Headline. "Boris Johnson's 95% mortgages will put Britain back on course for a house price crash".
By line: Josh Ryan-Collins
A few errors though.
1. This is not a failure of weak or not enough regulation as Mr R-C asserts. I run a retail FS business and I absolutely know that regulationism, was, is and continues to be, complex, onerous, massively costly for clients and an almost complete failure. In other words there's a lot of it so the lack of it cannot be a cause of high house prices.
2. The house price boom between 2000 and 2008 was when the Gruniads favourite idiots were in charge. It was driven by the arbitrary expansion of money and credit. Also IMHO helped along nicely by the FSMA 2000 which eviscerated the Bank of England's supervision powers and passed them to the FSA, which failed. From where I sit I could watch all that happen.
3. This is all driven by bad money, to which the Gruniad is either philosophically unable to grasp (it being avowardly lefty) or willfully blind.
4. The recent Stamp Duty threshold increase policy is also driving the current mini-boom.
Otherwise very good. And agreed generally. (Oh and excluding all that guff about state investment banks are similar)
11 comments:
I see you've worked out how to do line breaks. That is a right old faff!
Re 2, the house price boom was the result of scrapping all the old regulations that constituted "Georgism Lite" in the 1980s and 1990s. The final match on the bonfire was in 1997 when they made it easier to evict tenants, as a result of which banks piled into buy-to-let mortgages.
I know we don't like regulations or interference in free markets. Goeorgism Lite was loads of regulations and restrictions, but housing never is or was a free market, so the ends* justified the means.
* Low house prices, small stable banks and high levels of owner-occupation.
Concerning Georgism Lite, it did have the disadvantage that it was almost impossible to find anywhere to rent.
B, sure, but who rented? People in their teens and early twenties. You can tolerate sharing something grotty with a couple of idiots or being a 'lodger' at that age. By your mid-20s you just bought your own home and did it up nicely, pay a small deposit and it was cheaper than renting (and much nicer). Or you had qualified for a council house, which was not as nice but even cheaper than buying.
re 3, "bad money". It wasn't "bad money" looking for a home. The end of Georgism Lite created a vast black hole in which "bad money" created itself.
MW. I disagree about that. It's a combination of de-Georgification PLUS bad money. Money has been bad from, arguably, 1913, 1916 and definitely from 1971. GBP has declined in value by 98% since 1945 - ish, bulk after 1971.
De-Geogification and Bad Money are opposite sides of the same bad Penny...
(Come to think of it 'Bad Money' would be good name for a band.)
L, well yes and no. If the govt creates a situation where indebtedness arises, then that is all the raw material you need to create "bad money" (i.e. money secured on not very much).
Extreme case - they allow slavery again. Slave traders capture slaves and bring them in to the country. They sell them to people who have borrowed money to buy them. The owners can just exploit them - or they could sell them to somebody else who borrowed money, or they could allow the slaves to buy their own freedom (not sure how, but it did happen).
So there are loads of loans secured on slaves, with corresponding bank balances held by slave traders.
Then the government comes to its senses and abolishes slavery again - those debts are now unsecured, the slaves who bought their own freedom have wasted their money etc. To match it out, the banks would waive the loans and cancel any bank balances held by slave traders - but what if they have spent the money?
It would be an unholy mess.
Mark, I'm not sure how being young makes not being able to find anywhere to live less of a problem.
B: "not being able to find anywhere to live"
Provided you have a steady job, you could and can always find *somewhere* to live. Without a steady job, you were and are f****ed anyway. The Homeys need some token homeless on the streets pour encourager les autres.
@Bayard
I am not sure that it was difficult to rent before 1997. I rented then and so did others I know. I am not sure how the rents compare though.
LF, my recollection is that things had eased up quite a bit by the 90s, although I do remember finding it hard to find anywhere to rent in London in the mid-90s, which led me to buy somewhere. I do remember my main motivation in buying was the difficulty of finding a place to rent. I had been a lodger, then my landlord wanted to sell the house, so was looking for somewhere else and there really wasn't a lot on offer. However, back in the early 80s, when I was a student, it was much worse. The Rent Act had severely limited the amount of accommodation on offer and students were for ever going to the council and getting the rents reduced, which would result in the landlord selling as soon as the students left.
As always the detailed technical means used to enable high housing cost inflation don't matter, the principal points are:
* There was a new political will to make housing costs rise rapidly to reward/induce voters to switch to vote to the right (whether Conservatives or New Labour).
* The main policy tool for that was to spend enormous amounts to attract jobs to the south-east and London, as property inflation in the rest of the country was absent or negative.
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