The economic impact of Covid-19

[OutByEaster?]

With the houses, I'd have thought an awful lot of people would be staying put at the moment due to the uncertainty of the jobs market. If you've got a £40k deposit saved up right now, you'd be thinking about sitting on it in case you're out of work in the coming months wouldn't you? I guess the saving on stamp duty might encourage a few brave souls, but for me it's more likely to be a real benefit to those people for whom buying and owning houses is a profession rather than a part of a life. 

If you're Robbie Fowler, I'd have thought it was great news and I can see how those people who want to add another couple of dozen houses to their renting portfolio will be delighted both with the saving and it's potential to keep prices stable. For people looking to move house though, I'd have thought right now what they really want is some sort of income security before they jump.

Now I don't know much about how the housing market works so I'm probably missing the point of how this works, but it's not immediately clear to me how helpful this will be to all but a handful of brave souls pressing on regardless.

 

[OutByEaster?]

Also, how does all of that tie in with Boris's bombastic cry that w'll build our way out of this crisis - with homes being thrown up left right and centre - if we've got huge job losses, a depressed economy and a lot more houses available, aren't property prices due to crash anyway?

£5k off a £250k house that'll be worth £190k in two years isn't a great deal is it?

I'm confused.

 

[chrisp65]

15 minutes ago, Genie said:

Look, you clearly either know more about it than me or are just more optimistic than me and by the looks of it, possibly both.

If that’s the best bangs per buck the govt could achieve to protect jobs and boost the economy and get houses built, great.

Just put me down in the sceptical column.

 

 

 

[Davkaus]

14 minutes ago, OutByEaster? said:

 

 but for me it's more likely to be a real benefit to those people for whom buying and owning houses is a profession rather than a part of a life. 

If you're Robbie Fowler, I'd have thought it was great news and I can see how those people who want to add another couple of dozen houses to their renting portfolio will be delighted both with the saving and it's potential to keep prices stable.

 

Never waste a crisis.

https://tribunemag.co.uk/2020/05/government-by-landlord

 

Quote

 

Private tenants are among the most vulnerable to the economic fallout of the coronavirus crisis, so why are they getting such minimal protection when compared to mortgage-holders?

One reason is that we have a system in Britain which amounts to government by landlord, with around a quarter of all ministers – including Boris Johnson – collecting rent. These ministers themselves answer to a parliament where around a fifth of MPs are landlords.

MPs must reveal if they collect more than £10,000 per year in rent. I checked the records of all 650 MPs in the current parliament and found 110 MPs (17%) are landlords. In most cases this means renting out houses and flats. Some MPs also collecting rent from farms, shops and other commercial premises. 

The over-representation of landlords is more intense among Conservative MPs: 87 out of 365 Tory MPs (24%) are landlords. 45 of those Tory MPs (15%), including Boris Johnson, rent out more than one property. This puts the Tories in a league of their own.

 

 

Edited July 8, 2020 by Davkaus

[Stevo985]

53 minutes ago, chrisp65 said:

Look, hopefully I’m wrong and £10k off a £400,000 house triggers the market to a noticeable measurable extent.

I’d certainly benefit from that, so here’s hoping somebody can quote my pessimism back at me in 6 months time with proof of the benefit.

 

 

 

Again, it’s not 10k off a 400 grand house. That’s deliberately oversimplifying it. 
 

I have no idea if it will work out for the best. I don’t have an opinion on whether it’s a “good thing”

But I can certainly see that it will kickstart people into buying a house in certain situations

[Genie]

10 minutes ago, Stevo985 said:

But I can certainly see that it will kickstart people into buying a house in certain situations

Then for every house purchase there is income for an agent, solicitor, removal company, surveyor, lender, tradesmen etc. For these businesses it may mean survival or keeping more staff rather than turning a profit.

There may not be an uptick as a result of this scheme, but it might reduce the size of the slump. 

Edited July 8, 2020 by Genie

[chrisp65]

9 minutes ago, Stevo985 said:

Again, it’s not 10k off a 400 grand house. That’s deliberately oversimplifying it. 
I have no idea if it will work out for the best. I don’t have an opinion on whether it’s a “good thing”

But I can certainly see that it will kickstart people into buying a house in certain situations

How is it over simplifying it to say it’s money off the cost of a house?

It either is or it isn’t. It costs you less money to buy that house. Or are we presuming the the price will go up or people will buy dearer houses?

It’s the best case scenario that you have, say, £5000 in your current account that you can now spend on something else.

If it’s more nuanced than that, then the case for doing it gets even worse. If that £5k was another loan, or will now be used to pay 6 months mortgage, or will be a redundancy insurance buffer rather than marching it straight down to B&Q, then that’s showing the scheme to already have failed in part of its objective.

 

 

 

[Xela]

1 hour ago, KenjiOgiwara said:

How's the interest rates with you guys now? Are people on average doing fixed or adjustable?

Like most Norwegian I've got an adjustable rate, but I think that's a deviation compared to most of the world. 

I was close to going fixed interest earlier in the year, even got an offer on 2,5% for 10 years, but ended up not completing the contract. Now I've got an offer of 10 years 2,0% fixed. I think I might actually accept that offer. The risk reward seems very favourable. 

I went with variable interest 1.59% over base for my recent remortgage. Fixed rates are sub 2% for shorter terms (depending on LTV). a 10 year fixed will cost more though - possibly closer to 3%

[LondonLax]

2 hours ago, Seat68 said:

Is that really how it works? I can get a mortgage for x and I will cut my cloth accordingly. If I don’t  have to borrow more then I won’t. Thats me others might be differently, this is Stafford in the end and every area has pretty defined ceiling prices.  

That’s just the point though isn’t it, you can get a mortgage for x, previously you would have had to give a part of that mortgage to the government but now you are free to give it to the homeowner. The price you pay hasn’t changed but the owner has taken a larger share of the money you had available to buy.

[Stevo985]

1 hour ago, chrisp65 said:

How is it over simplifying it to say it’s money off the cost of a house?

It either is or it isn’t. It costs you less money to buy that house. Or are we presuming the the price will go up or people will buy dearer houses?

It’s the best case scenario that you have, say, £5000 in your current account that you can now spend on something else.

If it’s more nuanced than that, then the case for doing it gets even worse. If that £5k was another loan, or will now be used to pay 6 months mortgage, or will be a redundancy insurance buffer rather than marching it straight down to B&Q, then that’s showing the scheme to already have failed in part of its objective.

 

 

 

Because this:

2 hours ago, Stevo985 said:

Well I think a lot of people looking to buy a house, myself included, put things on hold when Covid hit because of financial uncertainty both personally and with the economy, and also the potential for house prices to fall as a result of that meant it didn't seem like the best time to buy even if you could still afford to.

But now you're effectively being told if you go and buy that house you were thinking of buying 4 months ago you'll save 5 grand, 7 grand, 10 grand whatever.

I know it doesn't quite work as simply as that. But it's a good incentive for people to start buying again. It's certainly got me thinking that it might be time to start looking again. At the very least waiting for 4 months to buy will have saved me 10 grand... or rather the 10 grand I had set aside (mentally) for paying stamp duty can now be spent on the deposit or a new kitchen or whatever.

It's not as simple as saying £5k of a £250k house is a tiny amount. It's not like it's coming off your mortgage. You have to pay it up front. So it's £5k off your up front fees for buying the house. So if you're buying a £250k house with a 10% deposit, you're paying £30k up front (25k deposit, 5k stamp duty) plus moving fees etc obviously

Now you only have to pay the deposit up front. £5k saving on £30k is far more attractive.

Your house being £10k cheaper means what? A few quid off your mortgage each month. Not really a big deal, which is I think what you're getting at

But having £10k extra in your bank account when you buy it because you don't have to pay that in tax is a huge incentive. 

 

I'm literally telling you I'm in that exact position and if you told me the house i wanted was now 390k instead of 400k it wouldn't convince me to buy. But telling me I don't have to pay that £10k stamp duty does  

Edited July 8, 2020 by Stevo985

[LondonLax]

16 minutes ago, Stevo985 said:

Because this:

Your house being £10k cheaper means what? A few quid off your mortgage each month. Not really a big deal, which is I think what you're getting at

But having £10k extra in your bank account when you buy it because you don't have to pay that in tax is a huge incentive. 

 

I'm literally telling you I'm in that exact position and if you told me the house i wanted was now 390k instead of 400k it wouldn't convince me to buy. But telling me I don't have to pay that £10k stamp duty does  

It’s a slight of hand card trick, the buyers think they are getting a good deal but it’s actually the seller getting the benefit. Both sides think it’s a good idea though so it’s a vote winner.

Here is some analysis from the last time stamp duty was reduced as part of the rejigg in 2014:

Quote

Will you be better off?

Joe Sarling, an economist and senior analyst at the National Housing Federation, says the Chancellor's new stance on stamp duty is a most clever policy "because it makes existing homeowners (often voters) better off, while making new buyers 'feel' like they will be better off". But he warns that in reality, analysis by the federation of Office for Budget Responsibility (OBR) data shows it will push up house prices "in the majority of places in England".

He explains: "A buyer will pay what they can afford in order to buy a house. They have factored in the fees, stamp duty and price already and know the maximum they can afford. If stamp duty is removed, they can still afford to pay the same amount as before and will offer to pay this."

“Indeed, the seller will also know that the buyer isn't going to pay such high tax rates and will ask for more money. In fact, the extra money will increase competition among buyers and will push up prices. The net effect is that the Treasury gets less money and the original seller will get more."

"And when the seller becomes the buyer on the purchase of their own new home, they'll have more money, too, and will most likely use it to pay a bit extra for their new property. And so it continues", he adds.

In the vast majority of places, the overall 'multiplier' effect (the stamp duty saving plus the impact of buyers having more money to spend) is that house prices will increase over time. The OBR has forecast that a 1% reduction in stamp duty will translate into a 1.4% rise in house prices.

https://nethouseprices.com/news/show/1712/what-have-the-new-stamp-duty-rules-done-for-house-prices

There is similar analysis available for the effect of things like a ‘first home buyer grant’, in reality those grants go straight into the hands of home owners in the form of higher house prices.

Edited July 8, 2020 by LondonLax

[chrisp65]

So from what I’ve just read, it’s actually an even worse idea than I originally thought.

 

 

[Davkaus]

It just feels like a ridiculous policy right now. Estate agents are already booming and have been busy again for weeks. It's a business that isn't hit too hard by social distancing, and isn't experiencing much in terms of redundancies. Meanwhile pubs, hotels, restaurants, cinemas, and theatres are utterly **** and letting people go. It feels like the government care more about house prices than they do people's jobs.

Some people who are very comfortable financially will save some money, great. 

[tinker]

All this printing money is surely going to impact on the pounds value? Import prices will increase. The money would be better spent on the tidal energy scheme that was proposed a few year ago only to be thrown out. Low cost energy would have a real long term impact on the economy. 

[Seat68]

Just be happy for us you miserable shits. 

[Brumstopdogs]

 

[Xela]

1 minute ago, Seat68 said:

Just be happy for us you miserable shits. 

You moving back to your spiritual home, Telford? 

[Seat68]

6 minutes ago, Xela said:

You moving back to your spiritual home, Telford? 

It was mentioned a couple of times. I shuddered and said no, firmly. Stafford somewhere.  

[chrisp65]

15 minutes ago, Seat68 said:

Just be happy for us you miserable shits. 

I am, honest!

But if I wanted to boost the television industry, I wouldn’t do it by knocking a fiver off the tv licence.

 

[Sid4ever]

2 hours ago, Xela said:

I went with variable interest 1.59% over base for my recent remortgage. Fixed rates are sub 2% for shorter terms (depending on LTV). a 10 year fixed will cost more though - possibly closer to 3%

We start in August on a five year fixed at 1.79% which looked like a good deal, think it still is.