy bumping along the bottom. As is happening now. Meanwhile the banks get to own the oiks and their houses. What's not to like from their point of view?

Mark Wadsworth said...

DBC, try highlighting one of the fundamental contradictions in the stated aims of Home-Owner-Ism:

1. Owner-occupation is good, we should encourage it.
2. House price increases way ahead of wage growth is good, we should encourage it.

If you want 1, you want to "Get the houses up and keep the prices down" (Tory manifesto, 1968). If you want 2, then clearly you can rule out 1.

Lola said...

DBCR and, be nice. A smiling assassin is much more effective.

Lola said...

Coming at the other way about, what hacks me right off is that all this dosh going into land means it's not going into production - wages and capital investment.

Why the 'good blokes' on left and the right can't see this defeats me.

Mark Wadsworth said...

L, exactly. I know we are just repeating ourselves, but if you are asked for evidence that Georgism works, point to the worldwide success of Georgism Lite and say that this was only a quarter of the way there, how much better would things be if we went a bit further? A lot further? All the way?

Lola said...

MW. Oooooo. All the way. Mmmmmmmmm.

DBC Reed said...

Tried to read a Tory manifesto :not something I've done very often. I could not find a 1968 one but did find 1966 (Heath) which does indeed say "Get houses up and keep prices down" (more or less);it also says their annual housing target is 500 thousand and that they will be sorting out land supply. I am somewhat shocked but cannot face re-reading it to check.

DBC Reed said...

@MW Mind you, Wilson then in power, said in 1965 that he aimed to see 500,00O houses built; he also said in same speech that you couldn't build houses without land and looked to a Land Commission to sort this out. (But material on the National Archives site says this commission was watered down during consultations, from "adversarial" with landowners to "advisory".
In his 1965 speech Wilson said he was surprised to hear that the Tories were, at the time, proposing a levy on the profits of land.
All very odd.

Bayard said...

"we are now returning to 'normal' as they were for centuries. Maybe up a percent from here"
Well the historical average (from here) is 5%, so it's a bit more than "a percent".

"what hacks me right off is that all this dosh going into land means it's not going into production"

I've been saying this for years: the money that financed the industrial revolution, the spare cash of the monied classes, is now tied up in overpriced land. However you can see who benefits: emerging businesses now have to borrow from the banks.

Mark Wadsworth said...

DBC, OK, it was 1966 not 1968, it was the BBC that flagged this famous phrase up a while back. The Tories have no principles whatsoever apart from being (re)elected and at the time there were more votes in Georgism Lite than in Home-Owner-Ism.

B, OK, but we will see. As you have said yourself, it is credit availability rather than interest rates that determine house price (increases), and the govt can twat about with MIRAS and FTB loans and so on to keep the bubble going indefinitely.

DBC Reed said...

For reference the 1966 Heath Conservative Manifesto reads in its relevant passages:
"First, we will raise the housing target to an annual rate of 500,000 houses by the end of 1968. We reached our target before and we will hit it again. We will make use of every new method that works to get the houses up and keep the prices down. And there will be major reforms in planning procedure to increase the supply of land for building"
But PM Wilson had already announced the same aims in 1965!
NB The reference to hitting housing target before must be to Harold Macmillan post-war hitting the 300,000 target much to everybody's surprise, pretty well securing his reputation. Strange that none of the Tory rabble think of repeating the trick. Sayid Javid has got left with the housing target hot potato and has to produce a Housing White Paper with house prices so unaffordable now he cannot let market forces (minus Adam Smith's Fucking Great Land Tax)wreak any more havoc. What he should do is propose LVT and tell the Tory shambles to shove it, as there is no alternative and what do they propose to do about it? He should be prepared to bring government down and form an administration from numerous Labour and Liberal LVT suspects and any Conservatives who will do anything for power.

Lola said...

B and MW. Going back to interest rates for the moment historical 'real' lie in the range 3 to 5%.

Interestingly that was the rate - plus a risk %age - that you could borrow at for a private loan, most often a mortgage. But more informative is the rate at which Sovereigns could borrow - upwards of 12%. In other words they were a bad risk. It took all of Gresham's skill to arrange loans for QE1 at 'only' 12%. (Also FYI Henry8 had capped rates at 12% by usury laws).

This was the case up until 1694 when the Bank of England was handed a special privilege on the issue of bank notes and promptly arranged a loan for the government at 8%. It's been all downhill since then.

Generally this reinforces my view that Central Banks have two jobs. One to borrow for the government at rates well below that they would have to pay on the free market, and two, work out how not to pay back those loans (aka 'inflation).

Shiney said...


Agree with most if not all... just can't see how the incompetent tossers could plan anything, let alone such a cunning plan.

@Mark.. re BoMaD - means I have to work a bit harder, longer than planned and take less holiday, not buy a new bike this year etc etc.

Lola said...

S. Yes. They are 'incompetent'. But what I think 'they' do is establish a 'set of conditions', mainly by granting special privileges,

DBC Reed said...

"The Bamk of England History and Functions" pamphlet which is reprinted on the Net says page 9 that the embryonic BofE was threatened by a rival Land Bank. I seem to remember reading somewhere that this outfit was secured on land valued equal to its capital.
Know anything about it?
And a jolly good Christmas to you!

Anonymous said...

«"The aim is that rents and prices should increase as much as possible,"

For which the lowest possible interest rates are required. So, happy coincidence or deep-laid plan? I am not convinced that TPTB are organised or competent enough for the latter.»

Quotes from G Osborne and D Cameron:

«A credible fiscal plan allows you to have a looser monetary policy than would otherwise be the case. My approach is to be fiscally conservative but monetarily active»
«“Hopefully we will get a little housing boom and everyone will be happy as property values go up,” George Osborne is said to have quipped at a Cabinet meeting earlier this year.»

«It is hard to overstate the fundamental importance of low interest rates for an economy as indebted as ours… …and the unthinkable damage that a sharp rise in interest rates would do. When you’ve got a mountain of private sector debt, built up during the boom… …low interest rates mean indebted businesses and families don’t have to spend every spare pound just paying their interest bills. In this way, low interest rates mean more money to spare to invest for the future. A sharp rise in interest rates – as has happened in other countries which lost the world’s confidence – would put all this at risk… …with more businesses going bust and more families losing their homes.»

It does not get clearer than that. Actually it does :-), quote from A Haldane, Chief Economist of the Bank of England:

«Haldane believes that property is a better bet for retirement planning than a pension. “It ought to be pension but it’s almost certainly property,” he said. “As long as we continue not to build anything like as many houses in this country as we need to ... we will see what we’ve had for the better part of a generation, which is house prices relentlessly heading north»

But the best and most honest quote is from the commenter on the "The Guardian":

«To be fair the house owning majority will never vote for it either. Any solution that improves the housing situation for those who don't own them will screw those who already do.
I will put it bluntly I don't want to see my home lose £100 000 in value just so someone else can afford to have a home and neither will most other people if they are honest with themselves»

Mark Wadsworth said...

L: "Central Banks have two jobs. One to borrow for the government at rates well below that they would have to pay on the free market, and two, work out how not to pay back those loans (aka 'inflation)."

Seems like a good summary.

Sh, re BoMaD, they have got you where they want you, you are working harder for less in return and less money for the real economy (holiday, new bikes etc), question is, who is benefitting..?

DBC, interesting.

B, yes, but with two kids rapidly growing up, I'd be happy for house prices to collapse, if that benefits millions of other under-40s, then so much the better.