Wednesday, 26 April 2017

Home-Owner-Ists 1: Economic reality 4.

From City AM:

New stamp duty rules are causing landlords to sell up in droves

An unforced own-goal right from the kick-off there. The extra 3% SDLT for non-owner occupiers might deter new landlords, but existing landlords are more likely to hang on to what they already own.

Last year the government introduced new rules meaning landlords could no longer claim relief on interest payments on their mortgages...

Another own goal in the third minute. They *can* claim relief, it will just be restricted to 20% (to be phased in over the next few years).

... at the time landlords warned it would put people off putting their homes up for rent, pushing up rental prices.

One apiece there, everybody agreed it would force a few highly leveraged landlords to sell up; followed by a foul in the Homey's box and a penalty opportunity for Economic Reality.

Economic Reality's best striker is trotting up to the ball... the decider is, will more or fewer homes be up for rent and will rents go up or down? Homeys says yes, Economic Reality says no - when landlords sell up, it will be higher earning tenants who buy them, thus leaving a smaller pool of lower earning tenants, putting downward pressure on rents. This is quite the opposite of the Disappearing Homes Conundrum.

However, the figures also showed the supply of rental stock increased eight per cent in the year to March, from 169 properties per branch to 183. The figure was flat on February.

Back of the net! Landlords who aren't selling up need to wring every penny out of all the vacants they own. An unexpected but welcome impact (the reduced tax break acts a tiny bit like Land Value Tax).

The number of tenants negotiating rent reductions also rose, with 3.6 per cent of agents saying they had witnessed tenants knocking down prices in March, compared with 2.2 per cent in February.

Some people are on the pitch. They think it's all over...

A quarter of agents said landlords had raised rents in March, down seven percentage points from March 2016.

It is now!

Tuesday, 25 April 2017

There's a right way and a wrong way to do everything.

The right way

From a London Assembly press release:

Recommendations include:

• The Mayor must take a visible lead in tackling FGM. The delivery of the Police and Crime Plan must demonstrate this commitment and drive a multi-agency response to FGM.

• A pan-London campaign to raise awareness of the real dangers of FGM, signposting women and girls to the support they require.

• Communities affected by FGM should be engaged to raise awareness, strengthen community-based prevention work and provide training for professionals.

• The Mayor must support the provision of bespoke training for London’s frontline practitioners.

• Support should be given to the police, health, social care and education services, voluntary organisations and communities.

The wrong way

From Sky News:

Mandatory checks are already law in France, which has had far greater success prosecuting FGM cases. Although it has been illegal in the UK since 1987, there have been no successful prosecutions.

Ms Parker said: "All these measures to combat this despicable crime are already law in France, a country that has a far, far better record than us on FGM. Not only have they proven effective both in protecting girls in France from FGM, they also help provide essential evidence to mount prosecutions where FGM has taken place. It is time the United Kingdom caught up."

Monday, 24 April 2017

Fun Online Polls: North Korea; The French presidential election

The results to last week's Fun Online Poll were as follows:

How would you prefer Donald Trump to deal with North Korea?

Stop ramping up the rhetoric and just ignore them - 28%
Try and persuade PR China to withdraw support - 44%
Continue with gunboat diplomacy - 6%
Drop a nuke on Pyongyang - 13%
Launch a full-on invasion - 2%
Other, please specify - 7%

Good, I voted for one of the first two (I think the second one), having read around, that does seem like the most sensible option.
This week's Fun Online Poll, before it's superseded by events:

If you were voting in the French presidential election:

Macron - the Europhile former Rothschilds banker and Socialist minister, whose campaign was apparently funded by Goldman Sachs.

LePen - the other one..

Vote here or use the widget in the sidebar.

"Central London housebuilding collapses 75% as prices continue to fall"

From Property Investor Today:

The number of new homes breaking ground in central London has plunged by 75% year-on-year as house builders put planned projects on hold, and in some cases, scrap them altogether, in light of falling prices in the capital.

According to fresh data from JLL, just 1,270 residential properties were started in zones one and two in the final quarter of 2016, the lowest total for five years, as the “particularly low” figures seen in central London during the first three quarters of the year continued.

Stamp duty, in particular, continues to have a detrimental effect on the housing market in central London where properties command a price premium, resulting in a 10% levy up to £1.5m and 12% above that figure, which largely explains why fewer property transactions and lower prices are being achieved.

The number of homes changing hands in central London has been plummeting, illustrated by the 24% drop recorded in Q4 to just 1,880 transactions, while prices for newly built homes have fallen by 5.7% year-on-year, JLL found.

As Dinero commented to my post of Saturday: You don't need collusion and meetings for effects that are similar to that from a cartel. Just a restricted number of similar minded people with the same goal and information.

The end effect is indeed the same. When new homes are built and sold, it depresses prices in the very short term. Developers have found out by trial and error that this effect can be minimised if only one new home is sold for every nine existing homes bought and sold 'second hand', which is why they cap their output at this level. So if buyer interest falls, prices and volumes fall, and developers put projects on hold, maintaining the one-to-one ratio.

A explicit cartel is required to restrict supply and maintain prices if supply restrictions mean current revenue is lost which cannot be clawed back in future years. If hairdressers collude to restrict supply and push up prices, then people will let their hair grow longer between visits or learn to cut it themselves. Overall, hairdressers will lose revenue. Whether their profits are increased by this tactic depends on whether the reduction in marginal costs is more or less than the fall in revenue.

But the large developers are just land bankers, so they don't need to worry about whether they realise the profit from a site this year, next year or some years into the future. They can only sell each site once, there is no loss of revenue and as the land element is pure profit, there is no loss of profit. This also explains why the cartels for oil and diamonds have been relatively effective - you can only extract and sell oil or diamonds once.

Saturday, 22 April 2017

Reader's Letter Of The Day

From yesterday's Evening Standard:

Developers on rely [sic] high house prices

Regardless of how liberal planning laws are, developers will cap their output at a level which does not lead to any significant falls in prices [Letters, April 18]. If they can sell new homes to wealthy overseas investors, then so much the better.*

This is not a housing crisis — it has been deliberately engineered. After 1945 UK housing policy was to limit rents, protect tenants, cap house prices indirectly by capping mortgages at two-and-a-half times earnings and ensure a ready supply of social housing. This led to a rapid increase in owner-occupation, the nigh-extinction of the landlord class and a small and stable banking sector. This was eventually reversed.

London First may call for more houses to be built but the backers on its website — banks, large landowners and property developers — are the very people who will do anything to ensure that rents and prices in London stay sky-high.

These people know full well that simply building more homes in itself solves nothing.

Mark Wadsworth​, Young People’s Party.

* They edited down my original opening paragraphs which explained the more subtle point:

Real-world evidence shows us that rents and prices in every country in the world are the highest in the largest cities. When more people will move into the new homes, this means a larger pool of potential employees and customers for businesses, which in turn means more job, leisure and social opportunities, all of which lead to yet a self-reinforcing cycle of even higher rents and even higher prices.

Real-world evidence also shows us that - regardless of how liberal planning laws are - developers will cap their output at a level which does not lead to any significant falls in prices. If they can sell the new homes to wealthy overseas investors who will leave them empty or merely collect the rent from younger workers, then so much the better. If prices show any sign of dipping, then projects are simply mothballed.

Friday, 21 April 2017

Nobody move or the mozzarrella gets it!

City AM passes on some fear-mongering:

Food prices will soar on key supermarket items such as mozzarella, tomatoes and apples if the UK does not secure a transitional trade agreement, retail's industry body has warned.

If the EU and the UK fail to agree to maintain current tariff rates, trading of goods will come under the rules governed by the World Trade Organisation (WTO). This means tariffs on Italian mozzarella and Irish cheddar will jump to 45.5 per cent and 44.1 per cent respectively on the day the UK officially exits the EU.

Ray Symons, head of European and International Affairs at the British Retail Consortium (BRC) said: "If the UK and EU fail to reach an is difficult to see how this couldn’t affect shop prices."


The WTO does not set minimum or standard tariffs at all, the UK is free to impose lower rates or abolish tariffs unilaterally. The WTO is all about encouraging countries to reduce their import tariffs, abolish import quotas etc.

The key to longevity appears to be sticking to a daily routine.

From The Guardian:

Morano’s extraordinarily long life began on 29 November 1899...

She attributed her longevity to leaving her husband in 1938 shortly after the death of her only child at the age of seven months, and to the inclusion in her daily diet of two raw eggs and a little raw minced meat. When she was 20, her doctor had told her she was anaemic and that such a diet would improve her health.

Bava, her doctor for 27 years, said Morano rarely ate vegetables or fruit. “When I first met her she ate three eggs a day, two raw in the morning and then an omelette at noon, and chicken at dinner.”

Also from The Guardian:

A Spanish woman, Ana Vela, 115, who was born on 29 October 1901, is the oldest European and the fourth oldest person in the world, according to the GRG...

Speaking to El País last summer, Vela’s daughter said there was no secret to her mother’s extraordinarily long life. “She liked a glass of semi-sweet wine with her meals, but she was never one to drink a lot. She ate everything: meat, fish, vegetables. Her diet was very normal – just home-cooked stuff.”

Thursday, 20 April 2017

YPP (London) meet-up, tomorrow Friday 21 April

We'll be at The Brewmaster from 5.20 onwards or so - if you think you'll turn up later than 6.30, please get in touch or 07954 59 07 44.

Leicester Square Tube Exit 1, turn left and left again into the alleyway (St Martin's Court). We put a yellow YPP leaflet on the table so that you can find us.

Topics: Two people have put themselves forward to stand at the snap General Election - any more takers?

"Is your child's school about to start charging you as government funding dries up?"

From The Manchester Evening News (the first article that came up on Google):

The government is proposing to change its funding formula to individual schools.

It means schools in Manchester will stand to lose £10m a year under the move, more than anywhere else outside London, with funding for schools cut by 2.7 per cent overall...

One of the schools facing ‘financial crisis’ in Greater Manchester is King David High School - one of the region’s’s most successful state schools. Joshua Rowe, chair of governors at King David, says his school is going to be one of the worst hit by the government’s ‘savage’ budget cuts.

Mr Rowe claims his school’s annual income has dropped by approximately £1m in the last four years - posing an ‘existential threat’ to the Jewish high school. He says they have lost £700,000 in government cuts, £250,000 through inflation and are now having to pick up the £120,000 SEN budget, which was previously covered by the council.

Now the state-funded Jewish faith school in Crumpsall has been told it can expect further funding cuts in the next two years and has now launched a huge fundraising campaign, although has stopped short of asking families for payments.

To be honest, why shouldn't councils charge extra fees for places at the best schools? They can transfer that money to the other schools in the area (underperforming or in poorer areas) to try and level things up a bit.

As we know, if you don't make parents pay directly for a place at a good state school, they will pay indirectly via higher house prices in the catchment area.

This also ties in nicely with the idea of education vouchers, where the taxpayer pays a basic minimum figure (maybe £5,000 for a primary place and £8,000 for a secondary place?) and parents pay the difference. Local education authorities just then have to redistribute the extra money somehow, for example by reducing the value of the vouchers for schools with very high extra fees or something.

Land Value Tax is usually the best way of collecting community generated land value, but if the value relates to a specific service that is only used by a small part of the population at any time, then why not do it directly with user charges? They can bump up the user charge until there simply is no measurable difference in house prices between homes just inside and just outside the catchment area.

For sure, this prices lower income families out of good schools, but the land market does that anyway. A canny good school will always have some free places for poor-but-clever children to bump up their grade averages (which is how I got a free place at a private grammar school, seemed to me like a good deal for both parties). There's not even such a thing as a Poor Widow In A Mansion With School Age Children :-)

General Election 2017 - call for candidates

If anybody is willing to stand as a YPP candidate in their constituency and has a few hours to spare to get all the signatures and form filling done, please get in touch.

YPP has £1,000 in the kitty which we will divide up between people willing to stand and use to pay towards their £500 deposits (which has to be paid in cash in advance).

We have previously gone to the bother and expense of getting leaflets approved, printed and taken to the Post Office. This costs another £1,500 - £2,000 per constituency and doesn't seem to make any difference.