Show Notes
There are so many ways to bring down the cost of new build in the UK, chief among them reduced regulation, planning and taxation. So I was most disappointed, putting it mildly, to see Prime Minister Andy Burnham’s new initiative, Your First Home, which will give government-backed equity loans of 20% to first time buyers, who will now be able to buy new build property with just a 2.5% deposit. Initially, that 20% will be interest-free. This is just another means to saddle young people with debt. As if student loans weren’t bad enough. Unlike period property, new build struggles to keep its value. It’s often because people overpay for new build - the so-called new-build premium. You’re buying a brand new product and somebody, you, has to cover the developer's margin, marketing costs and all the other costs wrapped up in that shiny new flat. Meanwhile, there is no longer the buy-to-let investor to prop up the buy side. The government has already seen to that. The risk of in the inexperienced first-time-buyer overpaying is high and the likelihood of them falling into negative equity is immense. Look at the problems those who went down the Help To Buy route are now having with London flats, where prices are down 20-30%, with owners in negative equity, unable to sell without taking huge losses, and unable to move up the property ladder. Trapped. Help to Buy artificially inflated the prices of new-build flats. Developers knew buyers had government backing, so they charged a “new-build premium,” which effectively captured most of the subsidy. It handed money to people who already had it. Of course building companies will welcome Burnham’s scheme this time around. Now that the Help-To-Buy subsidy has ended, new buyers must purchase using normal mortgages, which has caused prices to “normalise”, ie fall 30%. Meanwhile, there are the problems of skyrocketing service charges and the fallout from the cladding scandal, both of which have also made flats hard to sell. The main people Help To Buy helped were the large building companies, and Andy Burnham’s new scheme will do just the same. It is yet another demand-side intervention in a market where the fundamental problem is that housing is too expensive to build. It is a terrible and misguided thing to do. Builders can (and will) overprice their deals, and trap buyers, who, as first-timers will be naive, in punitive leasehold deals. It is no more than a subsidy for building companies. It does not address the many causes of Britain’s unaffordable housing. It exacerbates them. You are creating more of what caused Britain’s affordability problem in the first place. This is new builds only. So happy days for the likes of Barratt Redrow, Vistry and Taylor Wimpey, never mind the cowboys, who will take the money and run, and leave you holding the bag of poor construction, leasehold and unsellability. Builders’ shareprices will rise on the back of this. Loads of people will be suckered into buying because of the easy affordability now, and thier desperation to own a property. “Oh, it’s better than renting” “Oh, we only have to pay this much.” But if you or anyone you know is tempted by this, I urge you or them to please avoid it at all costs. As a rule flats, particularly new build, are to be avoided because, there is so much beyond your control that you end up being financially responsible for, from basic repairs and maintenance, to problems in the actual build, such as cladding, only found years later, which have now become your unsellable asset. A 2.5% deposit is just too much leverage. It’s fine if you know what you are doing, but most don’t. You could overpay for your property by 5%, which is easily done when you have the carrot of easy affordability now being dangled in front of you. Prices could fall 10%. Or you lose your job. Heaven forbid prices should fall 20-30% as they have with Help to Buy. There are so many routes to negative equity. It is going to ruin people. Do our policy ma
More from The Flying Frisby - money, markets and more
Something a little different this week. On Monday I gave a talk for UK Finance called Making Sense of It All, about the multiple contradictions at work int he economy: rising bond yields yet equity markets grinding higher, huge investment in AI despite limited profit, and the growing squeeze on the materials needed to build AI infrastructure. (Many thanks to Duncan and Rhiannon for inviting me to speak). I’ve taken the deck and put together an online version - the first time I’ve ever attempted such a thing - I hope you will find it useful. The transcript is available above. Until next time, Dominic If you live in a third world country such as the UK, I urge you to own gold or silver. The pound will be further devalued, as will the euro and dollar. The bullion dealer I use and recommend is The Pure Gold Company. They deliver to the UK, the US, Canada and Europe. More here.
After an extraordinary run which started in 2022 below US$20/oz and ended in January this year at US$122, silver has been working its way downwards. We have had a correction of almost 50%. Today we’re at $58/oz having been as low as $55 in July. We are almost certainly going to go back and retest that low, I would say, and silver is very much in a downtrend. $50 has been a huge line in the sand that goes all the way back to 1980 and for decades silver could not get above that number. Then, late last year, it cut through it like butter. What was resistance becomes support is one of the technical analysts’ guiding mantras, and there is every chance $50 will do just that. However, if there is one thing I have learnt about silver over the years it is that has an unrivalled propensity to let you down, which is I suppose my way of saying it could quite easily go a lot lower. It’s silver after all. However, the fundamentals favour silver. The market remains in deficit. The Silver Institute’s latest World Silver Survey forecasts a 46.3 million ounce deficit in 2026, which would be the sixth consecutive annual deficit. Never mind jewellery and investment demand, silver finds an enormous amount of industrial demand (~60% of annual demand), especially in electronics, because it is such a good conductor of electricity. The sudden increase from solar panel demand a few years back is thought to have triggered the recent run, although manufacturers are reducing the amount of silver used in each panel. Bear markets are a time to build. As an investor, you research the companies you might want to buy - there is no need necessarily to rush out and buy them - start building positions when nobody else wants them, make the purchases on your own terms. There is no need to rush. With that in mind, I am going to tell you about my largest silver position today. I even have an interview with the boss. It was a big winner for readers in the last cycle going from below 30c north of C$3, rising more than 1,000%. With the falls in the silver price it has now come back more than 50%, and I think it is worth taking a look. Its CEO is both young and competent and he is growing the company in an admirable way so that in 3 to 5 years time you are going to see something much bigger.
It’s my pleasure to sit down with with the man who “gold pilled” me back in the day with his book, The Collapse of the Dollar. James Turk, founder of GoldMoney, has spent five decades working in banking, finance and investments, making the case that gold is not an investment or another commodity, but money in its purest form. We discuss why he believes the US can no longer repeat the Volcker rescue of the 1980s, the relationship between sound money and liberty, and why he expects gold eventually to return to the centre of global commerce as technology changes the way money moves. James’ latest book is Money and Liberty and you can find his IEA paper here. This interview was brought to you by The Pure Gold Company If you live in a third world country such as the UK, I urge you to own gold or silver. The pound will be further devalued, as will the euro and dollar. The bullion dealer I use and recommend is The Pure Gold Company. They deliver to the UK, the US, Canada and Europe. More here.
Good Sunday to you, We have a fantastic interview for you today. I sit down with legendary Canadian investor Frank Giustra to discuss gold, government debt and why he believes the world is entering the most dangerous geopolitical period of our lifetime. You can either watch the video or listen as a podcast via Spotify et al.Frank made his fortune in mining and natural resources, before founding Lionsgate Films, the world’s biggest independent film studio. His track record as a businessman and investor is superlative. We discuss why he believes this is no ordinary metals bull market, the accelerating shift by central banks from government debt into physical gold, the risk that another round of quantitative easing could trigger a dollar crisis, and whether gold may ultimately need to be revalued higher, dramaticically higher. We also touch on China, financial repression, critical minerals and why, of everything Frank owns today, gold remains the asset he is most excited about. Money Markets & More is the interview series from Dominic Frisby, exploring money, markets, gold, economics and the ideas shaping the world.🥇 The programme is brought to you by The Pure Gold Company If you live in a third world country such as the UK, I urge you to own gold or silver. The pound will be further devalued, as will the euro and dollar. The bullion dealer I use and recommend is The Pure Gold Company. They deliver to the UK, the US, Canada and Europe. More here.
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