Pros & Cons #6: Buying A House

House ownership is traditionally seen as a sign of steadfast finances and, well, a settled life. So why did 2017 see house ownership in the UK fall to a 30-year low- and is this really a problem?

House ownership among the British population has been in decline over the past decades, culminating in the home ownership rate of 62.9% in 2017, according to the English Housing Survey. This is the lowest ownership rate since 1985, the midst of the turbulent Thatcher premiership. This decline comes despite efforts of successive recent Conservative governments to push home ownership through various incentives (for example, the Help To Buy policy designed to help first time buyers get on the property ladder).

So, why is home ownership at such a low level? The Institute for Fiscal Studies (IFS) asserts that the youngest adults in society are those at the greatest disadvantage compared to those of their age in previous decades. The purchasing power of the young has been disproportionately hurt by the failure of incomes to keep up with the rising costs of living. According to the IFS, "almost 90% of 25-34 year-olds faced average regional house prices of at least four times their income, compared with less than 50% twenty years earlier".

fig.1 - source: Resolution Foundation

Research from the Resolution foundation (fig.1) suggests home ownership among 25-34 year olds is currently at its lowest rate since the 1960s.

Other factors also contribute to the decline in home ownership- for example the decline of construction of new homes, foreign investment in large city centres (both of which have contributed to high prices), and also a changing attitude among the younger generation towards home ownership. Even among those who have the financial capacity to purchase a home, the decision to go ahead with the purchase is becoming less clear cut.

Germany is known for its renting culture- a 2013 study found just 43% of Germans were homeowners- and it could be possible that in the long term, the UK is heading in a similar direction. So what should you weigh up when deciding whether or not to purchase a house?


PRO: Your (Relatively) Stable Asset

The belief that home ownership represents stability is not an old wives' tale- indeed, owning a home means that you own an asset that, in usual circumstances, should be reliable and in fact increase in value over time.

What's more, when you own your home you have full autonomy over what you want to do with it. Renting leaves you dependent on your landlord- if they don't want you to put a nail in the wall to hang up a family photo, you can't. Although there are laws to protect those who rent (tenants), the landlord can also make you leave the property, even against your will. No one can do this to you if you live in a property you own (except the bank, if you don't keep up with your mortgage, that is).

Owning a house leaves you with a fall-back in case of financial catastrophe- it is a valuable asset that you can sell to downsize and shore up emergency funds, or sell to have a helpful hand further up the property ladder. A common practice among people approaching retirement age is to sell their home and downsize- leaving them with a tidy financial benefit to enjoy retirement with.


CON: Responsibility

As the saying goes, "with great power comes great responsibility"- and a house is no exception. Owning a house means you are responsible for it completely- you've got to deal with any issues that arise, whether that means a broken window or a fault in the structural integrity of the whole building. If you don't invest where necessary in the maintenance of your home, the value could tank.

On the other hand, tenants enjoy the freedom to pass over (most) issues of maintenance to the landlord, who has the responsibility to sort these things out. Furthermore, while the tenant doesn't take a share of any increase in the value of the property they are renting, the tenant is also protected from any fall in value- it is the landlord who has to absorb this cost.


PRO: Favourable Finances

Depending on when you purchase your home, you can benefit financially from favourable economic conditions.

The most common advantage taken by homebuyers is low interest rates- these are influenced largely by the base interest rate set the Bank of England, which essentially uses it as a tool to either stimulate or reduce demand in the economy. Low rates mean borrowing is cheap, encouraging people to take out loans to purchase houses, generating more activity in the economy.

Furthermore, taking up a fixed interest rate enables a clear idea of payments that are to be made over the time of your mortgage- as opposed to renting under a landlord, where the rent can change upon their whim. Home buyers need to decide, however, whether a fixed or variable (changing) interest rate suits them best- a variable rate helps when the Bank of England lowers its rate during the period of the mortgage, but increases costs should the Bank of England do the opposite.


CON: Lack of flexibility

Purchasing a home is not suited particularly well to a young generation that is more mobile than ever. A 'job for life' was a reality for previous generations that has become increasingly rare for today's youth. This is due not just to increasing job insecurity, but a young workforce that is more willing than ever to relocate regularly- in part thanks to phenomena such as social media tying people down less to 'home'.

Purchasing a home is neither a short nor flexible process- the average mortgage repayment period is 25 years. On the other hand, most renting agreements are 12 months long. Thus, renting offers a more appealing and feasible option to young people who may be changing careers every 2-5 years, or those hoping to upsize their home relatively soon.


PRO: Satisfaction

Studies indicate that home ownership brings a greater sense of security and happiness- a YouGov poll from 2017 found 73% of home owners to be satisfied with their standard of living, as opposed to just 53% of renters. 

Why Owen Smith Is Losing

Owen Smith looks set to lose against Jeremy Corbyn. James Dancey look into why his campaign has fallen flat and why moderates like himself will not be voting at all.

Beating Jeremy Corbyn was always going to be an uphill battle; he has swathes of grassroots support, he’s very mild-tempered and likeable on a personal basis and appeals to a lot of people who have felt disconnected with politics for the previous few months. However, the PLP politicians wanted to field someone against him. 

After ruthlessly ousting fellow candidate Angela Eagle, Owen Smith was the man who stood against Corbyn, to try and take back the left and unite the party. In Owen’s defence, the only way the more moderate side of the party had a chance of winning was by fielding one candidate, any more would’ve diluted the vote and Corbyn would’ve trampled over everyone. And don’t even get me started on how Eagle rubs me the wrong way, she sounds like she’s saying everything in falsetto and has the charisma of a damp flannel.

So I was open minded to the idea of Owen Smith following Corbyn’s reign at first, he was no revolutionary leader but a united Labour would’ve been stronger than a divided Labour. It’s a shame no-one told Owen Smith that, because since the start of the campaign he’s been trying to sell this passive, mature gentleman as this sort of warmongering Disney villain, which no-one buys.  The polls are stacked against him and I’m not remotely surprised.

When Corbyn won last year, he won over half the vote, which would mean Owen Smith would have to convince people who had voted Corbyn to vote for him, he would have to obtain significant swing. If someone has voted Corbyn, it means they have a positive view of him likely, that view may have wavered, but I guarantee most of the people who have voted him are still sympathetic towards his cause. So with that in mind, you have to present yourself as a more positive option, rather than a less negative option.

Unfortunately, Owen Smith has been given the jumped-up obnoxious PR treatment; a Corbynite comrade of mine invited me to watch the Smith against Corbyn debate in Glasgow stream with him. We both regularly cringed at how staged Smith’s responses seemed, and even how aggressive and unpleasant Smith came across, one particular highlight was when he started ranting about how Corbyn must’ve secretly voted leave. He asked Corbyn “Did you vote remain?”, Corbyn replying “Yes”(shutting Smith down completely). Smith then went on to savage Corbyn for his supposed lacklustre support, completely contradicting his previous compliments only a couple months prior.

People wanted reasons to vote for Owen Smith, not reasons to vote against Jeremy Corbyn, the jeers from the crowd against Smith’s accusations told me what I needed to know about how they felt about Smith’s sudden hostility. Smith’s aggression and nastiness isn’t going to heal the wounds, it’s just going to rub salt into them; Smith is doing exactly what he said he didn’t want to do: divide.

This sort of change in tone demonstrates a disingenuous nature of many politicians, and the exact reason that so many people voted Corbyn in the first place. Jeremy Corbyn went against a lot of his principles to support the Remain vote and did a lot more campaigning than a majority of Westminster politicians (including the current Prime Minister Theresa May). The sort of whinging from Labour politicians who blame Jeremy Corbyn for the vote not going their way is comparable to a delinquent child who can’t have ice cream in their favourite flavous. Corbyn was not the deciding factor of the EU vote, the establishment were.

Speaking of Brexit vote, we can talk about some Owen Smith’s policies, which are backward-looking to say the least. Call me a man with vested interests but I don’t want a second EU referendum, neither do most people in the northern areas, the Labour heartlands, Sheffield, Bradford, Wigan, Birmingham, Hartlepool, Barnsley, Doncaster, Durham, Sunderland, Rochdale, Rotherham and many more all voted leave, how can Labour expect to retain these seats with such a metropolitan policy which exemplifies everything wrong with politics currently. Also, how can he expect to win marginal seats in Bolton, Bury, Nuneaton, Derby, Telford (more strong leave constituencies) and so many more with a policy of defiant denial of democracy at the forefront of his campaign? Recent polls have suggest that ‘Regrexit’ is regressing, with a majority of people being happy with Brexit, he’ll end up forcing people to vote Conservative or even UKIP in a defence of their vote.

And then there are the gaffs, how on earth anyone can think it sensible to sit down for peace talks with ISIS is beyond me. He would be torn to shreds before the next election for that one quote alone, you could see it in The Sun now, the fact that he said something as stupid as that does not just demonstrate he has no understanding of ISIS, but no understanding of the motivation people voted for Jeremy Corbyn in the first place. Although Corbyn’s opposition to the Iraq war has been helpful through the Chilcott report, foreign policy was not the primary reason he received a lot of people’s endorsement, and the fact that Corbyn’s own team distanced themselves from Smith’s policy demonstrates that Smith is untrustworthy and unfit for the Labour leader position, and certainly no better option than Corbyn.

I’m no Corbyn supporter, in fact I’m more to the right of the Labour party, however, it’s not just a case of politics, it’s also a case of competence, and as much as I would like to support a progressive alternative, Owen Smith is not that. If you don’t want a protest party, then don’t make your manifesto based on protesting one of the most prominent votes ever.  If you don’t want an unelectable party, then don’t set out peace talks with ISIS.

I’d vote for the Monster Raving Looney Party before I’d vote for Owen Smith.  

The Unsurprising Truth Of Blair's Toxic Legacy

Tony Blair thought that Iraq would be Labour's Falklands.

I’ve never liked Tony Blair. Never have, never will. I guess to me, Tony Blair is a bit like a British Hillary Clinton, minus the breasts, of course. He just gives me this feeling that something just isn’t quite right about him. The smile, the gestures, the character. He just seems a bit off. And I’m not doubting that in his time he was a very credible politician, his charisma, his charm, it clearly won a lot of people over. But during the time I was old enough to actually have an opinion on him, it was never favourable.  

I’m not saying that everything he did was bad, no, he passed a lot of highly constructive legislation. However, I never had the feeling that what he did was out of principle, more out of faux pas attempt to appease the masses, I’ve never liked that, never have never will.

Yes, it’s better than having someone who is principally a bad person. But saying Tony Blair is better than, say, George Osborne, is like saying the common cold is better than swine flu: they’re still both illnesses you really don’t want to deal with.

Then came Chilcot, and everything most people knew about the Iraq War was confirmed. Blair had manipulated and been rather uninformed, I don’t have enough free time to read thousands of pages unless someone’s paying. Which, unfortunately, they’re not.

Tony Blair and plenty of his allies came out and said that there were ‘no lies’ however, I’d like to quote Piers Morgan: “If I sell you my car and claim it's perfectly safe, but don't show you existing paperwork suggesting the brakes might be faulty, that's not technically a 'lie' either. But it's a serious, wilful omission of detail which can have catastrophic, lethal consequences.”

Tony Blair knew he was uninformed, but acted like he wasn’t and completely knew what he was doing, with the backing of the Tories and my all time favourite media mogul: Murdoch, all creating this image that he was the missionary to rescue the Iraqi people.  He wasn’t. Hussein’s army was finished in barely any time at all, we were left with no exit strategy and pretty much deserted them with an anarchy and a scattershot army. This subsequently provided the roots for numerous groups who have spread terror across the Eastern world.

There’s no doubting that Saddam was an evil dictator who had committed some awful atrocities, but compare it to the chaos today… nothing like it. Not even close. Why would we rush in? Well, in my opinion, it was Blair’s own narcissistic ploy to have himself written into the history books, much aligned to Thatcher’s  affair with the Falklands, just with a very different result. He wanted to be this Great British patriot, but patriotism begins at home, Tony Blair went out into Iraq with his armies, artillery and false pride, however, all he returned with was an increased terror threat on our own soil. 

A ridiculous idea in hindsight, but with all his allies and friends to tell him he was in the right who was to say otherwise? That 1.5 million strong march was ‘fatuous’ in his view. He was floating on his own cloud of self-appointed sanctity, I’m relieved we’ve finally brought him back down to earth.

What now? He’ll probably skulk his way through a few interviews and fade into the background, only time will tell. I’d be very surprised if he was actually reprimanded for his actions, politicians work on a different level than the law. That’s the sad truth.

But what can we do? He’s made enough wealth to cover for all this and he I doubt he will ever pay the full price for what he’s done, one can only hope that lessons are learned from this very sobering disaster of an intervention. 

Why Is It So Expensive To Live In London?

London. Capital City of England, home to the Queen, and one of the most popular cities on earth. Attracting over 16 million tourists in 2013, its charm is undeniable to those who come to visit.

See our YouTube video HERE.

But for those living in London, the story is quite different after the initial 'honeymoon period' of living in the world's greatest city passes. London is known not just for its exemplary Britishness and history but equally the dreadful cost of living suffered by its inhabitants, as sky high as the towers of Canary Wharf.

Just a few months ago, London overtook Hong Kong as the most expensive city in the world to live in- a surprising statistic when you consider that just seven years ago, London was ranked fifth. Since then (in dollar terms) the cost of working and living in the capital has risen by almost 40%, the third highest growth behind Rio De Janeiro and Sydney respectively. Consequently, we've been seeing some crazy stories, like about how this student finds it cheaper to commute from Poland weekly than live in London accommodation, and how renting an average place in Camden Town costs more than commuting from Madrid everyday. Even in Britain, London's housing is ludicrously expensive- while the nation's average house costs £299,000, according to the Greater London Authority, London's average price is currently over £530,000.

So what is the reason behind London's new status as the most costly city in the world to live in? Well, at the core of this complex issue is supply and demand. Simply put, prices are so high because demand is constantly increasing, as supply is decreasing.

It's not too difficult to see why demand for housing in London is so high- one of the most vibrant, iconic cities in the world, the capital of England is a very appealing place to live. Though it has been having its troubles, transport in London is unparalleled in the rest of Britain. There are all the shops, leisure centres, cinemas, theatres, restaurants, that an individual could desire.

But increasing numbers of people are unable to select which city they live in, solely based on these luxuries. For many people, employment is what matters, and the factor that is driving many people to London. While much of the British economy has been slowly recovering since 2008, London's economy has accelerated the fastest- meaning massive numbers of jobs have been created in the capital, such that in early 2014, London had 10 times more job vacancies than other British cities, such as Birmingham and Edinburgh. Jobs have played a significant role in peoples' decisions to move to London, driving up demand for housing.

Despite the 2008 crisis, the City of London has thrived, creating many
high paid jobs.

However, the recent jobs boom in London has caused prices to rise in more ways than just this. It's important to look not just at how many jobs are available, but what types of jobs these are- and it is particularly noticeable that higher paid jobs make up a larger proportion of jobs in London than in most UK cities. The finance industry has particularly grown in stature in the past 30 years or so in London, despite shocks such as the recent 2008 crisis; data compiled by Z/Yen Group analysts concluded that London was the most competitive financial centre in the world, coming first above cities like New York and Singapore in every category tested.

Such an increase in high paid workers coming into London has meant that there has been a housing development boom, largely in luxury properties regular Londoners couldn't afford- pushing up the market prices, by as much as 7% in the last year.

Globalisation has further compounded this issue, allowing foreign wealthy individuals (the likes of Roman Abramovich and Lakshmi Mittal) to relocate to the capital, purchasing or building massively expensive properties at the same time. While foreign investment in the capital does indeed have its benefits, this aspect means that housing prices rise massively. Currently, almost 10% of the world's billionaires live in London (the highest proportion in the world), and the number of millionaires is also rising.

Both London's mayor and the government
have sought to take on London's housing crisis-
but their efforts have been relatively futile.  

Supply of affordable properties in London has not been keeping up with this rocketing demand. Despite George Osborne's efforts to stimulate home buying through schemes such as Help to Buy, which have made it easier for first time house buyers, not enough houses are being built. Mayor Boris Johnson's target is 42,000 homes built per year- but House of Commons research has suggested that over 80,000 would be required to meet demand.

With their financial power, wealthy individuals are able to purchase property in prime areas in central London- causing the average house prices of these areas to increase. Consequently, with a lack of new affordable housing developments in the centre, poorer people are being 'priced out'- forced to move to cheaper areas on the outskirts of the city. 

Supply Side 'Trickle-down' economics- does it work?

Supply-side (or 'trickle down') economics has for the past few decades been one of the discreet tenets of Western economy. It's the belief that giving financial benefits to the wealthiest of society (in the way of tax cuts/breaks, regulatory advantages given to big businesses) will inevitably benefit society as a whole, as the wealth will 'trickle down' the economic ladder in the form of employment, pay rises or whatever else of the extra wealth the richest will generously share with the rest of the population.

It's been a policy the conservatives of America has held ever so close to their hearts, and one that has faced much opposition by the lower and middle classes of America.

So how did trickle-down begin?

A turning point was certainly in the 1980s, during the divisive periods when Ronald Reagan and Margaret Thatcher were in power in the USA and UK respectively.
Perhaps never have two leaders either side of the Atlantic been so harmonious- Reagan curiously dubbed Thatcher "the most important man in England", and Thatcher once described Reagan as "the second most important man in my life".
The harmony of the two certainly extended to economic policy; both leaders were strongly influenced by the Chicagoan and Austrian schools of economics, the proponents of which included notable anti-regulation, free-marketers Milton Friedman and Friedrich Hayek.

Trickle-down was one of their most prominent legacies. Thatcher and Reagan carried out drastic economic changes that were designed towards 'supply-side economics' (another name for trickle-down). The most important relevant policy change was that of tax rate changes.
In the USA, the Tax Reform of 1986 saw the top tax rate for individuals drop from 50% to 28%, partly compensated for by an increase of the bottom rate of tax from 11% to 15%. This was the very first time in the history of the USA that the top rate of tax fell at the same time as the bottom rate rising.
In the UK, Thatcher followed suit by dropping the top rate of tax from 80% to 63%, meanwhile almost doubling VAT (Value-added tax) and the amount everyone had to pay to fund the National Health Service. However, she did indeed drop the common tax rate from 33% to 30%.

So what were effects of these trickle-down policies?
Let's remember, the motivation supposedly behind trickle-down economics was that the population as a whole would benefit from the wealthy being wealthier. The idea is that as the national wealth pie grows as a result of the richer getting richer, everyone else's pie would simultaneously grow as a result.
So has it worked?
Well, a certainly interesting effect is encapsulated well in the following graphic:

Comparison of wages of the top 1%, overall wages and productivity.
(Mother Jones) 

Note the real separation point on the graph, where the average income of the top 1% really lifts off- it's after the turn of the decade, through the 1980s- conveniently the decade of Reagan's presidency.

Note not just how the income of the top 1% rises incredibly, that as productivity increases the average overall wages of the population lags behind, barely increasing in relation to the other two factors in the chart.
The meaning of this is pretty unpleasant- the 'pie of wealth' may have increased, but this chart suggests that more prominent has been a relocation of sorts of national wealth.
The wages of the overall population has suffered since the 1980s when it is considered that productivity has boosted- the overall population have not benefited in terms of wages from this increase. Instead the wages of the wealthiest have been boosted far more than before the 80s.
CEOs in 1965 made 24 times more than the average production worker- in 2009, this figure was 185.

It seems clear that wages of the middle and lower classes, contrary to the motives of supply-side economics, have suffered as a result of the policy- meanwhile clearly the wealthiest have benefited HUGELY.

So why haven't most of the population benefited- a key belief of the theory is that it's better for everyone if the wealthy are wealthier, right?

Buffett has been a prominent opponent
of trickle-down economics.

Here there is a great fault in the trickle-down ideology- reduction in the taxes enforced upon the wealth is itself no guarantee of further reinvestment into the economy.
This is because the benefits are being given to people who are not in need of it. Little is in the way of CEOs creating new jobs to further production- most already have the capital available to invest where they see fit.
Warren Buffett (pictured right), one of the wealthiest men in the world, and perhaps the most prolific investor claimed "People invest to make money, and potential taxes have never scared them off". Taxes are rarely a stumbling block for the wealthiest, who are willing to take risks to invest (most entrepreneurs are where they are now as a result of their calculated risks).
Therefore tax cuts to the wealthy rarely open the doors to new investments. Instead it leads to simply a further amassing of wealth by the wealthy. By no means will the wealthy invest everything they benefit from tax cuts, to the gain of the middle and lower classes as the theory suggests. A staggering example of this is how currently the top 1% of wealthiest people in the world control 39% of the world's wealth. This is a clear sign of a broken global system, a large part of which is thanks to trickle-down.

Trickle-down, supply-side, Reaganomics, whatever name it is called, is a lie.

The solution lies not in blessing the wealthy with benefits and hoping that it will filter down to the rest of society, but the solution lies in the middle class. We need to make the middle the centre of our economic system, and see middle-out growth that will benefit everyone (yes, including the wealthy).

Middle-out. That is the solution we need.

Sources for this article can be found linked within.

Privatisation: what is it?

Royal Mail- the latest major privatisation. 

Privatisation: it's been a contentious issue in the UK, especially since the Thatcher era. It's salvation to some, a criminal act to others.

Thatcher, guided by the principles of free-market, non-interventionist saint Friedrich Hayek, led the privatisation of over 50 British public sector companies- notably British Gas, British Telecom (BT) and British Leyland (see, the names all make sense now). It's interesting how privatisation has integrated into our society over the last 30 years or so- while there was outroar from many when Thatcher privatised utility, automotive, financial industries and so on, nowadays it's difficult for much of the youth to believe that companies like BT, Jaguar and British Airways could be owned by their government.

So what is privatisation? It's a relatively simple concept to explain- there are various particular types of it, but privatisation is essentially the transfer of public, nationally owned assets (companies in this case) into private hands, which can be via sale, like we saw recently with Royal Mail.
Royal Mail was until recently a public sector company, essentially run by the government- but in October 2013 the company was broken up into shares and sold on the stock exchange (it was later
discovered to have been shockingly undervalued). It was open to investment from anyone.
A portion of the Royal Mail is still owned by the government via an intermediary, 10% by its 150,000 staff, and significant amounts are owned by foreign state-backed organisations from countries such as Kuwait and Singapore.

So, that's a basic introduction to privatisation- but stick around for a more detailed evaluation of the benefits and negatives of this controversial transformation. It'll certainly be an interesting ride.

SOURCES (and recommended reads): 

Margaret Thatcher: one policy that led to more than 50 companies being sold or privatised http://www.telegraph.co.uk/finance/comment/alistair-osborne/9980292/Margaret-Thatcher-one-policy-that-led-to-more-than-50-companies-being-sold-or-privatised.html

Royal Mail: Government of SINGAPORE is the second biggest private owner of our postal service

http://www.mirror.co.uk/money/city-news/singapore-governments-sovereign-wealth-fund-2558278#ixzz3BaHXfUtW 

Royal Mail: Sovereign Funds To Get Shares
http://news.sky.com/story/1152622/royal-mail-sovereign-funds-to-get-shares