'Do you want house prices to rise or fall?'
Would it be better for Britain for house prices to rise or to fall? It is a straightforward question but one to which politicians haven't got a straightforward answer.
You can see how the housing representatives from the Conservative, Labour and Liberal Democrat parties reacted below.
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Although the question is difficult, it is one any government needs to resolve if it is going to have a coherent policy on what is one of the most critical issues facing modern Britain.
The country is in the midst of what is arguably the worst housing crisis since we picked through the rubble of what was left of our cities after World War II. Millions are on waiting lists for social housing. Millions more are trapped in the private rented sector desperate to get a toe on the property ladder.
Housing may not be a major issue in the national election campaign, but it is a huge one on the doorstep. I was reading a piece in London's Evening Standard newspaper on what the candidates in the East End constituency of Poplar and Limehouse think voters care about most. The number one issue was housing.
A recent poll suggested that almost one in five voters think that housing is an issue senior politicians should be discussing more. That concern is driven by the fact that, for a great many, houses in Britain are much too expensive.
But for millions more who are lucky enough to own their own home, a property is often both a nest and a nest-egg. It offers financial security but, if things were to go the "wrong" way, their potential financial ruin.
Rapidly rising house prices in the past 15 years, driven by cheap and easy lending, has trapped us all; half the country is desperate for house prices to become more affordable, the other half is desperate that they increase in value.
It is a generational divide: the average age of a first-time buyer is now 37, which means that those younger or older than that will generally have a different answer to the question at the top of this post.
In response, the politicians stress the need for "stability" and "an end to the boom and bust" of the housing sector. Fair enough, but what general direction should the market take? No answer.
All talk of the need for more affordable homes, but none is candid enough to admit that that is another way of saying house prices generally are too high.
The relationship between average house prices and average incomes has changed radically since the mid-1990s. Then the relationship was about 2:1. Now it is more than 4:1 and in parts of the country double that.
Increasing supply of cheaper properties, introducing measures to help first-time buyers, expanding the social housing sector - these ideas would, to a greater or lesser extent, reduce demand and bring average prices down closer to incomes. But the politicians won't put it like that because, as one of them put it to me, "that would be political suicide".
If asked, voters often say they just want politicians to be honest and straight with them. When it comes to housing, politicians think it better to dodge the question and keep their heads down.
I'm 
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There are governments that have a primary revenue from property taxes. In those countries the prices were increased along with the taxes so property values and taxes rose the same. Now that prices are falling the governments do not want to lower the values as this also will lower the taxes for the government. When governments favor banking over people, governments were also motivated by greed of new taxes, the resulting mess is difficult to correct and as usual placed on the backs of the people rather than those who caused the problem. If the pain is going to be felt it should be the lowering of home values to reflect the market value, isn't that the way it is supposed to be, and lower taxes as well. The middle-class took the biggest hit from all of this, lost retirements accounts and investments, higher home values that have collapsed and higher taxes now and in the future. If the governments want to spur the economy they must recognize that the system is driven by middle-class consumer spending and not the well-being of the rich. This is really about the corruption of government and influence of big businees and banking that is the root of that corruption...as well as the politicians that can be corrupted.
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The best thing for Britain’s housing market is fair market value. In other words, establish fair market value.
Some might advise supply and demand, but supply and demand seldom gives the fair market value. E.g. If supply is low, the seller will exert pressure to get every cent possible. What’s wrong with that you might ask.
Houses that are overvalued, will likely come with mortgages that are, of course, based on the money needed to close the purchase.
Should the market fall, you will end up with a mortgage that is likely worth more than the house itself.
Should the market climb, you will end up with a house that is not profiting from the real estate upswing, and may never profit because it was not purchased at a fair market value for that neighborhood.
You say, the country is in the midst of what is arguably the worst housing crisis. All the more reason to establish fair market value. If builders cannot profit they will not build. If housing cost is too high, buyers cannot buy. If housing cost is too low, you will get speculators out the ying-yang.
Okay so houses in Britain are far too expensive; this must mean that they are either estates, or they are not selling at fair market value. As long as this position persists, the construction industry and the real estate industry will be in for a very rough time. This is one of the pitfalls of capitalism – supply and demand is seldom fair, and because supply and demand fluctuates you never know whether you will profit or lose.
I suspecxt this is why you make this statement: a property offers financial security but, if things were to go the "wrong" way, their potential financial ruin.
Why have prices rapidly risen in the past 15 years? Is it not supply and demand, capitalism's pitfall?
In response, as you say, politicians stress the need for "stability" and "an end to the boom and bust" of the housing sector. The answer is fair market value.
How do you establish fair market value?
In Canada, which is my country, the Canada Revenue Agency (CRA) lists the following working definition in its on-line dictionary:
Fair market value generally means the highest price, expressed in dollars, that a property would bring in an open and unrestricted market between a willing buyer and a willing seller who are knowledgeable, informed, and prudent, and who are acting independently of each other.
I suspect that British housing is overvalued.
What is an "open and unrestricted market"? One that does not depend on supply and demand. It depends on the intrinsic value of the house, and that value will be relatively permanent. I say relatively because every 20 years or so, Canadian properties get reasssessed to bring them in line with current fair market value.
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The wages to price ratio is a red herring: the majority of purchasing households now have two incomes and noone gets married at 18 and buys a house any more. As a result, price falls will primarily affect expensive family homes. First time buyers are primarily professional couples without kids; the loss of one wage only happens with a family.
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Property prices, like all other prices, are subject to market forces and the good old 'supply and demand' law.
If the financial institutions will only loan to people who put down a substantial deposit, then those who do not have the deposit are not in the market until either property prices are affordable or they have saved the money. This is how it was in 'the old days' when the building societies looked after their investor's money and would only loan to people who could afford the repayments. Also, if the loan takers failed to pay, the building society regained an asset that was worth more than the mortgage. Very prudent!
What does it all mean? House prices will drop to sensible levels.
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What's wrong with building Council Houses again. Most local authorities have plentiful capital receipts and what an excellent way to stimulate the local economies. It is shameful that we have had a Labour government that tolerated and even encouraged lending to those who were never going to pay back their loan. The parties are in denial about the fact that there are millions of people who are unlikely ever to afford to own their housing unless we have another government that virtually gives these public assets away. There is a need for a re-think on the cult of home ownership but I suspect that not even Nick Clegg will be breaking any moulds of this issue.
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> half the country is desperate for house prices to become more
> affordable, the other half is desperate that they increase in value
This is an excellent point, I've seen it myself - while I was moaning about interest rates for savers going through the floor, my friend was celebrating over his variable-rate mortgage.
I'm still trying to work out whether that's the way the game is meant to work, or not.
Am I surprised that pollies ignore the problem? No, that's what they do, they aren't interested in actual governing, they just want the power, and the second homes, free travel, discounted meals, renovations, and fancy gardens. Problems? Who cares? We are all right here, Jack.
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Personally I bought mine some time ago so I would be happy for the prices to go down a bit to help the first time buyers. Pretty horrid for people who get stuck in negative equity though.
However, I don't think there is any prospect of house prices going down consistently.
You can't add a million people to the population - think a city the size of BIRMINGHAM - in well under a decade, do nothing to improve infrastructure and think the number of houses will be sufficient.
Until they manage mass imigration and the overwhelming increase in birth rate from the same people then prices are only headed upwards.
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We so often see the comparison of average house prices with average incomes.
But is this telling us the whole story? I have experienced mortgage interest rates of over 13% and under 3%. Disposable income is another factor i.e. what we pay for everything else including taxes. A more meaningful comparison would take this all into account and compare the repayments on a typical mortgage to average disposable incomes.
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I think people need to give up their houses because we need the land for species preservation. People go to the country and expect every amenity to be there from the city. Development of "Ticky tacky little boxes on the hillside" is stupid and a waste of resources. Why can't people share amenities so that we stop encroaching on native animals. We need to get rid of zoos too and put that money in maintaining natural habitats. We don't have the right to destroy the world and take every last resource. As the only species with a cognitive sense of morality, we should be protecting the earth.
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This whole argument is predicated on the view that everybody needs to own a property. This was not the case historically and not the case in Europe where most rent and generally have a better quality of life without the millstone of a mortgage. It is a similar position to everybody has to have a degree - if you have the intelect or the funds fine. At the end of the day everybody is not equal. This is one of the fundemental facts of life (like it or not).
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"Hope all the house prices crash, so the buy to let landlords dump all they property so normal familys, can get a house to make into a home A place to live in ? { not just to make easy profit } for greedy money rich land-lords and The banks.
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I'm 31 and earn £26k a year which is about the average salary nationwide and way over the average in my neighbourhood. To buy a 2 up 2 down terraced house in need of damp proofing and top to bottom modernisation in Erdington (which currently "enjoys" the 4th highest unemployment rate anywhere in the UK), you need £75k. To buy one that needs no repairs it's more like £100k. Assuming I could get a mortgage for £100k with 10% deposit (it's difficult to save 5 months of your annual salary before tax), I can't get a 3 year fixed rate mortgage for less than 6.8%. If I had 40%, I can get as low as 3% interest, which doesn't seem fair, but it's a generational thing.
I missed the boat on buying a house. They're now starting to slow down, but it's ridiculous that house prices have increased during a recession. There are too many people and not enough houses. Sensible, green, affordable houses.
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I live in a small single apartment. I take the bus which is close to shopping. I have 3 pools, a park, a library, gym and dog parks nearby. I sleep on a futon. I'm not encumbered with material things. Life is simple. People should choose simplicity in their lives so they're not worrying about how to pay a ridiculously expensive mortgage and utilities. Maybe I live this way because I'm older and don't want anything anymore. Material things never made me happy. A wise actor once said, You spend half of your life acquiring things and half of your life giving it away. It's easier to give it all away and live a simple life.
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There's a terrific push to keep properties turning over at bubble prices - that's why there are so few first-timers in the market. I would sooner see mortgages limited to say 90% LTV over a max period of 20 years. With the base rate as low as it is + these stimuli the bubble will inflate further - then when interest rates rise all those on 100%+ mortgages are going to feel the pain.
And all for what? House ownership can be an absolute pain. It takes but one blight to make it extremely difficult to move without losing money in addition to the (nowadays) terrific expense that mostly drops into Brown's coffers.
Renting has real advantages with proper controls applied: when you want to move you wait until the end of the lease and move: no stamp duty, no wretched HIP, no fragile chains, no death or inheritance tax and no turning your house into a public exhibition.
Supply and demand is currently distorted by artificial stimuli. They lure first time buyers into a trap. When a couple starts a family, what then? No stimuli, no stamp duty holiday and at the wrong time they're forced to find even more money. What a life!
So the very least, politicians should withdraw all these stimuli to allow prices to reach a realistic market level. And when there's too little money at the first-timer end, the market isn't at a realistic level. In time, prices will drop - unless it's the government's aim to tie people up in debt for ever as well as the stress of home-owning.
Moving home is said to be the worst source of stress and misery after bereavement.
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Too many people get hung up about house prices. Frankly with falling prices the only people who benefit are first time buyers. With rising prices the only people who benefit are last time sellers. For everyone else its 6 of one and half-a-dozen of the other
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The worst legacy of the last Tory Government. They gave away all the social housing and relaxed almost all control on the banks so that the price of houses lost all relationship with any real material cost, and simply became a matter of how much a bank was prepared to lend. Why sell your house for £50k when the bank will lend buyers £100k. Call it market forces and it'll be years before anyone spots the banks doing a runner.
Its time at least one of the parties came up with a way to get some realistic control on the extortionate rents charged by the private sector because at the moment there is no alternative for those unable to get on the housing ladder. Unless you already own property (which is where all those large Tory party banners are hanging round the countryside), God help you if the Tories ever get in again.
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It's not house prices that are too high,it's land prices with planning permission that are too high.Obviously the government have an interest in keeping house prices high because of revenues gained from sales,so we find ourselves in a false market situation with artificially maintained prices,as soon as house prices started to drop in the recent financial meltdown,the government stepped in to stop them falling further.
Only around 10% of land in the U.K is built on,we could easily afford to build on another 5% of farmland which could be bought at farmland prices by compulsory purchase order by the government and built on,this would bring the price of houses down as the supply of houses would increase,then some younger people might be able to afford to buy instead of wasting their money on exorbitant rents.
The rental market is also kept artificially high by councils providing rent rebates to people who cant afford all the rent,this way,council tax payers are subsidising better off property owners who rent their houses out,some poorer people probably get 100% of their rent paid each week,all financed by the council tax payer and allowing landlords to put any high rental on a property in the knowledge that if the tenant cant afford it the local council will subsidise the payments.
Building houses on a further 5% of the land instead of cramming houses together on brown field sites would generate a huge amount of employment across the board for builders,road builders,landscapers,kitchen fitters,carpet manufacturers,electricians,plumbers etc,real jobs,where people get their hands dirty and earn a living and also contribute to tax revenues by way of income tax.
If the projected population increase is correct,and we are going to have 70 million people living in this country within a few years then something will have to be done to house everybody,cramming them all in city and suburban environments is a recipe for disaster,we could easily spread out a bit more,there are plenty of unused fields around the country,close to main roads and easily accessible,there are several near me that I never see a sheep or cow in,they just sit there doing nothing and the farmer probably gets paid for keeping them out of use.
Free market? I dont think so,more of a controlled market with the "haves" on one side and the "have nots" on the other.
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I completely agree with vitruvius55.
When are journalists going to start comparing statistics that house buyers actually care about? People decide to buy based upon the answer to this question: 'Can we live on what's left over after the monthly mortgage payment?' End of story.
If there are people out there who can answer yes to that question, there are people buying houses. They are not making rational investment decisions - they just want to do what they have been told all their lives is the right thing to do for their future.
Comparing the ratio of 'average whatever' to 'average whatever else' in 1993 versus now is meaningless.
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There was a similar situation in Holland in the 80's. They provided a solution by building lots of flats. This deflated property values for a few years. Not sure where that market is now. Certainly it would be advantageous if prices could be stabilized.
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The way the housing market operates is far from being a simple supply/demand model. What is not often commented on is the amount of public subsidy that already exists in the form of rent deposits and housing benefit. Until very recently there was another subsidy provided by the private sector in the form of either direct payments or built houses at well below market price as a requirement of obtaining planning permission. During the boom years the private sector could afford to provide this 'subsidy' and now it can't. The Private Sector is having to renegotiate the agreements signed in better days and reduce the proportion of affordable housing provided which was reaching 40%. Land prices are falling now but many of the private sector builders have bought land at a much higher prices and are facing losses if they build, and losses if they don't build.
House construction prices will inevitably rise due to higher and higher standards required in the interests of energy efficiency. Triple glazing cost more than double glazing for example.
One argument put forward is to allow a massive over-supply of development land in order to force the price of land down - hardly a practical approach in a country where battle commences over every greenfield site proposed for housing. In the South-East this would simple result in a lot more development sucking in people in to the South-East which has an inadequate infrastructure unable to cope with the last boom; and infrastructure is where many of the cuts will fall as they provide an immediate cost reduction. I hope you are not waiting on a by-pass being built - the start date of the much promised and needed schemes will come and go and the schemes may never be started.
Is it time to introduce a much wider use of longer leasehold secure tenancies where the developer/building society/bank retains some of the equity long term and the rents can then be set at a lower level than full market value?
In the 60's housing was described as being divided in to PITS (Poor Insecure Tenants), PODS (Property Owning Democrats) and WELFSTATS (Council Tenants) - has much changed?
Don't expect the politicians to provide a coherent and practical solution - it has yet to be devised
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A lot of nonsense is talked about the "recent" increase in house prices.
House prices have doubled every 7/8 years for decades.
My first house, bought in 1967, cost me £5,100, that house today would probably fetch around £250,000.
That rise did not occur in the last fifteen years.
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Selling off the council housing stock was one of the worst decisions ever made - sure, it 'empowered' a load of people to become property owners, at a massive subsidy, but, at a stroke, it denied thousands the chance of accomodation (not everyone wants to be part of the property owning mafia!). This is the direct cause of all the complaints about 'lack of affordable housing'. We need a coherant localised COUNCIL HOUSE building plan NOW, if we are to prevent serious social meltdown in a few years time. I chose to own property, and I don't regret the decision for one moment,but it's not for everyone, and we have a duty to provide decent accomodation for the less well off and those in the rural areas in low wage situations.I have yet to hear any serious propositions from any of the main parties at this election time - maybe it's time for proportional representation at last, might just concentrate the mindset?
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"The worst legacy of the last Tory Government. They gave away all the social housing and relaxed almost all control on the banks so that the price of houses lost all relationship with any real material cost, and simply became a matter of how much a bank was prepared to lend. Why sell your house for £50k when the bank will lend buyers £100k. Call it market forces and it'll be years before anyone spots the banks doing a runner."
And labour did nothing about this in 13 years, infact they are just as willing accomplices. For example, changing the inflation rate used as a target to the CPI which conveniently removed all housing costs. Similarly delegating a task such as interest rates to the BoE does not really absolve them of responsibility to make sure the MPC does it's job correctly. If interest rates had been increased in the mid 2000s it would have helped steady the housing market but the government was far to happy with the growth figures the market was generating to want to bother that (probably quite happy with their own property portfolios too!).
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The problem now is finding a suitable home, the second problem is finding one that I could afford. There have been loads of new building schemes in our area over the last few years but almost all of them are executive apartments that are designed as somewhere for a business person to stay during the week before going back home at the weekends. I've been to see several of them and they're just like posh halls of residence, this wouldn't be such a problem were it not for the £125,000 minimum price tag as well as the several thousand pounds per year building management fee's, a few thousand pounds a year more for a parking space and the fact that most of them have been built in non-residential areas that have no local shops or services as well as being off the public transport network.
Who wants to pay that much money to live on an old industrial estate in a home that's about as big as a veal crate filled with a load of business men that go home every weekend ?
You're stuck miles away from anywhere you want to go and anyone you want to see and you've got to bring everything you want in to the area as there's nowhere close by that sells anything.
Getting a home in a residential area around here is now only for those earning serious money or no money at all. The local councils and housing association's have a large housing stock but these seem to be reserved for teenage parents and immigrants. Obviously these two groups have a much more urgent need for housing and I can understand why I as a single man will be dropped down the waiting list so that these groups can be housed but I've now been on our local housing associations list for over six years and I'm now further down the list than I was when I first went on it.
I don't earn a lot of money but because I do work and have always worked since leaving University it means that I'm effectively excluded from the public housing program. I've been told as much several times by different people who work for our housing association, one of them joked that if I walked out of my job and got a young girl pregnant then I'd be found a home within a few months yet I had very little chance of ever being found a home while I kept on working.
The prices of homes in residential areas around here is now ridiculous, my mum bought her current home for about £30,000 in the mid 90s, the house that makes up the other half of the semi sold last year for over £130,000. We're not in some leafy suburb in the Home Counties either, we live on the edge of a 1960s council estate on Merseyside where most homes were bought by the residents under Thatcher's council house sell-off in the 80s.
It's unusual to find anything around here going for less than £100,000 unless it needs a significant amount of repair or is in an area that reminds you of Basra.
For me, the only option is for the government to start a massive house building project in order to provide enough homes for all of us that need them. The private sector simply is not providing enough homes or enough suitable homes for young people (singles or couples) and this has driven house prices to insane levels all over the country.
A public house building program would be a perfect way of providing training and employment to a lot of the young people that are currently unemployed. It would also allow them to be able to regenerate some of the run down parts of our cities. It may cost a lot of money but they'd be guaranteed to make a return as there are millions of us looking for affordable homes that would jump at the chance of renting a secure, long term council house.
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Another article about housing prices which doesn't mention housing benefit. The UK is subsidising BTL landlords to the tune of £20 billion a year. Given the stranglehold on new building permits, this subsidy does nothing to increase the supply of housing, but it does a fine job of keeping rents and house prices high.
Do the math on housing benefit. The UK spends £20 billion a year on Local Housing Allowance. Given that the government can borrow long term at 4%, this means that the UK could access £500 billion to actually build council houses for those in need rather than renting houses from landlords through housing benefit. At £100,000 per unit of housing, the Labour government could have built 5,000,000 (FIVE MILLION!!!) new houses. There are only about 20 million households in the UK to start with, so this represents a 25% increase in the housing stock, which would have taken care of almost any "housing crisis".
The New Labour strategy of turning to private sector BTL landlords to provide housing for the needy has been a colossal failure. It's bankrupting the Treasury while providing no net social benefits (any housing provided to the poorest is simply coming from the working poor who are being priced out of the housing market and being forced to live with parents or flat-mates). But, then, it keeps house prices inflated, so no one seems to care.
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the massive inflation in house prices in the last 10 to 15 years represents a significant inter-generational transfer of wealth, from young to old.
High land and house prices are a Bad Thing. They decrease mobility, and mean people get stuck in debt.
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The house prices in this country are disgraceful. Housing, and I mean decent housing should be a human right and that means affordable. We should take pride in the wealth of this country; we are wealthy enough to ensure everyone has a decent home rather than leaving far too many without.
What does anyone mean by 'financial security'? A nest egg for when things go wrong? Well, in that case why aren't people prepared to sell their homes to raise the cash needed when things go wrong if that property really is a 'piggy bank'? Either it is a nest egg just like cash, or it is a home. If it is a nest egg, then release the cash when you get old and sick rather than worrying about your kids and their inheritance.
It seems to me home owners are trying to have it both ways. What I'd like to see is the offspring who dedicates their lives to looking after the elderly parent who can't manage anymore gets the house. If no one in the family is willing to care for the parent who once-upon-a-time took care of them, then sell the house and use the money for the needed care.
It isn't fair on those who can not own their own home. The schooldinner lady won't earn enough to pay a mortgage, but may very well work her finger to the bone all day long for the kids, then go home to take care of mum or dad who never earned enough either, saving the government thousands every month. But she will be left with nothing other than memories, some bits and pieces. Now how is that fair?
It bothers me that we ignore the poorer, in a country where everyone is supposedly equal.
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Renting works in places like France because there when you rent it is treated like it is your own home not the landlord's. Which means you don't have to get inspected regularly, you can have pets, you can redecorate, you don't have to get permission to bang a picture-nail into the wall...
If the ridiculous restrictions were dropped from standard letting contracts over here, then renting wouldn't be such an onerous option.
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24. At 9:57pm on 19 Apr 2010, Buck_Turgidson
Good post. I do hope things change for you. You are not alone, but definitely ignored by not just the politicians but the media also (it wasn't so long ago they outrageously liked to run news items on those people who were so sad they stayed with mum and dad, highlighting just how useless our media really is.
The masses of executive apartments have always puzzled me - just where does all that money come to pay for them? I asked around and it seems that companies buy them to house staff!
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I could never understand why rising house values excite people, Any profit is normally an illusion unless you trade down (which few do). It is cheaper to trade up in a falling market than a rising market,yet few people want to sell in a falling market. What we have seen is a restructuring of the housing market back to the pre 1954 residential letting legislation. In future most young people will rent,rather than purchase. This has several advantages, not the least being employment mobility. There are also many hypocrisies in the housing market artificially increasing prices, notably the desire to restrict new development on green land at the edge of urban areas which is normally cheap land. Another problem alluded to by others is that now it is common for two partners to work demand, as determined by price, has increased. Where a household could formally spare say £10 for mortgage payments, they can now afford £20. All this has largely done is necessitate two partners working to live in a property which formerly could be purchase by just the one wage. It could be argued (and has elsewhere) that the increase in women working has mainly benefitted the banks.
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At 5:20pm on 19 Apr 2010, Ted Dobzhansky wrote:
> The wages to price ratio is a red herring: the majority of purchasing
> households now have two incomes and noone gets married at 18 and buys
> a house any more. As a result, price falls will primarily affect
> expensive family homes. First time buyers are primarily
> professional couples without kids; the loss of one wage
> only happens with a family.
This post does not make any sense: the poster says that a first time buyer benefits from 2 incomes, so this will push up the price of "starter" homes.
Then when they decide to have a family, they lose one wage (or use a nursery, which costs nearly as much as a wage). So they buy a "family" home with just one income.
So a "family" home should logically then be cheaper than a "starter" home.
Which is just daft...
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Good article. The politicians do indeed seem to be ignoring this issue, which is pretty close to my #1 concern in this election (or it would be, if any of the parties had any policies on it). Keep up the media exposure on housing!
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High house prices are very bad for the country, great for the individual who can afford a house or 20. But all that has happened with the increases well beyond inflation is a rich few own most of the housing stock in the UK. This in turn has lead to a high rental market were government LHA decides the rent and landlords immediately set to that rent regardless of how well maintained the property is, this makes it harder for people renting on low wages to save for a deposit as most of the income is sucked up in high rent, so we have a collapsing base that can not rise unless someone dies they win the lottery or sell a load of drugs ... by working they are just surviving.
The next problem with low ownership of the housing stock is crime and debt, both cost the UK a great deal of money and tend to move on from area to area making debt recovery and crime solving much harder. If more people owned their own homes then more civic pride would be placed on local environments, after all in a rented property a broken fence is someone else's responsibility and unless the landlord does the repair,it will in most cases go unrepaired as the tenant feels no sense of ownership for the property or the area, if it gets to bad one can always move somewhere nicer..
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The UK government should have introduced a property tax on all domestic housing bought for speculative/buy to let reason's, this would have kept ordinary family housing affordable for working/middle class's people.
The the Domestic housing market should not have been allowed to operate like a Stock Market etc. At the moment we have overvalued housing stock being rented out at high rents, the only way a lot of people can afford it is with help from the government. The housing benifit bill is going through the roof.
If the speculators want to bet on property price's restrict them to commercial property, or the Stock or futures Markets, don't let them push up the price of the ordinary domestic housing, when they push price's up making a home unaffordable for people to rent or buy.
The Government and Tax payer's are the one's who ends up picking up the bill. In all the large Citys in the UK there are millions of working people who need housing benifit just to be able to afford to pay their rent.
The price of housing needs to fall in the UK, what do we have a government keeping it high for a few greedy speculators, with Low interest rates QE and billion's in housing benifits being paid.
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It is inappropriate to compare property prices over the years on the basis of multiples of annual income, when interest rates are a third of what they were in the early 90s.
With low interest rates now the mortgage burden now is no higher than it was in 1991, but what has happened is that the lenders are now back to lending on income multiples comparable to the 1990s(as opposed to the higher multiples of the mid noughties, and that is what makes the property unattainable.
A friend going through a divorce earning £250k with perfect credit and two million pounds in assets was refused a second home mortgage by his bank recently .....absolutely nuts.
We need to improve lender confidence and increase the size of the mortgage market and funds available ......remember these names who used to lend cash by the ton.......
Abbey National,Bradford and Bingley,Direct Line, Intelligent Finance, Alliance and Leicester, Royal Bank of Scotland,Bank of Scotland, Northern Rock,Woolwich etc etc ........ all now merged,taken over, gone, or a shadow of their former selves.
The first thing would be for the government to renew and extend its £300bln guarantee scheme due to expire very soon.
The other thing would be to have an enquiry into how to prevent young people accessing inappropriate credit , and to seriously look at the effect of the progressive reduction and scrapping of student grants(decisions taken by the very generation who benefitted from them ) and how governments encouraged indebtedness with the student loan scheme.
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27 When some people are given affordable decently priced social housing it gets neglected and trashed because it has been handed to them on a plate on "prioity points" for drug and alcohol and social problems.
Common areas get vandalised, rubbish gets left in hallways and in gardens and the whole area suffers.These people are the minority.
As a result most normal folk are willing to mortgage themselves stupid to get away from nightmare neighbours like that....would you want your kids playing in a heroin addict's garden? It's desperation to escape deprivation, and coompetition that forces house prices up and it has been like that for a hundred years.There is nothing unrealistic about this, it is real ,but it is grim.
I got burgled, had my milk and papers pinched, had my hallway vandalised and my car broken into three times had a loony neighbour popping hatemail through my letterbox in the middle of the night, radios blaring incessantly.
I moved house and went from a £300 a month mortgage to a £1500 mortgage and it was worth every scrimped penny.
In Singapore if you trash the area that you get fined or jailed and evicted pronto ....so they do not do it.
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33 Nonsense, the high number of homes for renting in the private sector has meant that in real terms rentals are exceedingly cheap....a flat in my street is renting at the same price it was 10 years ago,even though its purchase price has tripled, and the glut of similar properties on the market is keeping rents down and competition is pushing quality and equipment levels and spec upwards.
It was the credit crunch which forced sales of erstwhile rental properties and that pushed rentals up!
BTL is a tenant's best friend, even though you do not realise it.
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26. At 10:17pm on 19 Apr 2010, Amanda wrote:
"the massive inflation in house prices in the last 10 to 15 years represents a significant inter-generational transfer of wealth, from young to old.
High land and house prices are a Bad Thing. They decrease mobility, and mean people get stuck in debt."
This is a truism.
As often as not it represents a significant transfer of wealth to the younger generation as a huge percentage of first time flats are paid for by the parents of lucky offspring....or the deposit is paid for by the bank of mum and dad, or the weddings are paid for.
What we have is a generation of selfish young brats who expect everything on a plate.
When I moved into my first flat I furnished it with handouts from neighbours chucking out old cookers and couches.....today's young expect 40 inch tellys and double ovens and dishwashers and ensuites and leather sofas and would not look at anything not still in a wrapper.
AND WHEN MUMMY AND DADDY DIE OF EXHAUSTION FROM BABYSITTING THEIR GRANDKIDS YOU ARE GOING TO GET ALL THEIR DOSH ANYWAY SO WHAT ARE YOU WHINING ABOUT?
And these moany brats are going to vote Tory!
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I would like a government that would sort out the housing shortage once and for all by committing to build 200,000 houses only per year for 10 years in the price range £100k-£200k. Some of these houses say 50% should be social housing. This would sort out house prices in this country.
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The fact that none of the politicians wanted house prices to fall speaks volumes. This is despite house prices being cripplingy expensive and at the root of many of our economic and social woes. Shame on them all.
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The last 10 years we have had the dash to make "Units" and not houses (preior to that councils were told the approx spread of 1, 2, 3 and 4 bed houses, now they are told they must provide X Units of hich a 1/3 or so must be on brown field sistes).
Hence we have massive garden inflows and larger houses being split into flats.
In addition people investing in houses (buy to let) have had massive tax consessions over some one buying a house to live in, that and the 3 years where were were told that their properties would be transferable into their pensions and the said pension would be passable to their kids. This, the removale of the pension tax credit and cheep money from the banks fanned the housing bubble.
The current wages to house price ratio falls directly on two politions, prescott who changed the building allocation to units and brown who raided the pensions, freed the banks and promised the pension reforms.
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In the summer of 2007 I was working on eight multimillion pound developments in the Northwest (hotel, retail and flats)
After the Northern Rock went down the following happened:
Three went to completion because they were well underway.
Two were stopped after foundation stage, and are still at that point.
Three were stopped after demolition of existing buildings and are still vacant sites.
Most of the developers went bust and only one scheme has re-started because it is for social housing.
During the boom property increased dramatically in value.
In the past for example buy to let flats and commercial property were valued as follows:
Gross annual rent x Years Purchase multiplier = capital value.
This method of valuing property was basically thrown out of the window during the boom. Buy a flat for say £100,000, next year it’s worth £115,000; you didn’t need to rent it out to get a return on your investment.
The boom ended in September 2007 and we have now drifted back to the traditional method of valuing property.
For example a flat in the Northwest of England being worth £125,000 in 2006 has now fallen to around £75,000, and even that’s starting to look optimistic.
Problem is you can’t actually build them for £75,000, so the developments that were based on these inflated values, have no hope of ever going ahead.
The legacy from the speculative boom will be:
Yesterday’s hot investment, today’s social housing.
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I am a 23 year old graduate with absolutely no prospect of owning a home in the foreseeable future.
I find it very difficult to talk to the older generation who bought their houses for very little, have now made huge sums out of them - and yet they still think it acceptable to demand it rises further so that young people cannot enjoy the privileges they had.
It is similar in most things though, final-salary pensions now being propped up by the young who themselves cannot have access too - not to mention the crazy costs of higher education that was free to the greedy generation x.
I am a graduate who has constantly had a job since the age of 13, but on 21k how on earth can i afford to save over 15k (when i have to pay rent) - just for a 10% deposit and a horrendous interest rate.
Tell me this, with savings rates through the floor where is the incentive? I put £200 away each month - then house prices go up by 1% and add 2 grand to the cost of a house, it’s absolutely pointless. Why not go on the dole and get a house for nothing?
I am struggling to see how it is any different for a homeowner who has over mortgaged themselves by following the crazy assumption that house prices will always go up, who then cannot make the minimum mortgage repayments is any different from the lottery that the banks were playing - and everyone hates them. But the government has bailed these people out too by ensuring interest rates hit rock-bottom, penalising the prudent savers at the same time.
Simple message from Mr. Brown, there is no point to saving, SPEND SPEND SPEND.
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Property has always been a political football, after all ownership of property did once settle who voted and who could not, and the divide is not simply a case of price, cost or value.
Anyone who has looked at pictures of poorer areas in any country in the world will see the tenement building or shack or hut or tent or box. In the fifties and sixties there was a great fight against the evil landlords for whom income was everything and delivery of a product nothing. This evil was beaten by a huge increase in affordable rental property. The option still existed to buy but it was a choice not an essential.
Property prices are, and we all know this, way above what they should be, because property has been used in much the same way as money was prior to Thatcher. In other words you give something a notional value and watch that value rise without increasing inflation too greatly. This was the same sleight of hand used by the accountants who eventually caused the great bust.
Build lots of houses and help anyone caught up in negative equity by property price reductions. But do not deny people accommodation because you wish to feather your own nest. Rental payments should never be greater than 50% of the cost of a mortgage on the same property.
Force the property speculators to suffer for a change. After all they have had a really long innings of glut.
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I’m so pleased to see this issue making the press. I’m in my early thirties. I work hard and earn an average wage; I don’t own a property and have been subject to the difficulties (e.g. landlord decides to sell/ return from traveling/ wants to renovate therefore tenant has to move) not to mention huge prices of the rental market in the South East. I have had no fully secure permanent residence since leaving home at 18. The psychological impact of insecure housing is well documented and I know I’m many people in my age group who are impacted in the same way. This conversation is not just about money it’s about a whole generation being able to have a home.
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43. At 09:03am on 20 Apr 2010, Down_with_Dogma wrote:
'I am a 23 year old graduate with absolutely no prospect of owning a home in the foreseeable future'
Bide your time, there's a long way to go before this recession ends.
When they decide to start cutting the public sector, prices will start to move down again.
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46. At 09:51am on 20 Apr 2010, Dempster wrote:
'Bide your time, there's a long way to go before this recession ends.
When they decide to start cutting the public sector, prices will start to move down again.'
Thank you, I hadn't considered this.
I would like to make clear that I do not feel that I have a right to have anything given to me (I have had a job every day of my life from the age of 13) but would like to think that I would at least have a chance of experiencing a lifestyle comparable to the generation before me if I am willing to study and work hard.
Sadly, for those of us who are not born into wealth, the only way we may be able to experience such a lifestyle is when our parents pass away and leave behind their homes.
A chilling thought.
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Personally I don't have an intention of buying a home, however I really don't like that fact that the rental market is heavily biased towards the interests of buy to let landlords. Rental contracts are completely in the landlord's favour, lots of landlords won't even let you paint a room or drill a hole in the wall to hang a painting. They also seem to like making sure you don't get your deposit back no matter how well you looked after the house.
The rent prices are way to high as well, I know people from older generations who purchased houses when they were cheap who pay less on a mortgage monthly than I pay for rent of a double room in a shared house, how is that fair?
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#34 Jeff King
The UK government should have introduced a property tax on all domestic housing bought for speculative/buy to let reason's, this would have kept ordinary family housing affordable for working/middle class's people.
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There is such a tax - Capital Gains Tax. The exemption only applies to your main residence.
One factor that would make a difference in the Buy to Let market is to no longer allow landlords to offset their mortgage interest against their rent to reduce their tax liability. You can't use this tactic if you took out a loan to buy shares or any other investment so why continue it for investment properties?
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Well, the hysteria whipped up around house-owning is a very British disease. The media take every opportunity to keep it on the boil by talking in fateful tones about the latest price rises.
Panorama last night, "Is Britain Full," was both timely and explicit and should be mandatory watching for politicians. As things stand, nowhere near enough housing can be built to cope with a population growth mostly down to immigration and births of immigrants.
To try to (rather hopelessly) to accommodate growth in London, builders have put together the tiniest of flats called "started boxes" or something. Your "double" bedroom allows an 18" floor-strip down the sides of the bed (so you don't have to climb over the foot-end to get up. I mean, the Parker Morris Standards have long been scrapped: the standards from the 1960s that guided government funded domestic dwellings: council housing, housing in new towns between about 1963 and 1970. Unfortunately those standards were not clapped on private development.
Lesson: if you bought a council house built during that period - or moved to a new town - you got a bargain.
I think house prices have still a way to fall and should be allowed to fall. With inflation as it stands today the bank base rate will inevitably rise. If the B of E stubbornly holds the rates as they are on the fateful hope that inflation will drop, the problem is simply being pushed further up the line.
All artificial stimuli should be removed now. There is no justification for keeping them on as they support bubble prices. The sooner prices can become affordable, leaving would-be owners some money on which to survive, the better.
The absence of interest among first-time buyers shows either that prices are still far too high - or (thankfully) people are getting sensible and deciding to rent.
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I live in the South East and have tried to buy a 2 bedroom flat, the toruble is they go for £200-£250k , which is only 8-10 times average wage.
The Bank I've been with since I was 4 offered me a mortgage at only 4.68%, which considering they pay 0% on my currant account and 0.5% on my savings was in my opinion a bit high.
One thing which hasn't been mentioned is that in the 80's when we last had a big house bubble there was high inflation, so if you took out a mortgage which took most of your earnings you lived like a pauper for a couple of years but soon your wage rises took inflation into effect and over time your mortgage as a 5 of your income reduced.
Now we have no payt rises so if you have a high mortgage at the start you will forever be struggling for money.
#38, the reson most 'young' people now don't take second hand ovens and fridges is because white goods have dropped so much in value it's not worth it.
when my parents bought their house is cost £40k and a fridge freezer cost £1k, now the house is valued at £400k and the fridge freezer costs £250, as a % of the value of the house furnishings are an insignificant blip, if you're a 1/4 of a million in debt from the mortgage whats another £300 on a new tv rather than a 2nd hand one that would cost £100 to repair in 6 months when it breaks down?
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48. At 10:21am on 20 Apr 2010, Jamie wrote:
'I know people from older generations who purchased houses when they were cheap who pay less on a mortgage monthly than I pay for rent of a double room in a shared house, how is that fair?'
It's not fair, but as all of the people in positions of power throughout our society, including the polticians, are all from generation-x, it is unlikely that it ever will be fair as history has taught us that they are greedy, miopic and self-serving.
They will come knocking when they want us to pay for their healthcare and pensions though.
And yes, it doesn't help that most of us younger people do not bother to vote as politicians have no incentive to engage with us.
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The issue is not if house prices rise or fall. It is about stability with no large falls or rises.
Key drives of housing demand are:
+ family break up driving more households
+ immigration
By having a hand in both yet failing to support building outside of the South East government has been complicite in driving house prices.
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38. At 04:02am on 20 Apr 2010, onward-ho wrote:
'What we have is a generation of selfish young brats who expect everything on a plate.
When I moved into my first flat I furnished it with handouts from neighbours chucking out old cookers and couches'
No, you're not getting it. I can't afford a house to put any furniture in. First hand or second hand.
And can you be my parent please, because mine have never given me a penny.
Unbelievable how the older generation will not acknowledge what they have done.
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As long as our economy is property based as now,house prices will never come down to levels that low and medium income earners can really afford.
The only real solution to the housing problem would be for government to set fixed prices for each type/size of home built and adjust these prices to the economic climate,this of course will never happen as they would upset their big business friends in the city and building trade.
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38. At 04:02am on 20 Apr 2010, onward-ho wrote:
What we have is a generation of selfish young brats who expect everything on a plate.
When I moved into my first flat I furnished it with handouts from neighbours chucking out old cookers and couches.....today's young expect 40 inch tellys and double ovens and dishwashers and ensuites and leather sofas and would not look at anything not still in a wrapper.
What utter nonsense! Some of today's young may indeed want that, but please don't tar everyone with the same brush! Most importantly, you at least were able to move into your "first flat". Some of us can only afford to live if we rent a room in a flat which we then have to share with strangers.
Most people I know (twentysomething young professionals) want the ability to live in a relaxed environment. Where I live (Watford, so not exactly for the super rich) my boyfriend and I cannot even afford to RENT our own flat. I don't want a house, I don't need a huge TV, we have one car between us, we haven't been on holiday since we met three years ago and there is still absolutley no way we could afford our own place.
The only real way for us to find somewhere to live would be if I got pregnant, pretended I didn't know who the father was, got a council house and then got married. I have too much repect for myself, my boyfriend and any future family we may have to make that choice, but sometimes I wonder if I'm being stupid chosing to not play the game.
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The average house price is around three times the annual income of someone just below the top ten per cent. Thus, unless you inherit a fortune or chain yourself to an incredible mortgage, there’s no hope of buying a decent house.
It should be pretty clear that house prices are too high.
But, it’s impossible for a politician to admit it. We are all voters and most of us voters are stupid enough to believe that we are rich because our house (if we are lucky enough to have one) is worth more than we can imagine spending or could spend on anything (apart from another house).
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54. At 11:29am on 20 Apr 2010, Down_with_Dogma wrote:
38. At 04:02am on 20 Apr 2010, onward-ho wrote:
'What we have is a generation of selfish young brats who expect everything on a plate.
When I moved into my first flat I furnished it with handouts from neighbours chucking out old cookers and couches'
No, you're not getting it. I can't afford a house to put any furniture in. First hand or second hand.
And can you be my parent please, because mine have never given me a penny.
Unbelievable how the older generation will not acknowledge what they have done.
Oh, I think we acknowledge what we have done. We elected governments that were incapable of doing the best for society. Thatcher, who promoted both parties of a couple going to work... that allowed house prices to rise to unprecendented levels. Then governments that failed to spot the financial crises with their economics based on credit expansion, happy to let borrowing rage while they could take tax. Of course, one doesn't want even more government intervention but mortgage intervention would have been useful. Allowing people to take 125% mortgages in times of a housing bubble; allowing them mortgages up to 30 years when the mortgagor couldn't even guarantee a job for a year, was crazy.
We tried to make our points but they fell on deaf ears. The idea of promoting women quitting housewifery in favour of working simply turned them from house-slaves (some would say) to wage slaves. The consequent problems on society that could not adapt swiftly enough are plain as daylight.
You have to remember that once a government gets in it's impossible to sack it from outside parliament; impossible to force direct democracy that might have curtailed some of the excesses that led to the housing crisis. It wasn't us who forced students into huge debts to get an education, hence worsening their chances of having a home of their own. It wasn't us who allowed immigration to flood us unchecked threatening just about every aspect of infrastructure and culture, etc, etc....So spare a thought.
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"But the politicians won't put it like that because, as one of them put it to me, "that would be political suicide"."
Not entirely true, I'm afraid. The BNP have been mentioning this for years, and their popularity has been growing and growing.
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Communities should be designed more intelligently that take into account lifestyle changes. What is needed in housing at 30 years of age is very different than at 50. Building housing that accounts for the care of extended family or the elderly or the teen or the homeless is what's needed. I live in newer mixed use housing with a good mix of every age range. It was well planned. They really incorporated a sense of community including all socioeconomic levels. I feel safe in my community and can help my neighbor by dog sitting. I walk the dog. The dog forces me to walk. The dog isn't lonely. My neighbor supplies me with coffee. It's a win-win. If neighborhoods were better organized and planned, people would enjoy living in them and neighbors might be more apt to help each other.
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At 04:02am on 20 Apr 2010, onward-ho wrote:
What we have is a generation of selfish young brats who expect everything on a plate.
When I moved into my first flat I furnished it with handouts from neighbours chucking out old cookers and couches.....today's young expect 40 inch tellys and double ovens and dishwashers and ensuites and leather sofas and would not look at anything not still in a wrapper.
AND WHEN MUMMY AND DADDY DIE OF EXHAUSTION FROM BABYSITTING THEIR GRANDKIDS YOU ARE GOING TO GET ALL THEIR DOSH ANYWAY SO WHAT ARE YOU WHINING ABOUT?
And these moany brats are going to vote Tory!
We don't expect any of those things and I don't have any of those things. I have a 24" tv (actually a pc monitor but I have to make do) no dishwasher, a sofa with holes in it. Hardly the life of luxury. The reason people buy things new these days is that nothing is built to last, so if I buy something second hand it will break down very quickly and end up costing me more in time and money. It's not like i'm on minimum wage either I earn £7.70 an hour which isn't great but my parents managed to buy a 2 bedroom house while earning less than that.
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Though I understand things may be hard for young people now (I'm hardly old, still in my 30's) I feel there is some exageration going on here.
I've just checked rents in Watford where someone claims her and her partner can't afford and there's flats for £600-£700. With all due respect, if the two of you can't afford that (£350 each?), then there's not a lot anyone can do. And as for the comment about 2 bed flats being £200-£250k in the South East, that's not true either - I own one and it's about £130k and that's on the high side.
There has just been a boom - why moan now? As someone has said, house prices will probably fall when the public sector are hit.
And there's simply no point in building more and more social housing if the benefits system is allowed to stay the same. All that will do is encourage more feckless single mothers and unwanted immigrants.
There are graduates on here claiming they can't afford to buy - are these people only in their early 20's? If so, that's not out of the norm and has been the case for at least 25 years or so. Before that the working classes were lucky to go to university let alone buy their own home.
I currently live in a beautiful village in the East Midlands where I have escaped the nightmare of the suburbs (as onward ho has rightly pointed out, our downward spiral in social behaviours is another factor for forcing people to move onwards and upwards) and was infuriated to read that the local council wanted to build social housing so that the young people of the village could afford to live there and not have to demean themselves by buying a cheap house on a nearby estate. The concept that people have to rough it in the early days and then work their way up seems a little lost on some folk.
Though some sympathies for some guys on here - what has happened to our economy in general is a disgrace and the younger generation will pick up the tab. However, Labour have been in charge for the last 13 years, so the next time you want to talk about "fairness" and "closing the gap" between the rich and the poor, just be careful about what you wish for.
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What about those who have borrowed against the inflated value of their houses and would fall into negative equity if houses prices crashed? A good proportion of the credit boom was secured lending - this was ridiculously easy to obtain. Anyone who bought an average-priced house in, say 1997, saw it more than triple in 'value' in many areas over the next decade, and a whole fiancial industry grew up in lending against this value 'gap'. Consequently many people have additional mortgages, often right up to the maximum inflated value of their house. Any fall in house prices would certainly trigger an increase in repayments. Whilst house prices need to fall to allow FTBs onto the ladder, a whole lot of other people might just fall off it.
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58. At 12:20pm on 20 Apr 2010, doctor bob wrote:
'You have to remember that once a government gets in it's impossible to sack it from outside parliament; impossible to force direct democracy that might have curtailed some of the excesses that led to the housing crisis. It wasn't us who forced students into huge debts to get an education, hence worsening their chances of having a home of their own. It wasn't us who allowed immigration to flood us unchecked threatening just about every aspect of infrastructure and culture, etc, etc....So spare a thought.'
I appreciate that you have acknowledged your generations' mistakes (I am certain that we will make ours too)and yes, no one individual can be held accountable for the collective mistakes.
Still, I can't help but feel that 'we couldn't do anything about it' was the defence given by the majority of German's after the attrocities committed during WWII.
I'm sure we'd all agree that whether it was intended or not, wrong is wrong.
I'd just be happier if the rest of the older generation accepted that something needed to be done about it rather than demanding higher pensions etc to fund their selfish lifestyle and slamming the young who only want what was available to those before them.
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62. At 1:09pm on 20 Apr 2010, tinkertaylor wrote:
I've just checked rents in Watford where someone claims her and her partner can't afford and there's flats for £600-£700. With all due respect, if the two of you can't afford that (£350 each?), then there's not a lot anyone can do.
But add council tax and bills on to that and your looking at more like £850 - £900 per month, and in order to live near enough to the train station to commute to central London every day you have to be at the top end of that. In addition there would be the £200 per month travel card into London, and, frankly we can't afford that. With student loan repayments and both of us trying to start a pension, that is not going to happen. Nevermind if we did ever actually want to go on holiday (in the UK, I haven't be abroad in so long I don't even have a valid passport), or imagine trying to start a family.
As for the graduate comment, I am 24 and my boyfriend is 26, and I know for a fact that my step-father owned his own house when he married my mother at 30, and that my mother and natural father bought their first house when they married at 20 and 23 and started a family two years later.
I do not want everything on a plate, and I am aware that I have been lucky to go to university notwithstanding the hideous amount of debt, and that current students have it even worse than I did. All I want is access to the same housing as people my age who chose to get pregnant instead of going to uni. I don't want right-to-buy and I don't want benefits, but we are the first generation since World War II who are actually going to be WORSE off than the generation before.
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49#
I am well aware of Capital gains Tax, I mean a new tax should be introduced that would discourage the greedy speculators from buying house's to let out. why should the government be paying billions in housing benifit, so these people can charge high rents on overvalued
domestic housing. The only way to stop this crazy situation is to tax them so much that they invest in something else then we would see the real value's of Domestic Housing return to something more affordable for someone earning average wage's in the UK.
And government would not be giving billons to a bunch of greedy
Speculator's who are pricing ordinary people out of a home.
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It is largely academic as to whether house prices should rise or fall, if interest rates rise sharply then repossesions will rise and prices will fall, if cheap money becomes readily available again then prices will rise.
I actually like the 'Right To Buy' that Magaret Thatchers government introduced, it allowed some estates to be rejuvenated, however I also think that the money from the house sales should have been used to build more (and not spent on other things by central government)
We have a lack of decent affordable housing in the UK, private renting is ok for some people but not for all, if you are young or mobile then the flexibility of private renting is what is required but that flexibility is at a premium.
Private rents are generally higher than housing association/council rents.
If you are settled with commitments, children, schools, work, family etc. then decent and affordable long term accomodation is what is required which the private sector has difficulty in providing as they are subject to the vagiaries of the market (property ownership changes hands, financial situation or requirements of the landlord changes).
A comprehensive council/housing association housebuilding program to replace those sold in the 'Right To Buy' years is what is required, the 'Right To Buy' should still be available after a qualifying period, all proceeds from the sales should be used to build more.
'Cash for Clunkers' and the VAT reduction did not stimulate the UK economy but gave succour to foreign manufacturers, a UK housebuilding program would be beneficial to our economy.
As for the younger posters on here complaining (rightfully in my opinion) that they will never be able to afford decent housing due to the actions of the current middle-aged, don't worry, soon all us middle-agers will be old and at your mercy. (the young will inherit the earth)
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A lot of people claim that loaning in relation to earnings isn't necessary because interest rates are so low now. The problem with that is that it assumes that Brown's no boom and bust ideals are true, which we know they aren't. At the moment inflation is climbing and the western world in general sits on a knife edge between deflation and hyper-inflation. Both of which would have serious consequences for the over-leveraged home owners of today. Deflation throws people into negative equity, hyper-inflation requires high interest rates to control, which in turn cause the variable mortgage costs to go through the roof. Do not be surprised if during the life of the next parliament we see interest rates go over 7% and possibly over 10%.
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Personally, I dont care. I bought a one bedroom flat when I was single in 2005, and gave it back to the bank in Decemeber last year. It had gone down in value, so I was in negative equity. I also had my first baby on the way - and the place was too small for 2 of us, never mind three.
I stressed for literally 4 years about interest rates, depreciation and the recession. And it was a sad day sending back the keys and moving into a rented appartment.
But I can CATEGORICALLY say now that it is the best thing I ever did. A mortgage IS a millstone. Before I bought the flat I felt like a free spirited person, but as soon as I bought it I felt like a slave to the banks.. and this continued until I got rid of it.
Now I feel free again. I havent felt better in years!!!
Get out of your mortgage at all costs - it is SLAVERY!!!
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Toni49 @ 65
My parents bought their houses in their early twenties, but that was a generation ago. When I was in my twenties (10-15 years ago) none of my friends bought their own homes and that included those who'd been to university and many waited until they were 30. We lived at home or in shared houses. The average age now is 37 to buy a home, so I'm not sure why people who've just graduated think it's the norm to buy their own homes with almost immediate effect.
And sorry, whilst I appreciate that things aren't cheap and money is really tight, a rent of £600-£700 a month is not a wild figure. The starting salary in a call centre in the East Midlands is £16k so if you and your partner can't pull in at least £32k after graduation then something's gone amiss. Living in the south east can be expensive and if your wages aren't reflecting this, then you should consider moving and getting more for your buck.
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62. At 1:09pm on 20 Apr 2010, tinkertaylor wrote:
'Though I understand things may be hard for young people now (I'm hardly old, still in my 30's) I feel there is some exageration going on here.'
I admit that I may come across extreme in opinion, and that this can often be counter-productive. This is because the housing situation is merely acting as a vent of a larger frustration (and i'm trying to stay on the topic of the blog).
The housing market is a reflection of a much larger generational injustice which my generation are waking up too (maybe as a result of a larger proprotion of us going to university and understaning the basic economics).
We could also moan about pensions. When young people start their careers they are told that their pension contributions will go to fund final-salary pension schemes for the older workers, "oh but this scheme is no longer available to you"- that's not fair.
What about university fees: They used to be free but now "oh you need to pay circa 5k per annum"- that's not fair.
What about jobs: A degree used to gurantee a good wage, but now I have friends with a 1st in law that work in Waterstones on minimum wage. (I have no problem with people that do this, I just don't see why you need to be 30 grand in debt and know the intracies of 'mens rea' to do so).
And don't get me started on the irrversible damage that has been done to the planet...
Finally, will people please stop saying that the housing problem is caused by immigrants, racism is not the solution to this problem.
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Poster 12:
"I'm 31 and earn £26k a year which is about the average salary nationwide and way over the average in my neighbourhood. To buy a 2 up 2 down terraced house in need of damp proofing and top to bottom modernisation in Erdington (which currently "enjoys" the 4th highest unemployment rate anywhere in the UK), you need £75k. To buy one that needs no repairs it's more like £100k. Assuming I could get a mortgage for £100k with 10% deposit (it's difficult to save 5 months of your annual salary before tax), I can't get a 3 year fixed rate mortgage for less than 6.8%. If I had 40%, I can get as low as 3% interest, which doesn't seem fair, but it's a generational thing.
I missed the boat on buying a house. "
Nothing you have said remotely indicates you have missed the boat on house buying, you are in what many people historcally would have seen as the normal first step. A house 'Ideal for the first time buyer', 'Ideal for the DIY enthusiast' or 'In need of modernisation' for about 3 times salary - You save a deposit of 10% (7.5k) and get a mortgage of ~3 times salary (up to 78k in your case). You buy your house, work hard to pay the mortgage and fix the house up (DIY where ever possible), then if you want to move you can trade up, hopefully on a better income in years ahead and a property that is worth more than the now partially paid off mortgage. That is how my parents who are now in their 60s got their first house, and almost anyone of that age who I knew of as a kid did the same if they wanted house.
My parents first attempt at buying, before you were even born, failed because it was £100 (a fair bit back then) above 3 times my fathers salary, hence they were refused a mortgage due to strictness in lending back then. They ended up with terraced house just a bit cheaper and in need of even more work. He then spent the next decade working long hours to pay the mortgage and support a family with 2 kids, and did DIY every weekend and holiday to fix it all up and make it a nice place to live. They had little choice in mortgage products, and lived through rates that were in double digits for most of the 16 odd years that they were there, peaking at over 14% at one point.
I was on a salary of 19k (about the national average at the time I think) when I bought my house that was on the market at 65K (also in need of plenty of work). Relatively speaking that was somewhat worse than your own position. My initial mortgage was for a bit over 2.5 times my salary. That would be about the same for your 75k house after a 10% deposit.
I don't understand how it is hard to save a deposit. My first real job paid less than 7.5K to start with (which was well below the national average at the time) but I immediately started to put aside 10-15% into long term saving for just such a purpose, After all If I couldn't afford to save that amount for a few years then there was little point ever aspisring to buying a house and the mortgage payments that went with it, which can be at 30%+ of salary on a 3 times multiplier.
The biggest generational divide I see is expectation. In terms of finance and the 'quality' of first house your position on the face of it sound very similar the one I had which was very similar to my parents. Yet you think you have missed the boat on buying a house, where as we just saw it as how you got on the housing ladder. The other factor that might factor in (in a general sense) is the culutre of saving and borrowing. In the past most knew they had to save (possibly for a few years) for big things like a house deposit, and avoided debt like the plague for miscellaneous things (anything other than a mortgage).
The mortgage rate based on deposit size is not a generation thing. It is simple risk managemnet, 40% deposit means that lender is far less likely to lose their money as they will be more likely to gain it all back on a reposession, and you are far less likely to default after putting up so much of your own money. Providing loans with small or no deposits at low rates is partially part of why the economy tanked recently, it is also partially what fueled demand and pushed up prices.
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70. At 2:51pm on 20 Apr 2010, tinkertaylor wrote:
If you and your partner can't pull in at least £32k after graduation then something's gone amiss. Living in the south east can be expensive and if your wages aren't reflecting this, then you should consider moving and getting more for your buck.
I appreciate your advice. You are quite correct in that it is where we live that is the problem. For the rent I am currently paying for a double room in a shared flat in Watford I could afford a flat of my own near my parents in Merseyside. Unfortunately, my job means that I have to stay here unless I want to completely change career. International companies are increasingly attracted to London rather than elsewhere in the UK and by locating offices just outside London they feel they can justify not having a "London weighting". In addition, most graduate engineers have starting salaries roughly equivalent to newly qualified teachers and nurses and have, in the last year often been expected to accept pay cuts.
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Down With Dogma @ 71
Agree with most of what you say.
This country has not served the people now in their twenties and under very well at all. The thing with the pensions is a disgrace. Having governments that build unaffordable client states is a disgrace. Regardless of what you think, allowing uncontrolled immigration and paying uneducated girls to have children is a disgrace. Having a society that rewards failure and signs over powers to foreign interests and sends young men to die in unnecessary wars so certain people can make millions is a disgrace. It will be a miracle if children today do not witness civil unrest or even war.
Encouraging young people to undertake a useless degree and making them pay for it and giving them the illusion they can buy their own homes at the peak of a boom is also a disgrace.
My comment was a reflection on some of the specific comments on here. Like I said, when I was in my twenties my friends and I never thought about buying our own homes after we had graduated, so I'm unsure where the current belief that it is something people have enjoyed in the past has come from. When I bought my first home, I slept downstairs and rented out my two upstairs bedroom. When I was a kid, my mum had a lodger. How many of those on here would be prepared to do that, or rent in a shared house? I lived in a shared house for several years after my graduation, I never dreamt once of affording to rent my own flat because I couldn't.
I just believe that some of the examples used in the comments aren't really reflective of what is available if people are flexible. I'm not saying there aren't difficulties, it's just that I have to challenge comments about 2 bed flats in the SE being £200k+ when that's not true. A bit like when our local council declare young families in our area can't afford to buy a house, when 5 miles from the village is an estate where a three bed semi-detached can be bought for £70k.
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For too long the economy has revolved around the property market, which is why we are in this predictable cycle of 'Boom and Bust'. Every time we have a 'Bust' we end up in recession. The government always stand back and let property prices over-heat because they make billions from the taxes. I would like to see property prices collapse so that the younger generation don't end up being left out.
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72. At 3:24pm on 20 Apr 2010, Lee wrote:
I don't understand how it is hard to save a deposit. My first real job paid less than 7.5K to start with (which was well below the national average at the time) but I immediately started to put aside 10-15% into long term saving for just such a purpose, After all If I couldn't afford to save that amount for a few years then there was little point ever aspisring to buying a house and the mortgage payments that went with it, which can be at 30%+ of salary on a 3 times multiplier.
Its very hard to pay a deposit beacuse at the moment most people renting are already paying over 30% of their salary on rent. My finances seem to be up for debate today, so might as well keep going. I recently checked out mortgages and the repayments on a small mortgage for myself any my boyfriend would be roughly equivalent to what we are paying in rent. Also, most people in our parents generation weren't expected to be paying 5% - 10% of their salary into pensions.
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2 separate issues here. Personally as a property owner and more likely to trade down than up then yes, lots of high prices please. Umpteen years ago when I was getting onto the property ladder I would have answered the other way.
However nearly everyone will tell you that financially buying their first house hurt, what ever age. In practice until a certain age/price most people can afford a given amount of mortgage payment and, subject to lending criteria, borrow as much as that will allow so lower interest rate will tend to push prices up.
No matter how you calculate it though it is probably harder to get on the housing ladder now than 20 years ago and the basic reason is quite simply a combination of 3 things.
More money available due to cheaper loans and more jobs with higher wages.
More demand for houses, not just from immigration but more single person and childless households, the policy of helping older people stay in their own homes longer and even just living longer.
Less houses, or at least numbers not increasing as much.
Although there are thousands of local sub markets in the UK at it's simplest if there are 20 million houses in the UK and 20 million people want houses, prices will be about stable. If there are 25 million people want houses the financially strongest 20 million competing for them get the houses. In practice its a lot more complex but other 5 million start clubbing together, sharing etc. that just adds to the money in the housing pot as do any government subsidies bank of mum and dad etc.
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The reintroduction of rent controls would solve things very nicely with a positive impact on those with less income. If there was not such a lazy profit in renting (effectively paying your landlords mortgage) and only professional property owning landlords were in the game then lots of housing stock would become available from the buy-to-let scammer's market of recent years. Supply and demand would naturally take care of property prices quite quickly.
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Lee @ 72
I think you're reflecting my thoughts here - that people's expectations are higher than they used to be and people's perception of hardship is not quite the same as it was 20 or 30 years ago. Yes, my mum bought a house in her early 20's but even when I was a teenager, we had no heating and I was allowed hot water twice a week for a bath and hair wash. Ice on the inside of the windows, chilblains and going to bed fully-dressed was the norm in winter and all our clothes were home-made. This was the 1980's, barely twenty-five years ago, not the 1820's. My guess is that if people now in their 20's had to put up with those conditions despite holding down a decent job (like my mum did) would think this all dreadful and a sign of how society had let them down. Back then, it was just done with and that's how you kept a roof over your head. Yet my mum would be classed as the generation that has now let down the young people. It's just not that simple.
My friend who is a single mum on £28k has just put down a 15pc deposit on a house worth £85k. She had no help from friends or family and doesn't have a degree. It can be done. I think there is a view on here that people working in a shop on low wages could afford their own homes a generation ago. I'm not sure that's true. My grandparents didn't buy their council home until they were in their 50's as was typical of people who worked in factories. Normal people buying their own homes is a modern phenomenon, yet people seem to be burdening themselves with visions of poor people in times gone-by putting deposits down on three bed detacheds. I just don't recall having that pressure when I was 25, which was barely more than a decade ago.
The sad thing here is that maybe graduates nowadays are wasting their money on their degrees because it helps the Labour govt keep unemployment down - maybe they would be better getting a job after their A-levels and using the money they save on putting down a deposit.
Politicians have a hell of a lot to be blamed for in all of this and yes they reflect the "me me me" attitude in society, but I'm afraid a lot of that attitude can be seen in people in their 20's and graduates have a dreadful reputation in businesses as being lazy, arrogant and having an entitled attitude. That's not a personal attack on anyone particularly on here, but the young people on here are being very quick to blame their elders without actually seeing themselves perpetuating some of the problems that have got us here in the first place.
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Fall please, I'm nearly 17, and it won't be long before I will be stepping onto the housing ladder.
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43:
=="I find it very difficult to talk to the older generation who bought their houses for very little, have now made huge sums out of them - and yet they still think it acceptable to demand it rises further so that young people cannot enjoy the privileges they had."==
The older generation enjoy privelage? And what on earth do you class as very little?
The average person has always found house buying a major financial hurdle requiring years of saving followed by years of heavy expenditure. They have never bought for 'very little' on the open market.
The 'older' generation do not on the whole demand prices rise. Most saved hard for deposits and worked hard to keep up mortgages, they are still living in homes they worked for and therefore haven't made huge sums on them. When they sell they need to buy somewhere else, which has risen just as much over 30 or 40 odd years. When they finally 'downgrade' as they retire they are getting no more than they might expect than if they had saved those large amounts of money that went into mortgages for 25+ years instead. It is the those who either can't plan what they can really afford, or those who want ever increasing equity to fund ever more borrowing who generaly expect/demand price rises. Both cases is usually the younger generations.
=="I am a graduate who has constantly had a job since the age of 13, but on 21k how on earth can i afford to save over 15k (when i have to pay rent) - just for a 10% deposit and a horrendous interest rate.
Tell me this, with savings rates through the floor where is the incentive? I put £200 away each month - then house prices go up by 1% and add 2 grand to the cost of a house, it’s absolutely pointless."==
The same way myself and my parents before me did generations before you. We started in rented accomodation, we had to save up deposits. You keep saving and get used to not having that money, cos you will have a lot loss money when you start paying a mortgage.
Interest rates are NOT the incentive to save for a deposit, if it is then you do not have the financial discipline that will be required. If a 1% increase in house value puts you off then you do not have the long term outlook required.
You are 23! My parents were 30 when they bought their first house, they weren't even graduates with any qualifications, just working class people working in a fish factory, they worked hard and saved for years so they could have a house of their own. I was 32 when I bought a house. Most of my friends were 30ish when they bought a first house. Like you at 23 I was paying rent and putting aside around 15% of my salary on the basis that I would one day be interested in buyng a house.
Increase what you save, you will have to get used to a higher outgoing anyway with a mortgage. If you can't save more then ask your self how on earth you would cope with interest rates in excess of 10% for several years. Between 23 and 30 you can save a deposit if you are serious about buying a house. You will have to go without things and make sacrifies just as generations before you did, whether it is working all the paid overtime you can get or doing a second job or not going on holiday or putting up with no car or living in the cheapest shared digs you can find.
House prices rise and fall, House values plunged in the 90s and they plunged again recently. Ours dropped by 15%-20% the other year. The drop is irrelevant to me, barring local variations, any where I buy will have gone up or down by the same amount so it's all meaningless for those who see a house as just that. Really if anything I want prices to drop as well, that brings the next 'step' on the ladder more within reach, just as it makes my house within reach of others (and hence easier to sell).
House price didn't rise rapidly simply because people demand they rise, they rise largely because ever increasing numbers of people with access to ever cheaper mortgages competed with each other to buy what was on the market. The price I 'demand' is meaningless if someone isn't prepared to pay that amount. If several people want to buy I will sell to the highest bidder not because i 'demand' that amount, but because I am being 'supplied' that amount.
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Some people are saying "buy a cheap run down house and do it up".
It's a nice idea but a lot of these houses have allready been bought and done up by the proffesional developers (or people who have seen a couple of DIY programs on the TV and think they are).
I've been looking for over a year and you rarely see 'fixer-uppers' on the open market anymore (no alligations of estate agents having links to local firms to snap up these type of properties cheap and then splitting the profits later)
Yes, there are some places in the south east for less than £200k, but once you discount those to far to commute from my place of work, those which are to far to commute to London (as work requires me to go there sometimes) and those where you can touch all four walls at once when you stretch you are only left with places where if you drove through them you wouldn't stop at a red light because your wheels would be nicked.
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Actually to some up my thoughts...
House prices are too high, but there's been a boom and they are not unusual in our society. Being suprised about it is like being suprised that England's not won the World Cup. Buy low, sell high like any other asset.
To get it more fair, prices will have to come down / sit still until wages catch up / be inflated away....or a bit of all three.
I think a second housing crisis will take place as soon as interest rates go up and people with public sector related jobs start feeling the pain. People need to learn that their houses are homes also, and make some common sense decisions that don't involve re-mortgaging against their equity and spending it on new cars and flash holidays.
And people under the age of 29 should be happy to live at home or in shared houses with other like-minded young people, they should be going out clubbing, meeting friends, and generally having a rather good time - and not worrying about things like mortgages and pensions. It seems to me that some post-graduates on here are burdening themselves with ambitions that a) are unachievable and b) have never really been achievable.
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Young women bling hundreds of pounds on stupid handbags,even the boys get their body hair waxed and wear jewellery and go to sunbed salons, many of the young have expensive Iphones, cars, MP3players, DSIs and Playstations, and designer clothes.They seem to spend a fortune going out at night, getting taxis at all hours, getting drunk and taking drugs, going on expensive holidays and years out, they spend money on silly ringtones and songs on their computers and waste money phoning in votes to tv programmes,and celebrity magazines, and every minute when they are walking down the street they seem to be stuffing their faces with takeaways and crisps,sending expensive idiotic texts,and even buying earrings for their illegitimate babies.
No wonder these young morons cannot afford a mortgage!
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There is a nasty four letter word the young see as taboo.......
WORK!
We had to do it when we were young and we still have to do it to keep our kids in their flashy trainers.
And then comes another taboo in the land of the EWTD ......
OVERTIME!
LOTS AND LOTS OF IT.
IF YOUR DISPOSABLE INCOME AND ABILITY TO SAVE IN YOUR JOB IS ZILCH THEN YOU NEED TO GET A SECOND JOB.....DO SOME HOMERS, DRIVE A CAB, MOONLIGHT!
AND LAST BUT NOT LEAST, STOP CONSUMING RUBBISH AND MAKE DO AND PUT OFF REPLACING STUFF, MAKE YOUR OWN, TRAIN UP AND BETTER YOURSELVES.
Stop thinking life is unfair, of course it is, it has always been, but the harder you work the luckier you get.And that is fair!
Not having anything when I was young helped me, it did me no harm at all.
Look at immigrants and copy what they do, huddling together , making do,working hard, sacrificing for the next generation, not thinking of yourselves ....... and you will do well, just like they do.
It is not easy, it is not quick, but it is simple, and it works.
It's not the economy stupid, it's you!
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78 If there was not such a lazy profit in renting!
Are you kidding?
Rents hardly cover the mortgage, and filthy, selfish ,often alcoholic and drugtaking tenants trash newly decorated and equipped flats, doing a bunk on utility bills and last months' rents.Flats require a huge outlay and effort to get them let again.
The worst tenants are divorcing males.
You get to know why they are divorcing ,I can tell you.
As an investment ,rental housing consistently delivers a lower return than shares or commercial property with lots of hassle and stress and fallow periods.
Rents in real terms are half of what they used to be twenty years ago.
Idiots phoning up in the middle of the night too lazy to adjust the pressure in their boilers, or change a lightbulb, leaving running baths on, losing keys, trashing carpets and furniture, not giving two hoots about their neighbours.
You should try being a landlord, it is very hard work.
Mind you we have been lucky,and have had lots of nice people, but we have treated them well and consider them as friends.
But there is a large element of filthy feral pig tenants out there and they make rents dearer and landlords cynical.
Anyone who is a landlord is desperate for the day to come round when they can sell up.
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So? Just build lots more houses, thereby creating lots of jobs in the construction industries, and driving down the price to affordable levels once again. It's not rocket science.
I suppose a few people will be upset that the house they paid £2million for will only be worth £1million by then, but more fool them for buying when prices were peaking. Everything else, from your car to your computer, goes down in value after purchase, so why not your house? We need to stop houses from being investments, and then we won't see these ridiculous situations.
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Hard Working Hobbs @ 82
Somebody on here commented that 2 bed flats in the South East were only available at £200-250k. Sorry, but that's just not true. Flats a lot cheaper are available as long as you're flexible and not as fussy as you - you, I'm afraid are proving right those saying that it's people's attitudes that are the problem, not the price of houses. You want the perfect house to perfectly suit your needs - well, sorry but unless you're prepared to compromise you'll have to pay a top price like everyone else.
My flat is two double bedroomed, with a large lounge, dining area, separate kitchen and en-suite. It's brand new, in a decent area and is 40 minutes away from London and near the train station. You can currently buy similar for £130k. If that's not good enough for you, if only theoretically, then you've proven all the critics of fussy first-time-buyers on this blog right
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Mark,
In your introduction you mention that "some are lucky enough to own their own home". Where is the truth in this statement?
You are lucky if you win the lottery or inherit wealth but you have to pay for the priviledge of owning your own home.
Many of the comments above speak of the serious financial hardship involved in committing to a mortgage today and through previous decades. Your grand-parents may have bought their home for a song but it wasn't a song when they bought it. They had to save for a deposit, meet all their mortgage payments or be repossesed and typically pay three times the house price in mortgage payments over 25 years.
I bought in 1991 when the base rate was 14%. When the base rate fell to 3.5% a few years ago the monthly cost of my loan would have fallen by 75% and I could get four times as much mortgage for the cost of my 14% mortgage of 1991. Low interest rates were the main driver of house price inflation but there were other significant drivers such as low interest rates on deposit accounts and little point in putting money into shares or pension.
If interest rates now start to increase from a base rate of 0.5% to 14% house prices will fall by a factor of three, to equal the historic ratio of av house price to av salary, for the very same reasons. There would be scant buyers able to pay 14% mortgage rates and a lot of sellers preferring to downsize or rent and get 14% interest on deposit rather thanhave all their money tied up in a falling asset.
It could be said that some home-owners are lucky because their home suddenly went up three fold in value over a decade. It cannot be said that today's generation of first-time buyers will be as lucky. Their average age is 37 and they will have to wait many years before they can pay off their student loans, manage on one wage and start a family. They also take the risk that the bubble will burst.
For all those who say decent accommodation is a right please tell that to those saving for a first home in the above paragraph.
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Ohward HO,
All the more reason to build mix use communities. My community works.I'm sure we have many criminals and drug dealers but they seem to blend in. The architecture and design is defensible and security is present. When the poor live in really nice upper scale communities they like where they live and try hard not to be kicked out. Children do better in school when they live in a nice neighborhood they can be proud of. It raises their self esteem and self worth. Children shouldn't suffer emotionally because their parents can't afford exploitive rents. Many poor families spend a half to 3/4 of their paychecks on rent and utilities. This isn't right.
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What is so different about housing. we are quick enough to complain about politicians who "use the system" to their advantage or banking professionals who appear to take large bonuses but we seem to forget that most of us also took advantage of profiteering on a huge scale whilst the boom literally "boomed". It is time to take stock of the real value and associated costs of housing and just accept that things do not stay the same for ever, and for the government to start building high quality, decent sized and affordable rental property that people can call home for life if necessary. Why do we allow the situation where such tenants have to worry about whether or when the often unscrupulous private landlords decide that they do not want their tenants money anymore but sell for a huge profit, or the letting agencies decide to increase their profit margins.
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@Lee, @Tinkertaylor and all of the other "when I were a lad we had to walk 100 miles in the snow for a bucket of water. And we were grateful" commentators, I appreciate that you feel that you had to work hard to get where you are, but your comments are patronising and pessimistic. I understand your intention may be to motivate, but sounds far more like "things were worse in my day, so why should you have it any better?".
Fact - society does, and should improve over time. It wasn't that long ago (in the history of human society) that people couldn't own property without it being a gift from the monarch. Is it really so unreasonable that people feel that they shouldn't have to live in hell holes for years while they destroy themselves with the second jobs, moonlighting and virtual prostitution that you seem to be advocating? (the last point is mostly directed to the commentator who reminisced fondly about having no heating and getting windblaines in their parent's first house).
From your posts, it certainly doesn't sound like you were happy with the situation. Have the courage to demand better.
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Having re-read some posts above, the people specifically addressed in my previous post are not necessarily those that the comment is directed at.
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62. At 1:09pm on 20 Apr 2010, tinkertaylor wrote:
Though I understand things may be hard for young people now (I'm hardly old, still in my 30's) I feel there is some exageration going on here.
I've just checked rents in Watford where someone claims her and her partner can't afford and there's flats for £600-£700. With all due respect, if the two of you can't afford that (£350 each?), then there's not a lot anyone can do.
£600-700 pm rent would be affordable to most if it was the only bill to pay,but council tax is often overloooked.At the same time of rising house prices,council tax has risen about 250% in 13 years,so that now the tax for a 2 bedroom flat may be £1000+ a year or £100 a month.Plus of course electriity and gas may be at least £1500 a year on top of that.Add water rates,home insurance,contents insurance,house maintenace costs,and the rent might only account for 50% of your bills per month,before even buying food and running a car
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Considering that house prices have risen far higher than under any conservative gvt and is unsustainable, house prices should be allowed to fall back to their pre-1997 values. This may mean that many are left with negative equity, but that's life. You buy a property to live in, not to gamble with. It would also mean that young people would actually have a chance to get into the market themselves. I would certainly support such a move.
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It depends on your situation. If you are looking to enter the market, invest, or move up, then obviously you'd like prices to fall. If you're looking to downgrade, borrow against your equity, or just want that nice warm feeling of watching your assets grow, then you'd like prices to rise. Looking in my local paper at house prices and job ad wages it's a wonder anyone can afford to buy a home at all, which suggests prices are still too high.
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I am perfectly happy about capitalist principles in general but not in the case of houses. Every time we build one we destroy more countryside, which we have on loan and stewardship from future generations. The answer is to get the population under control and respect the environment. In addition, we should not expect values to just go up like an escalator in return for doing nothing. Further, if property is used as a nest egg for retirement, first time buyers are effectively paying for the pensions of older people, which is unfair. Respect the environment, less greed.
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37. At 03:48am on 20 Apr 2010, onward-ho wrote:
33 Nonsense, the high number of homes for renting in the private sector has meant that in real terms rentals are exceedingly cheap....
really when LHA came into effect our rent went from £485 for a 4 bed house to £725 overnight almost a 50% increase. the landlord just brushed it of and said the council will pay it they set it. If only that were true with both of us waged we had to move out of the family home of 15 years. just about every rental property in an area were your liable to keep your belongings is set at the LHA rates.
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38. At 04:02am on 20 Apr 2010, onward-ho wrote:
.....
And these moany brats are going to vote Tory!
.....
Obviously not as they are typical Labour voters - sitting around doing nothing expecting everything to be provided by someone else!!
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Tony 49:
"Its very hard to pay a deposit beacuse at the moment most people renting are already paying over 30% of their salary on rent. My finances seem to be up for debate today, so might as well keep going. I recently checked out mortgages and the repayments on a small mortgage for myself any my boyfriend would be roughly equivalent to what we are paying in rent. Also, most people in our parents generation weren't expected to be paying 5% - 10% of their salary into pensions."
What do you think we were doing whilst saving for a deposit. Paying rent as well! The ratio of rent to mortgage for a property has probably varied over time, and whilst I can't remember my figures for rent back then, I'm sure rent and desried mortgage were similarish in monthly out going when I was younger. There has never been some magical method to get round the problem of paying rent/bills whilst saving for a deposit and all the othre costs of buying. You deal with it by making hard choices and sacrifies.
I left home at 19, I paid rent sharing with students until about 25/26 (keeps things really cheap even if you wouldn't want to invite parents or girl friends round) , paid poll tax/council tax, bills, transport to work etc. If you are serious about saving for a house deposit then you will find ways to either bring in more money (extra work), or economise - cut the drink, cigs, cars, holidays, mobile phones - everything that isn't actually necesssary. Watch the bills - switch off lights, why is the TV on, how much hot water do you need etc. That is how working class people have been doing it for generations.
As for pension, I'm not sure where you get that idea from. A recommendation to pay ~10% of salary as soon as you got your first job was standard whilst I was at school. Whether people actually do is another matter!
Mike 92:
Yes society does on the whole improve, because people work for it. We are not saying that things were worse in my time so you should not have it any better, we are saying we, like those before us had to work to improve ourselves. That is in fact entrirely reasonable and it is a situation I am entirely happy with. Instead of people having the courage to 'demand' better they should have the courage to work hard and do without things they think they want so they can have the things that they really want.
We didn't 'destroy' or prostitute ourselves saving for a house, that is tabloid style hyperbole. You already have it way better than my parents in many other ways. Things that were considered the lap of luxury are now seen as everyday things, but those things cost money, money that we didn't spend. I look around at all the youngsters in their cars nowadays and multi car families, society improved and cars are now common enough that teenagers have them, but how much is it costing in insurance/tax/fuel/maintenance, that is money that could be going towards a house deposit. I look around perplexed at the number of youngsters with mobile phones and how they seem to need the latest model, society improved and you have access to something that didn't even exist when I was young, but how much money is that costing in new models and bills that could be going towards a house deposit. I look at youngsters jetting off on holidays (often on credit) which is something that was way beyond the means of the average person when I was a kid, society improved and allowed you to see the world cheaply and on credit, but how much money (and interest) did that cost you that could have gone on a house deposit. Wondering around in a t-shirt may be nice in your centrally heating house but it costs money to run that could go towards a deposit. Society has improved immeasurably in many ways in 30 years, but the people inhabiting it have lost all sense of proportion and priority. Modern convenience comes at a cost. To many are 'demanding' better rather than working for it. Prioritise out the convenience whilst young, fit and healthy (or not as seems to be the modern trend, probably to much convenience) so you can save during your 20s and look to buy a house in your 30s.
Just to be clear though, as I mentioned previusly, I'm a house owner and couldn't really be bothered on a personal level whether prices go up or down. I have no more desire for them to go up than those trying to buy a house - that would just mean I also pay more if I move. I do think the house market has gone mad over the last 10-15 years, but that has not been driven by the 'older' generations. Ever increasing 'demand' from younger generations, fuelled by ever cheaper mortgages handed out to those unable to afford them has almost certainly had a much greater affect on prices than anything those who bought ~30 years have done. It was almost impossible to have more than 3 times salary as a mortgage, and that at interest rates that would make people nowadays squeal like a pig.
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The difficulty with house prices in the UK is that we do not have a true free market in the provision of housing. The normal rules of supply and demand are not allowed to apply - specifically builders are heavily restricted from acquiring land to build new housing. This leads to prices that are ridiculously high by world standards. The consequences for our society are severe as young families are forced into a mortgage 'arms race' where they have to borrow to financial breaking point in order to have a home of their own. Given there are good environmental reasons for the severe planning restrictions in this country, the regulatory authorities must over a period of time do something about the demand side consequences of their supply side planning restrictions. An obvious solution would be to make it a legal requirement that nobody is allowed to borrow more than say 2.5 or 3 times their salary to support a mortgage, and no more than 1 times the salary of the marriage partner who contributes. If past governments had enacted such restrictions in the past, our country would have been spared the worst consequences of the recession in the late 1980's and the current recession. The problem now is such changes will impact on families already heavily over-borrowed and result in negative equity. So the squeeze on borrowing too much has to be phased in over long period of time. However failure to do something along these lines will condemn future generations to current suffering of boom and bust.
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Lee 100: Most of the comments you make are fair, and I was intending hyperbole when I satirised the comments above. But I do take issue if people expect others to have to take second jobs just to be able to afford a house. It's not that I don't think that people should have to work for what they want, far from it, but I do not believe that anybody should need to work a full time job, and then take a second, part time job, just for the privilege of home ownership. I appreciate that this is the reality, and I am being idealistic, but this is where my demand better comment was directed.
You're certainly correct that some people waste money on luxuries that they can ill afford. On the whole, these people have no right to complain that they cannot afford a house. However, there are other people who do not buy the latest handset every year, and who reach for a jumper well into winter before considering central heating.
A point has been missed here. If someone saves £200 a month for 12 months, they have saved £2400. If they are looking to buy a modest family house, which seem to be selling for £150000, and which increases in value by a conservative (historically) 1%, then in that year, they have a net saving towards that house of £900. Assuming their wages increase enough to allow them to maintain this net saving a year in light of future house price increases, it would take over 16 years just to be able to put a deposit down on this house.
You might say that the answer is to save more money each month and aim for a cheaper house. Maybe you'd be right. But I get the impression that this just isn't feasible for many people.
I would also like to be clear. I don't necessarily blame "the baby boomer generation" (though I do take issue at serial landlords, as they do artificially push up house prices), after all, most people will take what they can get for their house when they sell. It is a vicious circle created by cheap, unbalanced credit. It only takes a few people to take that credit before a precedent is set, and others are forced to take such credit if they want to afford a house.
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Sums above are wrong! It would take 10 years to save 15% at my (possibly) unrealistic house price increase rate.
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At 6:04pm on 20 Apr 2010, onward-ho wrote:
Young women bling hundreds of pounds on stupid handbags,even the boys get their body hair waxed and wear jewellery and go to sunbed salons, many of the young have expensive Iphones, cars, MP3players, DSIs and Playstations, and designer clothes.They seem to spend a fortune going out at night, getting taxis at all hours, getting drunk and taking drugs, going on expensive holidays and years out, they spend money on silly ringtones and songs on their computers and waste money phoning in votes to tv programmes,and celebrity magazines, and every minute when they are walking down the street they seem to be stuffing their faces with takeaways and crisps,sending expensive idiotic texts,and even buying earrings for their illegitimate babies.
No wonder these young morons cannot afford a mortgage!
Really? I personally don't know anyone who does this, and I am pretty sure that it isn't the norm. I'm 21 and all of my friends are spending the vast majority of their money on the rent and are unable to afford to buy/do things like that.
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I took a break from this blog yesterday to think about what people had said and I would like to say that my position has altered slightly (mostly down to the sense talked by tinkertaylor).
I appreciate that young people have not had it easy in years gone by and accept that 1) my position may not be something new 2) that my expectations may be slightly out of line and 3) many of the older generations worked very hard to get what they had.
However, I feel it necessary to offer some sort of retort to the comments made At 6:04pm on 20 Apr 2010 by onward-ho.
Quite frankly, I find your perception of today's youth astonishing, antagonising and, bluntly, incorrect. I agree with you that there are elements of society that are most unpleasant - but these exist in all generations.
We have vast swathes of the population who are happy to live in 'free' social housing on the 'free' money prescribed to them by the government which often (but not in all circumstances) fuels their binge drinking/smoking - but I remember my parents moaning about this when I was younger.
You infer that young people are lazy. Well I worked 35 hours a week (cleaning toilets etc) whilst at university (on top of my university work) in order to pay for any non-tuition related fees. I reject the accusation that I do not know what hard work is.
Perhaps the breakdown is that I too would expect that these so called 'young morons' that waste their money on going out, games consoles and designer clothes should not be able to afford a mortgage. The problem is that those of us that get an education, work hard and contribute to society feel that there is little chance of us doing so either.
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House prices should be constant, that way no-one is ruined in buying one, and also giving set goalposts for those saving to get on the ladder.
I think the first thing to do is to end the current tax anomaly whereby whilst someone buying their own home gets no tax relief on their mortgage interest, those renting out homes to others who can't get on the housing ladder do get tax relief on the mortgage interest on their buy- to- let properties. This tax relief is worth a lot of money to landlords, and encourages them to buy more houses for renting out, which puts prices up even more. So less people can afford them and heve to rent, and so on. It's a vicious circle and I have no idea why this country chooses (and has fone for many years over Tory and Labour Govts)to give a very substantial tax advantage to private landlords, paid for by the rest of us, including those who rent from them!
Housing Associations, and Councils rent homes at less than half the "market" rents in the private rented sector. It seems to me that private landlords are simply acting out of greed, and are subsidised for doing so, whilst making it harder and harder for orthers to afford their own home. Bring back the fair rent tribunals and end the tax anomaly, this would help stop the house price explosions.
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If things in wider society stay the same then inequality will continue to be fostered by the housing systems. Perhaps some pretty one dimensional people cause a lot of the very problem people that they despise; they do not think very deeply and they're not that interested in other people's right to a say or be different.
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At 32 years old, I am only just now coming round to the idea that being financially tied in to a mortgage for 25 years is an acceptable yang to my yin to own a home.
Sadly, the only way I am going to be able to do that now is to buy abroad. Mind you, considering the current state of the nation that isn't such a bad idea...
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Prices NEED to fall and to hell with those who complain of negative equity. Mostly it'll be those who've bought-to-let or those who weren't concerned about those of us not able to buy HOMES because they were sitting pretty on the back of massive price-hikes patting themselves on the back at their astuteness.
7 years ago there was an arms race where FTBs outbid each other over the market value. We stopped trying to buy at that point as it was clear then the situation was unsustainable and a crash was inevitable. But when the crash came the banks and therefore home-owners were propped up by the govt.
I won't be trying to buy until the market returns to 2000 levels and I advise every FTB to do the same otherwise the bubble will be maintained.
I suspect a lot of repossessions will happen before then.
Two other quick points
MPs buy homes with help from expenses. When they finish being MPs they have a nice bonus especially if the value of that nest-egg continues to rise. They are therefore not likely to do anything about housing inflation without significant pressure.
People talk about building social housing/new houses but what about the 300,000+ empty homes in England [http://www.emptyhomes.com/usefulresources/stats/2009breakdown.htm]
[Unsuitable/Broken URL removed by Moderator]
http://www.emptyhomes.com/
http://pricedout.org.uk/
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I am 31 years old, live in the West Midlands in a non affluent area, I earn £20000+ per annum, left home at 18 years old, worked full time since I was 16 years old, rented ever since leaving home, have never had enough disposable income to save much towards a deposit (I have tried but as property prices and deposit minimums kept increasing I gave up, what was the point?) and am single (not for want of trying). I accept that I will never own my own home whilst I am single as, after investigation with independant financial advisors intermittently over the last 6 years, they have all advised me that it is not possible for the average single person paying rent in my area to ever own their own home. I will never earn enough to be offered a mortgage on my own (not even the price of a 1 bed flat over a crack den in some areas!) To put it short an independant person will never be able to own property in this country. (I don't see why having a partner should be a pre-requisite to owning a home)
And do you know what? I don't want to now. I don't plan on having children so if I did buy when I'm old and infirm then the government would take my home and sell it to pay for my care despite the thousand of pounds I will have already paid for this care through National Insurance and Income Tax. So I'm going to carry on renting and then when I'm naturally old and infirm and have no assets then they'll have to pay for my care, they can't very well go throwing an old lady out on the streets at eighty with a trick hip.
And I'm going to be very clever in hiding my pension fund from them!
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We all seem to have forgotten the basic law of economics, which is that if there is a limited supply of anything, it goes to the highest bidder. There is a limited supply of housing, and the highest bidders, in our own age, are now two-income families, whereas a generation ago you could buy a house on one income. The two-income household is the economic factor that has driven up the price of housing, and whether we like it or not, this factor is the unavoidable consequence of the feminist revolution.
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I do feel sad for young people as home ownership is such a rite of passage and it is very difficult for them to live a normal existence without help from parents, family etc. The flip side is that investors can suffer in very big ways when the economy tanks. This is especially true in commercial real estate. It is difficult to pay the mortgage on 40 million dollars when people can no longer pay rent. Usually the end result is bankruptcy.
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Dallas9791,
It's true that the government confiscates people's homes when they're infirm and need care but the cost of care amounts to more than the equity of your home and all the insurance you paid over your lifetime. Care can cost upwards of $10,000/month. I think this is a fair exchange. The government should be compensated for the cost of care it provides.
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'What we have is a generation of selfish young brats who expect everything on a plate.
When I moved into my first flat I furnished it with handouts from neighbours chucking out old cookers and couches'
That misses the point that some things are much cheaper now than they were 30 years ago - and cookers and sofas are among those things.
My parents married in 1974, when they were 27 and 25. My mother was a secondary school teacher, and my Dad earned less than she did. They bought a 3 bedroom maisonette in Blackheath, a nice part of south London, just before they married - similar flats now cost £500,000, which would be miles out of reach for a couple now, on slightly less than 2 x teachers' salaries.
Besides that wedge of cash, cookers and sofas are totally irrelevant.
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At Onward-ho. No doubt when you where a kid all you needed to do for a house was make a mud hut in your prefered corner of your leige lords feif. Sadly it's a bit more diffucult now and people are expected to lay down a 10-20 percent deposit on any house they want to buy, and in case you have not noticed, its been a bit difficult to save up ten grand.
Unless you expect people to either wait a decade, or only allow the super rich the privilege of buying homes.
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#5 watriler is correct in one sense.
It would be a sensible idea to implement a policy of council house buiding.
The current housing crisis was created by the Tory goverment of the 1980's who sold off Local Authority housing stock on the cheap and did not replace it. It was a cynical move to buy working class votes and got Thatcher into power.
However, although some gained in the short term, this created a lack of affordable housing for future generations. For those looking to buy, prices went up and up due to the laws of supply and demand - and those wanting to rent found themselves looking at higher rents and usually at short-term leases. A family could find itself having to move on every six months because there is limited security of tenure with most privately rented properties.
At least the Liberal Democrats are the only party who would implement a policy to start building council houses again.
By the way I am not a Lib Dem voter but this policy does seem to make a lot of sense. Critics who say this would depress house prices are purely being selfish and thinking of their own personal gain.
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What is wrong with building terraced houses,as there used to be,streets and streets of them.They created good communities.Not many people can be bothered with gardens,nothing wrong with a nice back yard.We are building houses crammed in anyway,and charging detached prices.Terraced houses would be good starter and retiring homes
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It is interesting to read the differing views between the (pardon my assumption) 40+ age group and the 20+ one as to what one should expect from life; the biggest influencers of which diversity I would suggest have been mass advertising coupled with loose lending criteria in the last 10 years. Expectations certainly seem to me to have risen far more quickly than are justified by actual economic growth and increased earning power!
As a 40+ commentator I have to agree with Lee, Onward-Ho, tinker-tailor etc in that, and based arbitrarily I accept on my own observations, the younger generations now seem to expect to get something either for nothing (music, video, communications, online security to name a few - music is often actually stolen although it isn't seen that way) or for very little or little effort and if something is not able to be gained easily it is deemed "unfair".
I have thought for a long time that a good indication of whether someone has really grown up is whether they have a view that aspects of life are unfair; as if life was ever meant to be. Someone wrote above "It bothers me that we ignore the poorer, in a country where everyone is supposedly equal." What on earth ever made anyone think that people are supposed to be"equal" - whatever that means?
There are a genera of expressions called truisms which the young often call clichés but which as you get older you tend to realise are indeed aptly named. The one that to me has always been most profound but seems one of the least well understood is that everything has a price; Paul Weller wrote a very good song about it and in it says wryly that he hopes it isn't expected to be free. Once grasped, the concept that everything has a price/cost immediately makes you think about pretty much everything you do and the consequences of your actions, that is the cost.
Not rationalising that a single pot of money can only actually be spent once leads many into debt and despair; yet it seems many of the younger generations do not, or are not prepared to, accept that to avoid trouble later the sacrifice of what are actually luxuries but seen as necessities is required to afford major purchases like houses. It is as if a little early years hardship is beneath them. This attitude is probably not much helped by the fact they have been sold the idea that a relatively worthless degree should guarantee a good living.
As just one example, I was told recently of a young couple who gave up their own flat and moved in with the parents of one of them specifically to save money for a deposit for a house. Bizarrely they still manged to have two foreign holidays in the space of a few months and ate out at least twice a week ..... surely those things are "rights" nowadays ..??
As with many situations in life, accept what has to be done, get your head down and get on with it - complaining and blaming will get you nowhere except bitter.
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House prices are way too high, those who got on the gravy train in the 70s and 80s are ok (jack) but people must realise that prices cannot rise indefinitely, especially relative to wages. As for those poor souls with negative equity when prices fall - well they, and I know this is a revolutionalry concept, they coould always live in it and use it as a family home as opposed to viewing it as an investment on which to try and make an easy buck.
Renting is all well and good, but when today's houseless generation retires, there will be a massive amount of trouble as their incomes will then not be enough to carry on paying rent after they stop work.
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More social housing is necessary, but preferably not in the hands of local governments as there has to be some fairness in the prices that are charged. The costs of facelifts to blocks of flats with mixed private/social housing, should not just be born by the private tennants (like in Birmingham), especially when the council tennants don't even get an increase in their rents for the 'improvements'!
This government and many local councils currently seem to be very anti-landlord (landlords seem to have few rights in disputes)and this has had an effect by reducing the amount of social housing available.
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This is the first time I have read a blog from beginning to end. I am very surprised by many of the comments. I am particularly confused by those that think the market will fall in sterling terms. The great advantage in having a free floating currency is that it allows the free market to assess the value of your assets/potential to earn on a floating basis. Most if not all reading this blog will be only too aware of the value of the £/$/€, the pound has not done too well recently and against a basket of World currencies UK property has taken a real hiding. if you lived in Mumbai/Cape town/Lagos/Moscow/New York or even Paris UK property is at a significant discount to 3 years back and many are taking advantage of it. I think the Swiss have a policy of only allowing locals to buy to ensure more stable prices for the Swiss.
This is not the only upward pressure on housing during this recession. Other significant factors include - Green belt policy - Up rated Building Regulations - Insulation Requirements - 2016 introduction of carbon neutral homes -Planners to name but a few.
It is only going to become more difficult and more onerous to build housing which in my mind means greater expense. If houses cannot be sold for an acceptable profit over the build cost very few houses will "not" be built.
'What to do' to be frank I have no idea, we become a split divided society of those with property and cheap mortgages verses those without and only able to access the most expensive of borrowing.
Housing Associations supported by the Government maybe a way forward but it will cost lots of money and lots of Green Belt. There will be many Parish Councils against that.
The situation is a mess but IMHO the price of property will continue to rise. More and more people will be priced out of the 'Market'.
We live in a Global Village now and our housing situation is certainly better than the majority living in Sub Saharan Africa. (A place I recently visited)
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House prices need to fall in line with peoples' earnings and affordability to achieve stability.
Unrealistic house prices are the product of artificially low interest rates which have fuelled high inflation and irresponsible lending, making the downturn much worse than it needed to be.
First time buyers are priced out of the market now. Since first time buyers make up the majority of the activity in the housing market, the bottom needs to fall out to allow these people back into the market.
without allowing this to happen , we are only delaying the inevitable. The longer we leave it , the worst it will be AND THE LONGER IT WILL TAKE TO TRULY COME OUT OF THIS RECESSION.
Low aND MIDDLE INCOME families are only too aware that the recession is still here with worse to come, as evidenced by their lower disposable incomes. You cannot spend what you have not got, at least not anymore with banks tightening their lending criteria now after realising and accepting that property prices cannot continue rising forever.
The artificial growth reported has only been funded by the huge deficit which we are now facing to buy time to reach the general election.
The party is over, it's payback time.
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Apparently more Brish people are leaving the UK than there are British people being born in the UK.
Almost certainly these will be hardworking British taxpayers rather than British benefit claimants.
Could this be because hardworking British taxpayers are sick of funding luxuries and excesses such as: satellite tv, mobile phones, holidays, housing, alcohol and drug habits, outings etc for people on benefits?
Nowhere else in the world is the benefits system so generous.
Perhaps hardworking taxpayers should be jumping the queue for housing etc ahead of non - taxpayers ,career claimants and benefit cheats?
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Why not force benefit claimants to work in public services to earn their benefits, making a contribution to society, getting them off the streets etc ?
Surely this could be a means of reducing public sector spending, unemployment and exploitation of the benefits system at the expense of the taxpayer ?
Surely social housing and other benefits should be extended to people who contribute rather than those who don't ?
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What is important is that interest rates go up - a long way up - to give savers, the careful and provident elements of our society, a fair return on their money. Of course that will hurt the feckless and overstretched but that is too bad. If it causes a wave of repossessions: good, that will bring house prices down and allow people who have saved enough for a deposit to buy.
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The economy will move again once house prices return to their former levels. The levels were stupid, but the feel good feeling is necessary, even if people pause for breath and pay back some debt the effect on jobs could be immense.
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We need to be mindful that we are now in a new financial landscape and that the conditions which drove the exponential rises in house prices no longer exist. 100% & 125% mortgages have gone and silly multiples of salary are also a thing of the past. These factors mean it is no longer possible to obtain the funds needed to support the rises in house prices we used to see. The perception of property is now in my view reverting to that of buying a home as opposed to a short term investment.
Also mentioned in previous comments, interest rates cannot stay at 0.5% forever and in the next 12 months must rise. This will cause many to have repayment issues and as such may infuence prices downwards again. I heard on R4 that there has been an 'unprecedented' number of properties put up for sale in the first quarter of 2010. This has given potential buyers far greater choice and as such are shopping around a lot more, putting in offers below asking prices. Vendors are standing firm and holding out for full asking price hence a stand off is developing.
To get back to the question should prices rise or fall? I think they will fall again post election as unemployment rises further and interest rates begin to climb slowly. In truth we're not out of recession yet and a 0.2% growth rate is not good especially when that is supported by another month of car scrappage.
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In a sensible world we should expect house prices to move in the same way as other prices, a slight upward drift. The Bank of England aims for about 2%. At most we might say house prices rise in line with wages.
The reality is that because of our inability to provide new housing to meet rising demand, housing prices continue to soar and will continue to so long as we fail to meet demand.
I don't know if this should be considered as a good or bad state of affairs but for certain this is the economic reality.
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People need somewhere to live, the population will grow short of wars and pestilence, the government permits continued immigration, demand for housing will not go away simply because the prices are too high..
Availability of housing development land is strictly controlled so it is inevitable that house prices will rise in the long term, if for no other reason than building workers wages rise and construction materials costs continue to increase. Trying to tinker with the system to control prices will never work in the long term, any more than trying to limit the rise in the international price of oil as economies grow and demand increases.
In the last 13 years NuLabour has overseen and encouraged (by poor control as a result of deliberate policies) a net immigration of well over one million - these people are not sleeping in the streets so housing demand and prices was driven up, demands on services increased, as did the costs of those services, and inevitably wages increased - just wait for the house price rise to follow when the current financial debacle is history.
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I couldn't give a fig either way as far as myself as I own a house that I love and intend to live in it until I have to sell it to pay for someone to wipe my backside and feed me before I die.
Generally though, I believe the best situation would be for house prices to be relatively stable (inflation level rise) so that people's house and mortgage become a savings method building up to their retirement home (which they own outright). When there is high property price growth, property speculation tends to lead to really bad workmanship and bad behaviour ("what do I care if the neighbours hate me and the massive extension was built by the lowest bidder, I'm leaving in a month with a pot of money").
Where this falls down is the insane level of stamp duty which acts as a disincentive to move and has become a tax on labour mobility. You get stuck in an area with very high unemployment and cannot move to where the opportunities are because it will cost you tens of thousands of pounds in stamp duty.
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72. We are first time buyers in our early 30s, we both have good degrees and good jobs, and have saved a 20% deposit. We are hoping to start a family and don't want to still be renting when we do as we have had numerous problems with landlords selling up from underneath us etc and don't want to bring a child into that environment.
We have made NINE asking price offers on flats that need doing up, that are within our budget and plan to DIY ourselves, and each and every time we have been 'outbid' by 'investors' paying cash doing up the property as cheaply and as quickly as possible and then putting it back on the market for a profit. It is impossible to beat these people.
The problem with this of course is that responsible young people, a group which we consider ourselves to be part of are putting off or abandoning the idea of having a family. It feels like in our area the only people who can afford to have a family are those born with very rich parents who have bought them a house or the feckless 'never workeds' in the estates. I dread to think what society will be like when those being born today come of age in 18 years time.
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I am a globalwarming heritic , who believe it is a Labour excuse to
tax and control us,
I have a American article on the subject I would like you to see ; but my
scanner is not working and I cannot find a fax no for you
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A hung Parliament would be a disaster for the future of our children and
childrens children ; but I fear Labourwill do anything to remain in
power , and will give the Liberals everything they want. How can the
voting public be so gullible. They should look at the way some
Liberal Councills are run. Rubbish BIn Gestapo . fines for everything.
Rate Payers money invested in a Hotel , Allotments sold to make money on the Land which they waste on more none staff jobs When I was a Lib dem District Cllr ,most of our time and energy was spent plotting to embarrass the Conservatives with trick questions, and we were very
good liars when it came to election leaflets.
trick questions.
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"Too many people get hung up about house prices. Frankly with falling prices the only people who benefit are first time buyers. With rising prices the only people who benefit are last time sellers. For everyone else its 6 of one and half-a-dozen of the other"
Frankly that is back to front from start to finish.
People are much too indifferent to house prices in the UK.
Over inflated house prices like we have at the moment benefit nobody but estate agents, property developers and those who managed to buy cheap and are not living in the property. While a drop in prices would hurt those who have paid too much in the last few years, people who bought cheaply years ago (and live in the property with no intention to sell) will not be affected by a drop in prices.
Everyone else would benefit since lowering the cost of housing has a knock on effect accross the economy. Lower house prices would mean lower rents both of which would reduce the cost of living substantially. This would mean more disposable income as well as making it feasable for employers to pay lower wages lowering their operating costs and helping British industry become competitive internationally. More disposable income would mean more money fuelling the economy.
The only way to get fair house prices is to introduce proper tenants rights. We need a cap on rents which could be judged area by area. Families in private rented accommodation should have security of tenure and a fair rent which can not be increased willy nilly by profiteering buy to let landlords. The government along with the tories talk about family values.. here is something they can do to help families, let's see them make a pledge to implement just one basic human right, let's make it even easier by just implementing it for children, the right to have a roof over their head, a place they can call home. And I don't mean a slum roof or a different roof every few days.
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Housing and House prices are very important issues which have been ignored. The problem is one of political will.
1 There isn't a land shortage - that's been artificially created by the planning system which tends to favour the haves and the status quo. Labour decided that building flats was the answer - but of course on its own was insufficient and it did nothing for families ( where the need is greatest) or to provide this was affordable homes. (NB not enough public money goes in to social housing ,rather the govt prefers to use the planning system to extract funds form developers. This system is a legal nightmare is not very efficient and extremely bureaucratic and wasteful of public staff resources , lawyers and house builders time . It has also distorted the purpose of the planning system -which is not or should not be taxation of land profits). Local objections are given too much weight and such objections are about preserving existing owners house values what ever objectors may say.
2. We are simply not building enough houses( social or otherwise ) to meet the rise in population (largely immigration led_).AS noted above this this is partly down to our planning system - which discourages house building on green fields - even to meet social needs. It is also political. Politicians at both local and national level have ignored the issue and focussed on environmental protection ( much less controversial and fashionable) or if there's a problem C Govt blames Local Govt and vice versa. That's the easy thing to do.
3. The buy to let boom was allowed and even encouraged by Labour following the dot.com crash., This has surely forced up prices with individuals who might have invested in stock or savings ( yes savings !!) being allowed to BORROW at low rates ( AND GET TAX RELIEF) - it is a scandal as tax relief is not available for most other investments ( eg to buy shares) and is being reduced / phased out for pensions. Politicians of all colours but esp Labour have been only have been all too happy to take the benefits of the overheated housing market [ stamp duty etc ] to spend on their pet schemes and favour their core voters. This has not been in the public interest and the very long housing queues demonstrates.
4. Nothing much (actually nothing atall ?) was done to control house prices ( they should have been included in the inflation rate) - then interest rate s may have risen and choked off excess demand ( although supply would still need to be addressed) . Capital gains tax too unpopular.. however its existence on other assets distorts the market making houses a more profitable investment esp. given tax relief available for buy to lets. )
5 Demand is rising. The housing crisis is a scandal and is getting worse. As well as be fuelled by lack of supply - demand is increasing as a result of immigration .I live in a flat in a reasonable area. When I first came here 13 years ago the flats were only occupied by singles and married couples without kids . Not any more - many have children now and some were not born here ( nothing wrong with that but is shows how supply is under pressure form increased demand.
Why the Tories and LIbs aren't making more of this problem ( it is got far worse under Labour) I don't know, but I can only guess they are afraid of a backlash from home-owners many of whom may be natural supporters.
The politicians silence is deafening from all parties. They don't want to build more because it would
a] upset the NIMBY lobby ( look at the voters in Surrey etc and also liberal Richmond and Twickenham who are anti all development whether in the national interest or not - this is denied and opposition is dressed up as preserving the environment etc but the effect is the same - not enough housing )
b]it might result in a fall in house prices - unpopular with home owners in leafy suburbs and also buy to let investors.
c] have a negative impact on growth.Labours economic boom was also driven by the buoyancy of the housing market with purchasers borrowing to buy furniture and electrical goods and remortaging to buy cars , holidays and all sorts of other goodies. So the politicians interest is actually in keeping high prices as it fuels growth swells the tax coffers and keeps the HAVES happy. As for those struggling to save or rent - well I don't know. But we do need to SAVE more and borrow less.
It seems to me we and our political masters are living in LA LA land. Just as we are not being told about the scale and extent of cuts and tax rises needed we aren't being told the truth about housing. I am very depressed about the nation's future as are politician of all parties are avoiding the issues and showing no leadership. I cant see this changing much ... Depressing. WHEN ARE THEY GOING TO GET REAL ( to use GB's phrase)
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I would like house prices to fall and remain stable. Housing is a basic necessity, the ownership (not renting or shared purchase) of which is sadly now out of financial reach for many.
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I think house prices are due to drop quite sharply within the next 5 years. The population has grown because people are living longer and so staying in thier houses. When they are unable to care for themselves and thier relatives are unable to care for them many go into care homes. We now have people in thier 80's whose children are in thier 60's and are retired living often on a fixed income. Care homes are expensive and you are expected to pay if you have a house or enough savings. However, savings don't last long and after a few years property has to be sold. When you have enough people having to sell property it will start to flood the housing market and tip it into a downward spiral.
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The housing pyramid scheme is a con that people still believe in.Look at the news about Ireland today where there are 300000 empty houses built under lax planning by a greedy market,often on farmland.No one wants them so many are going to be demolished!
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As Chancellor, Brown abolished dividend tax credits on pension funds in 1997 to 'raise money.'
[Brown then raised taxes in retirement on any income you may have above what is left of the state pension. ]
These companies saw the writing on the wall and immediately ended their final salary pension schemes to new employees shortly after the ‘Brown raid’.
They also started to cut down on the number of people with long final salary pension service and worked towards ending a scheme which would no longer be viable, unless as in the public sector ,it is guaranteed and underwritten by the tax payers
The CBI opposed the Tax credit cuts
Even the treasury and No.10 opposed them.
But Brown made the cuts anyway.
By abolishing the tax credit, the yield for institutional funds across the entire market fell by 20 per cent. Few people outside the City understood the change and hardly any MPs protested. But Whitehall papers produced under Freedom of Information show that Mr Brown was warned by his officials and by the Treasury that there would be dire consequences.
They warned it would wipe £50bn off the value of funds, and that shares could drop by up to 20 per cent and public sector pensions would need topping up.
In fact the value of pension funds have lost around £5bn per year since the cuts.
Pension funds holding the cash that you, me and almost everyone else in the country had planned to use for our retirement have lost around £100 billion over the last 12 years.
The advice Brown was given by the Treasury, in 1997 was as follows:
“The changes in incentives are likely to lead to substantial changes in portfolios. Pension funds will find equity relatively less attractive, and will prefer other assets – particularly interest bearing securities and foreign equity – and may also be prompted to consider more direct property investment.”
Those funds were then channelled into fuelling an unsustainable property bubble, BTL portfolios, which developed because of Labours complete lack of regulation of the Banks.
This was followed by ever increasing toxic mortgage debt, and this was followed by the bank bailouts.
This is just one example of Gordon Browns incompetent decision making helped to create the cornerstone of the debt bubble.
In the ten years previous to Browns Raid on pensions, From 1987 to 1997 the Average House Price rose from £40k to £55k.
A 33.3% rise over ten years.
From 1997 to 2007, [after the tax dividend cuts] the Average House Price rose from £55k to £190k
A staggering 245% increase over the same period. Ten years.
Make no mistake.
Labour knew what was happening.
They let it happen.
As a FTB I will not have a gun held against my head, and be forced into debt, to pay for someone elses house.
I will not be buying my first house until they return to their 1998 sold prices. PERIOD.
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I would like them to fall when I'm buying and rise when I'm selling please!
:o)
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I have no choice but to rent a room in a 2 bedroom house. I would love to be able to afford a 1 bedroom flat and it's sad that many graduates like me are living on the breadline since no political party is interested in helping us in terms of jobs and housing. My rent actually works out nearly/more expensive as a mortgage. But because I do not always have a job (due to this climate), I cannot get a mortgage. I am effectively paying more than half of my landlord's mortgage yet I have nothing to show for it. Thus my weekly rent is £100 and his is only £50. He has a really good job too so he is so much more better of than me, at my expense partly. It's expensive to be poor as my Sociology teacher told me in the late 1990s.
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My partner and I have been living and working in London for just over 2 years and have spent the whole time trying to save for a deposit.
We lived separately- both in shared student-style accomadation; my first flat had no central heating and leaky windows - it got so cold in the winter that our damp washing froze where we hung it in the kitchen to dry!
His roof leaked badly and the landlord took three months to fix it.
Don't worry, I'm not going to start a Yorkshireman-style rant about how difficult life was... my point is that these poor-quality rented places weren't even that cheap! They still cost about 20-30% of our monthly income - which made it very difficult to save.
We looked for houses to buy the entire time and, concluding that it would take over a decade to save a deposit, looked into Shared Ownership instead. There are a couple of schemes around and, basically, you can buy a percentage of the house with a mortgage and rent the remainder. We were pretty sceptical at first, but researched a lot and finally bought a one-third share in a 2-bed flat. It's worked out really well! The flat is a million times nicer than the places we rented (it has heating and everything...) and is a new-build done to a high standard. The key point is that it's a LOT cheaper than the places we rented. Our combined outgoings for the mortgage on the third we own and the rent on the remainder are slightly over 60% of what we paid before to rent the horrible places... We're using the saving to overpay the mortgage and hope to be able to buy a bigger percentage of the house in about 5 years.
It is very hard to save for a deposit. If we'd had to wait any longer, I'd have had to move to a more expensive flat to rent and saved less - as the cold and damp were making us all ill.
Frustratingly, the mortgage payments themselves are very affordable - it's just the deposit that's a big hurdle.
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