Home-Owner-Ism achieves important milestone

From yesterday's Evening Standard:

Ninety per cent of couples under 40 with children in London cannot afford to get on the housing ladder*, it emerged today. Analysis by a government housing advisory body found that as an average figure across the capital only 10 per cent of young families could afford to buy a suitable home... The figure of 10 per cent in London compares with 21.4 per cent in the South-West and 23.8 per cent for the South-East...

Typical first-time buyers have seen average deposits soar from 16 per cent of annual income in 2000 to 64 per cent last year. In addition, affordability has got worse as mortgage lenders reduced the loan-to-value ratios — the amount borrowed in relation to the value of a property.

The study by the National Housing and Planning Advice Unit concludes: “During the past decade there has been a deterioration in the affordability of home ownership.”

I wonder, is this enough for the Home-Owner-Ists, or would they like prices to rise the stage where only five per cent can afford a home? What is their end-game? At least this puts paid to the idea that Home-Owner-Ism is about 'encouraging homeownership', as it quite clearly isn't - unlike my policies which clearly are.

* The irony being of course that most people, by definition, can afford to rent. So what the Home-Owner-Ists appear to want is a situation where only the wealthiest can afford to buy properties, but will then get a miserable rental yield from it. What's the point of that then?

Economic illiterates of the day (8)

First up is Prof Stephen Nickell:

A year ago he was bravely forecasting that house prices would rise to ten-times-income by 2026. Six months ago he had toned this down slightly and solemnly told the House of Lords that prices might 'only' rise to over nine-times-income by 2026. Here's the same chap again, solemnly predicting that house prices are now on the slide (oh, so he noticed!). And, apart from being wildly out with his original predictions and not apologizing for that in any way, he appears to think that house price falls are a bad thing: "Families must wait until 2015 for the property market to start booming again". For young couples who'd like to start a 'family' these price falls are a most wonderful thing!
.............................................
Next up, Kate Barker:

She is the Government stooge who wrote the Barker Report back in 2004 and came up with the 'target' of 240,000 new homes a year*. The delectable Caroline Flint** referred to this as if it were Gospel in her recent FT interview with the FT:"The need to get up to 240,000 homes a year is as relevant today as it was yesterday and will be as relevant in the future, based on very detailed evidence Kate Barker pulled together demonstrating that we hadn't built enough homes."

Kate Barker has had four years to come out and distance herself from her earlier crap*** - but not much chance of that happening, is there?
.............................................
What is so terrifying about all of this is that Prof Stephen Nickell and Kate Barker have both served on the Bank of England's Monetary Policy Committee.

Jumping Jesus H Jack F***ing Flash, with knobs on, are these really the best people they can find?
.............................................
* To be fair, there is a lot of useful research in the original report, you can sort of imagine her sitting back and saying "F*** it, what we need is liberalisation of planning laws and/or Land Value Tax" but like that other government stooge Sir Michael Lyons, she only dared mention these possibilities very briefly.

** Yes of course she's an economic illiterate as well - she's a Labour politician, what do you expect? Her bright suggestion is "pressing ahead in the area where she believes she can make a difference - using the clout of public sector bodies to help housebuilders, not only by buying thousands of new-build homes from them, but perhaps by changing payment terms so registered social landlords pay more upfront. The move will be welcomed by the beleaguered industry, even if it is not enough radically to transform its fortunes."

Nice one, Caroline! And seeing as sales of cars, holidays, furniture etc will no doubt fall as well, how about doing something to help the "beleagured" car manufacturers, travel agents or furniture shops?

*** For a pleasing contrast, see Lord Joel Barnett, who has spent half his life "actively campaigning for a reform of his own formula".

"CML predicts 7% house price fall"

Firstly, won't this sort of prediction become a self-fulfilling prophecy? What's the point of buying a house, paying 6% interest and suffering a 7% capital loss if you can rent a house for a typical rental yield of 4%?

Secondly, in calculating this, presumably all they did was stick a ruler on a graph and extrapolate - according to the April House Price Index published by the Halifax/HBOS (one of the CML's largest members), prices are down 5.3% since their peak in August 2007. 5.3% ÷ 8 months x 12 months = 8%.

Finally, although the recent past is usually a good guide to the near future, the recent past is not a good guide to the distant future, which is the mistake that Prof Stephen Nickell made, who a few months ago solemnly swore that house prices would rise at 1.5% a year faster than earnings for the next 18 years*. Has he resigned his cushy taxpayer-funded job with the 'National Housing and Planning Advice Unit' in shame? Nope, thought not.

* 9.3 ÷ 7.07 = 1.32, the 19th root of 1.32, =1.32^(1/19) = 1.015

"Gordon Brown adviser Stephen Nickell fears mortgage rationing"

This Nickell character is a former Bank of England policy maker and professor at Oxford. And, it would appear, either a complete moron or a purveyor of propaganda and lies on behalf of HM Gummint. Or probably both.

A few months ago, he presented written evidence to the House of Lords saying that "...the house price to income ratio would rise from 7.07 to 9.3 by 2026 as indicated in my evidence".

So, bearing in mind that prices had already started falling in the second half of 2007, he can shove his clever formulae up his a*se, either he's a moron who stuck a ruler on the chart...
and somehow arrived at a ratio of over 9 or just as likely, he was being paid to fabricate evidence to support HM Gummint's plan to "build two million homes". The way things stand, home builders have downed tools; I'd love to see assorted cabinet ministers don hard hats and boots and get cracking!

In today's twattish outburst, The Great Economist is whining on about 'mortgage rationing', er, even in a free market, there is rationing - it's called price rationing, the best form of rationing wot is. Again, either he is a moron who doesn't understand this or just as likely, he is being paid to fabricate evidence to support HM Gummint's plan for taxpayer subsidies to banks to try and desperately shore up house prices at their current ridiculous level, because The Goblin King knows too well that Andrew Marr's accusation, that he had ridden on the back of house price inflation and the credit bubble for the last eleven years was absolutely spot on.

h/t Jack C at HPC.