Forget Covid-19 and Brexit. The question to which most people in the UK would want an uncertain answer is what will happen to house prices in 2021.
UK Prime Minister Boris Johnson seems keen to please one set of traditional Tory voters – landlords – even if this could mean putting the health of thousands of office workers at risk.
Instead, he should use his creativity to turn some of the now-obsolete office spaces into ways to fulfil a more important pledge he made not long ago: fight obesity. And not just his own.
A statement from Halifax shares the “good” news: home prices paid by first-time buyers are the highest ever.
In the first half of this year, first-time buyers paid on average £207,693 for a home, the highest price on record. This is 4% higher than a year ago, and 50% higher than five years ago.
The early UK election highlights the harm done by the Brexit vote, but also its short-term winner: the Conservative party. Hidden for now is the long-term loser: the British people.
The air came out of the bond bubble last month, when bond funds recorded the highest five-week outflows in three years and a half, according to capital flows data analysed by Bank of America Merrill Lynch economists.
The new chancellor of the UK, Philip Hammond, will present his first Autumn Statement on November 23. There are hopes in certain quarters that he will reverse a plan by the previous chancellor to stat phasing out tax relief on interest rates for buy-to-let mortgages.
If he does reverse it, he will make a big mistake with dire consequences down the line. The previous chancellor, with various governmental programs such as Help to Buy, had already blown up a real estate bubble — helped of course by loose monetary policy and a flood of cheap money from abroad.
The banks are already making plans to shift some jobs out of London into other EU capitals and the French government, usually considered anti-big business, is rolling out the red carpet.
There are some who say “good riddance” to a sector where all sorts of governance scandals have dominated the headlines since the crisis and into which UK taxpayers have had to pour billions to keep it afloat.
While it is true that bank bailouts have cost the taxpayer a lot, a diminished banking sector in the city of London would almost certainly trigger a crash in house prices, which in turn could start a recession.
The way the markets have reacted to Brexit, you’d be forgiven to wonder what the fuss was all about.
Another trick to keep UK house prices rising is taking center stage: the extra-large mortgage. It’s the mortgage lasting half a lifetime, or more, which allows you to buy a home even if, under normal circumstances, you would not afford it.
The news that Wells Fargo, the US bank that is the world’s biggest lender by market value, targets millennials with its mortgage loans is seen as a sign that we’ve finally gotten over the crisis that nearly brought down the world economy in 2007-2009.
The Financial Times reported that the head of the bank’s home finance business said he was keen to lend more to first-time buyers, who, the paper said, have so far “put off settling down.”
But what is good for America is not necessarily good for the world. While in the US there has been some deleveraging and restructuring that allows the housing market to re-start from a cleaner basis, it is not the case in the rest of the world.