The government shouldn't be propping up these mad house prices

[flashbac]

Forecast before the budget was that property prices would be more or less static this year. Then came flipping Rishi extending stamp duty and introducing a mortgage guarantee for 95% mortgages. Since then demand has hit the roof.
I spoke to an estate agent yesterday who said we were in a "red hot" phase and she last encountered such madness in the 70s (similar bubble caused by too much flowing and easily available credit, burst by the oil crisis).
I fear for younger generations that will be left behind.

I can’t work out whether this is a goady thread or not. But no, it’s not going to end well and no, the government shouldn’t be using public money to prop up the housing Ponzi scheme.

I'm not as worried for future generations as I am for current house buyers. If/when the artificial propping disappears there's likely to be a crash and there could be a lot of people in negative equity (even accounting for the government's 5% in the mortgage), especially taking into account how many people will have bought new builds.

A lot of donations for the Conservative Party come from property tycoons. They received at least £11m from some of the UK's richest property developers in 2019. Will probably have received similar this year. But I agree with you they shouldn't.
I will never own a house, I can now only hope the bubble bursts in time for my children to afford a house.

It’s a nightmare. Our purchase fell through last summer due to COVID just before exchange (sale agreed in early March). Vendors were shielding and decided after 5 months of conveyancing to not sell after all. We’re FTB so the jacked up prices are no help to us selling.

We’ve been trying to buy since. Two houses sold on the first day of viewings and we never even got in the door. Others we have made offers on have all sold for £50k to £100k over the guide price. We aren’t talking £1 million houses here. These were standard detached houses in a pretty buy far from London part of the country.

We are still in talks with our original vendors because they may still want to sell later in the year, but if they put the house back on the market instead of coming directly to us, it would easily sell for £100k more now and we’d never be able to afford it.

It’s widening the gap between rich and poor again - standard Tory policy really. So much for Bojo’s “levelling up” 🙄

There will of course be the inevitable crash.

Totally agree OP. I just can’t see anything but a massive great pop at some stage. The housing market has recovered and then some from the credit crunch, seen off Brexit, flourished through the first pandemic after a 100 years, and is souring despite the threat of a huge depression.

It needs to be left to correct right now.

You say this but my sister has just bought a house.

She is the first person in my family to not be renting privately or have a council property.

I'm so proud of her!

So it still must be helping some people.

I agree with you OP. It's a Ponzi scheme which the government is artificially propping up.

What’s worse too is that public money could be used to improve society in multiple ways but instead it’s being used to make the rich richer. I hope that penny drops soon in the general population as it’s a scandal

Our govt are beyond stupid.there is this determination to keep property values high but it's terrible for the economy, it locks up wealth, a high proportion of which goes to those already well off. It means people are constantly spending huge amounts on mortgage or rent, money which they could spend in other ways that would be far more economically productive. Not to mention its terrible on young people.

If DH and I were spending less on our mortgage we would instead be buying more clothes and shoes and gadgets, I'd be getting my hair done 3 or 4 times a year instead of once, we would eat out more etc. Instead of spending on all those goods and services that keep people in work, paying tax and spending more themselves, we pay a huge chunk over to a bank, that distributes a huge proportion of its profit margins to shareholders and high earning staff. A lot of that money then gets further tie up inflated asset values or flows offshore and no one gets any better off except the wealthy.

It's like they literally missed out on learning anything about the economy.

There is a BIG inflation issue coming soon though- probably by the summer - then the shit will hit the fan

What causes big inflation? I’m a bit hazy about that side of economics.

@Aussiebird99

What’s worse too is that public money could be used to improve society in multiple ways but instead it’s being used to make the rich richer. I hope that penny drops soon in the general population as it’s a scandal

Ha the penny will never drop for the general public. Too many idiots out there.

We were wanting to buy a bigger house in about two years, after we get married. Wanting a long term house for having kids. But that is looking unlikely with the house prices rising unless my partner gets a better paying job, which he can't do around here as there aren't any.

This is an interesting read: www.telegraph.co.uk/news/2021/03/10/inflation-back-tories-should-terrified/amp/

I think the Gov can't allow prices to fall to what they should be - SE in particular would have a panic attack - all those young people with huge mortgages bigger than their house value - stuck in their property for ever as they can't afford to move, all those older people losing their 'savings' for care home fees. It would have a dire effect on morale. Better to keep up the pretence.

I agree it's scandalous. Plus the cladding issue hasn't gone away and hugely affects the market in cities. We've needed a massive building programme for years but it's just been avoided to benefit wealthy Tory donors

I agree with a PP, the gap will be wider.

I can remember the big property crash in the early nineties, many people I knew were trapped in negative equity for many years, some just took they keys into the Building Societies. It was a really horrible time.

@Aussiebird99

There is a BIG inflation issue coming soon though- probably by the summer - then the shit will hit the fan

And yet there is this www.ftadviser.com/regulation/2021/02/04/banks-given-6-months-to-prepare-for-negative-interest-rates/

Dont high inflation and high interest rates go somewhat together, rather than low or negative interest rates with high inflation?

Absolutely agree. We bought after the 2009/10 crash and ended up in negative equity pretty quickly. Had to wait years for it to balance out. Looking at moving to our last property now and our mortgage advisor has basically told us to sit it out for a while. Luckily in Scotland they’ve decided not to keep the scheme going, so hoping it settles quicker. It’s just how far over houses are going for, almost all going to closing date and needing at least 25% deposit too. It’s clearly showing how many people have financially benefitted from this pandemic and widening the social gap.

The vast majority of tory voters either own or aspire to own their home.

You could argue that this is gerrymandering, similar to Thatcher's "Buy Your Own Council House" scheme in the 80s. You might even think that the two are linked.

^ meant 15% deposit

I personally think they should just have said any house sale that has been agreed and solicitors instructed by (date before budget) will be allowed to proceed on the reduced stamp duty, provided completed by date (2 months later) to allow for delays caused by second lockdown.

I can’t read that article, it’s behind a paywall and I’ve used up my free trial 😀.

However I didn’t think high inflation was simultaneous with low interest rates, and we can be sure of low interest rates for the next few years?

@Curiosity101

I'm not as worried for future generations as I am for current house buyers. If/when the artificial propping disappears there's likely to be a crash and there could be a lot of people in negative equity (even accounting for the government's 5% in the mortgage), especially taking into account how many people will have bought new builds.

A price crash could help people to buy their first home and negative equity is only really a problem for people who can't stay put and sit it out.

And at least we have low interest rates at the moment, so we shouldn't have the double whammy of negative equity and high repossessions like we did in the late 80s/early 90s. That was truly an awful time.

@NoIDontWatchLoveIsland

Our govt are beyond stupid.there is this determination to keep property values high but it's terrible for the economy, it locks up wealth, a high proportion of which goes to those already well off. It means people are constantly spending huge amounts on mortgage or rent, money which they could spend in other ways that would be far more economically productive. Not to mention its terrible on young people.

If DH and I were spending less on our mortgage we would instead be buying more clothes and shoes and gadgets, I'd be getting my hair done 3 or 4 times a year instead of once, we would eat out more etc. Instead of spending on all those goods and services that keep people in work, paying tax and spending more themselves, we pay a huge chunk over to a bank, that distributes a huge proportion of its profit margins to shareholders and high earning staff. A lot of that money then gets further tie up inflated asset values or flows offshore and no one gets any better off except the wealthy.

It's like they literally missed out on learning anything about the economy.

This is so true. Also plenty of pensioners living very frugally as all their wealth is tied up in an asset that is slow to shift if you need the money.