Osborne’s ‘help to buy’ scheme death knell for UK property market

The UK government has made a critical mistake: George Osborne’s ‘help to buy’ scheme is off to a roaring start with money pouring into house-buying, including many first-time buyers... but there's a big problem.

The demand for houses, both domestic and foreign, shows there is demand for a government guaranteed investment program, but why houses? Yes, there is a housing shortage in Britain and yes, many can’t afford to ‘get on the property ladder,’ but the primary reason for this is that wages in Britain have not grown over the past decade – in large part because of the last housing bubble and crash funded with government-gifted money to speculators leading up to the last crash – and many Britons who can’t afford houses – also can’t afford education, decent (i.e., private) medical services, enough energy to heat their homes and; in a growing number of cases, food.

In other words, most Britons can't afford energy, food, education and transportation because the way the economy is managed is fundamentally flawed and the answer is not to inflate a new housing bubble with a government-guaranteed scheme.

But the British hate these facts, because of the psychological hold houses have on their psyche. Houses are to the British economy what Cheese and wine are to the French economy: A protected, government-sponsored racket that distorts and cripples the economy as a whole but makes people feel good while the ship's going down.  

Britain’s housing bubble popped along with the outrageous 120 percent mortgage schemes of former banks like Bradford & Bingley and Northern Rock, and yet house prices in Britain, down approximately 40 percent in some locations, have not fallen enough to reflect the excesses (read: criminality) in the banking system that led up to the 2008 crash. The only way to rebalance supply and demand in the housing market is to let prices find their own point of equilibrium where demand catches up to supply. Government interference never works, and it won't work this time.

If anything, this is an opportunity missed. This was Britain’s moment to mobilize government resources to diversify away from house speculation and steer the economy into new areas that would create new, dynamic, high paying jobs. But instead of using the government’s ability to guarantee investment in, let’s say, jumpstarting high-tech infrastructure that would support a US-style technology boomlet, the government – presumably being coerced by the very same lobbying forces that got them into trouble in the first place – has succumbed to giving the very same speculating, non-job-creating, economically destructive group of corrupt, market-rigging banksters another huge taxpayer-funded gift.

Instead of high-reward jobs that would add genuine, sustainable GDP growth to Britain, what the Chancellor has delivered is a ticking time bomb. Based on recent trends in housing and the interest rate sensitive bond market, I feel it’s reasonable to predict that within 36 months Britain’s housing market will crash again – even more spectacularly than it did in 2008.

Osborne must know this in his bones, so the question is why would he proceed with such a reckless program. The answer is, look at various global gatherings of the top bankers and speculators in the world: Davos, Bilderberg, the IMF, World Bank, G20, etc. and you see a pattern. Osborne is simply gifting these racketeers another huge taxpayer-funded gift as a way to set himself up in his role post-no. 11 Downing St., where he can join that other British war profiteer and international man of deceit Tony Blair in ransacking the world for personal gain.

For buyers of homes in Britain, if you want to get an advance peek at your fate gaze across the channel to Ireland, where ‘first-time home buyers’ circa 2006 are still crushed under the weight of ‘negative equity’ (the mortgage is greater than the value of the house). This is what awaits thousands of happy ‘help to buy’ recipients of George Osborne’s gift to speculators who, by the way, when you are fighting to stave off bankruptcy and ruin in 3 years time will be happily lecturing for £100,000 a pop at various global confabs on the topic of how best to bilk the public out of billions to feather one’s own nest like the horrendous and dangerous 'help to buy' scheme.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.