Most commentators will tell you that rising house prices is down to the huge demand in the UK for houses. We have a small island and a growing population, they will say, so house prices can’t ever really fall much. This is nonsense. The reason, and the only reason, that house prices have not collapsed in Britain as they have in, say, Portugal, Spain and Ireland is because the government has not allowed them to. Our base bank rate is the lowest it has been since 1694.
On top of that, just to be sure, pressure has been put on the banks to hold off on repossessions. So while default rates look lower than usual in this rather deformed cycle, hundreds of thousands of home owners moved from repayment mortgages to interest-only mortgages.
Buy-to-Let investors are being used by the government to prop up the housing market. These middle aged people have money. They are frightened of bankers, financial consultants and pensions providers, most of whom have turned out to be nothing more than thieves with a licence. The Bank-of-England then distorted money markets with a near on Zero Interest Rate Policy (ZIRP) forcing these same people to invest. One fifth of all house sales are now snapped up by buy-to-let investors.
The next bogus house price escalation scheme was Funding for Lending, another Osborne scheme masquerading as a small business scheme that dramatically achieved….nothing, but did wonders at lowering mortgages rates – again.
Help To Buy, was Osborne’s next market-distorting scheme that effectively forces the already overcommitted taxpayer to underwrite £12 billion of mortgage lending to people who haven’t got an adequate deposit of their own, or who lack the income to have a go at producing one and who therefore shouldn’t really qualify for a mortgage at all.
If that wasn’t enough, Osborne has since cooked up a new house price growth scam that allows first-time buyers aged over 16 save into an Isa. The government will pay £50 for every £200 saved if it is used as deposit. The new help-to-buy Isa means, if a first-time buyer can save £12,000 in a tax-free account, the government will add £3,000. Forget the £2 billion cost to the taxpayer – again.
If it looks like sub-prime, lingers around bankers like sub-prime and smells like sub-prime, guess what!
If any other organisation except the government had manipulated a market to this extent, the management team would be behind bars (except bankers of course). Anyone scammed into buying a house at deliberately over-inflated prices, which then felt the misery of rapidly falling prices with a locked-in mortgage lender — would quite possibly feel they were at the sticky end of a Libor, commodities, foreign exchange rate rigging exercise – wouldn’t they.
Then of course there’s the ‘loan fees’ linked to RPI inflation on the bit of the mortgage the government guaranteed. Another scam likely to blow up in the faces of unsuspecting taxpayers, along with all the ‘promises’ to support these sub-prime loans, savings scams and other government double-dealing frauds.
It is because all of this government intervention into the market which is supposed to balance itself by supply and demand, income and affordability that we now have a housing crisis.
In order to avert the imminent housing crisis catastrophe, Osborne decided to take another disastrous turn and force private companies and charities to sell their own assets at discounted prices to the private market – commonly known as ‘right-to-buy’. This is perverse Thatcherite scheme destroyed Britain’s council house stock. Contrary to popular belief more than 4 million council homes were eventually sold, 40% are now in the hands of private landlords and low and behold – there are 1.5 million families on council house lists across the land. Only 1 in 30 will ever get one. This scheme should be called ‘illegally-forced-to-sell’.
Last week, the government announced a new plan called the Starter Homes Scheme under the false guise of ‘rural productivity’.
This was immediately followed up with housing charity Shelter publishing a report which claims that the government’s Starter Homes scheme will fail the people it is intended to benefit. No, surely not!
The scheme, which was one of the Conservatives’ key housing policies in the run-up to May’s general election, pledges that 200,000 affordable homes will be built by 2020.
The homes are intended for first-time buyers under the age of forty, who will be offered a minimum 20% discount off the market price. Are you starting to smell a sub-prime rat already? I am.
The charity’s report claims that the housing programme, which will account for a substantial proportion of new homes supply during the next five years, will not help the majority of people on the new National Living Wage or average wages onto the housing ladder.
The report claims that the average family will be unable to afford a starter home in nearly 60% of local authorities in England. It also states that families on the National Living Wage will only be able to afford a Starter Home in 2% of local authorities. In other words, it isn’t a low-cost housing scheme for struggling first time buyers – it’s another big discount scheme backed by the poor overburdened, unsuspecting taxpayer.
Rises in property values over the next few years are expected to push the average house price in some areas higher than the scheme’s new home price thresholds of £450,000 in London and £250,000 in the rest of England.
All of these dubious and duplicitous government supported schemes which appear to move pots of money around instead of actually increasing investment in housing, will not help. The government need to take the housing crisis seriously. That means properly funding Housing Associations (not asset stripping them) to build social and shared ownership housing and removing the arbitrary cap on council investment in new homes.
It also means removing artificial intervention schemes that do nothing but distort pricing to the short-term political upside that hundreds of thousands will be forced to stick with or be repossessed when this over inflated property bubble bursts and George is living off his inherited family estate and trust fund which he denies he is the beneficiary of.