Priced Out: Help to Buy = Help to Sell = UK Government Prop Up Over Inflated House Prices

image

I want to write about this as it affects me. I rent because buying is really beyond my means.

PricedOut is the only independent group that campaigns on behalf of priced out first time buyers and owner occupiers.”

They say:

Help to Buy: A DISASTER WAITING TO HAPPEN

Help to Buy should really be called ‘Help to Sell’, as the main ‘winners’ will be developers and existing homeowners who will find it easier to sell at inflated prices. Pumping more money into a housing market with chronic under-supply has one sure-fire outcome: pushing up house prices. At best it may help a small number of new buyers, but it will mean housing becomes more expensive for all those that follow.

The major problem faced by first time buyers is high prices and the daunting levels of debt needed to enter homeownership. Of all the policies you could think of to tackle this, it is harder to think of a riskier or more short termist policy than Help to Buy.

House prices across much of the UK are already unaffordable for young adults and families with ordinary earnings, so this extra upward pressure on prices will create far bigger problems in the future.

If the government is happy to take on exposure to the housing market, it would be much wiser to invest directly in building more houses, with the focus on targeting areas with the most chronic housing shortages.

In the words of a leading City figure: “I believe it truly is a moronic policy that stands head and shoulders above most of the stupid economic policies I have seen implemented during my 30 years in this business. “.

It does seem highly unfair that how much money you have depends for some on having bought a house before 2000. If I had known that when I was 20 when I could afford a mortgage on a small house I would have chosen differently. Now I’m 40 and in terms of buying a house I’m much worse off. There is no way I can afford the mortgage on a nice flat let alone a house. So it’s just the luck of when you bought in to the housing market that decides what kind of home you can have. If you were born after 1990 then bad luck, you have to try and buy into a highly over inflated market and put yourself into servitude to a bank or to a landlord. At least I can afford to rent a flat. I should be grateful for that.

These measures such as holding down interest rates, quantitative easing and help to buy could seem like bad policies. They do favour the borrower over the saver. What is the point having savings to earn a meagre 1% interest. They might be against the interest of the non home owner who needs affordable housing.

On the other hand though it would be highly unfair on those who do own their homes and have large mortgages if the housing market was to be allowed to crash. Many would lose lots of money. Many might lose their home if they did not down-size in time. So the government has a duty to not let that happen. It could cause chaos in society. Many businesses might fail. People might lose their jobs. It could seem right to take these measures to prop up the housing market. Not let it fall. The government must feel that the housing market could collapse if they don’t take these measures. But beware as they might not work. There could be a crash no matter what George Osborne does.

Better to allow house prices to slowly float down to a safer level than to have a price crash but it does mean that some of us might have to wait years to buy a house.

 

Links:

Advertisements