London housing bubble solution?

To avoid the rest of us suffering higher interest rates (in part seemingly due to ‘foreign’ cash) why can’t the Govt select the relevant post codes for Greater London/inside the M25 etc and say that stamp duty/interest rates etc HAVE to be higher for those? Would that not help close the north south property divide?

select the relevant post codes

You’re mistakenly assuming that every house in one of the smarter postcodes is an oligarch’s palace.

Then put the estate agents to hard labour …

Build more houses. Its a supply-side problem being badly (madly) managed by a demand approach.

It would seem that a tax on one of foreign buyers/empty houses/rental properties could help to hold things back a bit without affecting people just trying to afford a house to live in too much.

However none of this will happen since the London housing bubble essentially is our ‘economic recovery’.

House prices are higher in London which logically means proportionally more of them pay higher stamp duty than elsewhere. Your suggestion is already indirectly in effect.

I thought they were only Palaces and penthouse apartments there, is London not all like Hyde Park One or whatever? 😉 To be honest, the price of a ‘palace’ is of little concern, it’s the prime of your standard 2 and 3 bed that’s the problem and I suspect the money from foreign high rollers comes in a little higher up the chain. It’ll all end in tears except for those who sell high and emigrate (to the north).

2 up 2 down terrace houses near where I live are now over £500,000, it’s ridiculous, and not due to foreign money. The biggest problem is that people in the uk now see property as a way to make money rather than as a place to live.
The BoE isn’t going to raise interest rates any time soon because the economy is still in a mess and if they do so it won’t be just the huge problem of overextended mortgages causing repossessions but all the zombie businesses that’ll go to the wall that would put us back into recession.

House on friends street in Plaistow East LDN was for sale (2 up 2 down Victorian terrace), estate agents are now doing open house instead of individual views as demand is so high. There was a line of 15 waiting to see the house, out of interest she asked those not ‘buying to let’ to raise their hands – only two did.

Interest rates should be higher – there are more savers than borrowers in this country. They are stupidly low – albeit for a reason – but a hell of a lot of people will get burned when normality returns, due to a combination of desperation, greed and stupidity.

However, it is a supply problem, been coming since Fatcher sold off the council house stock and Bliar ignored the problem. We need to build more affordable housing on brownfield sites/those already with planning permission, and not grant permission for any more until they are built and occupied.

Then mortgage lending needs to go back to 3 times salary and repayments no more than a third of disposable income, try and get some common sense back into people.

Obviously, these policies may require the reintroduction of workhouses to deal with those who will be unable to exist in this new world – aka I actually have no idea really how to solve the problem.

Quite like the idea of a windfall tax on foreign buyers. And 50% stamp duty on second home owners.

The solutions are already coming through, albeit piecemeal
1. Lloyds have begun to restrict what they’ll lend for people buying in London postcodes
2. The strength of Sterling is making property more expensive to foreign buyers (up 30% against the Rouble in the last year
3. A public blame game between Carney and Gideon – clearly they’re both shitting themselves things are going to go pop and they’re both trying to protect their own reputations – which is a great motivator to providing a proper solution IME
4. Duke of Westminster pulled a chunk of his investments out of prime London, calling the peak of the market, a couple of weeks ago and made sure everyone knew about it
5. Fear amongst buyers that interest rates will be going up soon, meaning they’re thinking more about what they can afford
5. Looking at Rightmove for Bromley, quite a few sales appear to have fallen through in recent weeks – suggests maybe people are not being able to get the finance, or just refusing to stretch themselves.

tbh we need a drop and whole load of people to fall into negative equity and for the media to make a massive fuss of it just to remind people that house prices are not guaranteed to go up for ever and ever…

Sitting here as a first time buyer with deposit ready I’m really not sure if now’s a good time to buy or not – too much craziness (irrational exuberance) and too many suggestions of an underlying weakness from too many people taking on unaffordable levels of debt (again!)

OP the BoE isn’t daft and they are not going to put interest rates up to try and slow London’s property market, it’s too damaging nationally and a lot of London buyers don’t care about the level of interest rates, it’s not really a factor in their decision making process.

Foreign owned properties should be subject to capital gains tax, currently they are tax free.

More social housing built by state and rented to key workers (a lot of key workers have to rent from private sector and the private sector buyers push prices up)

Government work to encourage employment growth outside the South East, not just government departments but private sector jobs.

Would that not help close the north south property divide?

No. That’s a separate issue.

In no particular order-
Build more houses on green belt land.
Regulate the build quality to a far higher degree and specify minimum floor areas that are what people want rather than what house builders want.
Build more state funded houses, to circumvent house building companies claiming they’re getting insufficient return on their investment.
Vastly improve tenant rights.

MoreCashThanDash – Member

…mortgage lending needs to go back to 3 times salary and repayments no more than a third of disposable income, try and get some common sense back into people.

does that inlude all the ****ing buy-to-let landlords?

My friend rents a three bed ex council house in Earlsfield, similar houses to his have gone from £500K last year to £800K this year, as four have recently been bought at this price by Russian investors thus resetting the bar, so normal people in normal houses (if half a million quid is normal)are now being affected directly. He was hoping to buy in the area and now that is just impossible for him.

I don’t think it will be solved by building more houses. There’s too much money tied up.
If you’re a developer, are you going to sell a batch of new houses (which are released in small numbers) at less then the going rate?
Maybe after 10-20 years of a huge building program it might work, but not in a year or too.
Just increase interest rates to 10%, that’ll reduce prices.

There is absolutely no need to build on the green belt at present, loads of brownfield sites and other sites with permission already granted – need to offer a carrot – tax breaks if necessary – to make it happen.

Buy to let landlords have to jump through as many hoops as everyone else, but they will only start to decline when cheaper social or new build housing is available – simple supply and demand. And they are not all scum, some are decent landlords who were just lucky having cash to invest at the current time.

Why do we have to solve it?. For a start, I’d like to see a government that doesn’t base nationwide housing policies because of what happens south of Watford.

We’ve just sold & bought in North London .
The estate agent told us that in the past 12 months the area we are in has been swamped with foreign buyers.
Our old neighbours were an Israeli couple who had bought a flat and were renovating it before moving in .
Not palaces,just poky 2bed flats!. In the last 6 months prices have gone up 15/20% ,depending on location. 😯
Don’t know what the solution is tbh.people are prepared to work here so there is massive demand.

To say LDN is a bit too vague as well. Property in a lot of areas in LDN have always been very high especially for houses & out of range for almost all people What has happened over the last 20 years is East London has changed beyond all recognition. Certain areas where once affordable in fact stupidly cheap (Newham Tower Hamlets Hackney Waltham Forest). This all changed when the Olympic development & jubilee line extension started and has since carried on & on & on….even Canning Town now has penthouse flats 😯 & the last I heard the V&A & Saddlers Wells are looking at coming to Stratford. Couple this with a kind of domino effect where people who lived in flats across other areas of LDN & now want a house have had to look over East to buy and this has driven the price up. The property bubble isn’t gonna burst here yet though if ever as East LDN is nowhere near its full development & the prices are still way off compared to West etc.

Just build and saturate the market with good quality low cost renal properties
will be the answer and be an end to the housing boom.
But Who is actually going to do that when the same companies are going to make
serious short term cash return if they sell the properties.

The end of the day it is a Government problem not a developers one

1: Vote Boris out at the next mayoral election

2: Tax those buying to let into oblivion.

2: Tax those buying to let into oblivion.
.
.LOL But at the moment they are the only ones providing Housing and do pay an higher Mortgage rate.
Its a Government Problem.

Its a supply-side problem

Not really: http://www.theguardian.com/commentisfree/2014/may/21/no-housing-crisis-just-very-british-sickness

MoreCashThanDash – Member
…mortgage lending needs to go back to 3 times salary and repayments no more than a third of disposable income, try and get some common sense back into people.

does that inlude all the ****ing buy-to-let landlords?

Generally no if it’s a business (as is BTL). You just need to show you can cover the mortgage with the rent.

1: Vote Boris out at the next mayoral election

2: Tax those buying to let into oblivion.
@El.Bent – Boris has nothing at all to do with the price rises in London. Without buy to let landlords there’s a lot of people who would have no where to live as they don’t have the desire or resources to buy a house.

@jambalaya You’re making it sound like buying and renting out a property for profit is some sort of philanthropic pursuit for the greater good of society!
Without buy-to-let landlords inflating the market,a lot of younger people (myself included) could afford to buy and not need to rent at all.
It’s bad enough competing with the first time buyers of my own generation for suitable housing without previous generations squeezing us out of the market altogether.

@El.Bent – Boris has nothing at all to do with the price rises in London. Without buy to let landlords there’s a lot of people who would have no where to live as they don’t have the desire or resources to buy a house.

Boris encouraged too much overseas investment into the London property market.

Without the land lords…the houses/apartments will still be there.

I’m never sure about this supply crisis.
Isn’t housing demand a calculation of “potential demand” and more a view of how many homes the market will support rather than actually need. If there was really a supply crisis we would have homeless people all over the place and we don’t.

Does anyone have any actual data on vacant buildings, brown field sites and increase demand due to an ageing population(stripping out immigration and potential customers who may buy given easy finance but don’t really need to)?

All sounds a bit like the “we need to build roads” argument, when do we have enough roads and when do we have enough houses?

As some have suggested, there’s no such thing as “affordable housing” as as soon as it’s built the market will correct it’s value. The only ways to make this property is to either make it inherently undesirable or underprice it at time of sale and I can’t see any developer not wanting to milk every last pound out of a development.

I’m hoping the crisis we’ve now got will correct itself in 20-30 years time when all the baby boomers are gone and we’re left with a more manageable population size that doesn’t have half the money.* There’s just so many 60-75 cash, equity and pension rich folk around that very few of us that joined the party late can afford to either get on the ladder or get on the next rung. I’d be looking at another 100k for an extra bedroom where I am frankly, I can’t afford it and short of earning 100k a year I can’t see how I could.

* I haven’t looked at the numbers on that but that’s how it feels.

Just build and saturate the market with good quality low cost renal properties

Ireland mk2 right there, regardless or whether the the developers are reimbursed via rent or via sale.

Unless it’s government backed and underwritten.

Build more, and try to sway the general love of home ownership towards home rental.

No more building in the south east.
With whole streets empty in Liverpool and Wales new comers to our country should be persuaded to move to those areas.
The infrastructure isn’t there. Where’s the new hospitals,doctors,sewers?

Watching Homes under the HAmmer – once they tell me the answer I’ll post it up

Move as much government out of London as possible and increase taxes on companies based there. Simple solutions.

Without buy-to-let landlords inflating the market,

Nothing to do with globally available easy credit for years and years. No sir – just some private landlords. The evil murdering nazi serial killer banker bastards.

Need the jobs away from the SE so encourage businesses to set up elsewhere? London is seen as the appropriate place for many businesses for prestigious reasons and that attracts professionals but many poorer people want to live there too; not sure what can be done without someone saying it’s ethnic cleansing. As it is the Green belt will be built on and housing become denser as gardens are built on and gaps between villages and towns shrink. With remote working being viable for many seems a shame more can’t live away from the SE.

Buy to let distorts the market. I make no comment on whether it ethical.

Couple goes to buy a house as home. They’ll need 5% of the value up front and then the interests rates will be quite high as of the high loan to value ratio. They’ll also need any fees etc. up front

I could go along to the same property with cash in my hand to buy that same house buy re mortgaging my house. My loan to value would give a lower interest rate and I can choose to borrow enough to pay stamp duty and other fees up front

Move as much government out of London as possible

They did this in the 70s afaik.

Put restrictions on foreign buyers buying in cash who have no UK residency.
Limit the amount banks will lend.

IMO there’s not a shortage of properties (or there’d be masses of people living on the street), but there is a shortage of properties to buy ie: If I own 2 houses, live in one and rent the other out then the 2nd one is unavailable to a first time buyer.

Coupled with banks lending silly amounts, Estate Agent tricks with open days and sealed bidding + panicked naive first time buyers and you have a bubble. There’s basically too much money chasing too few goods – classic inflation. Sellers simply can’t ask for inflated prices if buyer can’t access the debt…

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)

Go figure.

We could turn the fox hunts of old into estate agent hunts.

23yr old wannabe The Apprentice types running through bracken and fields screaming they want a last supper of a line of coke and a night at Fabric before the hounds get to them