Budget 2011: Osborne's boost for house prices

Damn' stupid scheme.First timers would be far better served by letting house prices find their real level....rather lower than they are now me thinks.

House prices need to fall.............and they will.

If Osborne is attempting to reinflate the housing bubble this calls into questions his commercial competence. First time buyers would benefit from lower prices rather than this silly scheme. The price of housing should be allowed to gradually correct and find its own level rather than attempt to interfere with it and prolong the uncertainty.

Simple supply and demand. Far too many NIMBY's prevent anything being built in this country. Every town and village needs 10% more house then prices might fall. There is SO much green space - build on some of it. Only 8% of UK is built upon land!!!

It's more or less what Northern Rock did, 100% mortgages (ok then 95%). And if by some misfortune house prices should fall, negative equity and quite likely the government backed 20% loan won't be repaid

Mike Greenland----The world's population is exploding, there is already a shortage of food and water yet you and others advocate burying yet more land under concrete---Within the next century it is highly likely that even the USA and western Europe will see the return of unaffordable food prices caused by shortages and this will lead to mal-nutrition if not starvation in first and second world countries.

There is nowhere near enough geen space for sustainability---You are obviously yet another city dweller that has forgotten the link between agriculture and food---the stuff doesn't just miraculously materialise in shops you know.

if you want more housing units the future is either skywards or underground--we can no longer afford the spread of urban sprawl.

It's for new houses only, so it might actually cause an increase in the number of houses being built. I don't think it will increase the price of old houses that FTB buy; if anything it will probably decrease them as new homes can be more competitively priced.

Mike G: Simple supply and demand.

It is a common mistake to call higher volumes, higher demand; or lower volumes, lower demand. But is fundamentally wrong. Demand is not volumes. Demand is about how many (houses in this case) will be bought at certain prices - not how many houses are either wanted or needed.

Demand for housing is falling not rising. It is falling because the amount of money available with which to buy houses is falling. Osbourne's idiotic move merely increases the amount of money available for someone to bid for a house; therefore able to bid higher, and exacerbate the problem, which he himself rates "unfair". Either Osbourne does not understand basic economics 101, or he is being "ingenuous" Neither is complimentary.

It has its Pro’s and Con’s.

I am not expecting the house prices to drop rapidly, as everyone is gready.

Sellers will keep asking for a high price and they will slowly come down when they can not sell.

Buyers eager to buy a home, will be waiting for the property to drop to a value they can afford, and why would

they risk the chance of house prices rising again, or waiting for house prices to fall further, because waiting means

losing more money in rent. As someone who rents as soon as house prices get to my level of affordability/my deposit is big enough

I will buy somewhere. Then in about 7 to 10 years, prices would have risen again and the chances of being in negative equit is slim.

There are a lot of people who are miles of being able to afford a home, then at the other end are people who are just a little short.

So there are a lot of people waiting ready to buy once the house prices come down to their limit.

This is bad news for the people miles off, as they have to wait for everyone above them to buy first, this will keep the prices up.

The chances are poorer families will not be able to buy ever, however this is how the world works.

Going back to the budget, this is going to help some more people out. We cant help everyone. Once these people are on the housing

Ladder, it removes them as competition for other buyers.

What else could the government do, force banks to lend? Sure more people in debt who cant afford, more buyers = higher demand, house prices go up.

What if the government cleared all the debit, dropped Taxes etc, what happens then people have more money, business know this, so prices increases,

people ask for more when selling homes.

There is no solution. Between a rock and hard place! Constantly!!

It is also telling that the so-called "help" is for bidding up the prices of new builds. So Osbourne is not helpong FTBs, he is making the future FTBers even worse, and helping specifically, the building industry with our increasingly scacre and valuable money. Quite a disgrace!

Disingenuous, not "ingenuous". excuse me

SG, where do I start?

Your economics would be madness. If we allow people to get into more debt than they can service, and then have govt write it off - what by baling out the banks? and then cut taxes????; it would bring about the collapse of the state. Followed quickly by collapse of our money, and a trip to the IMF.

next, Osbourne's policy does not help FTBers. If his policy leads rising prices, then he has made everything even worse for those FTBs not among the 10,000 that have "been helped".

the problem with your opinion...

I will buy somewhere. Then in about 7 to 10 years, prices would have risen again and the chances of being in negative equit is slim.

Who is going to buy at current house prices, and with what? Buttons? Prices cannot rise if there is not the money to buy them with. The price of a house is what people have as a deposit, plus what they can get as a mortgage. And then how much of that they are willing to use. So...what will take house prices even higher in seven years? General inflation and the falling value of money?

If you look at Japan, another "heavily populated, small crowded island". People thought the same as you in 1989, banks introduced the "inter-generational" mortgage; 100-year loans, that you pass on to your children. The financial system collapsed, and prices fell for 15 years, and remain at half the level of 1990. Our problem is that the general population still lives an Alice in Wonderland world, in which house prices always rise even when money disappears. People are going to get a big wake up call, and the sooner, the better.

Prices will fall, but only when people are forced to sell, or realise that 2003-07 prices were all part of a bubble. Did anyone notice the biggest financial collapse since 1929? Over the next few years, people will notice the effects of that far more keenly. Bailouts have stopped people realising what has happened.

Well said Roberto!

The other obvious comment to make is that just about everyone will have less disposable income to spend on housing for the foreseeable future. Increases in taxation (either direct or indirect) and the need to fund services no longer provided "free" after budget cuts will eat into their affordability.

Japan is also a good example for those who own shares. The Nikkei-Dow peaked at 38000+ in the late 1980's and hasn't got anywhere near those figures to this day---does that sound familiar with the FTSE at 6930 at the end of 1999.

The only thing holding up house prices at the moment is the lowest ever rate of interest. The BoE has been printing money like there is no tomorrow this has worked its way through to inflation but not pay rises. This means that people are gradually getting less disposable income which will only make the inevitable rise in base rate more painful for them. This is how contraction of an economy can be implemented without too much publicity.

One of the biggest factors in the increases in house prices from 2001 to 2007 was the overstating of income by people applying for self certified mortgages. These people, many of whom doubled (or more) their actual income, are still managing quite easily to keep their heads above water with the current historically low rate of interest. But when rate rise these people will be the first to have their homes repossessed. One could argue that it was their fault for overstating their income to borrow an amount that no one would reasonably expect them to be able to repay, but the amount of this mortgage fraud probably amounts to over a third of all mortgages taken out between 2003 and 2007. They will have had to put down a minimal deposit of 15% of the value of the property; so every percent property falls below the 85% of the paid price will put be a loss to the building society when the house is repossessed. When you look at the figures involved you can see why the government is so interested in keeping property prices high.

John - Lacey - I am surprised you have not advocated birth control or euthanasia as you seem keen on the root of the problem. I am merely talking of solution to what is extant.

Roberto, I can understand some of your points,

But there are still first time buyers buying property… Where are they getting the money from?

In 7 years I would have thrown about £58,800 away in rent or in 10 years £84,000 based on rental property of £700 (Money I will never see again)

a month. This is not including any increase in pricing in renting. So If I brought a property for £150,000, do you honestly think that in 7 years property would have dropped by over 30%? In seven years the population will be larger therefore

increasing the demand on properties. We know the building of new property is not keeping up with growing population. I would rather take a chance rather then just losing the money!)

At least when I own the house, I will still have the house. I understand my mortgage repayments would increase

when they finally put the rates up. But at the moment rents are going up faster then the interest rates!

And as Jonathan stated, if the government wants to keep houses prices up, why wouldn’t they want to do this, and future

governments will do the same. So to put it simply the government is on my side and taking actions to stop dramatic decreases, so losing over 30% is even less likely. Why is it possible for someone to afford renting over paying a mortage, when

mortage repayments are less??

I totally agree with the Roberto’s reasons about the original housing bubble! and I think it has screwed it all up. But all

those thousands of people who brought in the bubble are going to do everything they can not to make a loss. Some

are not going to have a choice, but this is not going to bring the housing market crashing down.

One final thing with the Banks, yes we bailed them out, and we got rock bottom prices for the shares, now what

effects the banks failing? The Government! They are not going to hinder the banks they own, it would like cutting off your

right arm. Now in a few years time, the government could sell these shares and make a nice profit. The banks are already

turning round.

One final note, which I stated before ‘There is no real solution, Between a rock and hard place’

Which means I do not have the solution, and I am not pretending I do! As what ever action is taken, due

To the housing bubble, is not going to cure it! Unless someone on here has the awarding winning idea, that

No other person in the finance industry or government over several countries have not come up with…

Mike Greenland---I take your point that you are looking at the here and now but the point that I am making is that you don't want to solve one problem with a short term fix to turn it in to a much more serious problem further down the line.

On your other comment the chinese already have a compulsory birth-control system which will probably spread as time goes on----In the UK there is already passive euthanasia---its better known as a health system that is stacked against the elderly and a dis-jointed society that lets the old die through neglect and abandonment.

Its a bloody bleak world for many old folks!

Mike Greenland, re: "I am surprised you have not advocated birth control"

I think you should watch this set of videos. Although at the current time overpopulation is not an issue that any politician is prepared to address overpopulation is the biggest threat to the human race. You should watch this video:

www.youtube.com/watch?v=u5iFESMAU58

S G

In seven years the population will be larger therefore increasing the demand on properties.

---

This is a common mistake.

Demand is not a function of population. Easy example to understand.....Go to Bangladesh. There are millions of people in a small area of land, but prices are not going through the roof. I am sure I need not explain why. Bangladesh is poor, and so people cannot pay £250K for a house.

during the bubble 2002-07:

Why did prices fall in Japan?

Why did price rise 500% in Ireland?

Was Japan empty? Was Ireland crowded?

It's simple you see, demand is a function of money - not amounts of people. Get an economics primer, the first two chapters of economics 101 will do. It will show that volumes are NOT the same as demand. Demand is about how many houses can and will be bought at a certain price.

If you sell 20 houses for £250K each one year, then 20 houses for £200K each the next. Has demand remained the same? The answer is no; it has fallen. Demand is a function of money!

For buying houses, it is simple: demand depends on availbaility of mortgage finance. The banks are still being kept alive by government. New EU capital ratio rules are in place with govt guarantees till about 2017, because the system remains so insecure.

The availbility of finance from banks will not return to 2002-07 levels (when the securitisation markets went mad - that is what caused the financial crash). Those markets have become tiny and will not return to 2004/5/6/7 levels for a very long time. Without that market re-opening, mortgage availbabilty cannot return to those levels. Without mortgages at 6x earnings, and self-cert liar-loan mortgages, current asking prices cannot be met by more than a few elite rich.

You say some are buying. Most sales are to cash buyers, and volumes are puny - the BoE has figures on lending. It has crashed.

29000 new loans in January versus 100,000 a month in 2007. That cannot go on. Once volumes rise, when sellers gradually realise the champagne days are gone, extra sellers will need to find many buers, and not all will be cash-rich buyers. They will need finace. Finance will be far lower than it was. The money no longer exists.

Finally, we did not get cheap price for banks. They were worthless. Their debt levels made them unsaleable. And they must be kept on a leash. You are wrong to say it would cost government not to. It is the govt and us who would have to pay for another rescue act. That would make Britain a basket case. They cannot be allowed to go back to the same actions.

Finally

There is only one way to get prices to recover to 2007 levels. And that is general inflation. Destroy the value of money!!! That would hurt savers, pensioners etc but 250K houses will be the norm again. By the way, I believe the govt and the BoE is trying to do this; hence sticking with 0.5% interest rates. That is why Gold remains a good investment right now. And the policy is deeply risky, inflation goes out of control, and it could create huge problems for the sider economy.

But the sensible man will not buy a house until volume sales return to at least 60000 (minimum), that is when sellers will be waking up and smelling the coffee. 2003-07 was an aberration. Some - yourself included - seems not to have reealised that.

OnFTB volumes, see FT Adviser

http://www.ftadviser.com/FTAdviser/Mortgages/News/article/20110324/20f2ccfe-562f-11e0-ae7f-00144f2af8e8/Filling-potholes-will-not-help-the-mortgage-market.jsp

In each of the last three years, there has been a little over 190,000 purchases by first-time buyers, compared to a long-term average of around half a million annually.

Roberto re: "It's simple you see, demand is a function of money"

It's an interesting question about supply and demand. I think it varies with different items; with food for example, which is essential if supply does not meet demand then the escalation in value of food would be astronomical, as people need food to survive. With houses people need them but there hasn't been a great change in either population or the number of houses in the UK, people can generally find somewhere to live, even if it is back at their parents. There were two main factors that drove the the housing boom,

1. The availability of credit

2. The enthusiasm generated by increases in house prices and how people were making more than they earned just by having a mortgage on a house.

But it was like a pyramid Ponzi scheme based solely on confidence, eventually the bubble was going to burst; and the thing to remember with bubbles is that they always get a lot bigger and burst a lot louder than you would have thought.

The government has tried all sorts of measures to prop up prices from increasing payments for people out of work, printing money, rescuing the banks, getting housing associations to buy peoples houses and then rent them back to them; prices have dropped a bit and then levelled off. But now the ratio of houses on the market compared to buyers is increasing. This is the biggest indicator that house prices are on the verge of another fall.

hold it everyone..... its for 10,000 only ..how many towns are there in england wales ect....divide by that amount....its a.... HEADLINE thing...it helps nobody. its the conservatives trying to look good..

WRONG...pathetic idea

@John Lacy

"There is nowhere near enough geen space for sustainability---You are obviously yet another city dweller"

Do I take it that you are, or claim to speak for, a country dweller ?

Funny how "country folk", probably 5% of the population (if that), sit there in their pretty little villages, surrounded by acres of greenery, unworried by congestion/bad air quality/overcrowding - insist that the other 95% of folk live in ever more crowded cities.

Doesn't matter to me what reason you claim makes the status quo "nececessary" - it's simply NIMBY-ism

Population has grown massively (fact, not opinion), so cities need to grow.

House prices will revert to their long term mean, the1:4 ratio between average wages and average prices irrespective of any attempts to rig the Market. This can happen either through a drop in nominal prices magnified by inflation, or static prices with a real term adjustment via inflation.

What strikes me about this article is that many people in the UK are still utterly obsessed by house prices.

house prices be sorted in a flash if old system of repayments per month can be no greater than weekly income

Interesting to see a comment regarding supply and demand

If demand exceeds supply - why have prices been falling?

Have I missd something here

We need house prices to fall not be supported by the govt

This may suprise you that a Landlord should think as I do but if you are a profesional Landlord you buy on yeild only if the prices rise I cant expand

Boost for first-time buyers - is this a help, or a hindrance?

For a Government saying we've maxed out our credit card, it's a bit of a surprise move to then announce they've found an extra £250,000,000 to help lend cash to first-time buyers. Are they 'borrowing' it, and if so, from whom - one might be forgiven for asking. Are there no more worthy causes to receive a fillip as this interest-free loan of such a size, at this time. In numbers of pounds, it's somewhere between 20 to 50 times the number of people who demonstrated against the Government-Imposed cuts in London last Saturday. That's quite a sizeable amount of money by any stretch of the imagination.

Is it right to prop up part of the housing market that is already ready over extending itself in terms of high asking prices?

The deal is basically a 20% deposit as an interest-free loan if the FTB provides a 5% deposit and obtains a mortgage for the rest. This means up to £25,000 would be available for each FTB, which means there are funds for at least a thousand applicants, but there are also some strings. After five years, interest will kick in at 1.75% and in the year following, RPI plus 1%.

The objective seems to be to help out the construction industry by facilitating more sales of new dwellings at existing (or better) prices, whilst generating a bit of extra business for the mortgage market too.

The problem with such a notion is the lurking question of negative equity being lumped onto the already overburdened shoulders of students and others starting out in life and perhaps wishing to plan families?

In addition the question perhaps should be asked: If the banks no longer have enough cash to lend this amount to these people, and are considering that house process may be rather over-cooked, can doing this be very wise, (or might it be very Morecombe)?

Some leading economic commentators are suggestion that prices could actually drop by 20% in the next year, especially in the new-build part of the market, as prices here seem to be higher than those of average second-hand properties currently.

Whilst the Government is simultaneously encouraging more building and more conversions of redundant buildings to provide new dwellings, one can imagine that prices of these may still take a tumble, when compared to other properties, especially if the market were to be allowed to dictate prices without such direct intervention by Government.

Up until now the Governments seems to have been more in favour of cutting red tape and letting such markets sort themselves out, so is this a change of policy?

One FTB I asked said: -

"I have the 25% deposit, I have the fees and I also have enough money for furniture. What I haven't got is houses or flats in my range - despite a well paid job.

High house prices are the problem. High deposits are protection for the banks against price falls. At these prices, it would be me that would be taking all of the risks."

Not only will such intervention affect the pricing in the market, also bringing in a new loan structure of this kind could actually stop those hoping to buy, especially those who prefer second-hand property and those who do not wish to load themselves with extra debt.

The questions to be considered might be, is interfering in the market, in this way, good for the market and/or good for first-time buyers?

And why can't house builders re-value their land banks again? They've done it in the past.