Are we Looking for and have we been looking for solutions?
13. In this response, it is assumed The Committee is seeking to further the public interest, even where this may conflict with the private interests which usually dominate the analysis and debate. This will pose a major challenge to those who have learned their analysis exclusively through channels devoted to promoting private interests, and must “unlearn” erroneous but pervasive assumptions and principles.
the distinction between Bank, Building society and Other lending in all the stats is key, followed up by the Distinction between, Mortgage for New or Existing homes as 1st Mortgages,Mortgages for Remortgages and finally mortgages for Letting investments.The other very important distinction is Mortgage Funds secured in the Money Markets and Mortgages originated as Bank credit. Northern Rock of course famously became a casualty of the former and The Market itself is in my opinion enslaved to the latter. One further Stratification category would be the Element of Value attributable to Site or Land Value. ALl of my recent researches point to Land Value Tax, and the Late Dr Adrian Wrigley’s work.This paragraph is sandwiched between Two Quotes from Adrians work.
Evidence of a real housing “shortage” is absent. A real shortage would show up as overcrowding nationwide. People would be walking the streets in the hope of finding a room. Room prices would be high, and there would be no empty houses.We have a crisis of affordability and allocation. People are borrowing eight times their income to get on the housing ladder yet there are 700,000 derelict houses, 500,000 second homes, and hundreds of thousands of pensioners’ homes with at least three bedrooms spare. The overheated Spanish housing market shows that rapid building programmes do not cure price bubbles.
For an Affordable Product to work the appropriate supply of newly created credit needs to be accessible and it is successive failure to solve or even address this piece of the puzzle that has led to the Market as we see it today, and is by some estimations ( Werner et al) the cause of the Gyrations we call the property cycle.
At this point separating the Flows of Credit into the Housing Market is a non trivial task As one has to Factor in The Production Side of the equation Housebuilder/Developers and financing of Land Acquisition, Planning and Construction.
understanding of these flows into a model to see how the Split between; Newly created Credit and Institutional Equity Funding expressed as Developer Payments, Insurance Company Liability cover , and Other risk Capital from the Players in the Model Transaction
I think if a solution has been developed a workable Solution should satisfy one proviso.
• Higher LTV lending and also Lending at Higher Joint income Multiples is a necessary combination if First Time buyers are to see sufficient credit allocation.
The Macro Prudential framework will I think frustrate even prudent and attractive Mortgage products for First Time buyers. My Latest Blog touches on the Problem. Per Kurowski who I quote in the Blog is an ex director of the World Bank and If the Good Ship Sonia is to set sail, we could do a lot worse than pay heed to Pers message which he has oft repeated in the letters section of the FT.
“With lower bank capital requirements for residential mortgages than for loans to the entrepreneurs or SMEs, those who can create the jobs needed in order to service utilities and mortgages, you will not have a functional economy, and houses have morphed from being affordable homes into being the main risky-investment of way too many families.”
The Stylized Facts of the Macro Prudential Literature , succeeds in doing what Stylized Facts do. That is The decoupling of The Entry levels of the Market from Fundamentals has gone un-diagnosed. I am not convinced that this is not condoned by implicit policy, where being seen to be trying to do something is enough, Actually doing something is not the standard of success, a triumph of Stylized Facts over Substance, Perhaps? https://notthegrubstreetjournal.com/2020/12/18/a-ship-in-harbor-is-safe-but-that-is-not-what-ships-are-for-setting-sail-on-the-good-ship-sonia-perkurowski/
“A ship in harbor is safe, but that is not what ships are for”, Setting Sail on the good ship SONIA. @PerKurowski