UK Government To Scupper Economy

Posted on September 9, 2007
Filed Under News |


The storm over the American sub-prime mortgage scandal and the house of cards structure of financial instruments it has caused to collapse is very far from having blown out. In fact, it is probably still at the squally, dribbling showers stage, with the hurricane yet to come.

In Britain, this will probably lead to a severe tightening of credit facilities for ordinary consumers, from credit cards and overdrafts, to mortgages and loans. Quite enough, you might think, to strangle the already ailing property market. Not a bit of it! The government has another nail up its sleeve to hammer into the property market coffin in the form of HIPS.

The problem with the UK housing market (apart from the fact that nobody can actually afford to live in a house, as opposed to a cardboard box under a railway arch, unless you happen to own several houses and leave them empty) is that it underpins so many other financial activities.

If you go to your bank manager and ask to borrow money, what is it he always asks you? How many pairs of socks you own? How many ‘A’ levels you have? Whether you like Italian food? No. He is only interested in how much your property is worth and how much money you owe on it. What he will lend you will be a percentage of the difference between these two figures.

So, the government has hatched a cunning plan to desiccate completely a financial market which will soon be very dry indeed anyway. What they have said is: “I know chaps, let’s stop the housing market in its tracks and see what happens! Hurrah!”

So far HIPs, the nonsensical and damaging layer of bureaucracy devised by some halfwit penpushers to foist on the sale of houses have only been needed when selling four bedroom properties, but now even those with a mere three will have to have this idiocy tax applied.

The Telegraph has this:

Fifty-three per cent of chartered surveyors reported a drop in the number of four-bedroom houses put up for sale in August, compared with the same month last year. The average reported drop was 51 per cent - rising to 67 per cent in London and 62 per cent in the North-West.

According to industry experts, the fall in the number of houses with four or more bedrooms on the market is in “stark contrast” to expectations - and the finger is pointing at HIPs.

Sellers, they say, are being put off by the cost of the packs - which can be more than £600 - and the huge confusion and uncertainty surrounding the new law.

[…]

Jeremy Leaf, the housing spokesman for the RICS, is appalled by the Government’s handling of the issue.

“I have never known legislation so badly introduced,” he says. “Homeowners clearly have no faith in the packs or the policy, which have only brought more bureaucracy and mass uncertainty to an already paralysed market.

“Before they are heaped on the rest of homeowners, we need to see some evidence-based justification that this policy benefits consumers. At the moment, it doesn’t exist.”

[…]

Mr Salmon, who received only “a handful” of instructions for four-bedroom houses last month, and knows of many estate agents who have not taken on any since HIPs were introduced on August 1, believes that the Government is playing Russian roulette with the housing market.

“If HIPs have the effect on three-bedroom houses that they appear to have had on four-bedroom homes, the housing stock will simply dry up and the effect on house prices could be catastrophic,” he says. “The Government is insane to introduce HIPs into the mainstream market with no evidence that there is any benefit to consumers.

“Gordon Brown had the opportunity to kill this and he may rue the day he passed up that chance.”

Perhaps for people like Tony Blair with more properties and mortgage commitments than any apparent income could properly be imagined to bear, or like Gordon Brown who is supposed to be very good at sums, this just looks like a lot of fun. Tony Blair, of course, is hoping for a large cash advance for a book of funny stories he may write at some time in the future. Gordon Brown might not think it such a joke, however, if, come election time, his “prudent” handling of the economy is showing signs of subsidence.


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