Amazing how many wide-eyed people get their first contract on their doorstep (because they could wait for the right opportunity) and think contracting is a breeze.
Yeah, wait til you have to commute to a different country to find work!
IT mercenaries and buy-to-let landlords are my HEROES - here's why
High rates of home ownership increase the unemployment rate, says a new study. This doesn't, at first, sound very sensible; we'd probably think that anyone with a house is working so damned hard to pay the mortgage that they'd have no time to be unemployed. However, it is actually true that there is a correlation between the …
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Wednesday 19th June 2013 11:24 GMT Ian 55
Come the revolution
Buy to let owners will be the wall against which others are shot.
Without their subsidised input, house prices would be lower. There would also be fewer stupid developments aimed at them rather than real people.
When something happens to the economy that means they have to sell because rental income << mortgage payments, house prices will become very much lower, very quickly. All in all, it'll be HOUSE PRICE APOCALYPSE time, thanks to them and the people prepared to finance them.
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Wednesday 19th June 2013 11:43 GMT Ben Tasker
Re: Come the revolution
When something happens to the economy that means they have to sell because rental income << mortgage payments, house prices will become very much lower, very quickly.
Don't know about the rest of the country, but that's already happening (well, the first bit) in my neck of the woods. There are a lot of people competing for very few rented properties at the moment, a lot of whom (I'm told) have been kicked out because the landlord is selling up.
House prices appear unaffected though sadly, though they might come down in time
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Wednesday 19th June 2013 13:33 GMT lozhurst
Re: Come the revolution
One reason house prices are not falling far, and are unlikely to, is people simply cannot sell for much less than than their original purchase price (thanks to high loan-to-value mortgages) and be able to settle the outstanding mortgage debt.
What's more likely to happen, as is the happening now, is that house prices will flatline (near to 0% changes) for an extended period of time and inflation will cause the relative value to decrease (i.e. the actual asking price of any particular house is unlikely to change but how what the "worth" of that amount of money is going down).
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Wednesday 19th June 2013 16:10 GMT Alan Brown
Re: Come the revolution
"What's more likely to happen, as is the happening now, is that house prices will flatline (near to 0% changes) for an extended period of time and inflation will cause the relative value to decrease "
It's not just house prices, but also trading volume (number of houses being bought/sold) which needs to be taken into account. All this jolly talk in the media about prices might make one think that the recession is over, but the reality is that trading was down by 95-98% in the 2 years leading up to the crash and is still well down on "normal" with almost all the trading occuring at the top end of the market.
Prices have indeed flatlined, mainly because people "can't afford to sell at a loss", however the only reason that decision isn't being made for them by mortgage forclosures is that the govt and banks can't afford any further loss of confidence in the market.
There's also a lot of resistance to increasing rentals, due to the average man in the street having lost about 40% of his purchasing power since 2002. In some cases it means that it's cheaper to let a house sit empty than to pay extra taxes associated with having a rental property in occupancy (you can blame councils for that particular bit of madness).
In most situations when there's been a bubble things return to sanity fairly quickly, but because it's housing, this time complete collapse has been artificially prevented. This WILL have worse long-term effects than if the market had been allowed to collapse along with the banking sector (going bankrupt isn't always a bad thing).
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Wednesday 19th June 2013 17:00 GMT Tom 13
Re: All this jolly talk in the media about prices
might make one think that the recession is over, but the reality is that trading was down by 95-98% in the 2 years leading up to the crash and is still well down on "normal" with almost all the trading occuring at the top end of the market.
But in some sense that's the real question isn't it? What is "normal"? Is normal the housing market prior to Bears, Leahman, and AIG? Is it what we had while the baby boomers were growing up? Or is what we see now the real normal because there was both a real bubble plus we're downsizing as the boomers retire? Even if it is well below what we were doing a mere decade ago.
The rest of your points are spot on too.
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Wednesday 19th June 2013 20:06 GMT J.G.Harston
Re: Come the revolution
"In some cases it means that it's cheaper to let a house sit empty than to pay extra taxes associated with having a rental property in occupancy (you can blame councils for that particular bit of madness)."
Err... how does that work? If I have a tenant paying £400 a month, then (ignoring the basic allowance) I'd be paying 20% income tax on that, £80 a month. If it was empty I'd be paying "empty property" council tax, £85 a month, and after two years £127 a month.
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Wednesday 19th June 2013 14:46 GMT El Presidente
Re: Come the revolution
House prices need to be artificially inflated by the banks and building societies because if the market readjusted 50% down - where the market OUGHT TO BE IN REALITY - ALL of the banks and building societies would collapse because they are ALL over leveraged by a massive amount the same as the US sub-prime bubble was.
Fraud on a massive scale and call me Dave is concerned with windmills and gay marriage.
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Wednesday 19th June 2013 16:41 GMT h3
Re: Come the revolution
We should just have government mandated rents for given areas. (They do even in the US).
At the moment the reason our housing benefit bill is so big is because of paying private landlords.
(The bedroom tax is for council housing that is not the problem).
I hope anything possible happens to make buy to let owners lose everything.
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Wednesday 19th June 2013 20:10 GMT J.G.Harston
Re: Come the revolution
"(The bedroom tax is for council housing that is not the problem)."
Bedroom tax is also for private rentals, it's been there forever. The only change is that it is being introduced for council tenants.
Private sector Housing Benefit has ALWAYS been "for your assessed needs", until this year council housing Housing Benefit was "as much as you can eat". The changes this year have been to bring council housing Housing Benefit in line with private sector Housing Benefit to be "for your assessed needs".
I used to sit on a Housing Benefit Review Board before it was abolished ten years ago, dealing with exactly these issues.
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Wednesday 19th June 2013 18:38 GMT Anonymous Coward
Re: Come the revolution
> All in all, it'll be HOUSE PRICE APOCALYPSE time
House price apocalypse time is nearly a decade overdue anyway - and it would not be a bad thing at all (and I speak as a home-owner). And the longer it is postponed the sharper the adjustment will be.
All of the very biggest market crashes of any denomination (stock market, housing, etc.) were always preceeded by the notion that the prices can only ever go up. This is the ill thought out mindset that a lot of people follow today.
Here is a history lesson with scary parallels. In the '90s when the Barings bank collapsed, the biggest cause wasn't just a rogue trader, it was the way the markets were inflated in the first place. Certain financial institutions were effectively offering insurance against losses on the market. Since everybody was insured against losses and could only make money on betting the market will go up, everybody just bet on the market going up. Such insurance was then outlawed by the financial watchdog, and the insanely over-inflated market crashed spectacularly.
More recently, the same happened to the housing market, and the lenders' insurance against losing money on foreclosure this time was known as credit default swaps (CDS). This lead to mortgages being given to people who blatantly never had a snowflake's chance in hell of paying them back, and when a large chunk of them didn't the insurers issuing CDS-es got hammered out of existance - except the insurers were the same financial institutions doing the lending, including to each other. It doesn't take a genius to work out how that resulted in the events since 2008.
All of this has happened before and it will happen again. The problem is that falling house prices don't win votes for politicians, so the only alternative is to apply some psychological smoke and mirrors and have rampant inflation instead, which will wipe out the value without eroding the numbers, plus a hot-spot known as London that is easy to wave in people's faces and say "Look! The house prices are still going up! We saved the housing market! Vote for us!" when the reality is anything but that rosy.
Let it burn - it is the only sane thing to do. Let the Darwinian force do it's job. Propping up lame ducks only prolongs the pain on the way to the inevitable.
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Thursday 20th June 2013 08:16 GMT Anonymous Coward
Re: Come the revolution
Wow. You understand just about enough to sound convincing, while getting it all hopelessly wrong.
You misunderstand completely the relationship between Nick Leeson, Barings, and "the Market".
Your knowledge of Credit Default Swaps is hopelessly misguided.
Is the housing market expensive? Yes, but less so than it was in 2008. Will it fall further? In real terms (inflation adjusted) yes it probably will, but not much further. I say not much further because the economy is starting to show signs of a (very slow) recovery.
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Wednesday 19th June 2013 11:25 GMT Anonymous Coward
Given the hideously costly rental rates in this country I don't think private landlords are heroes. Perhaps the answer is to buy, but be prepared to rent out the property you own and then rent yourself as you chase the work around. You can at least have the prospect of rental and mortgage free home ownership when you eventually retire. The problem with that is the discrepancy between rental rates - they tend to be higher where the work is, so if you want to buy in an area with low employment, perhaps because it's where you grew up and want to return to, the rental income if you can even find tenants wont cover your own rent elsewhere.
So what's a better answer?
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Wednesday 19th June 2013 16:20 GMT Buzzword
Re: Tax?
But if you do own the rental property outright, and you're in the 40% tax bracket, then you're treated rather harshly for tax purposes.
Let's assume you own your house outright and rent it out, while working in another city where you rent from a landlord. Assume that both houses cost the same in rent. Your rental income only covers 60% of your rental cost because the rest goes on tax.
The only way to avoid this is to take out a mortgage on the first property and use it to buy a home in the city where you work. The current tax system actually encourages you to load up on debt so as to minimise your tax bill. A cynic might suggest that that is a deliberate feature, not a bug.
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Wednesday 19th June 2013 11:27 GMT Anonymous Coward
Well I'll go the bottom of our stairs!
If the problem is one of labour mobility, then surely the answer is to make mobility easier.
I can't see the private capital flooding into to supplant all (largely subsidised) local authority and RSL housing, nor the mortgaged sector. But there are plenty of things government could do, but choose not to, to enhance mobility. Like more and cheaper trains (noting that people won't pay for these at market rates, so we're talking about even more subsidies than the £6bn rail currently gets). Better roads, lower taxes on road fuel. The abolition of stamp duty on house purchases, the abolition of crappy government paperwork like "energy performance certificates".
There's also the problem that government have failed to dent London's economic hegemony in the UK. Having the centre of commerce, finance, politics and law in one place guarantees a skewed economy, regional imbalances and labour immobility. They need to do a lot more than send the BBC hoi polloi to Machester, and the paper pushers of DVLA to Cardiff if they want to resolve this.
Personally I can't see the needs of the 99% being put ahead of the 1%, and the 1% rather like the status quo.
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Thursday 20th June 2013 13:30 GMT Anonymous Coward
Re: What utter rubbish
Yes, whereas in America, "Asian" is taken to mean "East Asian" or "Southeast Asian", in Britain it generally refers to people from South Asia or the Indian Subcontinent.
As for the "-American" suffix being the "politically correct" term, this story is amusing:-
http://everything2.com/user/iain/writeups/Why+I+don%2527t+use+the+phrase+%2522African-American%2522
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Wednesday 19th June 2013 11:35 GMT trashbat
What's good for M&M Enterprises is good for the country
If the lack of an IT angle ever becomes too pressing, why not have these stories automatically generated? Take any arbitrary unpleasant conservative viewpoint, stir in some further right wing takes on economics, and bravely leap forth to present a logically-untroubled conclusion of some collective good. You can probably even use the whole idea to pay less tax.
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Wednesday 19th June 2013 11:41 GMT Zippy's Sausage Factory
As a contractor, and renter (and former almost private landlord, in that the ex used to rent out her place), I can totally understand this. The only problem with the rental sector is that it's brutally expensive, and rental agents think nothing of charging two months' rent in total fees to a prospective landlord, and then charging another £250 to the landlord for credit checks that (a) cost them £2 and (b) the tenant already paid for.
If we cleaned up the sharkpool that is the estate agencies and made RSL housing more fluid, we might stand a chance of economic productivity picking up again.
In the meantime, let's all continue towards the economic doom of a massive wave of bankruptcies and recession like we had in the 80s by keeping those house prices high and those Daily Express readers happy, eh?
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Wednesday 19th June 2013 12:04 GMT The Axe
It's not clearing up the shark pool of estates agencies, it's removing the meddling of the politicians in the free market of renting. For instance, ASL sides with the tenant so that landlord has to compensate with raised rents. Remove the expense of owning a rented property and the prices will come down.
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Wednesday 19th June 2013 11:44 GMT David Ireland
The reason neither party can tackle this is that both understand the value of communities,and having one requires people live in the same place for long periods of time. In they are so valuable in fact, that we better figure out how to bring the work to where people are, not the other way round:
By not having a job for a period of time, people are demonstrating that for a job that comes to them, they will accept a lower salary. The market is failing to use this fact, so the market is failing. Wow, a failing market. Who would have thought it?
This fail is for the author.
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Wednesday 19th June 2013 14:22 GMT ElectricFox
Just to expand on this, take London as case in point. Businesses could make huge savings by moving up to the north or out to Wales through lower wages and cheaper office space. By being reasonably close to an airport and mainline rail station, they can still get good links to London, and failing that, there're the interwebs.
It will be interesting to see if HS2 indeed moves more businesses out of London, or simply turns Bimingham into another commuter belt. I, for one, sadly fear that it will be the latter.
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Thursday 20th June 2013 05:54 GMT Richard 12
Birmingham commuter belt wouldn't be bad
The commuter belt is where the shops end up, because while people are willing to do a daily point-to-point train commute for work, they won't be bringing the weekly shop home on that train.
So the effect is to boost the local economy.
The downside is that house prices go up as locals now compete with bankers who can buy a house with their monthly bonus...
That inequality of income actually the problem. The bigger the gap, the worse everything is.
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Thursday 20th June 2013 08:33 GMT TopOnePercent
Re: Birmingham commuter belt wouldn't be bad
The bigger the gap, the more incentive there is to work harder and move yourself up the income curve.
The locals have already spent the past decade competing with not for profit housing associations - essentially they have been outbid for houses by the unemployed. Worse still are the soviet levels of public sector employment in much of "the regions" as they get outbid again by the public sector workers they have to pay for.
Capping benefits, and reducing the lavish public sector packages (through regional bargaining) are the real answer, rather than expensive and under utilised train sets.
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Thursday 20th June 2013 12:50 GMT Aldous
Re: Birmingham commuter belt wouldn't be bad
In most country's it would work by allowing people who can not afford London prices to live in the midlands. In the UK it will not work as the train ticket prices will still be over 160GBP a day to get into London before 9am and out any earlier then 7pm.
I used to live on the mainline and could get into london in around an hour so even with existing infrastructure it is doable. However at the price they want (even for a season ticket) i could either buy a car and drive in (and have change) or rent in London as the cost of transport outweighed the cheaper rent.
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Wednesday 19th June 2013 11:46 GMT Natalie Gritpants
Correlation <> Causation yet again.
You could say that high unemployment causes high home ownership - maybe something to be celebrated.
Or there could be something (i.e. technological advances in the last few centuries) that have led to high home ownership and high unemployment. As a species we can now achieve more and work less. Which is OK as long as the achievement and reduction in working are spread around fairly evenly.
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Wednesday 19th June 2013 12:27 GMT Anonymous Coward
Re: Correlation <> Causation yet again.
>You could say that high unemployment causes high home ownership
No you can't. Do you understand the meaning of lagged? Home ownership goes up followed by higher unemployment. They are not hand in hand. Let's examine what you say you are able claim, specifically, unemployment goes up followed by higher home ownership. Just think about that and then think how many mortgages banks are going to give to someone who is unemployed.
Also, all this "Correlation <> Causation" is over used. If there are enough studies and an absence of any other viable explanation then correlation does equal causation.
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Wednesday 19th June 2013 12:48 GMT Roo
Re: Correlation <> Causation yet again.
"Also, all this "Correlation <> Causation" is over used. If there are enough studies and an absence of any other viable explanation then correlation does equal causation."
Do you think that people can't see you when you cover your eyes with your hands as well ?
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Biting the hand that feeds IT
