George Osborne Warns of 18% Cheaper House Prices - BrExit for First Time Buyers
ElectionOracle / EU_Referendum May 22, 2016 - 04:24 PM GMTBy: Nadeem_Walayat
Britain's first time buyers fully understand the nature of the crisis that is Britain's housing market one of soaring average prices that far out strip average wages as unaffordability continues to trend ever higher to new extremes each year as I have illustrated over several years. A crisis that first the Coalition and now the Conservative government has bent over backwards to try and get first time buyers a leg up onto the housing ladder by adopting extreme tax payer funded measures such as the help to buy scheme, and most recently the Lifetime ISA, which will see the government hand out £1,000 cash to first time buyers for every £4k saved.
We'll the latest and greatest boost for the prospects for first time buyers could be a BrExit, that according to George Osborne would result in average house prices apparently becoming 18% cheaper! And thus resulting a huge boost for prospective home buyers as well as freeing up a lot of demand, as the prospects for falling house prices will incentivise those contemplating selling to actual move, as in a falling market you want to sell sooner rather than later. Thus BrExit could achieve far more than all of the costly tax payer funded schemes put together.
George Osborne stated: “If we leave the European Union there will be an immediate economic shock that will hit financial markets... That affects the value of people’s homes and the Treasury analysis shows that there would be a hit to the value of people’s homes by at least 10 per cent and up to 18 per cent."
Rising Interest Rates?
Apparently in a world where zero interest rates are moving into negative rates, the UK will be the odd one out to actually lift interest rates.
And at the same time first time buyers are hit because mortgage rates go up, and mortgages become more difficult to get.”
Whereas the reality is that rising interest rates would be a sign of economic strength, as has nearly always been the case that interest tend to rise so as to COOL an overheating economy.
David Cameron and George Osborne then continue with their contradictory statements of a plunging sterling and rising inflation.
"If we leave the EU the fall in the value of sterling would be an average 12%."
"Let's be clear what that means: a weaker currency means more expensive imports; that means more expensive food and it drives higher business costs; and we all know where that ends up: higher prices in the shops." - David Cameron
Firstly, a fall in exchange rate is what virtually every central bank is trying to engineer by means of zero and negative interest rates! It's called the CURRENCY WARS, central banks trying to IMPORT inflation and EXPORT deflation as I covered in this video in response to earlier government propaganda -
In fact since the referendum was announced the British Pound has been in a RISING trend on apparent BrExit hopes rather than REMAIN fears, as a rising currency is indicative of the inflow of foreign funds into the UK.
In a world starved of yield with many bond holders in Japan and Germany actually PAYING interest to lend money to the government (bonds), rising UK interest rates would act as a huge financial hoover, sucking in foreign investment into UK bonds which ironically would result in a FALL in UK interest rates i.e. demand exceeding supply.
So the blatant flaw in Osborne's reasoning that sterling would fall is that higher interest rates would be resulting in a flood of foreign investment BUYING the British Pound and sterling assets such as HOUSING which would send the British Pound soaring!
Of course all of which George Osborne and David Cameroon are saying is a load of rubbish because it is has no basis in reality, instead it is pure propaganda that is relatively easy to rip apart.
The bottom line is that a BrExit would result greater sterling assets demand for the fundamental reason that currency flows are relative, and following a BrExit it would be the euro-zone that would bear the brunt of uncertainty of whether the European Union and eurozone survive or not, hence triggering a flight to the relative stability of sterling and thus actually push asset prices such as housing HIGHER and inflation LOWER. The exact opposite of that which they have been spouting.
UK House Prices 5 Year Forecast
In terms of the prospects for UK house prices, it is now near 2 1/2 years since excerpted analysis and the concluding 5 year trend forecast from the then forthcoming UK Housing Market ebook was published:
30 Dec 2013 - UK House Prices Forecast 2014 to 2018, The Debt Fuelled Election Boom
UK House Prices Forecast 2014 to 2018 - Conclusion
This forecast is based on the non seasonally adjusted Halifax House prices index that I have been tracking for over 25 years. The current house prices index for November 2013 is 174,671, with the starting point for the house prices forecast being my interim forecast as of July 2013 and its existing trend forecast into Mid 2014 of 187,000. Therefore this house prices forecast seeks to extend the existing forecast from Mid 2014 into the end of 2018 i.e. for 5 full years forward.
My concluding UK house prices forecast is for the Halifax NSA house prices index to target a trend to an average price of £270,600 by the end of 2018 which represents a 55% price rise on the most recent Halifax house prices data £174,671, that will make the the great bear market of 2008-2009 appear as a mere blip on the charts as the following forecast trend trajectory chart illustrates:
Recent UK average house prices data (£212,859) is showing a 3.6% deviation against the forecast trend trajectory, which if it continued to persist then in terms of the long-term trend forecast for a 55% rise in average UK house prices by the end of 2018 then would translate into a 9% reduction in the forecast outcome to approx for a 46% rise by the end of 2018.
The bottom line is that house prices are going to continue to get ever more expensive where those who are waiting for a crash to more affordable levels will continue to regret not buying as the only way housing can even start to become more affordable is if the UK literally triples the number of new builds each year from approx 140,000 per year to 400,000, something that is just not going to happen as it would literally mean the government undertaking to build a new major city EVERY YEAR! Instead it has been over 40 years since the last new town let alone city was built.
Therefore the UK housing crisis is not just one of the inability of the housing market to cope with current demand, but as the earlier housing affordability trend graph illustrates that the crisis is going to get much WORSE with each passing year, which ultimately means an social EXPLOSION of some kind, maybe not a revolution but it's not going to look pretty! Whilst a BrExit bringing a halt to out of control immigration would provide a mechanism that gives Britain time to at least stabilise the current crisis, whilst a REMAIN vote guarantees that UK housing will continue to become ever more unaffordable, which will especially hit young people and families HARD! All because the vested interests in the establishment want cheap labour that the tax payer picks up the bill for in terms of in work benefits and the people of Britain pay the price for in terms of the slow motion collapse of society as literally each service after service FREEZES!
EU Referendum - Counting Down to BrExit!
The latest EU referendum opinion polls put the LEAVE and REMAIN camps virtually neck and neck on 44% with 12% of those polled undecided. Which compares against a month ago of 42% LEAVE and 48% REMAIN, 10% undecided. So it is no wonder that the REMAIN camp has gone into full blown panic mode with a relentless torrent of fear mongering emanating from the establishment REMAIN camp. Instead I offer my latest video in this series as a message of HOPE, a message of a New Dawn, New Life for Britain!
With just 5 weeks to go the Market Oracle's own 9 month long BrExit campaign has been ramped up a few notches as we enter this last stretch, producing Brexit resources from in-depth analysis, rebuttal articles such as this, many videos, and also active on the social networks so as to do our best to do our part in Britain not wasting it's very last chance for freedom which you too can support allowing us to continue to intensify our efforts to counter the daily barrage of REMAIN propaganda as well as to keep producing video's that help spread the case for BrExit being good for Britain.
And also ensure you are subscribed to my always free newsletter (only requirement is an email address) for forthcoming in-depth analysis and detailed trend forecasts that include the following :
- BrExit to Save Europe from the Apocalypse
- US Dollar Trend Forecast
- UK Housing Market Trend Forecasts
- US Stock Market Forecasts
- US House Prices Detailed Multi-Year Trend Forecast
- Gold and Silver Price Forecast
By Nadeem Walayat
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Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.
Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
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