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Budget: chancellor urged to curb second home ownership

Owning a second home could become less attractive under plans being looked at to move wealth out of property and into other parts of the economy.

 
Budget: chancellor urged to curb second home ownership
 

Owning a second home could become less attractive under plans being looked at to move wealth out of property and into other parts of the economy.

The chancellor, Philip Hammond (pictured) is looking into ways to curb second home ownership in a bid to take heat out of the housing market, according to reports over the weekend.

Hammond is due to publish the results of the Treasury's patient capital review, which was launched to help finance innovative businesses and projects.

It is believed Hammond wants to see the wealth currently tied up in housing, and helping to push up house prices, used to invest in different parts of the economy instead, as he tries to put together a set of housing policies for his Autumn Budget later this month (22 November).

According to The Times, several government departments are at pains to include housing measures in the Budget. It said No. 10 wanted to help people who are renting, the Treasury wanted support for homeowners and the Department for Communities and Local Government wanted measures to encourage building.

Conservative MP Neil O’Brien told the paper: ‘We should leave existing landlords alone. But to restore Mrs Thatcher’s dream of a property-owning democracy we should limit new buy-to-let lending and give tax breaks to young families so they can get their first home.’

Rate rise backlash

The chancellor has also come under pressure from bodies representing thousands of firms to drop a planned 4% business rate rise next year.

A number of lobbying groups including the British Chambers of Commerce (BCC), the Federation of Small Businesses and the British Property Federation, have jointly called on the chancellor to hold off from the rate rise, the The Observer has reported.

The groups have warned the chancellor the rate rise could dent confidence in the months running up to Britain’s exit from the EU (due to take place in March 2019) while other costs, such as pension auto-enrolment, were already mounting up.

Rates are due to rise by 3.9% in line with the retail price index from April next year.

Adam Marshall, director general of the BCC, told The Observer many companies were at a ‘tipping point’.

He said: ‘They face mounting pressures from a combination of costs and taxes including rates, pensions auto-enrolment, the apprenticeship levy, insurance premium tax and the immigration skills charge, just to mention a few.’

38 comments so far. Why not have your say?

In the Dark

Nov 06, 2017 at 14:53

Just what is the problem that requires the Government to interfere in the housing market? I would surmise Government interference, (nationalisation of planning, help to buy, etc.,) in the first place that has gestated over the year, to be the funamental cause.

If, as I am told and have read, house building of the 1930s gave rise to good quality homes that people could afford. Then what regulation was in place at that time which addressed customer needs and why have Government post war felt the need to interfere?

I would surmise less Government interference and more customer choice would improve the housing stock in the UK.

Further, please do not indulge with sympathy stories about how we must help young people and build starter homes, for if it has gone unnoticed every town and city is awash with such houses, its just that they are occuppied. So what does the buying public want, one, two, three, four, five or six bedrooms houses to buy or rent that I would argue is their decision. The point being the customer should be King and not Government and their hord of bureaucrats.

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Jonathan

Nov 06, 2017 at 15:18

If the government stopped giving housing benefit then the rental market would crash and no one would want to own a second home.

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Law Man

Nov 06, 2017 at 16:51

I have sympathy with In the Dark's view.

Is not the simple, free market, solution clear? Build more houses - available to meet demand, and limits market force supply & demand price rises.

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Jonathan

Nov 06, 2017 at 17:17

@In the Dark, That's right, people in the UK want to live in Rabbit Hutch sized flats. That's why the private market is building 205 square foot micro flats: http://www.telegraph.co.uk/men/style/can-micro-flats-solve-britains-housing-crisis/ because the UK population like living in tiny cramped conditions.

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Jon

Nov 06, 2017 at 17:43

Not sure how the Chancellor will differentiate between second homes / holiday homes / buy to let as they all can overlap.

Jonathan - if housing benefit were curbed then there would be floods of homeless. Even if this meant that rents fell, those at the bottom of the pile could still not afford a roof over their heads.

The main problem is the imbalance of population. There are masses of empty properties in the North. Some have been sold for £1 proviided the purchaser develops them. The more the State spend on London infrastructure (around 3 x the anount per person as is spent elsewhere), the more people will move there to be part of the "Centre".Rather the making London easier to live in the rest of the Country should be developed so that trade and services are as vibrant there as in the capital.

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In the Dark

Nov 06, 2017 at 19:44

@ Jonathan, I seemed to have missed the point you are making, apologies.

My point is Government interference begets Government interference. If these rabbit hutches are what customers desire then so be it but if these are the result of Government interference in the market hence inflated land price due to planning constraints, may I suggest we rip up the town and country planning act and all derivatives.

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Jonathan

Nov 06, 2017 at 20:07

One of the biggest scandals is the sale of council houses. Now 43% of council houses that were sold to the tenant have been purchased for BTL and are rented back to the council, through people on housing benefit, and the state is having to pay private rental rates on properties it once owned.

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Max P

Nov 06, 2017 at 20:11

Its a win - win if the chancellor has the balls to kick landlords in the balls

1. A landlord exodus should lower price and making more houses available for first time buyers which will have benefits for society enabling people to put down roots.

2. Former landlords if they have any brains (and capital rather than leveraged mortgages) will invest in stocks/bonds etc which should help the real economy.

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In the Dark

Nov 06, 2017 at 20:44

@Jonathan and @Max P, I do believe you both miss the point and you both wish to control what people can and cannot do with their own money.

1. Perhaps Government in the form of Local Authorities should not be building houses in the first place.

2. Attacking the BLT market is plain silly and do I detect a bit of Envy in your statement?

As I say, Government interference begets Government interference. If we agree that the problem is a shortage of housing then remove the constraints that have been in existance since the end of the War and then build houses that people need/want.

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Peter59

Nov 06, 2017 at 22:08

Years ago I considered a BTL but thought it morally wrong. But in a free market democracy there is nothing to stop anyone buying any asset they want, so it seems illogical to penalise private landlords. The key point here is to shift property wealth into other areas of the UK economy which would be a positive outcome. Lack of financial education is to blame as well as volatile share prices. Hopefully one day we will see property as a home rather than a pension.

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SLRist

Nov 06, 2017 at 22:35

Like air and water, housing is a necessity, and allowing people to charge others who lack a sufficient deposit to gain entry to the market while charging more in rent than the equivalent mortgage payment is a scandalous situation. For one thing, we need to restrict UK residential property ownership to UK residents only. Then we need to loosen planning regulations and institute a situation where the windfall wealth instantly created by allowing construction on undeveloped land is divided up between the land owner, those living nearby (otherwise NIMBY objectors) and the local authorities. That way all benefit. Land purchased for development should be tax free for the first year following permission being granted thereafter, the land should be taxed until construction is completed. This will discourage land banking. This should be applied to existing land banks also. The market needs to be un-stuck, and residential property needs to be changed from a profit-making asset to a commodity. If prices fall overall, that will be to the benefit of nearly everyone in society except people owning multiple properties already. If they have sense, they will get out early.

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Jonathan

Nov 07, 2017 at 00:39

@In the Dark, You don't detect any envy because I own a property that I let out. There are circumstances where people want to rent, they don't want to buy. But what I do find stomach churning is when ex-local authority homes were sold off for next to nothing to the tenants then purchased by BTL landlords to rent back to people on housing benefit at private rental rates. It's the tax payer who is funding the lifestyles of these BTL landlords. That is not envy, it's something else.

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Jon

Nov 07, 2017 at 10:36

SLRist - do you therefore object to people investing in water companies ? In many European countries by far the majority rent properties.

You forget that landlords are responsible for maintenance, which is expensive, agents' fees and so on. This is a competitive market.

But I like your idea on distributing land profits

The bottom line is to build more houses, make the North more attractive and control net immigration

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SLRist

Nov 07, 2017 at 14:53

@Jon, I do happen to thing that privatisation of what is essentially a local monopoly for an essential commodity like a water company where there can be no true market is far from ideal. My issue with the current property marketplace is that it's being killed by the Babyboomer generation who are simultaneously over-consuming existing family housing, whilst seeking to supplement final salary pensions with rental income and also blocking new planning by being by far the most NIMBY section of society. This is a triple-whammy effect which was not happening at the time they themselves were entering the property market. It's causing significant inter-generational resentment and putting extreme financial pressure on generation Y and the Millenials. The government needs to take an active hand in counter-acting the situation, by discouraging buy-to-let capital from pushing up property prices. This needs to be done simultaneously with bringing new land under development to add capacity to the market.

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In the Dark

Nov 07, 2017 at 17:27

Petty prejudices aside, the fundamental problem is that demand for housing is greater than supply, under normal market conditions building would increase to meet that demand. Government constraints on land for building, since its introduction, has increased the cost base. Remove the constraints and let us (people) build houses not the state.

Making people the enermy because of their investment choice may be fashionable but it will not solve the problem.

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Jonathan

Nov 07, 2017 at 17:37

@In the Dark, It wouldn't solve the entire housing problem. But it's an easy calculation to make that if the ex-local authority houses were owned by the local authority instead of private landlords they wouldn't have to be paying private rental rates for them.

This has an effect on all of us as it means higher inflation and higher taxes at the gain of the BTL landlords who have purchased ex-local authority houses, the previous tenants who bought public property cheap and made a profit selling them and the councils who took the money from the sale of the property and didn't invest it in building additional local authority houses to replace the ones they sold.

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SLRist

Nov 07, 2017 at 20:01

@In the Dark residential property should not be an investment choice - that's my point. The money should be directed into the real economy. The property market is a pyramid selling game, and not a real market.

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In the Dark

Nov 08, 2017 at 09:18

@ Jonathan, putting judge and jury in the hands of politicians and their bureaucrats, is that really the way to solve the demand for housing. I do not believe so, hence our problem today, 70 years in the making.

@ SLRist, As a personal choice that is entirely up to you, but interfering in other peoples business is not.

At some point you have to trust people to known what is right for them. As I stated before Government interference begets Government interference. When the constraints on building are removed and demand can be satified through people choice. We may not have to worry so much about housing shortages, gasumping and other unsaviour behaviours that requires Governments to tinker in our affairs.

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Jon

Nov 08, 2017 at 09:35

SLRist - unlike many countries we have a population which thinks that they have a right to own their own home. Irrespective of house prices this needs capital, and someone has to provide this be it via a mortgage, housing association, property company or private BTL. So the market depends on investors whatever your opinion.

And those investing in Building Societies and banks have seen returns over the past 15 years well below inflation, so they are subsidising others.

See my earleir posts to find what needs to be done.

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SLRist

Nov 08, 2017 at 10:47

@In the Dark - there is already Government interference in the housing market it's called planning permission. Until that is resolved to create a free market, Government needs to ensure that the limited resource that exists is divided up equitably. Allowing some people to hog vital resource while others are excluded is causing huge social issues which have a cascade effect far outside the property market. It effects the birthrate, the broader economy, mental health, social engagement, the list is endless. Balanced against some other peoples' right to choose residential housing as simply another investment asset class, that has to come second. There are plenty of other investment asset classes available. There is no alternative to housing.

@Jon - Home ownership for those who want to certainly should be a right. Anyone who can afford market rent can afford a mortgage. It's amusing that the people who think some shouldn't worry unduly about not having the opportunity to do so are almost always home owners themselves. If you put your cash in a Bank or Building society, you are guaranteed to lose money - only an idiot would do that. Even government bonds perform better. My pension is almost entirely invested in the stock market, and I've done very nicely thankyou.

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Jon

Nov 09, 2017 at 10:29

SLRist - Yes, interest rates are apalling such that mortages are very cheap and house prices are therefore too high. Hence, at present, rents are expensive compared with mortgages. The market is completely twisted by such low artificial interest rates. But if inteest rates climb to the level they should be - around 3% now, and rising as inflation rises, many who have bought houses will see negative equity, whilst those renting will suffer no such loss. Renting is good for labour mobility, generally risk free. It's horses for courses. Many people want to buy as they think that property values will go up and up, but bubbles burst. And they do not plan for a doubling of their mortgage costs.

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SLRist

Nov 09, 2017 at 15:02

@Jon - low interest rates are indeed bad for first time buyers, because they lock them into a low inflation environment and remove the property 'ladder'. However, home ownership is unarguably better than renting long term, as you effectively 'freeze' your rent payments at the point you buy. There are very few downsides. Even negative equity can be handled if you are not compelled to sell. If you need to move for work, you can always rent elsewhere and rent out your own house. For families, it's by far the preferred option. I suspect all the posters on this thread are home owners.

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Jonathan

Nov 09, 2017 at 16:28

@SLRist Yes, a landlord has to pay for the purchase price of the property over a number of years and make a profit from the tenants rent. So long term, it's got to be cheaper to buy than rent.

In the long term, the buying cost of a property should equal the rental costs minus landlords profit from a similar property.

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Mark Stringer

Nov 11, 2017 at 09:27

The second home housing market distortion boat sailed a long time ago. It's far too late now. All of those poor sods in places like Cornwall, Devon, Dorset, Wales, Hythe, Walmer, Deal.....where second homers have distorted the local housing costs.

It should have been mandatory that you need occupation at 75% of the year by the owner unless registered as a business and not a second home (then taxed appropriately) and the resale offered to locals at discounted rates.

I know it would knock the sale of pimms, , cava,chablis, prawn cocktails and rick steins seafood chain but maybe locals might actually live where they were born.

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Hotrod

Nov 11, 2017 at 11:13

@ In the Dark

I cannot agree with your view at all. Where have you been ? Your reasoning appears to be based on hypothetical theory and not on what is happening in the real world.

The property market will always have to be controlled to some extent by Govt. because; wealthy people are greedy and don't care a jot if they are depriving others of a decent roof over their heads. Marie Antoinenette said "Let them eat cake" and look what happened to her.

At the other end of the scale you have irresponsible people who are not interested in maintaining the property they are living in.

So ways have to be found to keep these people in check.

The Grenfell Tower disaster highlighted social problems. I thought at the time the Council were economical with the truth when they promised the former tenants that they would all be rehoused within the immediate vicinity. Yes, there are dozens of empty houses a stones throw away, but the freeholds and short leases have been bought by developers who will build high rise blocks of flats worth millions when they have acquired all the freeholds in that area, which could take many years. Meanwhile these properties remain boarded up.

Also is it reasonable or realistic for the former tenants to expect to be rehoused so close to one of the wealthiest districts in London?

As previously posted there are areas of the North East where it has been cost effective to subsidize housing redevelopment. When the wholesale closure of the coal mines was underway it was proposed to demolish some of the pit villages entirely and build new council houses for the former miners. But the economics didn't make sense as the new tenants couldn't afford the rents. So what they did was: Sold the houses to the existing occupiers at nominal prices and introduced a grant aided scheme to fully modernize them. The scheme was a success, the houses are now fully modernized and the area is thriving.

But the North East has tremendous potential for further development. The infrastructure is all in place and houses cost a mere fraction of that paid in the South East. What the Govt. needs to do is offer incentives for more firms to set up in the NE, and once the jobs are in place, for Councils to direct families who are living in overcrowded conditions elsewhere to move to a better future.

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Mark Stringer

Nov 11, 2017 at 12:57

Hotrod,

Well said.

Look at the scandal of the gerrymandering by that cow, Shirley Porter in Westminster and one of the reasons she cannot return here permanently for fear of prosecution, last seen running a Tesco express in down town Tel Aviv.

The social engineering in London alone is scandalous by current councils greedy for council tax and "cashbacks".

Not surprised that the miners couldn't afford the prices as they ended up working for companies like Great Universal Stores at a fraction of their former pay. However many could buy their pit houses at a huge discount. Many did and then modernise them.

Not sure about the subsidy except in extreme cases in the NE as they tried that in Sterling and it did work for a time but once the benefits petered out so did many of the firms.

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PRAKASH NAYAK

Nov 11, 2017 at 14:31

Not as informed as the rest here. I believe the UK economy is significantly dependent on housing market. However the principle ' WHAT IS IN IT FOR ME' applies universally including the Govt.

While making changes Mr Hammond would be mindful of any risk to the economy and to his own position. Yes the Housing crisis needs addressing but is there a magic bullet?

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alan thorburn

Nov 11, 2017 at 14:35

If houses/mortgages have been unaffordable to some over the last 10 years then what is going to make them affordable now interest rates are starting to rise ? (I recall mortgage rates of 14% in 70’s !)

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Hotrod

Nov 11, 2017 at 16:39

@alam thorburn

Unaffordable housing is most acute for two main groups. i.e. Urban (inner city) dwellers, and Rural Communities. Regarding the former: People who are employed by essential services cannot now acquire a home in close proximity to their work without incurring economic hardship, this is because Buy-to-Let landlords have forced up the rental value of flats and condominiums. The only way to curb this trend is to make it less attractive for them to do so through tax changes. (as muted)

The situation in rural communities is more complex, but affordability could be imelliorated if planning laws were relaxed and more land was released from green belt in certain circumstances. e.g. for the children of long standing residents or for building retirement bungalows.

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Mark Stringer

Nov 11, 2017 at 16:53

Prakash Nayak, no magic bullet but perhaps a dawning realisation that the ludicrous situation of using unseen rising equity as shopping money, converting properties into flats, the myth of the house/flat as the pension, help to buy and the artificial liar loans providing almost hyper inflated property prices treated like commodities by foreign buyers who have never set foot in the UK never mind seen the off plan design. The 35 year and lifetime mortgages along with the lowest rates.

Once your house is treated as a commodity it ceases to become a home.

Alan Thorburn, my mortgage averaged 8% throughout its lifetime and an svr once hit 16% .

I recall as I’m sure many do the birth of the yuppie oik when Maggot Thatcher attempted to make all of us capitalists and sold off council stock, it’s where the Labour Tory, Bliar, suckled his ideas for the other great mass con; polytechnics and tech colleges into unis to keep the unemployment figures down.

If only I’d realised years ago how gullible so many were i’d be a billionaire.

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Mark Stringer

Nov 11, 2017 at 16:56

Hotrod, I may be wrong but I thought a scheme like the one in your last paragraph had been mooted somewhere by a council.

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Mark Stringer

Nov 11, 2017 at 16:56

Hotrod, I may be wrong but I thought a scheme like the one in your last paragraph had been mooted somewhere by a council.

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In the Dark

Nov 11, 2017 at 17:37

There appears to be a lot of dancing around one's hat going on here, should do this, should do that. If you wish to solve the housing problem then you have to remove the constraints on house building and as some have muted the Town and Country Planning Act would be a good place to start.

Let people build the type of houses they need/want and stop pussy footing around with envy and petty jellosy it not good for the soul.

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Mark Stringer

Nov 11, 2017 at 19:38

In the dark, or use the ones left empty for years decades first then put off the free for all that has given us the eyesores like the shard, cheese grater.....have you seen some of the cow pats that people have added and built after the local authorities were forced to give in.

I saw the affect when three titled land owners forced the local authority to allow ad hoc building within area of outstanding natural beauty.

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PRAKASH NAYAK

Nov 12, 2017 at 02:10

Mark Sringer.

Agree fully. I know of people who own houses in London BTL pension . Successive Governments have only added to the complex problem. If there is a magic bullet, no one dares to fire it.

Hammond is only a passenger on this journey of dream , all home owners are part of the bubble, that keeps growing.

Lots of newly built flats in London seem to be empty, probably owned by foreign investors.I think the Council keeps getting the Tax to ease the cuts.

Let us keep paying lip service to the cause of housing crisis and everyone is happy.

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Jonathan

Nov 12, 2017 at 03:00

In the Dark, A lot of land is owned by house building companies. But they aren't interested in building enough houses so the price goes down. If in 2008 the BoE hadn't come to the rescue a lot of the building firms would have gone bust and a lot of the land that planning permission could easily if not already got would have been sold off cheaply.

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Hotrod

Nov 12, 2017 at 09:39

@ Jonathan

You are partially correct. But since 2008 the major building companies have revised their financing and development policies.

As regards financing: No one would be interested in investing in companies where forecast capital return is unsound, therefore it is now accepted that the building industry is cyclical. i.e. if the RATE of demand for houses is fully met then we should reach saturation point in roughly ten years time. With this in mind, the plan is to return all of the investors initial capital within this time frame in the form of special dividends. No one can accurately forecast what will happen in the intermediate years.

As regards ongoing development: I believe the major companies are doing all they can to build to their maximum capacity, but the problems associated with it are complex. e.g. the materials supply chain has to gear up in parallel. Trades people have to be trained before they can be employed. Planning authority approval can take up to ten years before it is granted. At the moment there is a shortfall of skilled labour to work on building sites.

These factors together with local and municipal objections are affecting the present rate of build.

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Mark Stringer

Nov 12, 2017 at 09:53

Prakash Nayak,Sadly, it goes beyond just empty properties and BTL's.

If local authorities hadn't taken Bliar's bribes when he was buying votes with ludicrous wage rises (made worse by the index linked pension liabilities) the cuts wouldn't have been so bad. The ingrained inefficiencies and 9-5 culture of local authorities makes the need for job creation and protection relevant as the greed for income rises.

Inspite of the cuts the 9-5 mentality is entrenched, still a bit of a side issue but relevant to the problem overall especially when local authority little corporals are wined and dined on yachts in the South of France so that they smooth the sell off of the council owned (taxpayer owned) social housing to developers meant speculators.

The cretins who engaged in the mass hysteria of spending their imaginary equity on hols, cars, shopping exacerbated the issue.

Everyone deserves a decent home (owned or not) to live in, but it has become commoditised like a packet of cornflakes with much wider implications for the whole economy.

The huge social changes to our society hasn't helped the issue.

Jonathan, too many people playing silly beggars (like share trading or allowed to play silly beggars) manipulating the price.

The tories (as they all have)have a nerve given they started this issue with the great council house sell off.

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