A Particularly Stressful Time of Year

So, who to vote for!

Gosh, it's all terribly exciting with the election and what-not.

For most people working in real estate, Christmas is a deadline rather than a religious festival. And the election makes it even more stressful in some ways, for those of us concerned that nothing is being done to address the crisis of housing provision in the UK and the related ridiculously distorted asset wealth distribution (or lack thereof). The consequences of this problem not being addressed, as I have covered (or rather, ranted about) in depth, are going to be potentially catastrophic.

Less than a quarter of people under the age of 35 are projected to own their own home at all, with the majority of that cohort currently destined to rent in perpetuity. The related questions this raises are of course well voiced (how will this cohort pay for retirement?) but will quickly be superseded: for Something Bad will happen before these longitudinal questions become relevant. And the longer the correction takes to come in the short term, the worse the Bad Thing will be.

There's a poster outside the office of the University that I teach part-time at, promoting general encouragement to seek help for mental health problems (I heartily agree on seeking help if you are experiencing such issues, of course); the poster starts:

"This can be a particularly stressful time of year...".

The poster has actually been up all year now.

But it's right: this is a stressful time of year. And thinking about the above doesn't ease the mind much.

I was going to provide a breakdown of the housing policies of the main parties, as I haven't written a blog post for a while, and I've read all the manifestos now: but then I remembered that at the last election the Tories promised to build 200,000 starter homes - and haven't built a single one. So, the fact that in the current manifesto of the Tory party they promise :""First homes"- discounted properties for purchase with discount maintained in perpetuity" - means almost nothing to me, as they blatantly disregarded previous policies, and didn't even pretend to implement them, so why would they honor this one?

Labour's chances of forming a majority and implementing their own housing policies are, apparently, zero. So there's not much point there, either. Ditto Lib Dems etc...

However, Labour's promise of offering a form of Right to Buy for private tenants - rapidly hidden from public view, and not making it into their manifesto (which is instead replete with promises of housing milk and honey, when the time of angels is upon the earth) - will, I am convinced, return with a vengeance, and probably be all we talk about by 2023.

Whether this, or a form of this policy, is done by stuffing the mouths of landlords with gold, or simply by confiscating all Buy to Let properties, will determine the future of our country for the next decade. It will lie somewhere on this continuum, but I am convinced it will happen, one way or the other. Whether we end up eating zoo animals for food will also depend on how this is handled. The longer we leave starting to at least attempt to help ease the housing crisis, the more chance of the latter occurring, and the more our country's collective Zoo's elephants and penguins should be nervous. Addressed quickly, we could plausibly find a way forward as a country without ending up boiling stones for soup.

Currently, I am not optimistic.

But then, this is a particularly stressful time of year.

The Revenge Of the Evictions

I appreciate that the title of this blog makes no sense. But nothing does these days. So why change it?

Anyway.

As a child I discovered that you could completely and utterly lose an argument on the basis of the facts to hand, but as long as your last words were “yeah, but, still…” you could leave with your reputation for reasoned argument in tact, and your argument technically undefeated.

All political debate is rendered thus. So this blog means nothing. These words, however true, however based in actual reality, change nothing.

However, for what it’s worth – here are my views on the Section 21 proposals announced this morning.

According to the BBC, the Tories are ending No Fault evictions –

Residential tenants at present can be turfed out for no reason at all, even if it’s just because the landlord’s daughter takes a dislike to you and asks daddy to turf you out as punishment for being vewy vewy wude (happened to my neighbour. Feudal eh?). This process is formally initiated by serving a Section 21 notice – a so-called ‘no fault eviction’ – as no reason has to be formally stated for the eviction, unlike anywhere else on the planet.

Except….well, except.

The Tories actually only plan to consult on the ending of Section 21 notices. So they are planning to consider if they might.

One day.

Possibly.

This is, without any shadow of a doubt, not a plan to ban them now.

And…well, the Tories have no absolute majority in the commons. They are so terrified of wrecking amendments that they dare not even propose legislation. So even if they do decide it might be a good idea – and we have no idea if they will – then they cannot turn it into law, because they cannot get it through the commons.

Any even if they did one day decide to ban Section 21 notices, and reality ceased to be important in these things and they could actually get the legislation through the commons – this is only the policy of a Theresa May government, and she has said she’s leaving soon, and there’s no plan to finish the consultation before she goes – so her successor will be in charge of implementing this policy, and there’s no reason at all to think that his or her manifesto will include it, as they won’t in any way be bound by May’s previous promises (much like May, actually).

Even if all of that was true, they also propose to consult on making it easier for landlors to evict tenants in rent arrears – at present quite a lengthy process. And they are not banning exorbitant rent increases. So if a landlord wants to evict a tenant for no reason, they can simply raise the rent fivefold. And it will be easier to evict them.

I get that the Tories have realised they face an existential crises – that with collapsing home ownership, they will disappear as a party, but…

…to launch a policy that won’t actually happen, but the announcement of which will piss off their core support base (1 in 5 Tory MPs are landlords, and a large slice of Tory voters) at a time when their existing support base is pretty pissed off, all to attract the votes of people whose votes won’t actually be attracted because it won’t happen, and if it did, would make the situation worse for them, just seems….a bit mad?

Well, yeah, but.

Still.

Maybe It Was Just An Acorn

Following the last post, and in the spirit of New Year optimism: what if our trusty Chicken Licken is, in fact, wrong? What if the sky isn't necessarily going to fall in?

How fast things move. Conventional assumption at the moment now appears to be that my last blog post in fact reflects where consensus opinion has currently moved to - ie a No Deal Brexit is on the cards, and that it would be a Bad Thing. House prices would probably drop by a third, with significant effects on the balance sheets of our major banks. And we would have to start eating zoo animals.

Clearly, being in line with the general consensus makes me feel uneasy, so I feel compelled to correct myself. I have to say, being a tin-foil hat wearing loon (to block out the Martian mind-control waves - it's a thing) is no fun if you look around and suddenly see everyone else wearing the same hats. Combine this with the fact it's always good to look at the counter-arguments  - so, what is the opposing non-sub-optimal outcome, given a No Deal Brexit?

I still can't get my head fully round the numbers, as there seem to be so many conflicting data sets.

However, based on ONS figures (and depending entirely on how you slice them) the base facts seem to be the following:

- Imports of goods and services from the EU are £302 billion annually.
- Exports of goods and services to the EU are £438 billion annually.
- Of our exports, approx. £188 billion are goods destined for the EU.

This last figure is likely to be a high-end estimate, as a number of goods are shipped to ports such as Rotterdam, which are then shipped to a final destination, so wouldn't be impacted by new EU tariffs. Services will not be impacted by a No Deal Brexit, as they barely form part of the Single Market anyway. The government has said that no tariffs would be applied in the short term on goods coming into the country from the EU. So this last figure is the only hard bit of our GDP which will be impacted upon straight away if TRESemmé loses her giant game of Chicken with the British public.

Our total annual GDP is just over £2 trillion. Average WTO tariff schedules are 20% - which would automatically be applied in a default scenario (granted, it maxes out at 35% on some goods, this is just an average). A No Deal Brexit would therefore add a fifth onto the cost of 0.09% of our total economy, or approx. £38 billion in extra tariffs. This is £1 billion less than we would be paying were we to stay - so we would, on a purely finger-in-the-air fag packet calculation, save a small amount of money in year 1 - just enough to cover the cost of Mark Carney's hair stylist (or around a billion pounds). And this is if we did nothing at all - the logical response would be to drop tariffs on goods from the rest of the world, which we currently cannot do because we are hidden behind a customs union wall designed to protect, in many cases, continental EU producers.

The problem then seems to be entirely a logistical one and the general downside risk to sentiment, with a break down in our just-in-time supply chains - although the Calais authorities are moving heaven and earth to ensure that there are as few issues as possible (they stand to lose an awful lot if things go wrong). I have been wondering for two years how the people that run this country (who are, unanimously in favour of the status quo of course) would stop Brexit - and this appears to be how: by making no preparations or alterations whatsoever for leaving the EU, and then at the last minute pointing out that if we leave, we haven't done any preparations or alterations at all for leaving the EU and our homework is in fact in my other bag miss oh and we'll run out of food - so we should have another vote so we can jolly well stay. Great, thanks for that. Not sure I'll ever bother voting again if that happens.

But, seeing as I'm a Chartered Surveyor (pre-Brexit, anyway - post-Brexit I am He Who Structurally Surveys Our Burnt-Out Cave Dwellings For Food Scraps) - what of housing?

I predicted a market value collapse after the last financial crisis (and there was one, of sorts) - but I was staggered by the rise - and rise and rise and RISE - of house prices subsequently. In the interests of full disclosure, I also predicted house price crashes in, erm...2013, 2014, and the period 2015-2018 (including years 2016 and 2017). But this boom was outside my market-modelling as it was down to a Deus Ex Machina, or "ZIRP" as it was known (zero interest rates) - and the pumping of £375 billion into the house market by Mark Carney et al (small hands, smells of cabbage). And, interestingly, the Bank of England have now said that, in a No Deal scenario, they would release another £40 billion or so of QE. And - this would be the key bit, housing-wise - if they didn't in fact raise interest rates, on the grounds that competitive devaluation is a good thing and would help our trade deficit, this extra money sloshing around would inevitably end up being lent by banks to house purchasers. This would lead to house prices actually going UP.

As I say, the above is just a stab in the dark - but despite all the screeching hysteria, very few people have explained to me exactly why the underlying figures look quite so apocalyptic if we leave the EU without a Deal - a melt-down just sort of seems to be expected. But unfortunately, expectation often begets reality (apart from at Christmas, seemingly, I wanted a train-set and OH SOCKS THANKS A LOT GUYS) so I wouldn't bet against it, given the pyramid scheme that in any case constitutes our fiat economy.

I think I need a lie down.