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Sunday, March 27, 2011

1st time buyer discrimination

The latest raft of announcements aiming to help first time buyers highlights the paradox in any policy to assist first time buyers getting on the housing ladder.

By boosting the potential demand for housing any scheme will artificially inflate demand.  Thereby increasing values and making them less not more affordable.

My argument against this measure is it's a dressed up subsidy and it is discriminatory.

Why are these measures only available to first time buyers?

Why not second time buyers or even landlords?

You may remember MIRAS.  This was another subsidy given to homeowners during the 70s and 80s.  The very fact that it wasn't available to landlords distorted the housing market and partially led to the decline in the private rental sector.

To me there should be no subsidies to any group in the housing market.  If you can't afford a property the answer is simple - you rent until you can afford to buy.

If I wanted to buy a Porcshe; would the state step in and provide a subsidised loan so that I was able to do so.  Of course they wouldn't!

I've never understood why we should treat housing as a special case.

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Anonymous said...

I agree that it is unfair that some get and some dont. It is the same as most things in this country - unfair. I managed to buy my first place without this kind of thing so people should stop moaning and overspending and they would soon get a deposit together.

Anonymous said...

I agree with everything the editor says. The only right way to help first time buyers is to bring house prices down to an affordable level. In the long term this would benefit every one wishing to move up the housing ladder.

Anonymous said...

Porsche isn't crucial to are economy. The building industry i.e. new builds are hence the governments interest. You are right though, if they do for one they should do for all but their interest is in building.

Anonymous said...

Wrong, cars are more crucial to the economy than houses, why? Well, because you can't export a house to foreign customers and correct our balance of payment deficit. Perhaps why the Government had the foresight of the car scrappage scheme to keep the car industry going.

The problem with our economy is because of exactly the opposite situation, we rely far too heavily on service industry's, such as the Housing Industry, to generate wealth. The reality is, it doesn't generate net wealth it just redistributes it. The only thing that generates real wealth for the UK are activities that bring net income into the UK from abroad, i.e. the country gets collectively wealthier.

Why does this matter, well because the reason we are in this whole sorry mess is because we built our economy on the stupidly steep rising value houses. Ireland being the extreme example of this folly.

Whether we like it or not (and I would be just as badly off as anybody else if this happens), we need house prices to keep falling until they reach sensible levels again.

The only way this is going to happen is if first time buyers are unable to afford housing until the prices drop to a level which they can afford. My ready reckoner has always been that the average price of a house in the UK should be no more than three times the average salary in the UK. That to me, is a healthy indicator that house prices are about right and more importantly, are sustainable for the long term.

Therefore, this proposed scheme for first time buyers will not help, it will make matters worse and cost the tax payer yet more money.