ARTICLE 6: This is what may get us out of the recession! by Shane Hindocha

In these uncertain times, it is important to look ahead, stay attentive and proactively navigate your way through the turmoil.

My name is Shane Hindocha. I am a father of 2, a husband, an active property investor & an entrepreneur. I have lived through 2 recessions already. Now that we are in another recession, a blend of hindsight and foresight is welcomed. Whilst my outlook on life is generally positive, I will remain objective and then form an opinion.

My aim is to break down complex information into digestible and easy-to-understand formats…and in particular, how the current situation will affect property prices in the UK.

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Background = From what I have read, most articles are simplifying what has happened…or predicting what they think is going to happen. In this article, I am going to try to outline some ideas that may actually help. Let it be known that I am not a fan of the current financial system, but I am basing my thoughts on this inefficient system lasting a little longer (the current financial system will fall at some stage & crypto-model will come into play if sense is allowed). The Talking Points below may work together, but don’t have to. I am taking into account that there is a mini-boom in the property market currently, mainly by existing homeowners overtaking first-time buyers as the biggest source of demand in the housing market...but I don’t think this boom will last…

I’m prepared for feedback and/or a complete tear-down of the ideas and improvements. In actual fact, I am welcoming a discussion or debate in the spirit of being solution-focused, so here goes.

Talking Point #1 = Stamp Duty rate to be 0% for First Time Buyers up to purchase prices of £700,000. Why £700,00 you ask? Well, because that’s the average price of a London property in September 2020 according to some popular sites. Other sites report £500,000 as the average price for London property, so let's just aim high shall we. Without the need to go into the London office for work, people are increasingly looking at bigger spaces & greenery, usually found on the outskirts of London / outside London. The commercial office sector in London is getting pummelled…& shops are suffering owing to lack of footfall. There needs to be a stimulus for people to want to stay in London and as it currently stands, London is still not affordable for most. So rather than the London property market plummeting, this move may actually support it.

Talking Point #2 = Currently, most first-time buyer mortgage lenders are offering Loans up to 85% borrowing (previously it was 90% borrowing).

For clarity, at 85% borrowing, a buyer puts down 15% as their own deposit…and on 90% borrowing, a buyer puts down 10% as their own deposit. That extra 5% (between 10% down & 15% down) equates to £35,000 on an average London property priced at £700,000! If we look at data from Moneyfacts, it shows that there are only 46 fixed-rate mortgages available for buyers with a 10% deposit (ie. 90% borrowing) compared with 446 at the start of March 2020.

So….here’s a suggestion… lenders go back to offering the 90%LTV...but with backing from the government for the extra 5%. This will hopefully encourage banks to lend, consumers to borrow…& increase property transactions.

Talking Point #3 = Observe supply & demand. We can create enough incentives for buyers, but what happens if there are not enough properties for sale? Well… more buyers available than properties available = property prices go up. BUT… we also need to ensure there are frequent transactions to help the economy…& we need to balance the prices moving upwards rather than downwards. So what can we do? How about offer an incentive to Sellers too! But, we don’t want a fire-sale….so maybe the incentive is, if your property is sold at least £1,000 higher than the last sold price on your road (an example), the government will pay a £2,000 reward to the seller / or refund the seller’s legal fees for the sale. This will encourage sellers not to buckle under the pressure of negotiation & incentivise them to price upwards. The concoction of stamp duty holiday & 10% deposit (mentioned above) will hopefully connect more buyers to sellers.

Talking Point #4 = People will be scared to borrow, especially if they have lost their job / fear losing their job. I get that point. Whilst the Furlough scheme is/was a good support mechanism, were the government unintentionally teaching individuals to not be productive and yet still be rewarded? What does this do for the mindset of an individual? One may argue that it can lull somebody into a false sense of security that they will always be bailed out…& therefore that individual may not realise the urgency of the situation…and not mentally prepare for the potential doom ahead. After all, a recession is based on output and productivity (these flavours not present under the furlough scheme). So what can be done? Well, let’s make a list of things that need to be done to make our country stronger nationally and internationally…. (open to suggestions) & then the government creates jobs around these specific priorities…& offers salaries for these jobs. This way, unemployment decreases, productivity increases & so does output. We emerge out of the recession in a much better position than when we went in. Use the magic-printed-money to actually make a difference where it matters.

Talking Point #5 = have you heard of “Millennium Prize Problems?” A correct solution to any of these maths problems results in a US$1 million prize being awarded to the discoverer(s). (ref: Wiki)

Why not offer a £x prize fund for the company that develops a successful coronavirus vaccine first? Maybe all the “leaders” of the world gather and agree to attribute some of their money-printing to this cause, and thus the race for a cure gains even more speed. A cure is found, we are all saved and economy has a chance of bouncing back quicker. The £x prize money would be payable only on the condition that the company makes the vaccine available to patients at low or zero cost.

Talking Point #6 = rather than giving fines to those that break lockdown & social distancing rules, offer rewards to those that adhere to the rules! Yes, may be a logistical nightmare to track, but so would it be trying to find all the “offenders”.

Now, the above ideas may encourage spending, borrowing, job security, property values etc…& they may well also create some negative impacts. We obviously still have the dilemma of industries and businesses being decimated owing to lack of mobility….but food for thought above.

CONTROVERSIAL? YES! We can discuss, "if that happens, then this would happen, and then that would happen and why would they do that, that’s unfair to “x”, that would only benefit “y” etc etc etc"…..which is exactly the conversation I want to start! I’m not fussed about being right. We all need to work together and be solution-focused.

Stay safe, remain positive and & be proactive.