A weekend update (cont) - 16 & 17 Jan 2010
17/01/10 21:11 Filed in: Collectanea
There were three
themes to the articles that caught my attention this
weekend.
As you will notice, I have captured a few lines from each article. The links are there if you want to read the full article. For some sites you might need a membership (paid or unpaid) depending on their business model and how long it is has been since the piece was first published.
From The Times
January 15, 2010
Levy is a wholesale improvement
David Wighton: Business Editor's commentary
“As taxes go — particularly ones sketched out on the back of a fag packet — the Obama levy on US-based banks is rather a good one. Certainly better than our half-baked tax on bonuses.”
“...the politics of the tax are attractive. The economics stacks up too. One of the best arguments for the levy is that it makes the price of wholesale funding more accurately reflect the real risks involved.”
It might be said the tax is really for a self-funding insurance mechanism. Maybe similar to the FDIC where an external agency steps in, wipes out the share holders while technically shutting down the bank on a Friday and reopening on a Monday with all new owners (the FDIC).
The UK press has reported discussions about a living will so the administrators or the government can bring about an orderly close or sale.
Forcing the banking industry to insure the risks the industry creates and letting institutions fail rather then be put on life support from the state. Granted I might be getting ahead of the thinking on the Obama plan as little has really been published.
“By increasing the price of wholesale funding to the banks, the levy would discourage banks from taking excessive risks and growing their balance sheets too far. By exempting banks with assets of less than $50 billion, Washington is also introducing the tax on size that many regulators have advocated.”
From The Times
January 15, 2010
New fears over funding for affordable housing
In the first of a new series on first-time buying, Kaya Burgess talks to the Housing Minister about the future
I found the following a great summary of what affordable housing is defined as in the UK. It might not be a universal definition or even well liked by all. Still, I think the summary gets to the heart of the topic without forcing a particular social agenda or solution.
I normally like to point out that there is no human right to be a home owner. It is more a privilege than a right. Prior to WWII the majority in the UK lived in rented housing so the idea of owning your own home is a relatively recent universal aspiration.
kaya.burgess@thetimes.co.uk
“What is affordable housing?”
“• Affordable homes are properties available through government-led shared- ownership and shared-equity schemes, run by housing associations or private developers.”
“• Shared-ownership schemes allow you to buy a percentage of a property. You take out a mortgage and pay a deposit on your share, while paying rent on the rest. You can later decide to buy a greater share of the property, reducing the rent you pay.”
“• With shared-equity schemes you get two loans: one from the Government (or the developer) and one from your mortgage lender. The first one is interest-free and you arrange to pay it back after a number of years. Under shared equity you are purchasing 100 per cent of the property, not a share as under shared ownership.”
“• Affordable homes are built by housing associations and private developers who agree with the local council to dedicate a percentage of their development to this type of housing as part of their planning agreement.”
From The Times
January 8, 2010
How to sell your shared-ownership flat
If you can afford it, it might be more lucrative to buy the property outright
Francesca Steele
The following text and the larger article brings up a significant point in any ’scheme’ no matter what the scheme is for. If you can only sell when the buyer can obtain financing anything that makes it hard for the lender to protect their position or to otherwise liquidate the position will cause the lenders to avoid the sector. The idea of a condotel where individual investors buy a room in a hotel has similar problems in that the market is small (niche compared to the bigger investor market), the lenders are few and there is no real history to assess the default risk and the amount that would typically be recovered.
The article implies that one of the best ways for a seller to conclude a sale is to market the property to the larger pool of buyers, the folks who are buying with conventional means and where they expect to buy 100%.
Buying into a niche product and depending on government programs to provide the funding implies the future is very murky. Completing such a purchase should be done with caution and with careful thought as to what your options are when it comes time to move on. If you have your eyes wide open and it still make sense, go for it.
“A shared-ownership buyer, for instance, buys a minimum 25 per cent of a new-build property, while a housing association, or registered social landlord (RSL), owns the rest, for which they charge a subsidised rent. The buyer can then buy more shares as he or she can afford them, generally up to 100 per cent of the property, in a process known as “staircasing”.
“This may sound simple, but such schemes can mean that selling your home — because you want to move for a job, relationship, or you need more space for a family — can be complicated. Your lease should state any restrictions set by the housing association (all the more reason to be well advised when signing up).”
“Affordable-housing landlords typically require a “nomination period” of two months, during which they will try to find a buyer themselves to keep the property within the affordable housing sector. This period should start when you sign official forms expressing your desire to sell, but there have been cases when it has not applied until the property goes up on the RSL website, meaning a longer waiting period for the owner.”
“The process can be costly: the buyer must typically pay the RSL an agent’s fee (usually 1 per cent of the percentage they own), as well as paying a valuer, a solicitor and for the home information pack. Richard Stone, of the affordable housing mortgage broker SPF Sherwin, warns that valuers employed by such landlords tend to be conservative: “This can work in your favour if you are planning to buy the remaining shares. But if the RSL is selling the property you may not fetch as high a price as on the open market.” If you can afford it, Stone says, it might be more lucrative to buy the property outright and sell it yourself. Each time you staircase you have to pay for a solicitor again, and stamp duty (only applicable after your share exceeds the stamp duty threshold) — but it may be worth it to boost your profit.”
Mortgage costs hit 5-year low
Published: January 15, 2010 18:47 | Last updated: January 15 2010 18:47
This article is interesting because it blurs the line between the price of the house and the price paid per month to be the owner occupant of the house. Most people can afford a specific percentage of their monthly income independent of what the total price is. If a property was a true bargain based on price but you had to pay all cash or with twelve equal payments the house would be unaffordable. If you can spread out the cost over a much longer time and the monthly payments are affordable then it makes a lot more sense to buy based on the monthly rather than the total (purchase price plus cost of financing over the life of the loan). If the monthly is close to or lower than the monthly rent the scales really start to tip towards ownership.
In some ways an owner is buying an option on the future equity that might happen if the value rises. A tenant who is renting has no such option. The owner who buys will be taking on responsibility for the maintenance plus the costs associated. They will also have control over where they live compared to the tenant. In many cases the tenant is more than willing to trade off control and future upside for the lower cost plus flexibility. In other case the family needs are better suited to a long term stay at the home so ownership may fit the profile.
The real key to the article is the more or less unstated risk of interest rate trends over the life of the loan. In the same way no one can predict what will happen in their life (marriage vs. divorce; children; job changes) one has to be prepared to deal with changing interest rates. Mildly similar to changing rent payments.
“New data released this week showed that home movers in November only needed 10.6 per cent of their gross income to cover mortgage interest payments, down from 14.4 per cent a year earlier – a result of falling interest rates and house prices.
First-time buyers are also better off, with the proportion of income needed for interest payments falling from 18.2 per cent in November 2008 to 14.4 per cent a year later. According to the CML, this is the lowest level since May 2004.
But while affordability has increased, experts warn that strict lending criteria and big deposits are still keeping many potential homeowners from getting a foot on the property ladder.”
GENERATION B
On Vacation and Looking for Wi-Fi
By MICHAEL WINERIP
Published: January 14, 2010
The article focuses on an extended family and it's yearly holiday as a 19 person group. I found it interesting how we no longer think anything of staying connected, of the ability to reduce the hit when you come back and the fact that being connected while away means a person is more able to get away while still not being away if needed.
Maybe the situation is more like being a parent. Until the children really and truly move out you are always on even when you are taking time off. You might have a babysitter taking care of things for a few hours but you clearly let them know where you will be and how to reach you if needed. Some will argue that people need time off from the job. I think the definition of job has changed. If parents can deal with children and be always on even when being off why should work be all that different?
“It almost seems like a dream from long ago, but I can remember coming back from vacation and sitting at my desk that first day and doing nothing but catching up — on my mail, on the back newspapers, on office politics. Nor did anyone press me. It was understood: I was in a 24-hour vacation decompression zone.”
“Now, we keep up on vacation, we keep up on weekends (my incoming work e-mail suggests we also keep up past midnight on weekdays). And on Monday morning, we hit the ground running.”
“These days, rarely do I receive one of those automated e-mail responses saying, “Sorry I’m on vacation, I’ll answer when I return.”
We expect ourselves to be available.”
_______________
If you have views or comments, please share. No one of us is as smart as all of us. Contribute to the conversation
-John Corey
- The tax on banks Obama announced late last week before bonus season kicked off.
- A couple of discussions on affordable housing in the UK with a particular focus on solutions for buyers in London or other major cities.
- A piece on how technology is changing how we deal with time out of the office.
As you will notice, I have captured a few lines from each article. The links are there if you want to read the full article. For some sites you might need a membership (paid or unpaid) depending on their business model and how long it is has been since the piece was first published.
From The Times
January 15, 2010
Levy is a wholesale improvement
David Wighton: Business Editor's commentary
“As taxes go — particularly ones sketched out on the back of a fag packet — the Obama levy on US-based banks is rather a good one. Certainly better than our half-baked tax on bonuses.”
“...the politics of the tax are attractive. The economics stacks up too. One of the best arguments for the levy is that it makes the price of wholesale funding more accurately reflect the real risks involved.”
It might be said the tax is really for a self-funding insurance mechanism. Maybe similar to the FDIC where an external agency steps in, wipes out the share holders while technically shutting down the bank on a Friday and reopening on a Monday with all new owners (the FDIC).
The UK press has reported discussions about a living will so the administrators or the government can bring about an orderly close or sale.
Forcing the banking industry to insure the risks the industry creates and letting institutions fail rather then be put on life support from the state. Granted I might be getting ahead of the thinking on the Obama plan as little has really been published.
“By increasing the price of wholesale funding to the banks, the levy would discourage banks from taking excessive risks and growing their balance sheets too far. By exempting banks with assets of less than $50 billion, Washington is also introducing the tax on size that many regulators have advocated.”
From The Times
January 15, 2010
New fears over funding for affordable housing
In the first of a new series on first-time buying, Kaya Burgess talks to the Housing Minister about the future
I found the following a great summary of what affordable housing is defined as in the UK. It might not be a universal definition or even well liked by all. Still, I think the summary gets to the heart of the topic without forcing a particular social agenda or solution.
I normally like to point out that there is no human right to be a home owner. It is more a privilege than a right. Prior to WWII the majority in the UK lived in rented housing so the idea of owning your own home is a relatively recent universal aspiration.
kaya.burgess@thetimes.co.uk
“What is affordable housing?”
“• Affordable homes are properties available through government-led shared- ownership and shared-equity schemes, run by housing associations or private developers.”
“• Shared-ownership schemes allow you to buy a percentage of a property. You take out a mortgage and pay a deposit on your share, while paying rent on the rest. You can later decide to buy a greater share of the property, reducing the rent you pay.”
“• With shared-equity schemes you get two loans: one from the Government (or the developer) and one from your mortgage lender. The first one is interest-free and you arrange to pay it back after a number of years. Under shared equity you are purchasing 100 per cent of the property, not a share as under shared ownership.”
“• Affordable homes are built by housing associations and private developers who agree with the local council to dedicate a percentage of their development to this type of housing as part of their planning agreement.”
From The Times
January 8, 2010
How to sell your shared-ownership flat
If you can afford it, it might be more lucrative to buy the property outright
Francesca Steele
The following text and the larger article brings up a significant point in any ’scheme’ no matter what the scheme is for. If you can only sell when the buyer can obtain financing anything that makes it hard for the lender to protect their position or to otherwise liquidate the position will cause the lenders to avoid the sector. The idea of a condotel where individual investors buy a room in a hotel has similar problems in that the market is small (niche compared to the bigger investor market), the lenders are few and there is no real history to assess the default risk and the amount that would typically be recovered.
The article implies that one of the best ways for a seller to conclude a sale is to market the property to the larger pool of buyers, the folks who are buying with conventional means and where they expect to buy 100%.
Buying into a niche product and depending on government programs to provide the funding implies the future is very murky. Completing such a purchase should be done with caution and with careful thought as to what your options are when it comes time to move on. If you have your eyes wide open and it still make sense, go for it.
“A shared-ownership buyer, for instance, buys a minimum 25 per cent of a new-build property, while a housing association, or registered social landlord (RSL), owns the rest, for which they charge a subsidised rent. The buyer can then buy more shares as he or she can afford them, generally up to 100 per cent of the property, in a process known as “staircasing”.
“This may sound simple, but such schemes can mean that selling your home — because you want to move for a job, relationship, or you need more space for a family — can be complicated. Your lease should state any restrictions set by the housing association (all the more reason to be well advised when signing up).”
“Affordable-housing landlords typically require a “nomination period” of two months, during which they will try to find a buyer themselves to keep the property within the affordable housing sector. This period should start when you sign official forms expressing your desire to sell, but there have been cases when it has not applied until the property goes up on the RSL website, meaning a longer waiting period for the owner.”
“The process can be costly: the buyer must typically pay the RSL an agent’s fee (usually 1 per cent of the percentage they own), as well as paying a valuer, a solicitor and for the home information pack. Richard Stone, of the affordable housing mortgage broker SPF Sherwin, warns that valuers employed by such landlords tend to be conservative: “This can work in your favour if you are planning to buy the remaining shares. But if the RSL is selling the property you may not fetch as high a price as on the open market.” If you can afford it, Stone says, it might be more lucrative to buy the property outright and sell it yourself. Each time you staircase you have to pay for a solicitor again, and stamp duty (only applicable after your share exceeds the stamp duty threshold) — but it may be worth it to boost your profit.”
Mortgage costs hit 5-year low
Published: January 15, 2010 18:47 | Last updated: January 15 2010 18:47
This article is interesting because it blurs the line between the price of the house and the price paid per month to be the owner occupant of the house. Most people can afford a specific percentage of their monthly income independent of what the total price is. If a property was a true bargain based on price but you had to pay all cash or with twelve equal payments the house would be unaffordable. If you can spread out the cost over a much longer time and the monthly payments are affordable then it makes a lot more sense to buy based on the monthly rather than the total (purchase price plus cost of financing over the life of the loan). If the monthly is close to or lower than the monthly rent the scales really start to tip towards ownership.
In some ways an owner is buying an option on the future equity that might happen if the value rises. A tenant who is renting has no such option. The owner who buys will be taking on responsibility for the maintenance plus the costs associated. They will also have control over where they live compared to the tenant. In many cases the tenant is more than willing to trade off control and future upside for the lower cost plus flexibility. In other case the family needs are better suited to a long term stay at the home so ownership may fit the profile.
The real key to the article is the more or less unstated risk of interest rate trends over the life of the loan. In the same way no one can predict what will happen in their life (marriage vs. divorce; children; job changes) one has to be prepared to deal with changing interest rates. Mildly similar to changing rent payments.
“New data released this week showed that home movers in November only needed 10.6 per cent of their gross income to cover mortgage interest payments, down from 14.4 per cent a year earlier – a result of falling interest rates and house prices.
First-time buyers are also better off, with the proportion of income needed for interest payments falling from 18.2 per cent in November 2008 to 14.4 per cent a year later. According to the CML, this is the lowest level since May 2004.
But while affordability has increased, experts warn that strict lending criteria and big deposits are still keeping many potential homeowners from getting a foot on the property ladder.”
GENERATION B
On Vacation and Looking for Wi-Fi
By MICHAEL WINERIP
Published: January 14, 2010
The article focuses on an extended family and it's yearly holiday as a 19 person group. I found it interesting how we no longer think anything of staying connected, of the ability to reduce the hit when you come back and the fact that being connected while away means a person is more able to get away while still not being away if needed.
Maybe the situation is more like being a parent. Until the children really and truly move out you are always on even when you are taking time off. You might have a babysitter taking care of things for a few hours but you clearly let them know where you will be and how to reach you if needed. Some will argue that people need time off from the job. I think the definition of job has changed. If parents can deal with children and be always on even when being off why should work be all that different?
“It almost seems like a dream from long ago, but I can remember coming back from vacation and sitting at my desk that first day and doing nothing but catching up — on my mail, on the back newspapers, on office politics. Nor did anyone press me. It was understood: I was in a 24-hour vacation decompression zone.”
“Now, we keep up on vacation, we keep up on weekends (my incoming work e-mail suggests we also keep up past midnight on weekdays). And on Monday morning, we hit the ground running.”
“These days, rarely do I receive one of those automated e-mail responses saying, “Sorry I’m on vacation, I’ll answer when I return.”
We expect ourselves to be available.”
_______________
If you have views or comments, please share. No one of us is as smart as all of us. Contribute to the conversation
-John Corey
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