After all in that article all that's being proposed is more measures to dampen demand. By her own arguments in that model your only outlets is supply more housing that people want or make people (investors) want property less. Frankly getting the right kind of housing out there in the areas needing it most is still important, at the same time make sure it's accessable and 'reserved' for first time buyers. Because the system is not going to be changing fundamentally any time soon. The recent measures for landlords has been a necessary one. But at the same time if interest rates were at normal levels so many people with spare money would just take the interest than have all the hassle for a 5% return. The low interest environment has also been another huge driver of asset bubbles all over the worlds property and equity markets. When she talks about the foreign money, it's really the Russians and the Chinese that piled in and it's mostly at the top end in London. Big capital gains were seen, but frankly this is not going to effect the average couple in the Midlands say looking for their first place.
Interestingly, there are 3 houses and 1 flat on my street (out of 50) which were rental and are now being sold, I wonder if this is related?
That's probably a fair bet axel. At least with one or two of them. It won't be so much the stamp duty change that brings property back to the market, but the tax changes I imagine. If you're holding them privately and are buy to let mortgaged, what they leave you won't be very attractive any longer. The ones that are quite high leveraged will be the first to come back on the market. Just wanted to note I was only refering to the rental income with 5%. The capital gains are an obvious attraction for investors too.
Shaking the Magic Money Trees - BBC Radio 4 This was just on radio 4, explaining the QE effect on house buying, and buy to let landlords, it was quite eye opening.
Banks have always created fiat money 'out of thin air', usually through creating debt and we've always had the option of turning on the printing presses usually devaluing whatever currency it might be. That there's a magic money tree pre supposes that a central bank can't go insolvent. This isn't true of course, the BOE can become insolvent, just like any Central bank or government can. It would be great if it were really true but May was right there's no magic money tree, only the illusion of one. QE is a modern form of turning on the printing press.. Gordon Brown did an unforgivable thing selling most of our gold, because when it all comes back to roost Gold IS money. Let's hope it doesn't because if there's ever a global money reset we're going to rue that day like never before.
Did you listen to the broadcast? The Bank of England explain how QE is incredibly ineffective, and has fuelled the buy to let markets to the detriment of first time Buyers, and they discuss other more effective forms of QE, such as infrastructure projects.
Yea I listened for about 20 minutes this morning or so whilst at work. I've been aware of what you're saying for a number of years - I know! It's pretty old news to people that follow money / finance. Cheap money (low interest rates) will do that QE or not. But the banks needed liquidity which QE gave them, so lending continued and it was business as usual before long. But really it's the low interest rate that directly encouraged people to borrow to buy investment/rental property. Let's just say that has flourished with small and big players involved. The people that already have equity in property can secure buy to let mortgages against their existing home for example. I've heard the idea of directly using the money for roads etc. It's been sometimes called 'helicoptor money' or is a progression of that idea. But there's not really such thing as magicing money from thin air. It has to be paid back, by someone, sometime. Or of course you default/ go bankrupt.
While you are correct that Buy to Let Landlords have been hit by tax changes and stamp duty, any landlord with a decent broker or financial advisor would tell them to go Ltd. Lenders consider Ltd Companies in the basic tax bracket. Which is beneficial to the borrower because the calculations in the background allow for more money to be loaned against the property. The 'magic money tree' does not exist but using this as a 'political catchphrase' is ridiculous. Every government since the abolishment of the gold standard has done the same thing to generate money which is essentially to sell bonds (and start wars, but that's for another topic, if you believe that sort of thing). Fractional Reserve Banking is to blame for pretty much every financial crisis that has ever happened. If you don't know what that is, I suggest reading up on it. It's the most eye opening thing I've ever read and really helps to understand how/why banks can churn out money to lend to people. "You're savings are only valued at the faith you place in them." - Lennon 2018
Sure, going Ltd will sort out the Tax side. It all really depends what kind of landlord we're talking about as we have such a wide range from people with that one extra property to those with several and much more than that etc. Mines (I kept my old house after I moved) in my wifes name who doesn't work, and to be honest if I wanted to make a business from it I'd stick to commercial property anyway. Yes, selling bonds is how governments raise money.. Not sure what your point is, that phrase was used on the podcast. Governments have to make good on those bonds still. QE, the subject of the podcast can't really be seen as one and the same as Gov. Bonds. Again I'm not sure the point about that. I think it's fine that a politician can point out there isn't a magic money tree, as some politicians certainly seem to act and think like there is. A Bank not having all our cash stashed somewhere is something that's been around a long time and something I heard about at school. But 0k.
My point about QE and the ‘money tree’ is how May uses it as a slogon to try and score points. QE is essential. She does, every other Goverment will/has done it so o dunno why she keeps banging on about it. Re Fractional Reserve Banking, I make the point because it’s scary that standard practise in modern banking os to keep only 10% deposit reserves. That means 90% of someones hard earned savings get lent out to someone else, at interest. It’s physically, universally impossible fore the books the balance! Just thought it was worth a mention.
I thoroughly disagree with this point. Gold is a shiny commodity, and the gold standard is widely accepted as one of the exacerbating features of the Great Depression. Fiat money is great for what money is supposed to do, i.e. to store value temporarily while you do something else with it and to settle legal debts. That's all money needs to do to be successful - it doesn't need intrinsic value if an economy backs it up.
Sure but economies go wrong all the time and people lose faith in them all the time. You just haven't seen it first hand yet. Sometimes in our relatively short experiences we forget how things have been before and could be again. It's about faith, I'm ok with it, as long as it holds. It doesn't always and for that Gold is the insurance: It is money, and remains money when people lose faith in the 'paper' and the bodies that govern it.
I think I had as you had asked me in the afternoon if I had watched it. Please if you have something specific just come out with it I'm not a mind reader. I was waiting for it to get to the point so to speak, but I had things to do. You posted so if you want to expand on something or use it to make some point you should do so. It's primarily a way for pumping money into the economy, to provide liquidity and provide stimulus. I'm not some defender of it by the way - such a prolonged use of it. A bond is a loan, so the BOE has these as assets that one day expire. Issuing debt has always been a standard way to create money, but one day that money is due. There is a difference between spending the money directly and buying bonds with it, it would be kind of disngenious if you wer not pointing that out if you're going to compare it directly with the idea of 'helicopter money' which has also been doing the rounds in financial publications for some time. It's certainly an option, but it's a different one with another set of considerations. There are ways the Government can spend money, but I just feel like that podcast was being a bit partisan the way it went about presenting things as if there was some easy alternative. I'm sure May wasn't talking about anything QE related when she used that phrase.
Yea but did she use it about QE ? I didn't think so, but I could be wrong. I repeated it because it was used in the podcast not really because I wanted to start being political in any way. The BBC should try to be more objective in its presentations perhaps. She probably said it in relation to spending in general. Personally I think the Tory government should get well away from the 'austerity line', it's had its day. Fair enough, of course it is. If that wories you, I'd advise look no further as that's just the tip of the iceberg of things that would keep you awake at night.
I'm expecting a slowdown, maybe some weakness/ some price falls over the next couple years, but not a 'crash'. Interest rates should be firming up soon, this will cuase some fall out for sure, combined with some of the changes to buy to let and of course Brexit. Keep your eyes open and you could time it pretty well. In relation to what I follow this coincides with a predicted mid cycle slowdown.. It's pretty much due anytime soon, we may have seen some already starting with Brexit. I saw plenty of prices dropped in London for example. Anyway I don't think the next couple of years will be the best for the housing market, but it's relative and the specifics are unpredictable. Don't take it as Gospel, but as far as this kind of advice goes.... I have seen in depth research on land price cycles and it's pretty convincing stuff. And obviously property and land prices are hand in glove. My advice is it would be better to risk it around now/ next year or two than wait for a full blown crash. If you're in the position to do it of course. The mid cycle slowdown usually lasts a couple years. Good luck!
Oh dear, I apologise about my terrible spelling/grammar in the comment. I was typing that on my phone while walking home Anyway, I agree with you about the inevitable price slumps. My worry is that this still wont be enough to secure houses for the younger generation. Even if house prices dropped by £10/20k that still wouldn't be significant enough to make a noticeable dent in my opinion. No doubt land lords will be waiting in the shadows to scoop up the semi-reduced properties anyway.
Also can I just add that it's apparently not acceptable to simply post links to youtube videos without any discussion points or saying what you have to say about whatever it is about. I think that has to apply to podcasts and articles probably. There are clear MAP rules about this I think. This is actually something I have to agree with wholeheartedly. Please can these things be upheld re. podcasts as much as they are video clips. How is it on me to spend half an hour of my life listening to nothing particularly new to me and then try to mind read why someone posted it anyway. Then I get questioned if I watched it after I responded, as if that's somehow a valid way to go about discussing the contents. I think not!! If you're going to post a link the onus is on you to direct and lead the discussion about it surely. Could a moderator clear up any ambuguity on this please for all the posters on this thread and give us all a reminder of good conduct on this, our fine forum.
You said you only listened to it, only after you initially responded to it, so it's not on me if you reply to things you've not listened to. Anyway as my brief introduction said, the impact on QE on house prices has driven them up, and encouraged landlords to buy up large amounts of housing stock. Which in the context of this thread makes it completely on topic.
