From an article on George Osborne’s “Help to Buy” scheme...

[randomness]

...this chart, with data from Torsten Slok at Deutsche Bank, comparing house price to income ratios in selected American, Australian, British, Canadian, Irish, and New Zealand cities.


(click to enlarge)
From http://www.bondvigilantes.com/blog/2013/07/10/first-home-owner-grants-a-gift-to-new-home-buyers-or-existing/:

The UK’s Help to Buy scheme will take two forms. The first part will offer buyers that qualify an interest-free loan (up to £120,000) from the Government. The second part will see the Government act as guarantor for a proportion of the borrower’s debt.

Well, that's one way to pump up a housing bubble market!

(achinhibitor, the post will probably interest you.)

Comments

[achinhibitor.livejournal.com]

Oh bloody yeah. In a market where prices are determined by scarcity (rather than building costs), if the government subsidizes house buyers, the subsidy is immediately included in asking prices. So the gains go to current house owners, and "affordability" (from the point of view of buyers) isn't affected.

Analysis: Immediate gains to homeowners. Ongoing costs to the government (those interest-free loans) and long-term, long-tail costs to the government (those loan guarantees). Sounds like a vote-getter to me!

(Does this remind me of something we did in the US? How did that turn out?)

[r-ness.livejournal.com]

Analysis: Immediate gains to homeowners. Ongoing costs to the government (those interest-free loans) and long-term, long-tail costs to the government (those loan guarantees).

Yah. From the article:

One has to wonder whether a scheme encouraging financial companies to lend and consumers to borrow is the brightest thing to do in an economy with £1.26 trillion (or 80% of GDP) mortgage debt outstanding. Especially as it is designed to make an already expensive asset even more expensive, which could lead to financial instability if the economy wobbles and ultimately cost the taxpayer big time.