Alistair Darling promised about £1.5bn today on “thousands of new and modernised social homes as well as regeneration projects.”

The money may soon be there. Spending it is easier said than done, however. Last week I reported on how the credit crunch has hit housing associations. Many are struggling with their finances and development is drying up.

The National Housing Federation  - which represents over a thousand registered social landlords - today warned that funding rules need to be changed as soon as possible.*

Continue reading "Why it may be impossible to spend billions on new social housing"

This Bloomberg chart tells a striking tale. Credit default swaps are a form of insurance on gilts. People buying UK government debt acquire CDS’s to protect themselves against the risk of the country becoming bankrupt.

In August, the price of CDS’s for UK gilts was just 18 basis points. By the end of last week it had soared to 68bp. As of today the figure has reached 87.5bp. (The yellow line is the UK, the pink line is Germany).

This is a huge signal from the markets about Alistair Darling’s pre-Budget report and the revelation that annual borrowing could hit £120bn within a year or two.

The City is shorting UK plc.

UPDATE

In fairness I should add that the stock market has roared ahead this morning with the FTSE-100 up nearly 5 per cent at one point. In part this is because of PBR expectations, which have pushed up some of the big retailers. It is also thanks to news that Citigroup, the US bank, is receiving a $20bn capital injection and guarantees for $306bn of distressed mortgage assets. UK banks are among the biggest rises so far today.

An extension of the stamp duty cut will probably be in the pre-budget report. After all it would be cheap: figures today showed that the policy has made no difference.

The stamp duty one-year holiday was announced by government ministers with great fanfare two months ago. Ministers raised the minimum threshold at which payment is due to properties selling for more than £175,000, up from the previous threshold of £125,000.

It’s changed nothing - judging by data released today by the Council of Mortgage Lenders. Continue reading "The stamp duty cut made no difference to the market"

A worthy code to limit the number of home repossession cases reaching court was issued on Wednesday. It won praise from all sides — lenders, ministers, housing charities, opposition politicians. That alone tells you something is not quite right.The “pre-action protocol” includes all the right things to make repossession a “last resort”. But it does not change the rights of borrowers or lenders. Rather it offers a code for lenders to follow if they want to be more lenient than required by law.

So it says a lender “could” offer to extend the term of a mortgage from, say, 25 to 35 years. But if the lender decides this is a silly idea that will lose him money, a judge lacks the power to make him do it when it comes to court. Cash strapped homeowners have no more legal protection today than they did last week. No wonder lenders are happy.

Gordon Brown wants repossessions to be a “last resort”. This code will certainly help to delay or avert some repossessions. But as Robert Jordan, the judge who led the drafting process, said: “the protocol did not change the courts’ limited powers to deal with these cases.”

Which begs the question: why is the government so reluctant to change the law?

It has been described by one former cabinet minister as the ultimate Keynesian move  - the nationalisation of the housebuilding industry.

Frank Dobson, former health secretary, said this would be a way of spending money to create “useful wealth”. ”I think he [Mr Brown] has got an appetite for this. He is attempting to minimise the impact on everyone else from banking lunacy and he’ll be looking for anything practical.”

But the industry is alarmed by the suggestion that the government could take stakes in ailing housebuilders, whose share prices have collapsed dramatically in the last year.

“We can’t see any benefits there would be for the government to do this at the moment,” said the Home Builders Federation. It is a non-option.”

Yvette Cooper, chief secretary to the Treasury, indicated today (Sunday) that officials were not yet examining the idea.

Asked by Sky News about the possible nationalisation of builders, she replied: “We have got to make sure we keep supporting housebuilders who are being affected by what’s happening right across the economy right now. That’s why we are bringing forward some of the money the government is putting in for affordable housing.”

Jon Cruddas, the influential Labour backbencher - who recently declined the job of housing minister- has urged Gordon Brown to buy stakes in housebuilders.

This would help hit the target of 3m new homes by 2020, provide more social housing and help protect jobs, he told the FT.

Neal Lawson, chairman of Compass, the left-wing pressure group, said part-nationalisation of housebuilders was one of the radical ideas which MPs should examine.

Taxpayers are already part-owners of two housebuilders, Crest Nicholson and McCarthy & Stone, because of the bail-out of HBOS - which holds large stakes in the two companies on its balance sheet.

Share prices in some builders such as Barratt Development and Taylor Wimpey have fallen by more than 95 per cent as a result of the slowdown in the residential market. Concerns are growing about the prospects for their survival if the housing downturn worsens.

Sam Coates makes a shrewd point about it being a good time for the government to bury bad news.

With all eyes on the global economy, what better time to quietly drop toxic policies such as 42-days detention without trial or key stage three tests?

I’d put money on the DCLG abandoning the target of 3m new homes by 2020. Margaret Beckett, the new housing minister, made her maiden speech today to the Home Builders Federation. I’ve just read the text. It has no reference to the target - even in vague terms - whatsoever.

The prime minister is determined to portray the US as an unrivalled basket case and has ceaselessly blamed the problems in the UK economy on America.

He loves to contrast the US housing bubble with that of the UK. (Regular readers of this blog will remember the nonsense claim that Britain has no subprime lending).  

This morning, he claimed: “What happened in America is that they overbuilt…In Spain, they’ve got one million unsold houses, which suggests again that they overbuilt.”

The PM argued that the British housing market had a better chance of starting up again because there was “pent-up demand”.

Unfortunately that pent-up demand is irrelevant if no one can find financing to buy a house. And it may evaporate further as prices keep on falling.

Yes, there was more rampant development in the US and the Costas. But UK house price tripled while US house prices only doubled during the recent boom.

Anyone who thinks it was “normal” to be selling one-bed flats in Leeds for £250,000 - does that include the prime minister? - is going to discover the truth the hard way.

I couldn’t entice Alistair Stewart, housebuilding analyst at Dresdner Kleinwort, into commenting on Mr Brown’s comments. But he did say: “The supposed under-supply of housing is one of the biggest chestnuts of our times, yes there is an undersupply of houses in London and the South-east but housebuilders have spent most of the last five years building apartments outside that region. …

“There are empty vistas of apartments in just about every city centre and not-so-central urban area of the country .” 

For some reason the prime minister likes round numbers, whether £1bn for fuel poverty, £1bn for the housing market, 3 million new homes or 1,000 troops home for Christmas. (All of which have turned out to be a tad flakey).

Perhaps the former Chancellor believes that £1bn is enough to turn around the vast, £5,000bn, housing market (would he sanction the purchase of £1bn of Vodafone shares to prevent a stock market downturn?)

One can imagine him sitting around a table, in the style of Austin Powers’ Dr Evil, who - after being frozen for 40 years - tried to impress his henchmen with a plan to hold the world for ransome for…….ONE MILLION DOLLARS.