I work in property and colleagues of mine had calls instantly from people due to complete ecstatic about the stamp duty news, then again, today we had investors raising their property prices...
Which proves what a stupid idea it is- these people were going to buy anyway.
My issue with government housing policy is that the government doesn't actually build houses. They sell off land for the purpose of building houses to the first bidder then let a developer build the houses and milk the profits.
It happened near where I live. The local govt sold off 2 colleges sites for the first bid that covered their (ridiculously low estimated) cost of buying a new site and building a new building to combine the 2 colleges. The developer who purchased the land walks away laughing. They've squashed wayy too many houses into the site, made the absolute minimum 'affordable housing' and made an absolute killing. The rumours of the profits they've made on the sites appearing in the local newspaper and madness. On top of this they are charging a ground rent to owners so are completely mugging them off and milking profit.
Exactly the same is happening on a site across the road from where I work. Previously a govt owned office building. The offices have been moved out of Westminster to a cheaper site. Land sold and now having flats built on by a developer who will make huge profits from flats worth millions each in prime central London location. I reckon one flat will sell for what the land was sold for.
Why can't government hire a project manager to appoint contractors and the rest complete the project themselves. They could make a higher proportion of the houses affordable and still male a profit.
I have a question. Now I'm an economist and I was trying to explain to a non economist at work why the stamp duty change will raise house prices (as stated by the OBR).
I can manage perfectly well explaining it using complex behavioural economics but when trying to dumb it down to basic supply and demand it became less clear (unless I'm missing something obvious).
Anyone help?
Person A is selling a property for £200k
Person B has a mortgage of £150k and cash of £60k, £10k of which is allocated to pay for costs (stamp duty, solicitors cots, removals etc)
Person A now knows that Person B doesn't need £2k for the Stamp Duty, so can now spend £202k on a property. Person A puts house on the market for £202k
I have a question. Now I'm an economist and I was trying to explain to a non economist at work why the stamp duty change will raise house prices (as stated by the OBR).
I can manage perfectly well explaining it using complex behavioural economics but when trying to dumb it down to basic supply and demand it became less clear (unless I'm missing something obvious).
Anyone help?
Person A is selling a property for £200k
Person B has a mortgage of £150k and cash of £60k, £10k of which is allocated to pay for costs (stamp duty, solicitors cots, removals etc)
Person A now knows that Person B doesn't need £2k for the Stamp Duty, so can now spend £202k on a property. Person A puts house on the market for £202k
That only works for across the board change to something like stamp duty, what if the buyer isn't a first time buyer?
I have a question. Now I'm an economist and I was trying to explain to a non economist at work why the stamp duty change will raise house prices (as stated by the OBR).
I can manage perfectly well explaining it using complex behavioural economics but when trying to dumb it down to basic supply and demand it became less clear (unless I'm missing something obvious).
Anyone help?
Person A is selling a property for £200k
Person B has a mortgage of £150k and cash of £60k, £10k of which is allocated to pay for costs (stamp duty, solicitors cots, removals etc)
Person A now knows that Person B doesn't need £2k for the Stamp Duty, so can now spend £202k on a property. Person A puts house on the market for £202k
That only works for across the board change to something like stamp duty, what if the buyer isn't a first time buyer?
You're assuming people act uniformly/rationally and, like markets, they don't.
On this occasion, the OBR are right to say that existing homeowners are the ones that will benefit from this move.
The seller doesn't care whether the buyer is a first timer or not, but they'll see an opportunity to up their price a little anyway. For those at an advanced stage, the FTBs will get the windfall this time, but that will quickly switch sides.
I have a question. Now I'm an economist and I was trying to explain to a non economist at work why the stamp duty change will raise house prices (as stated by the OBR).
I can manage perfectly well explaining it using complex behavioural economics but when trying to dumb it down to basic supply and demand it became less clear (unless I'm missing something obvious).
Anyone help?
Presumably because it will increase the number of buyers (demand) but do nothing to increase the number of houses available (supply).
Would make more sense if they had taken however much it'll cost to abolish stamp duty for FTBs and use that money to build houses.
Yes I see that. I guess what I'm trying to say is will the stamp duty reduction actually cause an increase in demand.
Will reduced costs of a couple thousand really cause a few thousand or more young people to suddenly be able to buy homes when actually it's just a fraction of what they have to save anyway? It will help those who have saved enough for the deposit anyway but will it help people who wouldn't otherwise have been able to buy? I'm sceptical.
It will probably help.
If you're buying a house for £300,000 on a 90% LTV you'll need a £30K deposit. The chancellor has just given you a 17% head start on your deposit which is very nice indeed.
I have a question. Now I'm an economist and I was trying to explain to a non economist at work why the stamp duty change will raise house prices (as stated by the OBR).
I can manage perfectly well explaining it using complex behavioural economics but when trying to dumb it down to basic supply and demand it became less clear (unless I'm missing something obvious).
Anyone help?
More people want/can afford houses now that the tax has been removed so demand increases. The supply of houses is the same, so price rises.
Zilch for the desperate. I read this Guradina piece about Robert Peston and I think it sums up my position.
“If you’re on shit wages, it’s completely reasonable to want your children to be better off than you are. Completely reasonable. But the notion that we,” and he gestures around his elegant townhouse kitchen, “should want more [for our children] is shocking and appalling. We shouldn’t think in those terms. We’ve actually got to think, maybe we should make some sacrifices and be a bit poorer. Because if we don’t make those sacrifices and become a bit poorer, so that those lower down the scale have better lives, we may end up facing utter chaos.”
Zilch for the desperate. I read this Guradina piece about Robert Peston and I think it sums up my position.
“If you’re on shit wages, it’s completely reasonable to want your children to be better off than you are. Completely reasonable. But the notion that we,” and he gestures around his elegant townhouse kitchen, “should want more [for our children] is shocking and appalling. We shouldn’t think in those terms. We’ve actually got to think, maybe we should make some sacrifices and be a bit poorer. Because if we don’t make those sacrifices and become a bit poorer, so that those lower down the scale have better lives, we may end up facing utter chaos.”
He can say all the rhetoric, but until he downsizes to a 2 bed flat then it will mean nothing.
Comments
It happened near where I live. The local govt sold off 2 colleges sites for the first bid that covered their (ridiculously low estimated) cost of buying a new site and building a new building to combine the 2 colleges. The developer who purchased the land walks away laughing. They've squashed wayy too many houses into the site, made the absolute minimum 'affordable housing' and made an absolute killing. The rumours of the profits they've made on the sites appearing in the local newspaper and madness. On top of this they are charging a ground rent to owners so are completely mugging them off and milking profit.
Exactly the same is happening on a site across the road from where I work. Previously a govt owned office building. The offices have been moved out of Westminster to a cheaper site. Land sold and now having flats built on by a developer who will make huge profits from flats worth millions each in prime central London location. I reckon one flat will sell for what the land was sold for.
Why can't government hire a project manager to appoint contractors and the rest complete the project themselves. They could make a higher proportion of the houses affordable and still male a profit.
Person B has a mortgage of £150k and cash of £60k, £10k of which is allocated to pay for costs (stamp duty, solicitors cots, removals etc)
Person A now knows that Person B doesn't need £2k for the Stamp Duty, so can now spend £202k on a property. Person A puts house on the market for £202k
On this occasion, the OBR are right to say that existing homeowners are the ones that will benefit from this move.
The seller doesn't care whether the buyer is a first timer or not, but they'll see an opportunity to up their price a little anyway. For those at an advanced stage, the FTBs will get the windfall this time, but that will quickly switch sides.
If you're buying a house for £300,000 on a 90% LTV you'll need a £30K deposit. The chancellor has just given you a 17% head start on your deposit which is very nice indeed.
I read this Guradina piece about Robert Peston and I think it sums up my position.
“If you’re on shit wages, it’s completely reasonable to want your children to be better off than you are. Completely reasonable. But the notion that we,” and he gestures around his elegant townhouse kitchen, “should want more [for our children] is shocking and appalling. We shouldn’t think in those terms. We’ve actually got to think, maybe we should make some sacrifices and be a bit poorer. Because if we don’t make those sacrifices and become a bit poorer, so that those lower down the scale have better lives, we may end up facing utter chaos.”