Rightmove has, according to the Guardian, just announced the sort of news George Osborne will not want to hear. A report says:
The average asking price of a home in London has tumbled by more than £30,000 over the past month, figures from property website Rightmove showed on Monday, with new sellers in all of the capital's boroughs seemingly becoming less optimistic about the price they can achieve.
Across the country, Rightmove reported the largest ever monthly fall in the price of properties coming to market, a 3.3% or nearly £9,000 decline to £258,424.
No wonder George Osborne revamped stamp duty last month in a desperate attempt to boost house prices. He knows that the British 'feel good factor' is, bizarrely, linked to this issue and right now it looks like that may be fading away.
He created that boom with mortgage assistance schemes at cost to the state and other wholly artificial stimuli, of which the stamp duty reforms are just the latest. But it looks like across the country that prices are moving against him. Nothing can reduce his chances of being in No. 11 in late May next year more than that. He won't be happy, but those who want to buy houses might be.
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The stamp duty reforms were just making a bad tax slightly less bad. You’re not seriously suggesting that it was better before, are you?
Stoking house prices has been government policy for as long as I’ve been an adult. When I see some evidence that Labour would like to reverse the damage done by Osborne, and by the Blair/Brown years, I’ll think about looking at the issue as being a party political one. As it is, I prefer not to see either party getting individually criticised for simply proceeding along the same policy lines as the other would if they were in power.
Why give the impression, even if unintentionally, that things would be different with Ed Balls (or A.N. Other) in number 11? Remind me what he was doing when house prices reached current levels the first time around?
Stamp duty reform was needed
But please do not tell me it was not party political: the timing says that of course it was
And how come he housing market needed an £8700 million injection right then
When people in real housing need are being evicted?
I am not suggesting Labour may be better or worse – it could be either. I am not a member of the Labour party and ma more than willing to criticise Labour
I am saying it could be better
At what point does a fall in house prices destabilise the banks?
We did that stress test for the BoE a few months ago, and it’s only going to put a handful of this year’s first-time buyers into negative equity, right?
(Asking for a friend).
35%
But that ignores the impact of interest rises on many households
That is the most likely reason for a tipping point
Interest rate rises are, indeed, the most likely trigger for a recessionary spiral.
Note that the continuing squeeze on middle-class incomes is a slow-burning fuse toward the same end as an abrupt trigger from a rate rise.
The bit that’s missing from all the forecast models is that there’s an endogenous risk rate for mortgage lending: the rate of default. Which is, in turn, a product of affordability and economic stability.
The increasingly precarious nature of white collar employment is a factor here; will whatever government we have in 2015 be willing or able to pull the emergency stop on that 40% cut in public-sector staffing?
There are large towns and at least one city where the State is the whole of the home-owner payroll, and I’m not convinced that any local collapse in house prices will stay localised. Try that for a trigger!
Meanwhile, I’m fishing for figures on the affordable ‘haircut’ in home loans; it’s surprisingly difficult, because of the ‘moving target’ of rising prices means that crude linear averages don’t work, and you need very precise numbers on lending activity and equity margins.
What I can say is that the drop-off in activity that comes in any ‘topped-out’ market isn’t happening; or rather, it’s happening a bit, but nowhere near enough to act as a stabilising factor. Every last-ditch attempt to keep the housing boom going is exponentially more damaging than the last such act of madness.
Resolution Foundation have done good work on this
Did you not read the rest of the report
“Rightmove believes growth in house prices will moderate next year, but will still outpace earnings growth. Mr Shipside predicts asking prices will grow by between 4pc and 5pc next year, with the lower end of the market boosted by the stamp duty shake-up. “If buyers are paying more than a year ago, you want to make sure that the property you buy suits your long term needs,” he said.”
http://www.telegraph.co.uk/finance/personalfinance/houseprices/11293494/House-prices-fall-by-30000-in-just-four-weeks-in-some-parts-of-UK.html
Your argument doesn’t really stand up.
I look at realities, not estate agent hype
“Stoking house prices has been government policy for as long as I’ve been an adult”
Time to wheel out Gordon Brown of 1997:
“Gordon Brown said: ‘I will not allow house prices to get out of control and put at risk the sustainability of the recovery.”
Between 1997 and the Financial collapse mortgage lending increased 370%. As land value tax campaigners keep pointing out, rising housing costs kills the productive economy and creates generational inequality. The tail was wagging the dog, ie., the out of control banking sector created bubble after bubble with Governments supine.
Indeed
“the out of control banking sector created bubble after bubble with Governments supine”
I’ll edit that slightly:
“the out of control banking sector created bubble after bubble with Governments porcine”
At least it keeps the peasants from revolting, even if it does not protect them from the revolting.