To avoid the rest of us suffering higher interest rates
Not everyone wants low interest rates.
aP - Member2 up 2 down terrace houses near where I live are now over £500,000, it's ridiculous, ...
Crikey. Soon it will just be multinational office blocks in London. 😯
If you have £500K you can migrate to any part of the world as you wish.
Presumably people who buy a £500,000 house to live in don't normally have £500,000 to emigrate with.
They have an income which is high enough to persuade some one to lend them the money, provided the loan is secured against that house. Their income is almost certainly reliant on them being in London 5 days a week 48 weeks per year
mikewsmith - Member
Move as much government out of London as possible and increase taxes on companies based there. Simple solutions.
..
. Really ? Are you actually serious !
Like all "bubbles" this one will sort itself out eventually as supply/demand/prices equalise. I can't see the SE of England building itself out of a housing crisis and it will be rising interest rates (poor for buy to let returns) or currency changes (as the pound strengthens foreign investors will sell and return their cash abroad) that will change things.
Otherwise some of the other suggestions are not going to happen (extra taxes on London jobs/houses/buildings/buy-to-let) for any government that wants to stay in power.
A lot of the value in housing in the southeast will stay since beyond any bubbles as the money stays within families and keeps property prices high. This is the reason that my sister and brother-in-law have just bought a nearly £1M house on fairly average salaries. Inheritance (brother-in-laws not mine!).
To compete internationally you need large cities, there are huge efficiencies to be had by having lots of businesses all in the same location.
One of the problems with the UK is we don't have a large enough 2nd city to compete with London.
Like all "bubbles" this one will sort itself out eventually as supply/demand/prices equalise
I can't see that ever happening. If you did suddenly build a million 2 bed homes you'd create a huge negative equity problem / bad bank debt as all the huge loans given out over the last few years would be under water.
If you did suddenly build a million 2 bed homes you'd create a huge negative equity problem / bad bank debt as all the huge loans given out over the last few years would be under water
Which is never going to happen.
What I meant is that the current London prices increases will slow or slowly reduce. This has the been way for London prices for the last half century.
Move as much government out of London as possible
(and other business too)
... and then link it all up with HS2 and HS3 🙂
If you have £500K you can emigrate to any part of the world as you wish.
I've thought this, I could get a place in France or Spain for £250k and the money I could earn from the capital I released from my SE home would mean I didn't have to worry too much about what job I got. Can't see this happening as wife wouldn't go for it and, anyway, fairly settled in the SE.
Why is it a problem if more people rent though? People do this in the rest of Europe without problem and most only buy when they're later in life and convinced they're going to stay for a lengthy period of time. Keeps the labour market fluid. Would need much more protection for tenants if that's going to be an option in the UK though.
I can't see that ever happening. If you did suddenly build a million 2 bed homes you'd create a huge negative equity problem / bad bank debt as all the huge loans given out over the last few years would be under water.
We didn't see 2008 ever happening either.
As a first time buyer wanting to buy I'm slightly obsessed about this particular subject and I'm reading everything I can find so I don't buy at the wrong moment and massively overpay, and there is a HUGE amount of comment from serious people that we're setting London house prices up for another bust...
Why is it a problem if more people rent though?
Because you never get any of the money back. If you buy, you do.
Buyers now will end up £250-500k richer in 30 years' time. Renters will get nothing.
People do this in the rest of Europe without problem and most only buy when they're later in life and convinced they're going to stay for a lengthy period of time. Keeps the labour market fluid
In Germany AGENCY FEES were several thousand euros. So a fairly big barrier to moving house even as a tenant.
and there is a HUGE amount of comment from serious people that we're setting London house prices up for another bust...
A bust would just be a small cyclic blip.
I was talking about house prices returning to sensible multiples of average wage that they were at 20 years ago rather than a minor perturbation of the current upward trend....
Buyers now will end up £250-500k richer in 30 years' time. Renters will get nothing.
Only if house prices continue at such a high rate. Could rent and also invest in the stock market then buy later or rent and live off the generated income.
Only if house prices continue at such a high rate.
And if they don't, they'll only be £2-300k better off as they repay their mortgage. Hardly worth bothering with, is it? No, wait, it is.
I'd rather line my own pockets than someone else's, tbh.
Could rent and also invest in the stock market
a) Stock market is much more volatile than housing afaik and
b) That's assuming renting is cheaper than buying. In many areas it's not.
Out of interest, what would be the equivalent stockmarket investment? Presumably it would have to involve Derivatives or something? If you've 30k in the bank and 1000pcm for rent/mortgage or whatever, you can't use that to direclty invest, say 200k in the stockmarket by buying shares.
molgrips - MemberWhy is it a problem if more people rent though?
Because you never get any of the money back. If you buy, you do.
Buyers now will end up £250-500k richer in 30 years' time. Renters will get nothing.
I'm not so sure it's so clear cut. I've been renting for years but the fact I haven't had to shell out a huge deposit on buying a house has meant that I've been able to invest in my own business. The returns from that have so far outstripped any possible financial gains from buying a house. Will buy when I'm convinced I'm going to stay put in an area long term but until then this US article kind of agrees with how I'm thinking:
[url= http://techcrunch.com/2012/03/24/entrepreneurs-should-not-buy-homes/ ]Why you shouldn't buy a home[/url]
Only if house prices continue at such a high rate. Could rent and also invest in the stock market then buy later or rent and live off the generated income.
I've never seen anywhere in the SE you could rent and have something left to invest vs. buying and paying down the mortgage. The monthly outgoing differential isn't there - renting you are just paying someone elses mortgage.
Houses in my village (S rather than SE really) rent for more than I pay in repayment mortgage, monthly for a better house I will own. If interest rates rise you can bet your ass rent will rise with them.
Why you shouldn't buy a home
Very specific set of circumstances that don't apply to most people. It's not always wrong to rent or buy, but equally neiother are always right - but for most people buying will make more financial sense long term. Plus you get a home you can't eveicted from as long as you pay for it.
Could rent and also invest in the stock market then buy later or rent and live off the generated income.
I was reading in the Economics section of the Guardian that housing has been out performing the stock market for some time, hence the huge number of wealthy people investing in BTL etc...
That's because equities had become expensive. Housing is now expensive v income but not against mortgage costs. Equities are so-so. When IR are allowed to return to non-artificial levels, the housing market will adjust accordingly. Until then we stimulate a bubble as is so often the case when governments intervene in markets.
I've been able to invest in my own business.
Well that sounds like a shrewd move for you, but it's hardly an option for everyone.
If you've 30k in the bank and 1000pcm for rent/mortgage or whatever, you can't use that to direclty invest, say 200k in the stockmarket by buying shares.
Good point - I'm paying about £4.5kpa into my investment currently, to do that whilst renting I'd have to find somewhere to rent for less than £400pcm. Possible, just about, if I were single and wanted a tiny scruffy place. Or I shared.
Yes you'd have to borrow money to be able to invest the £200k, or whatever, but the point is you're paying interest on what you are borrowing at a certain %age so your house has to increase by at least that amount just to break even - and there are maintenance costs of course.
We started looking for 3 bedroom house in October last year within the M25 in Surrey.
22 houses later and 6 or 7 good* offers, we still don't have a house as people are panic buying and putting in stupid offers. I'm told that a significant portion of the houses we've seen have been bought by investors.
* we offers 25k over for one, it went for 50k over**.
** I don't blame anyone for this, if someone's willing to pay well over the asking price, then there's not much I can do about that.
The people next door to my parents in Surrey just sold their house for at least* £465,000. It's a standard 3-bed semi in an okish location (20min walk to a station that's 30min into Waterloo)
I'm trying to convince them to sell up and move North!
*That was the asking price, but I don't know what it actually went for after an open day.
it went for 50k over**.
So did they have £50k going spare or did they just borrow more? I wonder?
It's kind of obvious where the problem lies with house prices... I mean prices went up 18% but the population of London didn't go up 18%, nor were 18% of houses knocked down...
So did they have £50k going spare or did they just borrow more? I wonder?It's kind of obvious where the problem lies with house prices... I mean prices went up 18% but the population of London didn't go up 18%, nor were 18% of houses knocked down...
?????
They teach economics in the room opposite me. I think its a bit more complicated than that......
The proposed site of Ebbsfleet Garden City, Kent. ‘The poor have no ‘need' for executive homes in distant commuter land. They just want somewhere cheap to live near work.' Photograph: Graham Turner for the GuardianHousing booms are today's medieval plagues. Boils suppurate on the political backside. People rush to find culprits to lynch. Quacks appear on street corners with fake remedies. Reason takes a holiday.
Thus it was yesterday, as the Today programme's John Humphrys chided David Cameron for the "housing crisis" and for not building more houses in the Tory shires. It was like curing famine by sending caviar to Africa.
Meanwhile, everyone from Ed Miliband to the governor of the Bank of England screams crisis. There is a crisis when prices fall and a crisis when prices rise. Almost everywhere house prices are still bouncing along the bottom, but at London dinner parties they are a "bubble".
Most people would like a nicer house. That is not a "need" but rather a demand, and thus drives house prices in a free economy. But in Britain demand is not just for a nicer house: it is for an investment, a hedge against inflation and old age, a golden gate to otherwise impossible wealth. It is this that drives middle-income families into a frenzy, and has pushed up house prices in the south-east by some 9% in the past year.
Neil Monnery's Safe as Houses is one of the few sane books on the housing market I have read. It compares Britain's boom and bust with experience elsewhere in Europe. Germany is much richer than Britain, with ever rising wealth and immigration, and a cautious government. German house prices have actually fallen in real terms over half a century. There is a flourishing rental sector, regulated and with a degree of tenant security, while just 43% of Germans, mostly in middle age, own their homes. They invest their savings not in property but in productive industry, much to the benefit of the economy. Germany's housing stock, says Monnery, "is a stable, functional and affordable asset".
Or consider another housing pundit, Danny Dorling. His new book, All That Is Solid, emphasises that the central failing of British housing is chronic under-occupation, which is getting worse. The 1971 census return showed Britons enjoying 1.5 rooms per person. Today, with a larger population, the figure is 2.5. Small households were moving into larger properties and staying there, even when children fled the nest. The rich are simply storing money in surplus rooms.
Another economist, Rebecca Tunstall of York University, long ago stole a march on France's Thomas Piketty, in showing how housing has reflected income inequality. In 1981 the richest 10% of Britons had three times as many rooms as the poorest, while by 2011 the gap had widened to five times. The issue is wealth, not housing supply.
As Dorling concludes, "We cannot build our way out of the disaster of our current housing system." We should rather tackle "how to better share and look after what we have already got".
We still read daily nonsense about Britain "needing" to build 250,000 more houses a year to "hit a 1.1% inflation target" for annual price rises. These figures are near-meaningless. The need is based on crude household formation, with no reference to demand, price, migration or anything else.
Yet it is still seized on by newbuild lobbyists, such as the Home Builders Federation and Savills estate agency, eager to grab lucrative plots in the south-east. This in turn fuels panic about planning delays and drives young people into desperate over-borrowing.
A belief that more housebuilding nationwide will both meet "need" and drive down prices dates from the 2004 Barker review, which has guided policy ever since then. There is no proof of this thesis. As Monnery points out, more houses were indeed built, yet "real price increases actually jumped to 5-10% a year".
London also had a "crisis" in the seventies, when its population was plummeting. The reason was the same as in the United States and Australia, where houses were built with none of Britain's planning constraints and yet prices soared: reckless bank lending.
Building estates on greenfield sites – which is the current coalition policy – may delight free-market lobbyists and leftwingers eager to enrage rural Tories. But it wastes energy and infrastructure. It promotes commuting and destroys a dwindling environment. Housing "need" is in cities, where labour mobility and immigration are high and most poor people find work. The rejection of Labour's brownfield-first planning policy was the crassest of coalition innovations.
I may not go so far as Dorling in declaring: "We have built enough homes." But he and others are surely right to refocus on demand. Britain has a huge stock of empty and underused residential space, public as well as private. It is why Iain Duncan Smith's "bedroom tax" was in the right direction, however hamfisted its implementation. Council tax should now extend the principle to the private sector.
A policy for housing supply cannot lie in Eric Pickles's "war on the councils", in Nick Clegg's garden cities, or in planning minister Nick Boles's skirmishing across Cotswold meadows to win a handful of town houses. It lies in retrofitting old cities to modern demands. It cannot make sense to leave urban land derelict, in the south as well as the north, while commuter corridors sprawl into the surrounding countryside.
The wasted space in inner Manchester or South Yorkshire is comparable only to eastern Europe. Inner London's employment density is similar to New York's, yet its housing density is less than half. Housing supply in inner cities will have to rise to counter this glaring mismatch. The poor are the true victims of today's locked minds and political tribalism. They have no "need" for executive homes in distant commuter land. They just want somewhere cheap to live, near work.
Everything in policy seems the wrong way round. Stamp duty discourages transactions just when they should be encouraged. Limiting VAT relief to new construction discourages urban renewal. Council tax is regressive when it should be progressive, with higher bands taxing space as well as value.
Councils should be set free to develop and manage their low-cost estates. Tax incentives should encourage renting, co-ops and sublets such as Airbnb.
It may be true that income inequality lies at the root of housing inequality. As such both will always be with us. But housing policy should not make inequality worse.
http://www.theguardian.com/commentisfree/2014/may/21/no-housing-crisis-just-very-british-sickness
The recent increase began almost to the day that Help To Buy began... (I was looking to buy at the time and prices literally went up in a matter of weeks)
But the facts are that the average mortgage guaranteed under help to buy is under £150K - so this can't be stoking the "bubble" in the South East as the average house already costs twice that.
This is classic example of causality vs. correlation.
But the facts are that the average mortgage guaranteed under help to buy is under £150K - so this can't be stoking the "bubble" in the South East as the average house already costs twice that.This is classic example of causality vs. correlation.
I'm not claiming causality in respect of putting more money in the market in London but Help To Buy did send a signal that the government wanted to encourage people to buy... coupled with lax lending policies and off it went like a rocket. It had been flat for 2 years before...
IIRC from Land Registry data a 2-bed flat in Sydenham went for £212k Feb 2013, another for £242 in May and come October, £300k was being asked for (and got). Mar this year, they're now above £300k... even West Norwood is £350k!
Germany is much richer than Britain, with ever rising wealth and immigration, and a cautious government. German house prices have actually fallen in real terms over half a century. There is a flourishing rental sector, regulated and with a degree of tenant security, while just 43% of Germans, mostly in middle age, own their homes. They invest their savings not in property but in productive industry, much to the benefit of the economy. Germany's housing stock, says Monnery, "is a stable, functional and affordable asset"
Agree 100% - and they are nice houses too, not like our rabbit hutches with shoebox rooms and tiny windows. Just a shame we're so fixated on property prices here in the UK, at the great expense of investment in new business and exporting things that we could actually be making if the investment was there.
Yet property prices are so high that they eat up a huge chunk of peoples disposable income. In the mean time a friend who owns a successful and growing business that exports has had to go through hell and high water to borrow to expand from the bank - yet low interest loans seem to be doled out to BTL investors to buy an overpriced house like bread at a duck pond. Something seriously wrong here!
But the facts are that the average mortgage guaranteed under help to buy is under £150K - so this can't be stoking the "bubble" in the South East as the average house already costs twice that.
Well it pushes up demand for the cheapest places which means those prices go up and then so do the prices of all properties above them as they become relatively better value.
Well it pushes up demand for the cheapest places which means those prices go up and then so do the prices of all properties above them as they become relatively better value.
But this is negated by two things - firstly there aren't any "cheap" places to buy in the South East, and secondly the majority of Help to Buy transactions have been in the North East, North West and Midlands, where just about everyone agrees there's no sign of a bubble - to the extent that the average Help to Buy Transaction actually fell £10K between December last year and April this year.
The figures out today also suggest that the numbers of mortgage offers extended last month is down. I guess that the new tougher lending rules will slow down things, plus the talk of interest rates going up.
But this is negated by two things - firstly there aren't any "cheap" places to buy in the South East, and secondly the majority of Help to Buy transactions have been in the North East, North West and Midlands
Well there are small flats in unappealing parts that aren't too pricey but I haven't seen any stats on where the Help to buy has been used so got a link?
Agree 100% - and they are nice houses too, not like our rabbit hutches with shoebox rooms and tiny windows. Just a shame we're so fixated on property prices here in the UK, at the great expense of investment in new business and exporting things that we could actually be making if the investment was there.
I know why don't they package up all the mortgage debt into neat bundles and sell them to investors and get all that money working !! doh!
Germany is much richer than Britain, with ever rising wealth and immigration, and a cautious government. German house prices have actually fallen in real terms over half a century. There is a flourishing rental sector, regulated and with a degree of tenant security, while just 43% of Germans, mostly in middle age, own their homes. They invest their savings not in property but in productive industry, much to the benefit of the economy. Germany's housing stock, says Monnery, "is a stable, functional and affordable asset".
Who owns all of this quality german housing stock?
If it is being suggested that having a larger proportion of renters is a better way for the market to work presuably there has to be a financial incentive to rent vs buy, for individuals to invest in industry rather than property.
But in the UK rents are as high as a repayment mortgage. Its a no brainer to buy rather than pay someone else's mortgage.
So who are these philanthropic German land owners accepting a lower ROI through renting out their property and where do they get the finance from to own the property?
Genuine question. It's an interesting system.
Or is there a low availability of credit in Germany? Retricting the number of potential buyers? In which case I'm moving to Germany and starting a bank making a fast bucks offering easy credit.
So did they have £50k going spare or did they just borrow more? I wonder?
I don't know.
I spoke to the agent after and he was a bit sheepish about it...he called it a 'stupid offer' and said it would be great if it actually went through.
I thought that the mortgage would fall through as the provider would say that it's not worth the money they've offered, but that was 6 months ago now and similar houses are going for more.
FYI - it was ex council too
Annoyingly, when we started looking, if we had put in a stupid offer of as much as 75k over on the first house we looked at, it would now be worth more.
We've seen a house on Rightmove that is on for 145k over the value of a similar house that sold last September.
They invest their savings not in property but in productive industry, much to the benefit of the economy. Germany's housing stock, says Monnery, "is a stable, functional and affordable asset"
So a) if it's so affordable, how come so few people own and b) if people aren't investing in property who owns all the houses that people are renting?
If prices are low then surely supply meets demand? If it didn't, then it makes no difference if people rent or buy - prices would rise. After all, someone has to buy the house even if it's not the person living in it.
I think the reason people are 'obsessed' with ownership, as you put it, is that it's better than renting. You can do stuff to your own home and there's no landlord. And even if prices don't go up, your rent money goes to you not some third party. I'm sure this is true in other countries, so I doubt it's any intrinsic difference between Germans and Brits that causes this. I suspect it's basic market factors. Generally speaking if you put people in the same environment they end up doing the same things.
Or is there a low availability of credit in Germany? Retricting the number of potential buyers? In which case I'm moving to Germany and starting a bank making a fast bucks offering easy credit.
Germans are largely allergic to credit. Yes they'll all have a credit card, but you'll look like a freak if you actually use it. Low interest rates too (was certainly lower than UK by some margin before economies went titsup, UK did QE an reduced base rates to silly levels). I got 3.6% fixed for 10yrs, when UK would have been 6-7%. Don't know what typical UK mortgage rate is these days for a straight repayment linked to bank a/c where I can pay what I like above a minimum interest only.
Start such a bank if you like, but it'll be the Brits with their "I have a right to own" attitude and love of debt (or gearing/leverage, if you prefer), that will be your customers.
Property purchase costs can be high in other countries which can put off buyers until they're sure where they want to be. Germany maybe 10% cost and also decent deposit of around 30%. Obviously UK purchase costs have been going up but I suspect the lower costs in the past helped create the ownership culture.
the Brits with their "I have a right to own" attitude and love of debt
Getting a bit annoyed with this painting mortgage owners as some kind of vain avaricous social climber. I bought a house because I wanted an asset I could live in and I was fed up of giving money away; and because I wanted to do stuff like decorate and put shelves up.
Help to Buy mortgages are upto £600,000
http://www.helptobuy.org.uk/mortgage-guarantee/eligibility
Not sure why the average mortgage they lend matters. Its still pouring more money into the market.
I agree with Molgrips that wanting buy a home isn't a crime
I bought a house when I had kids. Its almost impossible to rent a house privately and have any security in the property longer than 6 months. Is that true in Germany?
agree it's not a crime, but for many it seems to be the "status" that home ownership brings. for others it's a home and an asset, for others again, it's a pure financial asset.
rental security no problem in Germany. In fact it's the other way around, and enough to probably scare the s**t out of the UK BTLers. You can rent for years no problem, not just apartments but houses too. Far more rights afaik. If the owner sells, he sells it with a paying tenant and it used to be that the new owner couldn't evict or anything for at least 3 years (if at all).
NL I vaguely recall being similar, and rent is strictly determined by law too. If you remain in property the tenancy can only ever be extended, not renewed or a new one started, and rent for the extension is strictly limited by law to the lesser of 5% and RPI (or something like that).
