It amazes me in a place as small as England, with 55 million inhabitants, that 20,000 acre estates still exist!
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Well, the news from the latest UK inflation report for May is not good.
Core Inflation rose from 6.8% to 7.1%
CPI stuck on 8.7% (Bank thought it would be 8.4%)
At this rate, we are probably looking at 7% swap rates fairly soon (sitting at 6%). SVR rate is already close to 8%.
Definitely getting some 2008 economic vibes now as the economic snowball is getting larger and larger.
Comparison table below for CPI:
I like this metric. When my parents were buying back in the 80s, the house prices were much lower than 2010s compared to income. However, the mortgage rate was around 17% in the 80s so the actual monthly repayment took a similarly percentaged chunk out of your monthly income compared to the much lower interest rated 2010s. The difference was though, that the pain in the 1980s only lasted for the first few years - with the higher inflation, the relatively stable monthly repayments would shrink faster in real dollars.
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I thought there were new laws in Vancouver that made it harder for foreign buyers to park their money -
They certainly should have something like that in Sydney.
A couple of comments on the new foreign owners ban in Canada.
Firstly, there is a long history where there were no restrictions so there is an existing stock of foreign-owned homes. The ban should have some impact going forward however.
Secondly, there are ways around the ban through the way the ownership can be structured so it will be interesting how much it is circumvented.
I have mixed feelings about the ban. My concern is more about empty houses bought on speculation which our empty homes speculation tax in Vancouver was meant to address. However the annual declarations around them are not audited extensively and/or a very rich person will just shrug off the fines as a cost of owning here.
Vancouver’s bigger problem is a shortage of housing supply. Our geography makes it difficult to expand outwards so we need to fill in more.
London has the same problem really.
Lots of properties sitting empty because it was an easy way to park money as a foreigner (and even get some return).
Plus, the council tax on these properties is tiny.
We really should be doing what Vancouver is doing, and ratchet up the council tax to much higher levels for empty properties.
I recall discussions about an empty property tax in London. Did that have any success? Or, as Cooke described in Vancouver, did people find a way around it?
They made it so that:
If property is empty for 2 years you pay 2X
If property is empty for 10 years you pay 4X
The problem is that for most properties that 2X is basically a rounding error given that X is so small to begin with.
What we need in the UK is a proper US-style property tax.
How Council Tax works: Second homes and empty properties - GOV.UK.
This is an interesting idea. Although I think our municipal taxes in Canada are high they are nowhere near what municipal taxes are in major US cities as a percentage of the market value of the property.
I get reasonable value from the municipal taxes I pay. Not sure many Americans would feel that way about their municipal taxes but they have some tax deductibility of those taxes, albeit limited. No tax deductions exist for any taxes paid in Canada.
Looks like the pause is over for student loans in the US. Presumably that extra debt payment will take some steam out of the market here but I’ve no idea how much. Anyone got anything on that?
I’m a total armchair economist but so many US markets feel overvalued.
Is it?
I mean, do you really need more people living there? If so, what kind of people? Just anyone willing to contribute to the tax base?
Just wondering.
The govt feels a responsibility to people who have been living there for years (and sometimes generations) and now their kids cannot afford to live there.
A similar thing is happening in Toronto and it is a hard sell to tell people just leave for the suburbs (which are quickly becoming unaffordable as well) since you are not rich enough to live in the city that you family has been living in for years/decades/generations.
Well, they shouldn’t. It should not be their job to adversely affect the economy. Keep the citizens safe. End of responsibility.
Now, if in the past the government was stupid enough to adversely affect the economy by encouraging people to live in cities, then bad on them. Two wrongs won’t make it right. Provide safe, affordable housing somewhere cheaper. Two birds, one stone. Third bird (staying put) will simply have to fly away. fly, fly.
Canada probably has the same problem as the UK
All the higher paying jobs are in London (or surrounding London).
Toronto, Vancouver have the higher-paying jobs which attracts people to the area.
Problem now is that the number of higher paying jobs has basically maxed out (the competition for them is off the scale - specially graduate jobs that pay well. I sometimes help out with graduate recruitment and am amazed at how much graduates cram into their CVs in order to make it through the door. It was not like this 20 years ago. Not even close), while house prices have kept on climbing. The remaining jobs (middle income and below) are simply not enough to be able to buy.
This is the reason why social housing is needed.
easy to say on an actuarial forum, harder to do if you are running for (re) election and you depend on those families for votes.
I am not advocating for or against increased housing, I am just explaining it from the perspective of a politician
Toronto has this problem specifically for actuaries, where you have Waterloo and University of Toronto feeding an entire graduating class of actuaries into the job market each year and the increase the size of the Canadian job market has not increased in kind. This results in actuaries (and I am sure other professions as well) as not being able to have the same quality of life that they would have had in years past.
I was just thinking this as well: Give voters what they want, and you get re-elected.
So, really, they don’t feel a responsibility, as good people. They do this to stay in office.
On a slightly similar topic, small towns in places no one wants to live are “selling” their alleged perks of living there.
LA Times:
If not subscribed:
What will it take for you to leave California for Indiana?
Start with $5,000 to $7,500 in relocation cash. If that’s not enough, how about free health insurance for a year, unlimited golf club membership, a seat on the community’s nonprofit board?
How’s a Himalayan massage strike you? Or bourbon and burgers with the mayor?
Across the Hoosier State, dozens of counties and cities are practically stepping over one another in what has become the new competition across the land: attracting the pandemic-enlarged horde of people with remote jobs who no longer feel the need to live in more expensive urban centers such as Los Angeles or New York.
Some 30 states have gotten into the action.
Cities and states are accustomed to fighting for manufacturers and other businesses by offering tax abatement and sweet land deals.
The game today is recruiting higher-income and younger households — made possible by the rise of remote working and the geographic flexibility it has afforded many American workers.
Mariah Zingarelli, 29, a fourth-generation California native and self-declared Disneyphile, took the bait. She and her husband, Chad, 34, sold their house outside Fresno in February and a month later moved to Noblesville, Ind.
Never mind that she had never set foot in Indiana, let alone the 71,000-population city about 30 miles north of Indianapolis.
But the Zingarellis decided late last year to leave California for a new adventure. They discovered Noblesville from a promotional video and ads by MakeMyMove.com flashing the incentives.
The $5,000 cash was nice, Mariah said, but what was really appealing to her was Hamilton County’s top ranking as a place to raise a family — they have a 3-year-old daughter — and a suite of freebies connecting them to the community and leaders.
The package includes memberships in a co-working digital office building shared among entrepreneurs and remote workers, the city’s golf club and the local chamber of commerce.
“We felt like the incentives would really jump-start our business,” said Mariah, who with her husband runs a social media marketing firm. “You’re kind of getting paid to immerse yourself in the local community.”
Three months ago, the Zingarellis closed on a 3,500-square-foot, four-bedroom house for $495,000 in Noblesville.
Such newcomers are especially important to smaller communities that have long struggled with loss of population and talent to bigger cities.
Now with the pandemic having caused a dramatic shift in employment — Stanford studies show about 10% of all workers are fully remote, five times pre-COVID-19 levels — many see opportunities to attract people looking for a quieter, cheaper and friendlier place to live.
“We want to grow our professional base,” said Todd Barton, mayor of Crawfordsville, Ind.
Typical relocation packages include grants of around $5,000, although several areas in West Virginia, including Morgantown and Lewisburg, say they’ll pay each qualified worker who moves $12,000 in cash.
To qualify, most places require that you move from out of state and have a remote job and a minimum income, usually around $50,000 a year.
Noncash inducements run the gamut. Gym memberships, entertainment passes and access to co-working office space are common.
Greensburg, Ind., is offering stand-in grandparents to babysit. One town promises you’ll have coffee with the mayor; in another it’s beer.
Elsewhere, the carrots are often tied to distinctive features of their communities.
Poplar Bluff in southeast Missouri, population 16,000, is offering passes to stay at vacation cabins to enjoy the nearby waters and mountains of the Ozarks. They’re among 17 incentives valued at $11,000.
“I think we have a lot to offer,” said Matt Winters, Poplar Bluff’s city manager.
Whether anyone else agrees remains to be seen. He’s still waiting for his first applicant under the program.
“Our cost of living is low,” he added. “Rural America is attractive to some people. It takes me five minutes to get to work every morning, and that’s if I’m not in a hurry.”
Indiana has been one of the most aggressive states in going after remote workers.
Over the last two years, about 22,000 people have applied for the incentives in Indiana through MakeMyMove, which is based in Indianapolis and helps cities across the U.S. recruit remote workers.
More than 400 people have moved to Indiana and an additional 350 are on their way, said Christie Hurst, a MakeMyMove spokeswoman. It’s helped that Indiana’s Economic Development Corp. fronted the money for the program.
In Muncie, a city of 65,000 about an hour’s drive north of Indianapolis, Mayor Dan Ridenour said that nearly all 44 individuals who have moved to his town or accepted an offer mentioned the lower cost of living as a prime motivation.
After that, he said, they talked about being attracted by the ability to get involved in the community.
Muncie’s package includes $5,000 in cash and passes to use Ball State University’s library and fitness center.
“The incentives are like a sales ad. I personally feel it’s a better return on investment,” the mayor said, noting that the battle to lure companies can prove very expensive for cities and often doesn’t yield the hoped-for payoff.
When attracting new residents, Ridenour said, “it’s more about what they spend locally — at groceries, for a haircut, getting their car fixed. It drives spending and jobs.”
To be eligible for the cash and benefits from Muncie, workers have to come from out of state, have income of at least $50,000 a year and relocate within six months of receiving an offer.
Rudy Ramos, 41, of Fremont, Calif., is taking the plunge.
This month he will be moving to Muncie, taking with him a remote consulting business that helps build laboratories and medical facilities.
Ramos is single and has lived his entire life in California, but said he just couldn’t keep up with the rising cost of living.
He signed a lease for a three-bedroom house in Muncie for $950 a month. In Fremont he had been paying three times that much for a two-bedroom place.
“Honestly, it’s just way too expensive here,” Ramos said. “All I’m working for is for my housing. I don’t have an opportunity to reinvest in my business.”
As for the incentives, he said access to Ball State attracted him the most.
“I love learning new knowledge. I’m going to take full advantage of that library.”
I’d love to FJM that, but it wouldn’t be fair to the person who lived in Fresno, with whom I agree that there is someplace better than Fresno.
Anywho, this seems like a better idea (analysis on whether it works out, financially, for the towns is a separate project, like luring a sports team to a city) than providing subsidies to allow someone live somewhere expensive.
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Labour Party response to UK mortgage crisis:
BOE just raised the rate by 50bps (4.5% to 5.0%)
Problem with this move is that its too little, too late. The inflation genie is fully out of the bottle now.
It’s going to take a sizeable recession now to force inflation back down to 2% due to Brexit-related labour market shortages.
Modelling suggests that house prices will drop by about 15% nominal and 40% real over the next 3 years.