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

[happyfunpaul.livejournal.com]

Yet another example of why I wish legislators would be much more knowledgeable about economics. ("The Law of Unintended Consequences is the one law always passed by Congress/Parliament!")

(Or maybe they do understand economics and just don't care, because winning votes is more important to them than doing the long-term wise thing. But my bet is on ignorance.)

I wonder where Boston-metro would fall on the graph? Around DC, I'd guess.

[frotz.livejournal.com]

6.1, in line with Victoria and New York, per housingcorrection.com. ( http://housingcorrection.com/medianpricechart/caseshillerAbsoluteVsMHICensus.aspx )

[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?)

[rednikki.livejournal.com]

Huh. LA's not on there. I wonder if it's because our prices are going up so fast that by the time they'd get us on the chart it would already be outdated? (Because they are.)

[r-ness.livejournal.com]

Or maybe they do understand economics and just don't care, because winning votes is more important to them than doing the long-term wise thing. But my bet is on ignorance.

Embrace the power of and.

[r-ness.livejournal.com]

That's useful; thanks!

[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.

[r-ness.livejournal.com]

Taking the information from the link helpfully provided by frotz, I see that Los Angeles' ratio in the 3rd quarter of 2012 (same time period as the chart above) is just under 6, or between Toronto and New York.

[fin9901.livejournal.com]

Woo hoo! Cheap housing in Atlanta! No wonder we're adding another million people every decade.

[frotz.livejournal.com]

Sure thing! I'm a bit leery of using these numbers for specific comparisons, but I suspect the economists are at least on top of it. (At least, I've never gotten around to reading the original Case-Schiller-Weiss paper.) Still, the US "Metropolitan Statistical Area" definitions that are being applied here are huuuuuuge, and while on the one hand it does seem essential to try and capture the entire economic cross-section of the area, these are also capturing large swaths of territory that I don't think many people think of as being part of the core housing market.

There's also the question of how useful it is to look at house sale prices in a market like NYC where there's a whole lot of the population that rents (and wouldn't ever think about doing anything else) vs. places where there's a lot more of an ownership culture.

[r-ness.livejournal.com]

Sure. I notice the numbers aren't actually comparable, but they give some ballpark comparison.

It's particularly useful to see how far out of whack Vancouver and Sydney look.