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Pandamonia
I would like to read about a rate cut + a stamp duty holiday lol :-)
we dont live in a communist state. there is no control of land values so lowering land values is impossible unless you build on greenbelt.
also wikipedia is bull**** nothing on there is worth reading these days.
Land costs are a significant portion of a house purchase. Lowering that cost will increase demand from those currently renting.
No doubt Help to Buy helped some to buy. There are several expressions of opinion here on the overall market impact of Help to Buy:
https://en.wikipedia.org/wiki/Help_to_Buy
There is no proof that help2buy was inflationary. House prices went up after the scheme went to capped lending and first time buyers only.
To think that tiny part of the market can push the price of ALL houses up had no evidence. What was house price inflationary was the zero rates of interest for 13 years. Help2buy did nothing other than help many people buy their first home such as me. Now i have a 4 bed and paid the loan off costing only 8k for 5 years. It should have never been 40% in the south though as that distorts the south versus north but thats different.
Fact is that without help most first time buyers have almost no chance of ever getting out of rented housing. What most ignore is that Help2buy is no different than Parents2buy where the rich mommy and daddy give little matilda a 50k gift to buy their first house.
Fact is that with enough house building the market will balance and there is not enough demand without help for people to get on the ladder on their own.
Londoner,
Excellent post, and Iām in full agreement with you.
The Help to Buy scheme provided a short-term fill-up to house builders and buyers about to enter the market but all the sensible economic commentary was that Help to Buy was largely house price inflationary, and they proved to be correct.
What we need is a Help to Build scheme.
What form might that take? Something that reduced land prices and increased the incentive to develop under utilised land would help. Any ideas? One idea has been around for over 100 years and is viewed by most economists as the fairest form of tax.
A Land value Tax.
Tax an asset and it reduces its value and provides an incentive to maximise the value of the taxed asset. Speculators can sit on land untaxed, while the land value appreciates due to neighbouring and surrounding development, paid for by the community, in one form or another, such speculators can drip feed land into play at their own pace. A Land value Tax accelerates that pace.
https://petition.parliament.uk/petitions/657040
Panda,
As youāve said, a help to buy scheme would likely be required if Labour actually hope to achieve this target (or get close to it).
The govt-backed mortgage scheme and planning reforms should stimulate supply, but Iām not overly excited.
Stevebt, sorry to sound pedantic, but house prices donāt always rise, cash just always falls in value. A war (or a similar crisis) isnāt required for house prices to fall. Without economic stimulus, housing would be much, much cheaper today than it is. The housing market is propped up with an obscene amount of debt, the bank of mom & dad, and blind optimism, and homeowners are typically highly leveraged in other areas of their life (every man and their dog has a car on finance/lease). A fall in employment is all that is required for a serious correction, in my opinion.
The U.Kās economic performance of late and outlook over the next decade does not inspire me with confidence. Most of the skilled and knowledgeable people I know (Iām 30) are looking for a way out, permanently. Thereās money to be made with HB stocks, but I donāt think itās the free lunch it used to be.
As I said previously, I expect housebuilders to recover, eventually, but I think it could be a slow recovery, and Iām not convinced that weāve seen the worst of it yet.
This is their target. "Keir Starmer has pledged to get Britain building again ā starting with one and a half million new homes across the country within five years of a Labour government."
That's an average of 300K per year, but from a standing start of 230K built in 2023 (GB), and assuming same again in 2024, a 9% p.a. growth in build numbers would be needed to achieve 1.5m over 5 years. The build in year 5 would be 354K.
I don't see it but it would be great for our society if it happened. It would also help my Breedon shares.
There isn't enough labour to even come close to building 1.5m houses per year.
Lorenzo, House prices will always rise and a correction wont happen without a war, an amreican living solution will be heading to the UK and it will be the rise os people living in caravans that cant afford houses!
Labour are getting in next and they are talking about 1.5m homes being built on brown and some greenbelt. There is no way thats possible without the big builders pumping out houses and the only way that happens is with some kind of help2buy scheme of some sort. It might be a bit stricter than previously but builders build to demand and the demand is there but in order to hit 1.5m there needs to be incentives for buying and building. There is not a single thing a labour government can do to force companies to build more and charge less. That would require law changes to ownership and free markets that even labour couldnt pass so the only way is incentives and lower interest rates.
I was listening to the most recent Bellway investor presentation over the weekend, and I was taken aback by their forecasts.
For transparency purposes, I sold my Bellway shares a couple of months ago (or so) at Ā£28 per share. Why did I sell? Because I believed that the risk outweighed the potential reward (and I still do). House prices in the U.K. are simply far too high in relation to income imo. Yes, there is latent demand for homes (much like thereās latent demand for Ferraris), but I donāt see how further house price growth is sustainable.
Weāre long overdue a serious correction, in my opinion. That said, with the āhouse prices only go upā rhetoric from those who fail to understand the debasement of the GBP, we might not see a collapse in confidence in the housing market anytime soon.
Anyway, the presentation contained some fairly alarming forecasts, as follows:
In FY23 and FY22, Bellway completed c.11,000 homes. During the Q & A of the presentation, the top brass explained that they believe it will take Bellway 2-3 years to complete 10,000 homes in a financial year (still 1,000 less than FY23!). They elaborated on this by stating that they believe their output will increase by c.5% per annum. If correct, they wonāt return to a FY23 level of output for 4-5 years! As an aggressive investor (I target 30% CAGR per annum), I donāt see there being enough upside in the housebuilders over the coming years, although the market could easily get carried away, as it often does. Iām an earnings man, however.
Bellwayās top boy could be wrong, and I could be wrong, but I think a rapid recovery is far from a foregone conclusion. All it takes is another black swan event or some further inflationary pressure, and things will start looking very bleak.
Iām also concerned by the volume of redundancies (Iām often reading about them in interim and annual reports). The increase in the minimum wage adds fuel to this fire imo.
As for PSN, I find it alarming how theyāre prepared to increase debt in order to maintain a healthy dividendā¦ what could possibly go wrong there? I hear 2008 was eventful in this sector due to housebuilders having poor balance sheets (I was only 15 at the time)?
FWIW, I wouldnāt be surprised if we see interest rates fall and strong housing market rebound (in FY25 or FY26), but given the circumstances, Iām happy to sit on the sidelines for a bit. Albeit, a continuation in the SP decline may cause me to reconsider.
To conclude, I like a sure bet, and I donāt see that in housebuilders at the moment. I donāt feel like I (or anybody else) can confidently predict when they will recover.