Cash in as our desperate government inflates a new housing bubble

Property: the bubble is back

At MoneyWeek, we’re bearish on UK residential property.

Prices may have fallen across the UK in real terms (after inflation), but houses remain expensive in most areas relative to income, based on the long-term average. And we don’t like buying assets when they’re expensive.

However, it’s clear that the government will do all in its power to push prices even higher. You can see why: a house is generally a family’s costliest purchase, and its most visible asset.

So if prices are going up, people think that their situation is improving. Happy families make happy voters – and happy voters vote for the party in power. That’s why a massive mortgage subsidy scheme – Help to Buy – has been thrust upon us. And it seems to be working. Prices and sales are rising.

This reflating housing bubble will cost us all dear in the long run. But between now and the election, you can make some good money. Here’s how…

The housing bubble is back with a vengeance

All the major indicators suggest that prices are moving upwards. In June, prices were up 1.9% on the year before, says Nationwide. London did particularly well, up 5.2%. But prices were up in most areas – rising in ten out of the UK’s 13 regions.

Halifax’s housing index tells a similar story. Prices have been rising for five months in a row, and are now up 4% on last year.

Sales are rising too. The number of mortgages for house purchase is up by a third, to 37,300, according to the British Bankers’ Association. The more comprehensive data from the Bank of England has sales back up to the levels of early 2008.

Sellers are getting offers which are closer to their asking prices. The time taken to sell is falling too, says Hometrack. Surveyors and estate agents are optimistic, and new buyer enquiries are rising all the time.

Time to snap up a buy-to-let? We wouldn’t go that far. The rise in prices has not been matched by an increase in wages. As a result, the ratio of prices to income has risen, making houses even less affordable than they were last year.


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Overall, house prices in the UK cost four and a half times the average person’s income. That compares with a historical average of 3.4 times. In London – as you’d expect – things are worse. Historically, the average London house has cost 4.8 times the income of the average first-time buyer. But according to Nationwide, the average London house now costs seven times a first-time buyer’s salary. That’s nearly 50% above the historic average.

Sure, if interest rates stay where they are now, that’s not necessarily a big problem. If you look at the ratio of mortgage payments to income, they account for half of net pay, which is just a little above the long-term average.

Trouble is, interest rates right now are at or near record lows. So mortgage servicing costs are only likely to rise. Ironically enough, it could be an economic recovery that does the damage: a recovery would result in higher rates, pushing mortgage payments up, and making many loans unaffordable.

The government might be happy to risk taxpayer funds to boost the housing market just now, while an election is just around the corner. But the subsidy scheme might not seem as smart an idea after the election is won or lost. And in the longer run, it’ll just mean that the inevitable correction in prices is even more painful.

A better way to play property before the election

Property takes time to buy and sell. And it’s a hassle – and an expense – to manage. A more flexible way to benefit from the current rebound in UK property is to focus on companies involved in construction.

There are two reasons for this. Firstly, government attempts to stimulate the housing sector are focused mainly on new-build properties. The Help to Buy scheme is the most obvious example. At the moment, a 5% deposit on a new property worth up to £600,000 can be topped up with a 20% low-interest loan from the government. The idea is that borrowers go to the bank with a much larger deposit, enabling them to get lower rates.

The flaws in the scheme are pretty clear. It leaves the taxpayer heavily exposed when the market collapses. And it’s a blatant subsidy for house builders. You give desperate and naive first-time buyers a big chunk of money for a deposit, and what do you think happens to new-build prices? They go up of course.

However, the government doesn’t care about that. As long as things look good come May 2015, it will happily ignore any potential collateral damage. And the scheme has had an almost-immediate impact. Formally launched in this year’s budget in April, it has already seen sales of new homes surge. The government now plans to expand it from next year.

Meanwhile – and this is the second reason to invest in builders – the government is loosening planning laws to make it easier to build new houses. Unlike the Help to Buy scheme, this idea enjoys broad political support.

Obviously there are plenty of house builders you can invest in. My colleague Phil Oakley looked at a few likely bets in a recent issue of MoneyWeek magazine. (If you’re not already a subscriber, get your first three issues free here).

One that’s certainly worth a look is Barratt Developments (LSE: BDEV), a major British housebuilder. It currently trades on a trailing price/earnings ratio of 20 times. Thanks to surging profits, this is expected to fall to 12.3 times earnings by 2015. It trades at only a slight premium to its book value.

You could also look at home improvement stocks, which are likely to be boosted by any new rush to the property market. Builders’ merchants SIG (LSE:SHI) gets half its sales from the UK market. It will also profit from various schemes to encourage householders to improve their energy efficiency. While the weather has hit recent sales, they should bounce back in the next year. SHI is on a p/e ratio of 14 times 2014 earnings.

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156 Responses

  1. 24/07/2013, gamesinvestor wrote

    “”” Overall, house prices in the UK cost four and a half times the average person’s income. That compares with a historical average of 3.4 times”””

    This is wrong – The average salary is £26k and average house price is £165K, therefore the ratio is well over 6.3X

    Also most of the builders have had their prices inflated during the last 12 months and the government scheme success is already factored in.

    Now is the time to be selling the builders or you will get caught out.

    I’m surprised at the advice given here, it seems very wrong to me.

    • 24/07/2013, Boris MacDonut wrote

      Average salary is actually £28,000. But Matthew said average income, which is over £33,000. Only 65% of income is made up of salaries.

  2. 24/07/2013, PFReilly wrote

    The most efficacious way to revive the housing market is to change the current property tax system to one of Land Value Taxation (LVT). In Pennsylvania, many cities separated the land value from the building value and increased the percentage tax rate on the former, whilst lowering the rate on the latter. The result was that house building and improvements were stimulated without the need for government intervention. This is evidence that LVT works.
    The value of land depends on its earning potential. Under LVT it would make absolutely no economic sense to hold on to vacant and underdeveloped land. Owners will be forced to sell or develop. Land prices will fall to a level developers can afford. Land speculators would be put off. This will provide the stimulus to housing construction and make housing more affordable without the need for government subsidy.
    Such development will also relieve pressure on the green belt, as better use is made of urban sites.

    • 24/07/2013, Inquisitor wrote

      Sure, as long as government slashes spending and abolishes every other tax it charges, that’d be dandy.

      • 24/07/2013, Boris MacDonut wrote

        I often wonder if you are rich or just aspirational. Either way you seem to object strongly to taxation, which is a clear indicator of personal greed.

        • 24/07/2013, Inquisitor wrote

          I’m not partisan, no, especially not when they all support the same levels of taxation broadly speaking.

      • 01/08/2013, PLfram wrote

        Other taxes and government spending, whatever their purpose or justification, needn’t change just to accommodate LVT. Any government that taxes real estate can change from market value taxation to land value taxation without negatively affecting other government functions. The rate on the land value would be higher, but the average bill would not have to change. There is also an infinite number of hybrids combining traditional property taxation and LVT, eg. some localities tax undeveloped land at a lower rate, in order to discourage over-development. Others tax the building based only on square footage, so the condition and aesthetics don’t affect the tax bill. All of these avoid the Achilles’ heel of market value taxation: that an owner can get a tax break simply be letting his or her property get old, ugly and undesirable. I have a neighbor who gets her bill cut every year by filling out a form claiming that the interior of her house is dilapidated enough that assessors are afraid to go in and check it. In the Boston area there are plenty of properties that are neglected or covered with tacky plastic exteriors; while it’s hard to speculate how tax policy affects the behavior of their owners, many of the properties would instantly be subjected to a tax increase if their owners dared to clean them up.

  3. 24/07/2013, Mr Tweet wrote

    Tuesday – the only thing keeping the market up is continued government interference and ZIRP. It is criminally insane of the government to try and start blowing a bubble with BoE base rate practically at zero; if you think this is going to last for years and years why don’t you put down a large wager? Thought not. Most people do not benefit from rising prices – only those that are trading in and out of the market, i.e. BTLs, developers, builders who can sell their overpriced products, or people downsizing. For everybody else – i.e. the bulk of people it is detrimental. No good for FTB, no good for people trading up (the next ‘rung’ cost proportionately more). If you are selling your house to buy an equivalent other, it is irrelevant what the price is – you are effectively just conducting a swap, but indeed if you are pushed into higher stamp duty because of price inflation, it is detrimental. People need to wake up to the damage such policies will ultimately cause this country both in social and economic terms.

    • 24/07/2013, Inquisitor wrote

      It clearly works – people like him believe it.

  4. 24/07/2013, Rabster wrote

    There are 2 housing markets in the UK …the UK housing market and the housing market of the South East.

    In the South East you have overcrowding , ridiculous rents and unaffordable everything (thanks you successive govts London Centric economic policies) .

    In the UK you have a sluggish economy, no overcrowding (relatively few houses of multiple occupation …unless you live in a Bail hostel !), and a degree of affordability through a high street full of tacky markets and charity shops .

    This housing boom blip is shameful given the amount of effort and money sloshing in the system thru QE.
    The housing market is riddled Govt meddling due to 0% interest rates. Lax planning laws will create further poor housing. Speculation in housing is rife…if you wanna make a quick buck buy a house and sell it.
    We have an economy based on selling houses to each other!!!

    But before we feel smug at the wealth of our houses consider the following ….a 20 year old who can’t afford to buy , can bearly afford to rent , is told to save a ridiculous amount for a pension and pay back a £50k plus student loan.
    If that 20 something is a Lawyer , Doctor or someother professional s/he wants a big pay packet to afford.
    To meet that pay increase patients, clients must pay more for medical, legal or other professional services …………………and all because we think its a good idea to push house prices up.

    The long , slow ride to serfdom continues.

    • 24/07/2013, Inquisitor wrote

      Don’t forget the smug taxman, robbing those twenty somethings of their income, and crushing them with punitive measures like IR35 if they realise NIC buys them nothing, and instead resort to contracting to make a living, whilst still paying extortionate rates of tax, which are nonetheless a better deal than they’d be getting otherwise.

      Oh, and then there’s all their student debt. :)

      Great world we live in.

      • 24/07/2013, Boris MacDonut wrote

        This explains it. Aspirational only. You object to the taxman using the law to stop someone from pretending they are something they are not, in order to evade tax.

        • 24/07/2013, Inquisitor wrote

          Yes, I object to it strenuously, I am not some zombie who will simply give in to the Stockholm syndrome of accepting HMRC’s utterly morally bankrupt depredations. I wager that you are pretty ignorant of what HMRC gets up to, or too blind and indoctrinated in the system to care. You are, in short, a lost cause.

          • 24/07/2013, Inquisitor wrote

            Oh and by the way, the contracting parties define what the relationship is, not some HMRC eggheads. Do you wish to do a cost-benefit analysis, showing not only why NIC is good value but also why I should voluntarily cede money to it?

            One wonders when HMRC is going to release up to date figures on its latest schemes, in terms of their overall cost relative to the “benefit” they bring in, i.e. robbery of non-consenting tax victims.

            • 24/07/2013, Inquisitor wrote

              Sorry. You think it’s perfectly okay for HMRC to make up interpretations of contracts and ignore their letter in its relentless pursuit for money due to the financial crisis shaking the confidence of the government in its own predatory schemes.

              The rest is just utter nonsense on your part. What you deem is ‘fair’ is your utterly subjective opinion on the matter. Could you please explain to me how HMRC taking money that will never, ever benefit me other than if the government resorts to the printing presses to support the lifestyles of geriatric sacks of excrement that put these policies in place to begin with is somehow “fair”? You still haven’t done this. I am awaiting.

              Or is it not ‘greed’ in the government’s case, because the money goes to causes you, in all your narcissistic abandon, support as being “fair”, or thrusting towards some lofty vision you have like, “social justice”, or whatever other fuzzy doublespeak you resort to convince yourself that naked theft is something other than it is?

              • 24/07/2013, Boris MacDonut wrote

                All taxation benefits all people. Government does not have to specify how it helps short sighted individuals who feel they aren’t being given enough.
                FYI .HMRC draws conclusions based on the legislation which is enforced/interpreted by the law courts. If you had a rridiculous contract that said you were henceforth to be deemed a foreigner and absolved from tax, the law of this land allows the courts and the taxman to look through the sham. But by all means keep complaining as there is nothing more unbecoming of the selfish and right wing than their bleating about onerous taxes.

                • 24/07/2013, Inquisitor wrote

                  Gee, well thanks for informing me the government’s depredations are beneficial, just because they are.

                  If individuals do not wish to pay tax, it is clearly because they don’t perceive any benefit from it. The government is free to tender its services at at a fee and prove otherwise, or accept they are not desired. As for the scenario you mentioned, I am referring to it overriding existing arrangements, e.g. a firm employing someone’s services as a limited company and treating them as “employed” by the firm, just because baby wants its NIC. It does so by resorting to rather arbitrary, archaic criteria, as to what a business is. Of course when challenged by real tax experts, HMRC tends to back down quickly. But as long as they can siphon as many contractors as they can into umbrella companies, so they can rip them off money it has done nothing to earn, all is dandy.

                  As for ‘selfishness’, if wanting to keep what I earn is ‘selfish’ and not abiding by what the narcissistic government thinks is a fair price for the services it (and people like you) so arrogantly proclaims to be beneficial simply… well, simply because, makes me selfish, so be it!

                  You enjoy paying taxes? Forward 100% of your salary to the government. No one will stop you. Anything below 100% is selfish, say I.

                  • [This comment has been removed.]

                  • 25/07/2013, Carrick wrote

                    Have to agree with Boris on that one.
                    If you live in the UK, no one is forcing you to. You enjoy the roads and all other public services just as much as anyone else.

    • 24/07/2013, Boris MacDonut wrote

      Why on Earth should a 20 year old be able to buy a house? FTB average ages have varied between 27 and 37 since forever and 32 is about the right age now.
      Why would a 20 year old have left University? They’d be lucky to be in the second year.
      How would a 20 year old be a lawyer or doctor? Given the 5 to 6 years training needed.

      • 24/07/2013, Boris MacDonut wrote

        Why has my response above to Rabster #10 been demoted below others? It is now out of context and detracts credibility from my post.

      • 26/07/2013, Cilurnum wrote

        It has not hovered between 27 and 37 since forever at all Boris. Younger people are renting or living with their parents for longer.

        • 27/07/2013, Boris MacDonut wrote

          Until 1800 folk did not even marry until 26 or 27.With a life expectancy of 45 that was about 60% of the way through life. FTB ages have fluctauted between 27 and 37 since 1970, depending on the overall financial outlook.
          Young people are living with their parents for longer ,compared to when?

  5. 24/07/2013, Rabster wrote

    Agree with you on Gold but housing is down 20% from peak and still needs a 10% drop .

  6. 24/07/2013, Myki wrote

    the government and BOE have to destroy the value of Sterling to keep jobs here and deal with the national debt. they could default but the loss of credibility to UK PLC would put us into the wilderness for a millennium. the much better option is to allow inflation to get going thus devaluing all that debt.

    so if you’re sitting on a pile of cash and no debt its best to buy hard assets like property, fine art and precious metals/stones and take on some debt for good measure too.

    because it wont be long before that big lump of cash in the bank can only buy the weekly shopping

    • 24/07/2013, Inquisitor wrote

      Inflating to reduce deal with debts most of us never even agreed to is fine – yet that isn’t what the government does. It keeps its debt cheap and goes on and on and on spending. Someone will have to take the hit. At the moment, it is consumers and businesses faced with higher commodity prices.

      Or we could simply default on the debt and learn to live without it and all the “welfare” and warfare schemes it has been used to buy. But nah, lets just go on spending forever, pushing the bill down the road and forcing others to later pay the price for it.

      What makes you think if the UK inflates to repay its obligations, that this will be perceived any differently to a default, by people who understand what is happening?

      • 24/07/2013, Inquisitor wrote

        Such as: regurgitating figures one doesn’t even understand and which don’t really prove their point.

        • 24/07/2013, Boris MacDonut wrote

          I spend hours pouring over the figures, as I find it pointless simply taking anything at face value. MW does the latter and is rightly criticised when it does so.

    • 26/07/2013, Cilurnum wrote

      I’m afraid the debts are too large to inflate away. The pound will be worth less than toilet paper.

  7. 24/07/2013, Inquisitor wrote

    Well yeah, if it weren’t for them, the housing market would have further to correct (downwards.) So yes, the market absolutely should have crashed to re-align with fundamentals.

    I am curious: how do governments propose to deal with their debt, and if they do at all, how will this impact gold/silver etc?

    • 24/07/2013, Boris MacDonut wrote

      “Should have crashed…”.That is like saying men should beliving onnthe moon by now. It ahsn’t and they are not. if you are going to talk about fundamentals at least ascerttian what these are first.

      • 24/07/2013, Inquisitor wrote

        Still curious: how does the government propose to deal with its debt?

        As for the fundamentals: how are the loans sourcing bank credit?

        Should have crashed = absent government intervention by further QE injections, would have crashed.

        Done?

        • 24/07/2013, Boris MacDonut wrote

          Ask the Government ,not me. I assume they are happty to live with a debt level no higher than in 1967 or 1935 and will repay a lump when they sell off Lloyds etc..

          • 26/07/2013, Cilurnum wrote

            Where are you getting this load of assumptions from from?

          • 27/07/2013, Colin Selig-Smith wrote

            Boris,

            Both 1967 and 1935 were strangely enough, followed by extended periods of crisis and devastating inflation… You’re using this as an argument that it’s sustainable?

            • 27/07/2013, Boris MacDonut wrote

              Good point, but crises we came through and later thrived from.

        • 24/07/2013, Boris MacDonut wrote

          Ask the Government ,not me. I assume they are happy to live with a debt level no higher than in 1967 or 1935 and will repay a lump when they sell off Lloyds etc..

          • 24/07/2013, Inquisitor wrote

            Yep, that’ll do wonders to knock off a few billions from the over £1t UK debt, not to mention those unfunded liabilities. We’ll just print money to deal with those anyway, no problem.

            When you compare the burden of interest payments relative to tax revenues, or simply the debt to tax revenue per se, the picture is not rosy. Debt:GDP ratios are useless, they factor in government spending and are deflated by the misleading CPI measure. Besides, the correct way to measure a debt burden is against one’s ability to repay it, i.e. tax revenues. When these derive primarily from government workers and the service sector, itself the beneficiary of government inflationary policies, where is this income really going to come from? Also not sure if you noticed but the previous debt spikes were attributable to a war.

            • 24/07/2013, Boris MacDonut wrote

              The Government debt to tax revenue ratio is about 2 to 1, a lot lower than the amounts most banks lend as mortgage multiples after their due diligence and much lower than the 6 to 1 seen in 1945.

              • 24/07/2013, Inquisitor wrote

                And again:

                what happens when interest rates rise and QE no longer works? The interest rate payments at the moment are low because sovereign debt is subsidised by central bank credit expansion.

                Same with revenues, these are bloated as a result of QE.

                • 25/07/2013, Carrick wrote

                  This government will no longer be in power. Therefore they don’t care. Whoever is can try to pick up the pieces, blaming it all on previous governments.

  8. 24/07/2013, Boris MacDonut wrote

    This is a quite dreadful article. MW should be ashamed to do this. Why do they persist in trotting out ill researched bits of received wisdom as fact? It has been pointed out sundry times that the figures they quote on housing are massively, massively wrong.
    House prices in the UK have not been at 3.4 times income at any time since 1986.
    Matthew refers to the “major indicators” (i.e the ones he hopes supports his doom agenda) then refers to the “more comprehensive” ( i.e a bit more accurate) figures. Nationwide only records snmall homes bought with miortgages up to a value of £600,000.That is not our housing market. Only 44% of homes are being bought on a mortgage. The Land Registry has prices at £235,000.
    What does Matthew mean by 4.5 times income? That would suggest incomes of £53,000, or house prices of only £145,000.
    Here are some relevant and basic facts;
    a) The long term average house price to income ratio since the ERM debacle in 1992 is 5.5 times income.Now at (6.3times)
    b) I prefer looking at the cost of buying a house outright ,using a 25 years mortgage.That has averaged 7.3 times income since 1992 ( now at 7.9 times)
    c) Both of the above suggest HP’s are about 7% above the trend for the last 20 plus years.
    d) London is extraordinary as it has an extraordinary number of millionaires. Now approaching 1 million, or 10% of the population there.
    e) The mortgage rate is NOT artificially low. It averaged between 5 and 6% from 2001 to 2008 and is now around 4%.This is not a sufficient decrease to lead to a massive overvaluation.
    So once again MW trot out a lazty article to try and support the mistakes made in the End Of Britain report.
    The failure to verify facts and detail should fill readers with more than just doubt.

    • 24/07/2013, Inquisitor wrote

      Besides the fact that comparing interest rates at two points in time is no way really to tell whether interest rates are too low relative to loanable funds (savings), where are you even getting these figures from, and how is a 20 – 30% reduction not “sufficient” to lead to a massive overvaluation?

      • 24/07/2013, Boris MacDonut wrote

        Well in 2007 when rates were over 5% the typical mortgage was £107,000 and it cost £270,000 in total over 25 years to buy a house. Now the mortgage is £120,000 at 4% and the total cost is £260,000. Meanwhile incomes have risen by 13.5% making homes more affordable.
        The figures I use are from the DCLG, ONS, Zoopla, Hometrack, Land Registry, Halifax, Nationwide,RICS and Rightmove and are a weighted average of the range since 1970.

        • 24/07/2013, Inquisitor wrote

          Again, what makes you think the figures in 2007 were ‘normal’? You’re essentially resorting to a very narrow historical comparison of highly aggregated interest rates to establish that low rates are not artificially low? How does this work, precisely? How is it that you think banks source the credit for these mortgages?

          I suppose I should rejoice that incomes have risen by 13.5% (adjusted for inflation, and if so, using which measure of inflation?), as that means there really is no mortgage problem, in spite of the fact that any rise in incomes may itself have its origins in a bubble.

          • 24/07/2013, Boris MacDonut wrote

            I’m not resorting to anything. I am comparing now with just before the credit crunch, as that is the oft used comparator year. I am showing you how the “fundamentals” you are so keen on have barely moved.
            The base rate was reduced from 45 to 0.5% in 2008/9, but the typical mortgage has onmly fallen from 5.5% to 4%.So the dramatic, unusually low rates the doom mongers wish to cite are a fiction. Even in 2001 the typical mortgage was under 6%. The difference equates to less than £150 a month.
            By the way “adjusted for inflation” the typical mortgage is now only £57,000 at 1993 prices.

            • 24/07/2013, Inquisitor wrote

              What is the “typical” mortgage you’re referring to? Again, you are referring to a fall in mortgage rates over 30%. During the boom mortgage rates were also lowered due to monetary expansion, so the comparison is not useful. The issue is how do the banks propose to source the credit.

              • 24/07/2013, Boris MacDonut wrote

                There are £1,230,000,000 of mortgages outstanding by value and 10,200,000 mortgae contracts ,making the typical mortgae some £120,000. FYI the typical mortgage has 22 years left to run.

                • 25/07/2013, Inquisitor wrote

                  I want a source to your figures re mortgage rates. From US figures, I can see there was a significant drop in long term fixed rate mortgage rates (http://research.stlouisfed.org/fred2/graph/?g=jdx). As I have repeatedly stated, this has little to do with whether supply and demand of this credit is actually aligned, but the story you are presenting is a dubious one even accepting your methodology on face value.

                  • 25/07/2013, Boris MacDonut wrote

                    Funnily enough it is easy to find historic mortgage rates.There is a search engine called google and sites like the Council of Mortgage lenders, ONS or Houseprice crash give the averages. It is just as easy for me to looka t what I was paying since 1986.The average rate since 1931 has been a bit over 6%.

            • 26/07/2013, Cilurnum wrote

              When you lower interest rates to that extent you pay for it later, either in higher interest rates as institutions seek to get a return or in inflation. In 1990 mortgage rates hit fifteen percent. No one will survive that now, that’s ht pertinent point.

        • 25/07/2013, Inquisitor wrote

          The biggest issue with his income:debt servicing assumptions is that he is assuming real income is at present unaffected by QE. Newsflash: inflation is under-reported, because it is or was mostly taking place in equity markets and commodities, and also in subtler ways, e.g. by preventing the long-run decline in prices productivity increases bring about, or by keeping zombie banks alive. Housing price figures are also notoriously under-reported due to the rent-equivalent measure inflation figures rely on, when it is known that rent figures tend to decline during housing booms due to the surge in home ownership, either for personal or speculative reasons.

          If the majority of the country’s income is from the service sector, and this in turn is heavily bloated by our banking sector, the question is what happens when no one wants to buy what Britain has to sell? Sure, it will always be able to export high quality professional services, but this is a slither of what the UK economy produces. If there is a debt contagion (China, Japan, the US, the Eurozone, Australia etc. are all in a bad position), there is no reason that tax revenues will continue to look so rosy (and this is assuming the government isn’t resorting to the well known trick of taxing its own branches to boost its revenue figures, e.g. in the case of sovereign debt purchases by banks.) Add to this the possibility of soaring interest rates and debt down grades when people realise the junk the government is peddling, and a collapse in wealth should those who banked on housing providing a source of speculative revenue, and you have a precarious situation, which official statistics will do nothing to reveal. Add to this further that high levels of taxation (as per Laffer) diminish productivity (and no, closing off tax havens won’t help, it’ll just force eventual reductions in production when there’s nowhere left to run) and inflation (taxation by another name), which are destructive of wealth generation. Especially if inflation is conducted via credit expansion, which foments business cycles, diverting resources to wasteful endeavours.

          Yet he is seriously resorting to 2007 mortgage interest rate levels, themselves buoyed by monetary expansion, to show all is honky dory?

          MW may sensationalise and exaggerate all this, but to pretend everything is going to be fine is to dig your head in the sand.

          • 25/07/2013, Boris MacDonut wrote

            So you want to pretend inflation is actually a different figure and house prices are also a different figure and then if….if….if….then things may be worse. A lot of smoke and mirrors to support your doom agenda there.
            Again, I am not resorting to 2007 figures. I have done a comparison. I have also done a comparison to 2001. How far back should I go. I can go to 1931. Since when average mortgage rates have been about 6%, just liek they were in 2001 and 2007.

            • 26/07/2013, Cilurnum wrote

              You can only go on so long shouting figures from the rooftops to anyone who will listen before you realise things haven’t improved.

              A modest rise in anyone’s mortgage payments, let alone to 6%, would utterly decimate the market. Don’t ask me, ask Mervyn King who said the very same thing before he ran for the exit.

        • [This comment has been removed.]

          • 25/07/2013, Boris MacDonut wrote

            What are you taliking about. When did you do a bit of research? When did you call my bluff? I have spent many days of time compiling my figures. It is precisely because I do not trust any one set of figures that I use weighted averages.
            What i do find funny is your having to do some research.This presupposes that before hand you simply had not looked or checked, just spouted on with no basis to what you were saying than the received wisdoms of a doom agenda.

            • 25/07/2013, Carrick wrote

              I apologise for speaking out of turn Boris, I’ve looked through the thread again, and you did have answers to my comments, even though I didn’t agree with them, which were related to the 1.9% annual rate reported by Nationwide which you were calling 4% annualised.
              That was my first forray into this forum. Therefore beforehand I had not spouted anything.

              Also, I notice my comment has been removed, and again, I’m not sure why.

              • 25/07/2013, Boris MacDonut wrote

                You seem to misunderstand. The nationwide reported the rise from June 2012 to June 2013 as 1.9%.They also reported the rise for June 2013 alone as 0.3%. It is that last monthly figure that i referred to as being an annualised 4% and in line with the findings of other house price gurus like the RICs and Land Registry. Good news is we are now looking at 13 to 19% in 5 years or a rise of £146 a week for the average house for half a decade.

                • 26/07/2013, Carrick wrote

                  I don’t happen to think that’s good news, even if it does pan out. The creation of wealth and GDP through artificially increasing house prices by subsidising deposits and incresing the nation’s personal debt whilst making it more and more difficult for first time buyers to buy their home absent government intervention (or toff parents) is not right.

                  I happen to believe house prices should rise in line with inflation and wages / earnings. Not faster. That’s a big part of what created the mess we are, maybe, only just starting to recover from.

                  • 26/07/2013, Boris MacDonut wrote

                    But it is only artificial because you doom-mongers say it is. It is not artificial just because you wish it were otherwise. It is reality. Something you singularly fail to grasp and have done so since 2007.
                    For a while I thought you were all trying to be too clever by half. Having interacted with you all for a few years I realise you are mostly terminally hopeless cases of depressing doom, without an iota of sense, pragmatism or understanding between you. Utterly devoid of new ideas, totally bereft of solutions. Just an endless carping vitriol of impending awfulness, but with not one jot of credibility to it.

                    • 26/07/2013, Cilurnum wrote

                      It is artificial…..because it is Boris. You can’t get richer by getting into ever greater amounts of debt. That’s not GDP growth or wealth. With debt you’re saying “OK, I owe you in the future but it’s OK because we’re going to be genuinely productive and be able to pay this off”. The Weimar Republic had lots of houses that were worth billions of marks, but few could afford to eat. That’s the leap in comprehension that people like you simply can’t make, and I’m afraid it will be fatal.

                      It all works for a while until you have to work several times as hard to keep up as the debt repayments overwhelm you, and then the loan shark knocks on your door. He wasn’t let in in 2007 but he’s still there and we’re still talking about him.

                    • 26/07/2013, Boris MacDonut wrote

                      Part of being rich is the increased ability to borrow. We are now rich, so now we borrow.

                    • 26/07/2013, Cilurnum wrote

                      Define rich. If you’re constantly rolling over debt then you’re not rich. Just ask Michael Winner’s widow.

                    • 28/07/2013, Boris MacDonut wrote

                      Michael Winner was indeed richand properly well educated. He had and spent many millions over a long lifetime. He lived well, eating and staying at the best places in the world. He lived the life of a very rich person and chose to not bother being the richest man in the graveyard. He was great, great man and a lesson to us all.

                    • 28/07/2013, Cilurnum wrote

                      Michael Winner was lucky enough that he died before his debts caught up with him. That is all. The rest of us won’t have quite that good fortune.

                    • 26/07/2013, Boris MacDonut wrote

                      This reply is to the lunacy advocated by Cilurnum at 90.
                      I am flabbergasted that you suggest we are all going to die. You say the current economic siutaion is “fatal”.
                      I’m afraid it is perfectly possible to get richer by getting into more debt. I see this every day of my life. It definitely is GDP growth because the money taken on as debt is recycled in the economy. Even at the mundane level of cleaners and gardeners.

                    • 26/07/2013, Cilurnum wrote

                      GDP growth is based on getting off your backside and doing something productive and having a private sector that can support a comparable size of government. Sorry, but the Bank of England typing numbers into a computer and having the treasury write an IOU and spending it is not productivity.

                      When you’re in ever greater amounts of debt you get to a point where all your income goes into servicing that debt and you default. That’s what is commonly known as *bankruptcy* Boris. Where a government is concerned many think that they can just print away, but the catch with sovereign debt is that you make your currency worth less than toilet paper as it is diluted away bringing about even bigger problems. Yes, history is full of such examples. The two options are thus – default or destroy the pound. Pretty simple. You either service the debt, or if you can’t you’ve just been running the printing presses to fund yourself and the inevitable follows.

                      It really is la, la land stuff if you think that’s going to continue. If you’re about to die then you won’t have to live with that, but I and the rest of us do.

                    • 29/07/2013, Carrick wrote

                      Boris, from reading your posts for a few months now, it seems your idea of a solution is to close your eyes, cover your ears shouting “lalalala” and to hope that everything turns out for the best.
                      I’m saying this in jest so please don’t take offense, but I’ve seriously not often seen you actually suggest anything different to what the powers that be are doing already.
                      I do have to admit I enjoy debating with you and, sometimes, agreeing with you

                  • 27/07/2013, Boris MacDonut wrote

                    It is absolutely nothing to do with what you think should happen. It is all about what ,on the balance of probability will happen.

                • 26/07/2013, Cilurnum wrote

                  A rise of 13% to 19%……with a contracting economy and real terms wage decreases? Errrrrrrr, rrrrrrrrrrright.

            • 26/07/2013, Cilurnum wrote

              You haven’t spent days compiling any figures. They’re pulled out of thin air when you are in a corner and feel a number will give you some credibility.

              Weighted averages…… Sorry, I’ve just had to get back on my chair after reading that one.

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        • 25/07/2013, Boris MacDonut wrote

          Do show us how incomes are not up even though GDP is 14% higher than in 2007

          • 26/07/2013, Cilurnum wrote

            Ahhh, so you’re basing your extrapolated income growth off GDP and not off actual income measures, nominal or real? I have explained why GDP is completely meaningless when a government can print for nothing and magically increase GDP. The economy has contracted. No ifs or buts. Merryn also did an article about how it’s a measurement of pure nonsense. I suggest you read it.

            The economy has not grown 14% since 2007. If you believe that then it really is time to call a straightjacket for Boris.

            • 27/07/2013, Boris MacDonut wrote

              Mortgages and loans are repaid out of the money available. Money printing reduces the onerous value of debt. This is anet benefit to the relatively poor and it is why your type objects to it.

              • 29/07/2013, Carrick wrote

                it’s a temporary measure and has artificailly increased the GDP.
                I have no issue with helping the poor and relatively poor. This, in my opinion and in the long term, does not. On the contrary.

    • 24/07/2013, Cilurnum wrote

      You have been told umpteen times why your figures on your ramblings about the housing market are drivel and you trot out the same crap about the house crash right at the beginning of the nineties having something to do with the ERM in 92/93 when it had absolutely *nothing* to do with it. It was a logical conclusion of a bubble with too much cheap money and government help to keep it going. What’s happening right now is on a scale never seen before.

      You’re debunking absolutely nothing about Moneyweek’s pertinent warnings Boris, and quite frankly, you’re just making yourself look more and more desperate as the (non)recovery continues.

      • 25/07/2013, Boris MacDonut wrote

        I have absolutely never siad that. The house price crash in the UK was in 1989 to 1991.Well before the ERM debacle. What I have said is the whole economic environment radically altered in September 1992 when we left the ERM.The so called fundamentals you are so keen on changed then 21 years ago and bear no relation to those of the years 1945 to 1992.
        MW’s predictions are based on heavily manipulated statistics and ignoring basic facts.It is poor journalism aimed at the naive and easily led.

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              • 26/07/2013, Carrick wrote

                Since 1970 the UK population has increased by 12%. The world population has increased by 75%.
                I think that is relatively stable.
                Meanwhile the housing stock has increased by 44% from around 18M homes to over 26M.

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                • 29/07/2013, Carrick wrote

                  Something seems to have gone seriously wrong with the reply system here.

                  • 29/07/2013, Realist wrote

                    Cilurnum, I have to agree with you,Boris is really clutching at straws with this ‘extra’ income. A lot of the points only covers a minority of people and for every betting winner there are probably ten losers. Ordinary Joe Bloggs and FTBers, who are the ones that are vital for a bouyant market, will have none of this extra income.

                    • 29/07/2013, Boris MacDonut wrote

                      Reply to Realist at #’117 Please google the ONS figures for UK sources of income. This is not made up .Wages account for 64% of income. Also Mortgages account for only 44% of house purchases.

                    • 29/07/2013, Realist wrote

                      Boris, you really have made a massive error on this 64% of income. The other part of the income, which is 26%, is not extra on top of the 64%, but its own income………….

                      11% is self employed, therefore their own wage.

                      6% state pension, high % of people, it will be there only income

                      1% tax credits…..too poor to buy a house.

                      The actual % that boosts the wage income is very small and only accounts for a small % of people.

                      Oh dear Boris, go back to the drawing board.

                    • 29/07/2013, Boris MacDonut wrote

                      Sorry. But the other part amounts to 36%,not 26%. Please simply google UK sources of incomer and go to the wiki entry. That is easiest. Then come back and expalain how I have made a massive error. I have not. I have accepted that self employment is akin to a wage and together account for 74% of income.
                      I can’t see what you are driving at here. I am hioghlighting that there is much more income around than jusrt wages and salaries ,which the doomsters say house prices relate directly to. I have no beef with whetehr a pension is someone’s only income source, only that it is one of the sources of income.
                      You do introduce a useful point though .The poor are too poor to buy houses and the old often don’t need to buy one. So house prices pertain to the income of the richest 60%, those who buy houses.
                      In the same wayFerrari’s pertain to the wealth and income of those who buy Ferraris, not the millions who can never afford one.
                      You seem to have been let down by your GCSE , maths again Realist.

                    • 30/07/2013, Carrick wrote

                      Boris,
                      I’m not saying everyone should be able to afford a Ferrari. I’m not even saying that everyone should be able to afford to buy a house. But, and I thought you agreed from previous threads, it would be good for the number of people able to afford a house to go up, not down, no?
                      You seem to promote the evil of elitism one day and then find it completely normal that a vast % of the population can’t afford to buy a house the next.

                    • 30/07/2013, Realist wrote

                      I am highlighting the point that the majority of people, especially FTBers, only have a wage as an income and seeing that FTBers are the driving force for a good housing market, that makes a big difference.
                      It is pointless comparing a Ferrari to a house, as a Ferrari is an exotic item that costs a lot of money to produce, while to build a house isn’t that expensive, it is the cost of land that makes it expensive and there is no reason why that should be.
                      A house isn’t a luxury item, it is a necessity, so why shouldn’t everyone be able to buy one at a reasonable price, without crippling themselves with debt.

                    • 30/07/2013, Boris MacDonut wrote

                      #122 Realist. Funnily enough a Ferrari usually costs less than a typical house. I know several chaps at Le Mans who would tell you a Ferrari is a necessity.

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                    • 30/07/2013, Boris MacDonut wrote

                      If you think an average house costs £162,000 you must have gone through a time tunnel to about 2003.
                      The Land Registry has house prices at £237,000 and the cost to buy using an 80%, 25 year mortgage is nearer £300,000. The figure you quote is for houses under £500,000 boguht using a Nationwide mortgage.
                      Oh, and where did I say buying a new Ferrari? The average car is 7 years old. A 7 year old 430 Ferrari is about £70,000.

                    • 30/07/2013, Realist wrote

                      The Land Registry.gov says £162k, but then if you Google house prices it has about four different prices. But if it is higher, then that bit of land is even more of a rip-off, considering it costs £80k to build.
                      Oh BTW, where did I say a seven year old Ferrari in my original comment. I was talking about a new one.

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            • 26/07/2013, Cilurnum wrote

              279,000? The situation is far, far worse:

              http://www.channel4.com/programmes/the-great-british-property-scandal/4od

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  9. 24/07/2013, charlesdb wrote

    Too many elderly. Too many single households. Too many immigrants. Too many multi millionaires and billionaires in London and The S.E. Not enough money at Conservative Central Office. The answer? Cosy up to the housebuillders. Tiny houses. Tiny flats. In estates where aspirational home owners, having paid 6 figures to live cheek by jowl with Council tenants – sorry, social housing. Lots of profit for housebuilders. Lots of lolly to Conservative Central Office. Mortgage rates driving people into bigger debt? Inflation will take care of the problem. And Cameron wants to reintroduce the right to buy, compounding the problem started by Maggie T. The most cynical election bribe of all. Meanwhile, businesses struggle with Pension deficits, lack of working capital and banks who refuse to lend, except for housing. This country is sick. Obsessed with houses whilst ignoring the needs of businesses. Except for housebuilders.

  10. 25/07/2013, Romford_Dave wrote

    Oh Mathew, if only your article was celebrating it’s first birthday….

    http://i.dailymail.co.uk/i/pix/2013/07/25/article-2376778-1AFC4CB0000005DC-972_634x488.jpg

    I do fear for your timing, the contrarian inside me is saying the time for being long is short and you should now be longing to be short.

  11. 25/07/2013, Merryn wrote

    Here’s a fascinating piece on house prices.. if they weren’t so high, labour participation at high skill levels would collapse. http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2013/07/in-defence-of-high-house-prices.html

    • 25/07/2013, Boris MacDonut wrote

      The Stumbling peice is interesting in that it confirms what I was saying about Keynes’ predictions. Only I underestimated it. I think I said Keynes thought we’s get 6 times richer by 2030 than in 1930. He actually predicted 6 to 8 times. We are well on the way to that at over 5 times already on per capita GDP.
      Much richer folk can afford to put much more of their income into housing and this is a point MW consistently misses. Once households have about £3,500 a month in today’s money they can provide for most of their needs and the surplus can go to improved living standards. This helps to explain why higher proportions of income are devoted to housing than in even the recent past.
      The same pertains for smaller family sizes the money saved is sucked elsewhere.

      • 26/07/2013, Cilurnum wrote

        The big fallacy anyone has when talking about Keynes is that he lived in a world where deficit spending by governments didn’t happen and wasn’t used to cheat GDP figures.

        You can’t get richer because the government has decided to borrow ever greater sums out of the future.

  12. 25/07/2013, Realist wrote

    Boris. Yes it is very good news that the most expensive purchase of your life time is now more expensive. I would give up on this forum if I were you, economics is not your strong point.

    • 25/07/2013, Boris MacDonut wrote

      What do you mean? Housing has been getting cheaper for the past 6 years.

  13. 25/07/2013, Realist wrote

    Not to wages it hasn’t

    • 25/07/2013, Boris MacDonut wrote

      Are you joking or deliberately misleading. The typical house has fallen in value since 2007 by anything between 5 and 20% depending where you live.The cost over 25 years has fallen by at least 7%. Incomes are up by at least 13% and salaries are up too. the proportion of take home pay devoted to house purchase has fallen by around 17%.
      Please explain how houses are more expensive now than in 2007.

      • 26/07/2013, Boris MacDonut wrote

        Income in 2007 was £29,000 per adult. Now it is £33,000. that is 13.5%. I am no loon. But you clearly cannot do maths.

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          • 27/07/2013, Cilurnum wrote

            Actually, it’s a 35% increase, 100 down and 65 back……it’s the weekend and a little too late here.

            However, even looking at it after that the sad fact is that the figures are so ridiculous, who’s counting?

            • 27/07/2013, Cilurnum wrote

              Actually, it’s a 50% increase in the fuel price – a healthy 10% per year. If I could be bothered to calculate percentages properly for these comments then I would, but it’s pretty irrelevant because the figures are beyond ridiculous. It’s certainly far, far higher than any comparable increase in wages.

              If you thought that the cost of living was bad since 2008 then get prepared for 2008 Mark II. Why? Because printing is, again, all they have.

              • 28/07/2013, Boris MacDonut wrote

                What does this mean. Is it out of context ?
                Just to remind you how you doom-mongers can’t do maths a 50% rise over 6.7 years is NOT 10% a year, it is 6.2% a year. 10% a year gives an 88% rise.
                But then, as you say, if you “could be bothered to calculate…”. It is precisely this laziness that leaves you floundering and unable to articulate a decent argument.

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                  • 28/07/2013, Boris MacDonut wrote

                    I am at a loss to respond to that Realist. How on earth can rising house prices ever…ever be construed as a bad thing? Especially when most recently bought property is encumbere with debt.
                    This comment really gives the lie to ho myopically selfish the doom-mongers are. Petty, almost childish intheir inability to see sense.

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                    • 28/07/2013, Realist wrote

                      Boris, I didn’t say that rising house prices are a bad thing, rising prices at this moment in time is a bad thing and if you can’t see that, then give up on economics.

                    • 28/07/2013, Boris MacDonut wrote

                      Please explain why rising prices are a bad thing.It is very easy (and I know you dommsters are given to laziness)to simply say “if yuo can’t see this2 or “it is so obvious”. But I genuinely do not see why, and i’m sure many other casual readers of your spleen will have the same doubts.

                    • 28/07/2013, Cilurnum wrote

                      House price rises is simply asset price inflation. House prices aren’t going up because houses have got better, more efficient or more productive. It’s just asset price inflation. Nothing else.

                      When you have at best wage freezes and real terms wage decreases then that obviously makes it more difficult to afford a house, hence ‘Help to Buy’ – which is government cash that we pay for twice in the form of inflation and interest payments. The government being a backer of mortgages is outright dangerous.

                      I know you have this pathologically laughable belief that rising prices mean progress, but well……most people who don’t think do and the future does not look pretty for them.

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                • 28/07/2013, Cilurnum wrote

                  It’s precisely this kind of strawman argument that you love.

                  Inflation ain’t 3% and incomes certainly aren’t rising – that’s what we’re discussing here. There’s little point in sitting there on a railway track totting up small victories when a large train is heading towards you, but then that sums up our current economic situation.

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            • 28/07/2013, Boris MacDonut wrote

              #109 Cilurnum. One minute it’s 65% ,then it’s 35%, then it’s 50% ,then you say you can’t be bothered with calculatuions, then you say you want to keep it simple.
              Fact is, to understand it, you have to do calculations and you can’t keep it simple. But as you so obviously struggle, I promise to keep explaining it properly for you.

              • 28/07/2013, Cilurnum wrote

                If I gave you a modicum of thought I might put more effort in, but I’m here mostly for entertainment purposes to witness the car crash of peoples’ current denial over our problems.

                I thought you’d try and split hairs over the figures as you do on many MW articles. You have this apparent belief that you can latch on to something that you can use as a strawman which doesn’t in any way relate to the central points. You did that on one of Tim Bulford’s article, even though I thought he was wrong, and filled the comments section about irrelevant nonsense about perceived retirement ages.

                As for simple, incomes are not rising, your ‘average salary’ is complete nonsense and you still do not understand inflation or real term wages – deliberately. I suppose trying to pull the wool down by talking about raw prices and wage numbers ‘rising’ is about all that you have. You have this really weird and nonsense notion that GDP represents rising wages, probably because you have nothing else in the face of ample evidence to the contrary, and after I and MW have explained to you why GDP figures are nonsense.

                As for you *explaining* *it* (whatever *it* is) properly to me – I corrected myself. You didn’t.

                • 28/07/2013, Boris MacDonut wrote

                  I see now. You are simply on here to entertain yourself. Whereas I am here to correct misinformation.
                  The Tom Bulford article was a case in point. He spuriously claimed that Britain had had a babyboom between 1946 and 1965. We did not. The USA did and it is simply lazy to assume we had one too. He then sought to blame so called babyboomers for current economic issues. Just plain wrong. So wrong I think MW got embarassed by the article and removed it. It is no longer listed under Bulford’s name.
                  What I said was not irrelevant nonsense it was correcting totally wrong and misleading information.
                  As for average salary. Where do I talk about that? I always refer to income and am careful to remind people that salaries make up only 65% of income. GDP is indeed shorthand for income. But I have never said that rising income translates to rising wages. It is your own failure to read what i say properly that leaves you confused.You seem to hear what you want to hear.
                  It is immensely tiresome that your raison d’etre seems to be to put words into my mouth and to tell others what I think. Try coming up with an original argument rather than repeating the doom agenda you have fed on for years, and seeking to misrepresent me. It is oafish.

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                    • 28/07/2013, Boris MacDonut wrote

                      Well it comes from investment income, dividends, pensions, windfalls and betting wins, inheritances, asset sales (such as antiques), self employment, and some benefits as well as the black economy.
                      If you add employment and self employment together they do make up 74% of income.
                      Cilurnum makes the typical mistake of assuming only wages buy houses. It is all income that buys houses,while above £500,000 and in London it is wealth, not income that does so.

                    • 28/07/2013, Boris MacDonut wrote

                      Oh and I forgot rental income and overseas income repatriated.

                  • 28/07/2013, Cilurnum wrote

                    You’re correcting nothing Boris and merely attempting to spread misinformation. When you post ‘$800′ on an article about gold without the faintest idea of the fundamentals behind that market it’s pretty clear what you’re dealing with.

                    I don’t particularly expect MW posters to proof read everything they post and I was looking some figures bleary eyed late at night. I stand corrected. Sue me. If they ended up saying completely the opposite to the point I was making, fair enough, but……..they don’t. Accept it or don’t. It’s a strawman game I’m not playing. I would expect some posters to back up where they are pulling a multitude of mythical figures from that they post consistently though…..

                    Tom Bulford made a throwaway “During the war….” comment about retirement and Boris has completely misinterpreted and missed the point of the article, that savers are being hammered. As such the comments section was polluted.

                    Your assertion that salaries only make up 65% of income is pure nonsense. 65% of what? You’ll find that for the ordinary citizen their salary, or their wage, IS their income. Again, it’s pure twaddle in a desperate attempt to muddy waters and to try and inflate the general ability to service debt and mortgages.

                    ‘Income’ from ‘investment income’, dividends and alike has to be funded from somewhere. Increasingly, and certainly in recent years, that ‘income’ is funded by debt (government bonds paying out etc.) rehypothecated several times and not via any productive activity. The sub-prime crisis came about because those debts stopped paying. If wherever Boris is pulling this 65% figure from was hypothetically accurate then he is actually unintentionally painting a far bleaker picture of our debt problem than he intends.

                    That’s what Boris simply doesn’t understand. He thinks debt is free and there is some parallel universe we can simply pull wealth from with no cost. There isn’t.

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                    • 18/08/2013, Boris MacDonut wrote

                      Debt is not free. Debt is, by historic standards very cheap. This is liberating for the relatively poor.

          • 28/07/2013, Boris MacDonut wrote

            Reply to #106 Cilurnum. Which education was I given? I am not a loon. I have said this many times but MW chooses to allow you to derrogate me in this fashion, despite my complaints of abuse. You really are a piece of work to stoop to name calling rather than try to string a couple of words of argument together. Lazy and misconceived.

  14. 25/07/2013, charlesdb wrote

    You know what? I have been thinking of dumping Money Week for some time now. I can read Merryn’s article every week in the FT. I hate the company’s promotional material and methods. Bill Bonner is worth a good read. As for the rest, apart from recycling old news, it makes a very thin read; but I do enjoy the banter of these forums. Boris MacDonut, you are a hero! You alone carry this forum and are a reason for hanging onto my subscription. I mean that as a compliment. Money Week should pay you for keeping this forum lively and entertaining. Thank you.

    • 27/07/2013, Boris MacDonut wrote

      Charles your post seems to have been truncated to cut out your compliment to me. Thank you for your kind words. It is not easy with so many doom preictors constantly chipping away on here. Any innocent passerby could be forgiven for thinking we were in some sort of fiancial trouble.

  15. 25/07/2013, Realist wrote

    Houses around here haven’t fallen in value at all. Mortgages are cheaper (if you have enough deposit) and wages have risen slightly, but is cancelled out by inflation of on everyday items and services, so effectively no change. But if you take the period from 2000 to 2007, house prices rose way above wages increases and this hasn’t corrected itself.
    We are still paying far too much of our wage into a mortgage.

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  17. 28/07/2013, Realist wrote

    These average salary figures are very distorted, because you have the likes of CEO’s, bankers etc on well in excess of £100k. The majority of people in the country are not only earning less than £30k, but they haven’t had anywhere near a 13.5% rise.

    • 28/07/2013, Boris MacDonut wrote

      This is a reply to realist #89. That is why one must look at income across the whole country and not just pay among workers. Houses are bought by the richest 60% of society, so you may as well ignore what the poorest earn when seeking to establish prices.

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  20. 28/07/2013, Boris MacDonut wrote

    Cilurnum continues to make the mistake that house prices are linked to wages. They are not. They are linked to income. Above £500,000 and in London they are linked to wealth.

  21. 28/07/2013, Realist wrote

    Boris, in the real world, where does this extra ‘income’ come from on top of salaries.

  22. 29/07/2013, Cilurnum wrote

    I see Boris is still arranging deck chairs on the Titanic over income figures when the ship has it’s backside in the air. It’s pretty clear what his game is – inflate incomes and make the ability to pay for houses look better than it is, and to muddy the waters as much as possible on that point.

    Money is a representation of your time and wealth, and you use money (or in our case, currency) to trade that time and wealth for things we want and need. You also offset some of your time and wealth over your lifetime to pay for your retirement. The fact that we have such large debt piles and inflation tells you there isn’t much productive activity going on, not only in the UK, but Europe and especially the US. Debts are not collateral, as the subprime crisis gave us a small taster of, debts cannot be paid off with debts and incomes cannot be paid with debt unless that is being paid down, but that’s the crazy world our monetary system lives in.

    I advise people to protect themselves because wealth is not destroyed, it’s merely transferred. If you persist in believing nothing will go wrong then your wealth will be transferred to those who read the warning signs over the coming years and especially if your retirement is some way off. Boris won’t so whatever he has is up for grabs. There’s always a silver lining – literally.

    • 01/08/2013, Boris MacDonut wrote

      This is a further reply to #82 Cilurnum as my other replies were removed due, I can only assume,to excessive honesty.
      You are now going too far. How can I exaggerate incomes? Income is simply GDP. I definitely cannot be accused of making houses look more affordable. Every single time someone says average house price is £165,000 I challenge it and insist it is nearer £235,000. If I wanted to make them seem cheap I would accept the lower figure.
      Debt that can’t be repaid is simply written off. I have seen many people over the years blag a big mortgage out of the gullible Banks. Barclays ,as long ago as 2004, were averaging 6.5 times income with some loans up to 20 times. These people would buy a house for say £1 milliion on a 90% mortgage. The seller got his £1 million. The agents and solicitors and surveyors all got their fees. The builders and builders merchants all got paid as the house was renovated. The new owner would buy a nice BMW to congratulate himself on gulling the system and for a few years all went well. A few monthly payments would be missed, a loan from Coutts or some other posh fellas bank to stave of the inevitable then the plug would be pulled,usually by Coutts who don’t give much forebearance. Coutts or HMRC or Barclays would petition for bankruptcy and perhaps get 10p in the pound. The debt as good as gone and the bankrupt living his his wife or son’s name for 3 to 5 years. But…….. the seller banked his £1 million at another bank, maybe bought another house and another BMW or travelled the world or passed the money on as inheritance. I agree with Cilurnum that it is crazy, but debts are like the Snark, they softly and suddenly vanish away.

  23. [This comment has been removed.]

  24. 30/07/2013, Realist wrote

    Boris. The cost of an average house (land registry) is £162,000, the average cost of a new Ferrari is £200,000. But that’s by the by,in the scheme of things house building is cheap, as that average house costs about £80,000 to build. Therefore, for that bit of land, you are rather being ripped off.

  25. 18/08/2013, Boris MacDonut wrote

    Turns out inflating a housing bubble is of no consequence.
    Today the ONS tell us net national personal wealth has hit £7,300,000,000,000 (7.3 trillion) after allowing for £1.5 trillion of debt. Each household is on average worth £280k.The debt ratiop is just 17% or 0.17.
    Inflation sinc3e1988 has been 145% but wealth has risen at 265% making us 120% richer and I am at a loss to fathom how the dommsters can spin these facts.

  26. 18/08/2013, Boris MacDonut wrote

    What good news today. The UK’s net private wealth has exceeded £7. 3trillion or £280K Per household. With debt levels at only 17% of wealth I wonder how the dommsters can spin that.

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