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Thursday, May 7, 2015








Bruce Gauld News

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Promoted by Independent candidate Bruce Gauld, 22 Amory Road, Dulverton,Somerset, TA22 9DY


The Housing Market

One of the major problems we have in this country is the provision of and affordability of housing. A dangerously high proportion of the British economy is solely based on housing. It led to the problems we saw in 2008. Unfortunately it is always much more difficult to rein back from and mitigate an economic problem than it is to get into it in the first place, especially when that problem has been caused deliberately by Government policy.

Another house price collapse would be catastrophic for Britain. How do you engineer a gradual fall in prices? The first method is increase supply. However, thousands of houses have been built in Taunton Deane and throughout the country in the last 10 years but prices have not fallen. Why? The availability of historically low mortgage rates and ready availability of finance.

A policy deliberately engineered by the Government and the Bank of England to forestall a house price collapse. The Help to Buy Scheme which has allowed people to buy houses they would not ordinarily be able to afford. A Government policy. The unprecedented increase in the population caused by mass immigration. Again Government policy started under Labour but not addressed by the present Government, another of their failures.

I would favour the following policies: Stop Help to Buy. Gradually increase interest rates and restrict availability of finance. Very difficult to do. Monetary Policy has a tendency to overshoot or undershoot.

Monetary indicators are, in my opinion, notoriously unreliable and invariably there is a lag in the effect, which usually means the policy will go too far, and have too great an effect and lead to, in this case, a house price crash. Stop immigration and by the use of other policies restricting benefits available to immigrants start to lower the population and therefore the demand.

There would of course be losers. The large-scale housing developers would suffer. At the moment they have a captive market, they know that whatever they build they will be able to sell. They also have an unhealthy relationship with the Government. For some reason, I do not know why, the planning rules seem to be designed to help them and hinder others.

The employees of the large-scale housing developers would almost certainly suffer redundancies. However, as you walk and drive around, you will notice the state of the current housing stock, there are billions of pounds of maintenance work that needs doing. Why does it not get done? People with savings not earning enough because of low interest rates is one reason. More importantly new housing is VAT-free, maintenance is hit with 20% VAT. Yes, if you find workmen who are not VAT registered the labour will not be subject to VAT but all the materials will be. This is why I favour a gradual reduction in VAT to 10%.

Yes, house prices would, if the policies worked, gradually fall. However, this should not be a problem unless the borrower was overextended and was forced to sell at a loss. You would no longer be able to rely on capital appreciation, but a house should be somewhere to live not an investment. If, and I readily admit it is a big if, the policy worked a point of equilibrium would be reached and affordability, demand and availability of finance would be in balance.

Yes, I do own my own home and I am debt free. I fully realise how lucky I am to be in that position but, if the policy worked the price of my house would fall.

Buy To Let

I am not a supporter of Buy to Let for a number of reasons. It should really in most cases be called Borrow to Let. If you own a property outright the return you need is less. You only need to provide an income.

If you borrow you have to also cover the cost of the mortgage. This means you have to charge a higher rent. Even if your tenant is not in receipt of Housing Benefit its existence raises the level of all rents.

If a landlord uses the income from one property to then purchase another he is looked at more favourably by the mortgage providers than somebody who is buying a house as a home.

As most Buy to Lets are at the lower end of the market this restricts availability for first-time buyers. I would favour a policy of restricting Buy to Let mortgages to a maximum of 50% LTV (Loan to Value). Coupled with reducing Housing Benefit and rising interest rates, better returns on savings and higher costs, and house price falls should, if done successfully, reduce the Buy to Let sector. T

his coupled with the other policies I have outlined should also reduce the level of rents.

Right To Buy

I am not really a supporter of the Right to Buy. However, I try not to be a hypocrite. I live in an ex-council semi, I did not buy it from the council, I am the third private owner. So I cannot in all conscience stop somebody else buying their own Local Authority/Housing Association home.

I would add the following conditions to the sale. The tenant buying must be British born. It was paid for originally by British taxpayers for British people. That link should be maintained. Any subsequent purchaser should also be British born and there should also be a local occupancy clause restricting its sale to somebody who has either lived or worked in the area for a minimum of three years.

This usually has the effect of restricting the market value of the home and therefore making it more affordable. Finally, all money raised from the sales should only be used to provide more Social Housing. I would point out that my home has a local occupancy clause which meant theoretically I paid slightly less than the normal market value and if (when) I sell I should obtain slightly less for it.

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