I can't sleep because of the property market.

So here’s something that’s been keeping me awake:

I’m of the opinion that the biggest rip-off in modern Britain is the property/rental market. My girlfriend and I are in our mid twenties, and have been living together for several years. We currently live in a one bedroom, ground floor flat in a converted terrace house. The flat has been really shoddily put together when they’ve renovated the building into two flats, and we pay £525 a month for the pleasure of staying here. This is a reasonable amount compared to other flats on the same road, as it’s a pretty decent area of town. However, given that the people upstairs will be paying a similar amount to us, I don’t see how the amounts of money handed over for this building each month can be justified. It seems to me like sheer opportunism and greed.

Despite both of us having reasonable income, by the time income tax is paid the rent is around a 3rd of our monthly income. Once all the other household bills are paid, it’s bloody difficult to find any other money to put into savings. We’d love to get onto the property ladder (although I hate that term) but it’s not an option, and I can’t honestly see how it’s ever going to be an option for us at this rate.

I reckon the problem is the “buy-to-let” market. It allows those with a bit of money to call themselves “property developers” and make more money without really doing much. Now while this is great for them, by slapping on a coat of paint and jacking the price up this forces overall rental prices upwards. When the “property developer” next door sees the rental value go up on the first house, he jacks his price up because he knows he can.
With there now being such a demand for rental properties, as less people can afford to buy, the rental prices will just keep going up. Meaning those folks renting can’t save as much, making it even more difficult to get a deposit together. And the cycle continues…

Now, the solution: (bear in mind this is blue sky thinking here, based on some pretty wide generalisations)

If all of us who are renting privately, could find a way to basically say “no”, the demand for rental properties would decrease, forcing the prices down. Some landlords may choose to sell up, meaning there’s more properties for sale, again forcing prices down.

While the drop in rents would not affect those landlords who have owned their properties for 15-20 years or more, as their running costs are probably pretty low (after years of high rents paying for the mortgage) it would have a drastic effect on those who have relatively recently bought into the property market (in a buy-to-let capacity.) In the latter case, the rent they were receiving may have barely been covering the mortgage. So what happens when this occurs? They can’t sell, as the housing market’s flooded, and even if they could they might not get enough to pay back the mortgage. So the house/flat/whatever is then repossessed by the bank.
OK, this sucks for the latter group, but this is their 2nd property, so they should have something to fall back on and not be homeless. If they don’t, then hell mend them. They shouldn’t have taken those kind of risks just to make easy money. We all know this end of the property market is a gamble, and if you’re not smart enough to have a back-up plan then it’s bound to end badly.

Anyway, the banks aren’t going to want to hang on to loads of property, it’s too much of a risk. So, they continue to flood the market and sell it off. This leads to more affordable house prices. Winner!

As I said, I know it’s highly unrealistic, as there is no real way to refuse to pay rent. Not if you want to have any kind of dignity anyway. It’s not like cutting back on your lifestyle (spending money on expensive bikes :P) where you can just opt not to do it. Everyone needs somewhere to live.

So what are the options? Social housing? Not for me personally. It’s not that I’m a snob, but I feel that this is my (and everyone else renting privately)’s problem, it should not become an issue for councils to deal with. Why should I become a social burden?

Move back in with our parents? Not likely, both my girlfriend and I’s parents live over 500 miles away. There’s also very little in the way of work where we’re from. So, we have to live where the decent pay is.

Many of my friends are now buying houses/flats, but I don’t know a single one of them who has come out of a normal living situation to buy a flat. Everyone I know who is buying has had help with their deposits, either by living at home until their mid twenties never having moved out, or by having a loan/handout to cover a deposit. Neither my girlfriend’s family nor mine are in a position to do this. Even if they were, why should they? They shouldn’t have to shell out massive amounts to cover the greed of landlords & “property developers.”
No doubt if I was in the situation that some of my friends are in, I wouldn’t be complaining, but I’d like to think that I’d at least still feel some resentment of how much of a rip off houses are. Their value is really only loosely based on how much they cost to build. Much more of their value is determined by what a “property developer” or estate agent thinks they can get for it.

I’m trying hard not to make this rant too much about my personal situation, as I’m not looking for STW suggestions as to how I can comply with this horrible system. I’ll have to deal with it myself. But I can’t be the only one who feels that the property industry is totally unfair, and it’s only getting worse.

Mind you it’ll have to get better at some point, because the property market is basically a capitalist economy of its own right. And unregulated capitalist economies, as we know from the plethora of crashes we’ve seen time and time again, are bound to failure. People get greedy, as they keep pushing prices up and up, thinking it’ll last forever. But prices can only go so high before they price themselves out of the market- forcing a crash. The domino effect takes hold and we see what’s happened in pretty much every decade in one country or another. History is doomed to repeat itself.

Maybe I’ll just go live in a tent, sell all my shit and save any money until the next market crash. Then I’ll buy a load of houses and **** over the next generation. It was good enough for people in the 80s & 90s, so why shouldn’t I do the same?

All in all, I think there’s just too much money in the world, and it’s in the wrong places. And I think I might be a communist…

ZZZZZZZZZzzzzzzzzzzz

So, one of your your suggestions is to artificially fix the market (the withdrawal of rent) to enable you to take advantage of this financial situation?

No, your not a communist.

How can the money you are handing over be barely justified if, in your opinion, it would only just cover a landlords buy to let mortgage? That doesn’t sound like profiteering.
As for not being able to buy a house until your mid twenties, after a divorce I have started from essentially nothing twice, about 17 years ago and about 7. Both times from a starting salary of about 18k. Both times I have bought with a partner within a couple of years (1st time partner earned way less, this time they earned the same) and both times lived somewhere that was ok to live. “Nice” enough areas, good schools etc.
I wish it was easier but it is doable, you just have to decide what you are willing to do without to get what you want.
Now what will happen to my kids if they want a uni education and their own home in 16 and 18 years…

Certainly wide awake there, use to time awake to get a second job and earn more money!!

But seriously…

Things are not perfect in the market.
Rental – the price is generally based on Location and number of bedrooms. The quality of the property rarely links to the price.

Buy to Let landlords also include people trapped by the same problems. My missus has a house we can’t sell but we had to move so now it’s rented. It costs us money to do this as the rent doesn’t cover the outgoings. Long term issue we need to sort really.

As for getting on the ladder I see no good reason to lend at less than 15% deposit. 20% would be better. Lets look back a little, banks were being hammered for bad lending choices and over lending. they are only correcting what we told them to.
On a £100k house a deposit of £10k can be wiped out very quickly if the market shifts a little.

I’d at least still feel some resentment of how much of a rip off houses are. Their value is really only loosely based on how much they cost to build. Much more of their value is determined by what a “property developer” or estate agent thinks they can get for it.

Cost of a house initially relates to the cost of the land and the build. The build is fairly static (not much difference as to where you build the house) but the land can vary due to demand.
As the last few years the price has not much to do with a developer or an estate agent but by what people will pay. Hence the market has slowed down. You will find it hard to get people to sell at a loss regardless of if they are a developer/landlord or private owner. If you bought a house would you sell for a loss?

The housing market got out of control over the late 90’s and early 2000’s. Unfortunately there a huge number of people involved in this who can’t/wont take a loss.

Relax have a beer and see what you really want to do.
How about a house share? On top of your rental cost you also pay all the fixed bills, sharing reduces these. It might not be great but it’s a start.

Find a creative solution instead of whining. Can’t afford your current town, get a buy to let in another, of course this could be a quick solution to your fixation with getting on the propety Market but may not sit well with your morals, but everyone has to compromise.

Most campsites round here charge you £15 to £20 a night and you have to provide your own “property.” On that basis I don’t think £400 to £500 a month is all that bad especially come winter time 😉

You are in your mid 20s……go ask your parents and grandparents how old they were when they first bought a property.

Rent, save, work hard and get promoted etc etc…..

and we pay £525 a month for the pleasure of staying here. ……………………………

…………………. Despite both of us having reasonable income, by the time income tax is paid the rent is around a 3rd of our monthly income

So around £1600 take home per month, for the pair of you?
That doesn’t sound like a reasonable income to me

I struggle with long sentences

but i did read some and if you forced repo of rentals to the magnitude of what you need the banking system as we know it would collapse – in its self that might not be a bad thing IF you have the ability to ride the storm BUT for the majority and probably even the country **** royally …..

if it wasnt for council buy your rental scheme my parents wouldnt own a house…… they were in their late 20s/early 30s

my grandparents bought a pair of wrecked cottages cheap before it was fashionable to buy a wreck. They were in their mid 40s and took on a massive mortgage back then……

can the government keep interest rates this low for ever?

if they do go up you might see a lot of repos but it wouldnt be fun for lots of people

it is depressing when it seems that most MPs have a nice property portfolio, often with help from the taxpayer

can the government keep interest rates this low for ever?

if they do go up you might see a lot of repos but it wouldnt be fun for lots of people

SVRs are and have been going up
Santander just announced 0.5% rise yesterday, up to 4.74% from October

also – if i was you id sleep easy at the moment knowing i had no silly debts.

I have friends with crazy amounts of debt(and i dont mean a mortgage i mean debt with no tangiable asset) with no hope of ever paying it off – if they can sleep at night – i was able to sleep nicely not having a house. I just got really really pissed off at moving every other year when they tried to bump up the rent

Try selling a house at the moment!

Ours was ‘valued’ by 3 estate agents at ~£20k more than the current asking price and we’ve still only had one person round to look at it, and that was at the original price!

Fella, you just need to face facts. The government of this country want to keep the masses pegged down as much as they can so that we don’t rise up. High house prices are what the government desire for the following reasons.

1. Most politicians will own multiple homes. Higher house prices == higher property portfolio.
2. Stamp duty revenue. They have a vested interest in high house prices.
3. More rental properties == more tax receipts from landlords

The older you get the more you realise just how twisted society is and the way it is run by these muppets in power.

Now where did I put that David Icke book?

IMO it’s only going to get worse as govt force pseudo-inflation and those with cash throw it at bricks and mortar.

Seems that nice/desirable stuff is shifting, houses that aren’t quite right are sticking. Just taken 18 months to sell (£40k less than lowest valuation in the end), and the house we brought had 15 viewings in 10 days and offers from 4 parties (according to the agent….)

Kinda happy with the way things are heading, but understand it’s difficult to get on the ladder.

Well, after my rant, I did manage to get some sleep. I now feel a whole lot better about the whole thing.

I should reiterate that many of the statements above were based on wild generalisations and are not designed to have a dig at anyone in particular. Let me address a few:

@mikewsmith- that sucks about your situation, being stuck with a house in negative equity. My point would be that you’re in this situation because houses cost too much to buy. Therefore, in an unexpected situation like yours where you need to rent it, you’re stuck.
I agree with you about mortgage deposits. It’s low deposits etc. which people capitalized on thinking they could make quick money, which got us into this mess in the first place.

@mcboo- My grandad (now deceased) bought his first house for £7k. He saved up for 4 years and bought it outright. Try doing that these days.
Relatively, I’d have to be earning at least triple what I am just now to even come close.

@Jota180- I think I may have miscalculated in my sleep deprived state. between the two of us there’s about £2k comes in every month. Up until this point however, we have been living off my salary alone (after tax there’s about £1150pm.) It’s not a huge amount, but I think I’m lucky to have the income I do. There’s a lot of people working harder for a lot less. My girlfriend’s just got back in to work, so that will make things easier.

@Trail-rat- I’d love to be in a position to buy a council house, but I don’t live in one. It’s not right-to-buy that I have a problem with.
Regarding debt, I’m definitely very lucky. My girlfriend and I both have a relatively small amount of student debt (I say relative because we’re both Scottish and went to uni up north)
When we get to the point of having kids, we’re definitely going back to Scotland.

@StewartC- Would you like a pinch of salt with any of my statements? I think it would be great if there was no private rental sector and it were all government run. Social housing as it should be: for everyone! Buy to let has basically turned social housing into something only for those with the lowest income, and attached a real stigma to it. Any properties in decent areas are snapped up by people who call themselves property developers. This makes it much more difficult for first time buyers, forces up the price and reduces the amount of affordable housing.

I’d love to answer more, but I gotta get to work. Have a nice day, all!

If your still at home at 20 past 8 maybe you should try going in earlier? They might think your lazy!

I appreciate there are problems for 1st time buyers at the moment, but when I bought my first house, interest rates were 11% ! Only way i could do it was to take out a low start endowment and buy a flat with a mate, we bought all our furniture SH and the rest from car boots.

Trouble is now that the Sky package and large telly etc seem to be an essential not a luxury, along with other shiny goods

I am turning into a grumpy old git yes 🙂

Yes, house prices are high but a lot of young people complain about how they can’t afford a house but never make any sacrifices to save.

Too many people are buying must have items like every Apple product under the sun, travelling the world etc. and not saving. I know my parents had to scrimp and save to get their first deposit and were right on the limit of what they could afford.

A lot of people just don’t want to sacrifice their lifestyle to be able to buy a house, but are all to happy to complain that they can’t afford one.

(32yr old, who bought first flat in 2006 on my own after paying off student loan and saving up a deposit. Flat now worth £25k less than I paid for it)

Not reading all that, stopped at the complaint that mortgage/rent would be 1/3 of income and you wouldn’t have any money let for savings. Yeah, that’s why saving is hard!

I’m 41 and I don’t ever really see myself buying a house- and TBH I’m not that bothered about it at the moment. Sure I could save but a massive mortgage and all the money on interest just isn’t that attractive to me- certainly not at the expense of my quality of life, which would take a big dive if I started saving for a deposit. I’d rather rent somewhere nice that gives me a nice ride to work relatively close to the things I want to be close to, than buy somewhere I don’t really want to live anyway.

All things being equal I suppose I’d buy, but I’m not that desperate to get on the ladder.

Basically you are not wrong, the cost of property has been out of control for a while (probably 20 years) and IMO was only sustained by cheap-deals. But these cheap-deals stopped in late 2008.

How anyone can buy their first place now, at a reasonable age/salary is beyond me. I bought my first flat (good quality 2 bed) when 21, paid £21k for it while earning £7k.

Basically we need to build more property in the right areas and I am quite happy with rent controls.

But one thing that didn’t exist when I’ve rented/bought property in the past were the various fees/costs/admins etc – these seem to have come from nowhere, and are considerable.

If the number of houses built exceeded the demand from a growing/more disparate population, or the population steadied or even dropped, house prices would go down.

Actually the population did pretty much stabilise between about 1975 and 1995. Even with people wanting to live in smaller households/increasing divorce, the wage to average house price ratio was probably the lowest ever in the mid nighties.

Really we should of tried to keep it that way with a stable population, guess it pretty hard to stop immigration in a more connected world with a billion more people. The strange thing is Germanys population has actually fell in that time why dont people want to go there ?

suck it up.quit moaning , and deal with , like everyone else has done since the dawn of the private property market.

the vast majority of people have always had to live in a pokey flat/house, in an undesirable part of town (although you say you’re in a nice bit) initially whilst they evetually build up enough cash to get somewhere bigger in a nicer part of town. Its the way it always has been, and its the way it always will be. Paying for property through rent or mortgage is always expensive for most people, you situation is no different to millions of others over the last 100 years.

This part of your life will pass, and you will be in a nicer place soon enough if you have the right ethic regarding sacrifice ,saving and work

Too many people are buying must have items like every Apple product under the sun, travelling the world etc. and not saving. I know my parents had to scrimp and save to get their first deposit and were right on the limit of what they could afford.

Laziest quote of the day, generally the only apple product most young people have is the iPhone.

In some ways a decent smart phone is a good investment, if you have a computer at work a smart phone means you might not need a computer at home, an internet connection or a land line. Especially if your renting and moving from one place to another moving a smart phone is alot easier.

The question is have they got a good deal on their contract ? Well you would nt know from looking.

Most of my younger cousins dont have a computer/laptop anymore just a phone.

Also it has to be said most of these electronic gadgets can be had very cheaply. Remember most younger people dont have cars which the older generation did have that would £1000 insurance a year £50 MOT £100 tax + fuel + price of car. Why didnt people in the 70/80/90s not buy a car and save for a deposit ?

Because the public transport system was terrible and a car was seen as a necessity. Why do most youngesters now have a fancy smart phone because being able to get on the web/be connected is seen(probably is) as a necessity.

Also a couple of nights out is probably far more expensive than any electrical gadgets people might have. Probably would be better to start saving there.

Kids want everything handed to them on a plate these days.

OP, think you’d like this website. Forums too. 🙂

http://www.housepricecrash.co.uk/

MrSmith 😛

I bought my first house in 2001, saved pretty much for 4 years compromising holidays etc. even had council Telly only FFS 😉 stretched me to the point I had to bike to from work, eat lunches from home etc. renovated it over 6 years with pure graft and some help from friends. During this time I started a business blah blah. Anyway, I am vaguely sympathetic but control what you can control. Move to a cheaper area, cut back on expenses etc and save hard. Most others did. And I had 4 properties for a while there as investments, funnily enough I paid for them by working v v hard so while to you I was rotting the system all I was doing was investing in a reasonably controllable way.

It takes time and determination.

A friend of ours has just bought her first house on her own (aged 28), but she’s been saving for the last 10 years!

If you want to get on the housing ladder but can not afford to on your own then look around at the other options in your area. There are often shared equity schemes and it may be possible to apply for council housing. Your other option is if you do not like the place you live just now is move out, downsize, move further out of town, move into a less expensive neighborhood and commute to work on foot or by bike to save more cash.

Remove your blinkers to one way to do things and see what is out there to help you. These other ways my not be the most strait forward or ideal in the short term but they may be able to give you the leg up you are looking for.

I saved for a wedding then saved for a deposit, meant I had to wait till I was 32 till I could afford to buy and even then it was the cheapest house I could get.

I also didn’t have a parental home I could live in after uni as my folks split up and went their separate ways and sold the house in my final year. So I have spent more than my fair-share of time renting.

“Life is pain little girl, get used to it”.

You think prices are high now, think about after the downturn we have had recently, how many people do you know having kids, I know LOTS, where are they all going to live?

Eh? Rental costs are set by the market, if people can’t/won’t pay the price a buy-to-let landlord wants then the property sits empty (or rent gets reduced). There’s been loads of repossessions of buy-to-lets you know…
Main issue I think is that it’s so much harder to get a 90%+ mortgage these days. I know some would argue that’s a good thing as it’s much harder to borrow beyond your means but there are also plenty of people out there, like the OP, that struggle to save enough each month to make a dent in the 25% deposit often required. That doesn’t mean they couldn’t comfortably afford the mortgage though.

The fact that the best part of a generation is unable to buy a house is an obvious sign of massive overvaluation in the market. Housing is basically transferring a vast amount of wealth from the young to the baby boomer generation. Like all bubbles, it’ll collapse.

(and I say that as someone who was lucky enough, 13 years ago, to be able to buy a small terraced house in Reading with a salary under £20k and a deposit of about three and a half grand. It’s gone bonkers since then)

If £525 pm really is a third of your combined net salaries then I think that the answer is that you need to earn more money!!

Try for a promotion, work harder, get a part time job – we have all had to do a little extra to get a bit further in life from time to time.

If you want to get on the housing ladder but can not afford to on your own … do not rush into it.
Property prices have peaked and are going down. There is no rush to “get on the ladder” when it is more of a snake.
Take advantage of the flexibility of renting to pursue your career wherever it takes you. Enjoy your freedom from the commitments of a mortgage, the chances are that even with the “dead money” of rent you will have “lost” no more than homeowners in a falling market.
It won’t continue falling forever, but take this chance to save and set yourself up to enter the market on your own terms when it stabilises in the near future. Then look at it as buying a home, not an investment, and you’ll be alright.

All these arguments are fairly academic as property rents are linked to values and mortgage costs. In simple terms if an average mortgage on a property costs about £1,000 per month then you would expect a private landlord to be letting it out at £1,250 per month or more. The 25% is their return before all their other costs and the risk of voids etc.

This basic maths will always apply although you can tinker with the profit margin dependant on local factors. Essentially it means it is always cheaper long term to own your home as renters pay a premium to their landlord however there are pros and cons, renting is highly flexible and low risk owning has no flexibility risk of loss but also upside potential from price rises.

Owning (within your limits of affordability) is the better option for most people when viewed long term and the sacrifice in raising the initial deposit is one of the best investments you can ever make.