The masses are going to rebel over housing sooner or later. The politician who can represent their grievances will find him/herself kneeling in front of the queen.
All politicians and governments pay lip service to the problem but nothing really ever changes.
1,000,000 new homes by 2020 is the latest nonsense being spouted which everyone including those who build homes are saying is at best highly optimistic and at worst just another lie.
The big five building companies are sitting on acres of land, enough to build 25% of that target but who actually thinks that they will free up that for affordable homes when all they want is to maximise profits.
I agree with your cynicism. The cosy triangle of politicians, house builders and banks have too much to gain from the current system to want any real change but that doesn't magic away the (justified) anger of those who've lost out and they're a huge voter bloc.
Yes but as we've seen recently, that's a "huge voter bloc" that for a large part doesn't vote. The older generations, those whose housing is already sorted to the extent that many are able to own more than one property, are extremely unlikely to vote for any party likely to damage their "investment" aka house prices. And so the cycle continues.
I've rented (£750pcm) in Maidstone for 8 years now whilst saving for a deposit and finally ready to buy this autumn at 32 years old. I've been able to afford a mortgage for a while now (with working wife of course - on my own would be a different matter), but the killer is the deposit. Saving £30k whilst renting has taken a long, long time (as I've not wanted to stop enjoying life completely) and have got married in that time, but I've had the same 2nd hand Car since 2006, take packed lunches every day, have done additional jobs etc. at weekends etc. etc. but it's a long slog.
Yet I see youngsters (18-25: earning circa £20k) at my place now moaning they can't afford to buy, whilst living at home with Parents and financing a brand new Car, doing all inclusive holidays to the Caribbean every summer.
I do think some of the latest generations aren't prepared to go without quite so much as prior generations, but maybe they just see it as an impossible task, so don't really bother, or in the case of some wait for a family member to peg it and pocket a deposit overnight - lucky them!
Then you get silly incentives like Help to Buy ISA - a good idea in theory but only applicable for houses up to £250k in the SE. Now it might work for some, but what I want (3 bed EOT in a reasonable area - nout special) will cost over £250k, so I want a house for say circa £280k and I don't get the bonus. Very helpful!!!
Ultimately there is housing out there (a quick looks now for a 3bed in Maidstone brings loads of options) but it's not affordable for most who don't have help and aren't prepared to slog for a decade to get it.
And for those unfortunate to have been brought into the world without a good support network and opportunities available it must be nigh on impossible to ever buy a place.
I make you right, although it's hard it will only get harder and a lot of people aren't making any effort or sacrifice at all. I went a few years of not going abroad to help and save up for a deposit.
If you had bought a small flat as an intermediate step to the 3 bed you could have sold that after a few years and used the money as a deposit on the house. Crazy that a 3bed is £280k in Maidstone, that would only get you a studio flat in South London!
Definitely need more council flats and to prevent oversea investors buying up entire blocks and leaving them unoccupied.
Political will. Make it that properties not lived in have to pay 10 times regular council tax. It would soon alter the economics around hoarding homes.
There are a number of things I would want to see the government do that ultimately, is interfering in the free market so will never happen and I'm probably looking at it too simplistically, so what in my head is a good idea, wouldn't work in practice.
Basically I'm 110% with @Fiiish on this subject. I agree with pretty much everything he's written, particularly the bit about property not be used as an investment vexhicle. However I know that viewpoint would not be welcome by a number of people
Mainly people that think human misery is a price worth paying for guaranteed returns of 15% and upwards on their investment, as long as they already have access to millions of pounds of capital to spunk on scarce property.
I don't doubt that if someone could generate that kind of investment return on a product that actually directly causes the death of other Brits in realtime, there would be people lining up to invest (and I'm sure some of our members here believe such an investment vehicle already exists).
I'm not sure if there is ever such a thing as a guaranteed return (even government bonds have some risk), but if there is then it certainly wouldn't be offering 15%+!
I'm not a BTL landlord and never will be because I find it to be a wholly unattractive investment offering returns which do not get close to compensating for the risks, especially on a levered basis and factoring in the illiquid nature of the investment.
Just to use an example using similar numbers to those I used in an earlier post, imagine a BTL landlord financing a £400k property with a typical 75% LTV interest-only mortgage at say 3.3%:
- net income: £4,100 - gross return: 4.1% (ie. £4,100/£100,000)
Personally I don't find a 4.1% gross return (before any taxes) to be remotely interesting importantly on a levered investment.
Now I'm sure some people will reassure me that house prices never fall (they do and they are falling) and I need to factor the capital appreciation into my calculation, but a 10% fall in house prices would wipe out 40% of my investment and still leave me stuck with an illiquid investment and a £300k mortgage.
The masses are going to rebel over housing sooner or later. The politician who can represent their grievances will find him/herself kneeling in front of the queen.
All politicians and governments pay lip service to the problem but nothing really ever changes.
1,000,000 new homes by 2020 is the latest nonsense being spouted which everyone including those who build homes are saying is at best highly optimistic and at worst just another lie.
The big five building companies are sitting on acres of land, enough to build 25% of that target but who actually thinks that they will free up that for affordable homes when all they want is to maximise profits.
I agree with your cynicism. The cosy triangle of politicians, house builders and banks have too much to gain from the current system to want any real change but that doesn't magic away the (justified) anger of those who've lost out and they're a huge voter bloc.
Yes but as we've seen recently, that's a "huge voter bloc" that for a large part doesn't vote. The older generations, those whose housing is already sorted to the extent that many are able to own more than one property, are extremely unlikely to vote for any party likely to damage their "investment" aka house prices. And so the cycle continues.
The traditional non voters voted for Brexit and in America a similar demographic got out and voted for Trump. The right politician/party could mobilise them again by promising to relieve the more affluent members of society of their 'investment' gains.
So if we cherry pick the figures and use a single, unrepresentative example, then yeah it isn't an outstanding investment.
What about the house down the road from me, where the owner bought it for around £400k, split it into 2 properties and now has two properties worth around £300k each around rents them out at that value accordingly. He is definitely getting the returns I stated.
In my area, house prices are definitely not falling. Had I moved down South 3 years earlier than I did I would have saved a lot of money.
The masses are going to rebel over housing sooner or later. The politician who can represent their grievances will find him/herself kneeling in front of the queen.
All politicians and governments pay lip service to the problem but nothing really ever changes.
1,000,000 new homes by 2020 is the latest nonsense being spouted which everyone including those who build homes are saying is at best highly optimistic and at worst just another lie.
The big five building companies are sitting on acres of land, enough to build 25% of that target but who actually thinks that they will free up that for affordable homes when all they want is to maximise profits.
I agree with your cynicism. The cosy triangle of politicians, house builders and banks have too much to gain from the current system to want any real change but that doesn't magic away the (justified) anger of those who've lost out and they're a huge voter bloc.
Yes but as we've seen recently, that's a "huge voter bloc" that for a large part doesn't vote. The older generations, those whose housing is already sorted to the extent that many are able to own more than one property, are extremely unlikely to vote for any party likely to damage their "investment" aka house prices. And so the cycle continues.
The traditional non voters voted for Brexit and in America a similar demographic got out and voted for Trump. The right politician/party could mobilise them again by promising to relieve the more affluent members of society of their 'investment' gains.
'Workers (unemployed, homeless, disenfranchised) of all nations unite - you have nothing to lose but your chains'.
It's been tried (sort of), and failed - vested interest always gets in the way.
So if we cherry pick the figures and use a single, unrepresentative example, then yeah it isn't an outstanding investment.
What about the house down the road from me, where the owner bought it for around £400k, split it into 2 properties and now has two properties worth around £300k each around rents them out at that value accordingly. He is definitely getting the returns I stated.
In my area, house prices are definitely not falling. Had I moved down South 3 years earlier than I did I would have saved a lot of money.
Criticise my unrepresentative example by using another1 If some mug wants to pay £300k for half of a £400k property then more fool them!
So if we cherry pick the figures and use a single, unrepresentative example, then yeah it isn't an outstanding investment.
What about the house down the road from me, where the owner bought it for around £400k, split it into 2 properties and now has two properties worth around £300k each around rents them out at that value accordingly. He is definitely getting the returns I stated.
In my area, house prices are definitely not falling. Had I moved down South 3 years earlier than I did I would have saved a lot of money.
Criticise my unrepresentative example by using another1 If some mug wants to pay £300k for half of a £400k property then more fool them!
Someone will, that's why rents are so high. Property speculation drives rents up.
Don't get too salty. It is perfectly feasible for property investors to get very good returns on their investment.
So if we cherry pick the figures and use a single, unrepresentative example, then yeah it isn't an outstanding investment.
What about the house down the road from me, where the owner bought it for around £400k, split it into 2 properties and now has two properties worth around £300k each around rents them out at that value accordingly. He is definitely getting the returns I stated.
In my area, house prices are definitely not falling. Had I moved down South 3 years earlier than I did I would have saved a lot of money.
Criticise my unrepresentative example by using another1 If some mug wants to pay £300k for half of a £400k property then more fool them!
Someone will, that's why rents are so high. Property speculation drives rents up.
Don't get too salty. It is perfectly feasible for property investors to get very good returns on their investment.
I'm a bit of an efficient market purist and would like to think that in a world of perfect information, such opportunities should not exist ie. the original seller should have recognised the potential to divide the property into two and marketed on that basis (less the cost of actually doing the conversion plus a small 'profit incentive' for the aggravation).
However unfortunately in the real world there is asymmetric information, irrational behaviour etc.
The masses are going to rebel over housing sooner or later. The politician who can represent their grievances will find him/herself kneeling in front of the queen.
All politicians and governments pay lip service to the problem but nothing really ever changes.
1,000,000 new homes by 2020 is the latest nonsense being spouted which everyone including those who build homes are saying is at best highly optimistic and at worst just another lie.
The big five building companies are sitting on acres of land, enough to build 25% of that target but who actually thinks that they will free up that for affordable homes when all they want is to maximise profits.
I agree with your cynicism. The cosy triangle of politicians, house builders and banks have too much to gain from the current system to want any real change but that doesn't magic away the (justified) anger of those who've lost out and they're a huge voter bloc.
Yes but as we've seen recently, that's a "huge voter bloc" that for a large part doesn't vote. The older generations, those whose housing is already sorted to the extent that many are able to own more than one property, are extremely unlikely to vote for any party likely to damage their "investment" aka house prices. And so the cycle continues.
The traditional non voters voted for Brexit and in America a similar demographic got out and voted for Trump. The right politician/party could mobilise them again by promising to relieve the more affluent members of society of their 'investment' gains.
Firstly. House prices as Fiiish said are not falling.
Secondly. Which politicians exactly are going to try to mobilise the marginalised into voting to relieve the more affluent in society of their investments when those politicians are in the main doing quite nicely Thankyou.
The masses are going to rebel over housing sooner or later. The politician who can represent their grievances will find him/herself kneeling in front of the queen.
All politicians and governments pay lip service to the problem but nothing really ever changes.
1,000,000 new homes by 2020 is the latest nonsense being spouted which everyone including those who build homes are saying is at best highly optimistic and at worst just another lie.
The big five building companies are sitting on acres of land, enough to build 25% of that target but who actually thinks that they will free up that for affordable homes when all they want is to maximise profits.
I agree with your cynicism. The cosy triangle of politicians, house builders and banks have too much to gain from the current system to want any real change but that doesn't magic away the (justified) anger of those who've lost out and they're a huge voter bloc.
Yes but as we've seen recently, that's a "huge voter bloc" that for a large part doesn't vote. The older generations, those whose housing is already sorted to the extent that many are able to own more than one property, are extremely unlikely to vote for any party likely to damage their "investment" aka house prices. And so the cycle continues.
The traditional non voters voted for Brexit and in America a similar demographic got out and voted for Trump. The right politician/party could mobilise them again by promising to relieve the more affluent members of society of their 'investment' gains.
'Workers (unemployed, homeless, disenfranchised) of all nations unite - you have nothing to lose but your chains'.
It's been tried (sort of), and failed - vested interest always gets in the way.
Fair point but I'd say the have nots have spread beyond the traditional disenfranchised demographic and even quite wealthy people are worrying about where their kids are going to live. Maybe it really will be different this time
The masses are going to rebel over housing sooner or later. The politician who can represent their grievances will find him/herself kneeling in front of the queen.
All politicians and governments pay lip service to the problem but nothing really ever changes.
1,000,000 new homes by 2020 is the latest nonsense being spouted which everyone including those who build homes are saying is at best highly optimistic and at worst just another lie.
The big five building companies are sitting on acres of land, enough to build 25% of that target but who actually thinks that they will free up that for affordable homes when all they want is to maximise profits.
I agree with your cynicism. The cosy triangle of politicians, house builders and banks have too much to gain from the current system to want any real change but that doesn't magic away the (justified) anger of those who've lost out and they're a huge voter bloc.
Yes but as we've seen recently, that's a "huge voter bloc" that for a large part doesn't vote. The older generations, those whose housing is already sorted to the extent that many are able to own more than one property, are extremely unlikely to vote for any party likely to damage their "investment" aka house prices. And so the cycle continues.
The traditional non voters voted for Brexit and in America a similar demographic got out and voted for Trump. The right politician/party could mobilise them again by promising to relieve the more affluent members of society of their 'investment' gains.
Firstly. House prices as Fiiish said are not falling.
Secondly. Which politicians exactly are going to try to mobilise the marginalised into voting to relieve the more affluent in society of their investments when those politicians are in the main doing quite nicely Thankyou.
The masses are going to rebel over housing sooner or later. The politician who can represent their grievances will find him/herself kneeling in front of the queen.
All politicians and governments pay lip service to the problem but nothing really ever changes.
1,000,000 new homes by 2020 is the latest nonsense being spouted which everyone including those who build homes are saying is at best highly optimistic and at worst just another lie.
The big five building companies are sitting on acres of land, enough to build 25% of that target but who actually thinks that they will free up that for affordable homes when all they want is to maximise profits.
I agree with your cynicism. The cosy triangle of politicians, house builders and banks have too much to gain from the current system to want any real change but that doesn't magic away the (justified) anger of those who've lost out and they're a huge voter bloc.
Yes but as we've seen recently, that's a "huge voter bloc" that for a large part doesn't vote. The older generations, those whose housing is already sorted to the extent that many are able to own more than one property, are extremely unlikely to vote for any party likely to damage their "investment" aka house prices. And so the cycle continues.
The traditional non voters voted for Brexit and in America a similar demographic got out and voted for Trump. The right politician/party could mobilise them again by promising to relieve the more affluent members of society of their 'investment' gains.
Firstly. House prices as Fiiish said are not falling.
Secondly. Which politicians exactly are going to try to mobilise the marginalised into voting to relieve the more affluent in society of their investments when those politicians are in the main doing quite nicely Thankyou.
Prices falling for £1m+ properties in one of the most expensive areas of the country is hardly representative of the country as a whole.
Not sure what angle you're playing NYA? Do you think the UK has a housing problem? And if so what's the solution? Is it sustainable that house prices in London and the South East are continuously rising out of the reach of younger first time buyers?
Respectfully, as someone that has volunteered for crisis and I honestly do not want you to think that I think that puts me on some pedal-stall, we have a housing problem
Respectfully, as someone that has volunteered for crisis and I honestly do not want you to think that I think that puts me on some pedal-stall, we have a housing problem
I was chatting to a Newham housing officer a while back. She described the situation in East London as Dickensian. She also told me that the reason they don't lift a finger about all those glow in the dark sheds is that the people living in them would be on the street if they intervened. Problem is an understatement.
You're entitled to your opinion and thanks for what you do for Crisis, but all of the arguments I hear (eg rising population, landlord speculation, foreign buyers, lack of affordability etc) to support an apparent housing crisis echo those I recall from Ireland or Florida a decade ago just before their prices fell 50% after which the 'shortage' miraculously disappeared.
I am not predicting a crash at all but high prices cure high prices.
Respectfully, as someone that has volunteered for crisis and I honestly do not want you to think that I think that puts me on some pedal-stall, we have a housing problem
I was chatting to a Newham housing officer a while back. She described the situation in East London as Dickensian. She also told me that the reason they don't lift a finger about all those glow in the dark sheds is that the people living in them would be on the street if they intervened. Problem is an understatement.
I just feel that a lot of people are oblivious or do not realise the extent to which how many people are really suffering out there. The 3 single mothers that newsnight highlighted the other night that had been moved to Welwyn as a result of them seeking emergency accommodation through Waltham Forest council were a great example.
You're entitled to your opinion and thanks for what you do for Crisis, but all of the arguments I hear (eg rising population, landlord speculation, foreign buyers, lack of affordability etc) to support an apparent housing crisis echo those I recall from Ireland or Florida a decade ago just before their prices fell 50% after which the 'shortage' miraculously disappeared.
I am not predicting a crash at all but high prices cure high prices.
No one has a crystal ball, but I cannot see a crash monumental enough to bring it back into affordability for both renters and aspiring buyers. All I can see is (admittedly from my south east London view point), rents eating into well over half of people's incomes, house prices rising so high that to get any decent mortgage you need a huge deposit that is highly unachieveable, more and more people that rely on social housing being squeezed into unsuitable and verging on inhumane living conditions, basic aspirations of settling down and start a family evaporating, 2 generations of families potentially living in one house together.
If prices in the South East were eventually driven up by foreign buyers in prime London then the opposite can occur too...:
I don't think we have a significant housing problem - we just need to rethink our attitude towards property ownership.
Absolutely agree with the bold bit.
The Brits are fixated with owning property (thanks Maggie) whereas the Germans for example are more than happy to rent and as such have one of the largest rented sectors in Europe. But rents are regulated by local/regional government, the law favours tenants, and tenancies are for much longer, usually a minimum of 2 years. Revenge evictions are never heard of in Germany.
Building properties for affordable rental is the solution - in areas on the edge of towns and cities (green belt if necessary) and also ensuring transport infrastructure is in place for commuting to where the jobs are located. That can be social housing, housing associations, and/or private developers - the latter needing perhaps incentives with carrots and perhaps the odd stick e.g. planning permission is only granted for rental properties. Property developers also become estate managers. Land costs greatly reduced by using public sector land and compulsory purchase of brown fields which would be worthless to private owners because the planning regs would only allow rental properties to be built. A move away from short-term lets to longer term tenancy agreements giving greater security of tenure. Fair rent regulation that allow developers to get a return on investment but also allow the man on the Clapham omnibus to afford them.
The above, in turn, would naturally regulate property prices.
The problem is that a lot of people think they're entitled to spring water from the freshest mountain stream but turn their nose up at a glass of tap water.
Yes, and tap water is just as good for you, if not better. I know this, but still don't drink it though:)
The masses are going to rebel over housing sooner or later. The politician who can represent their grievances will find him/herself kneeling in front of the queen.
All politicians and governments pay lip service to the problem but nothing really ever changes.
1,000,000 new homes by 2020 is the latest nonsense being spouted which everyone including those who build homes are saying is at best highly optimistic and at worst just another lie.
The big five building companies are sitting on acres of land, enough to build 25% of that target but who actually thinks that they will free up that for affordable homes when all they want is to maximise profits.
I agree with your cynicism. The cosy triangle of politicians, house builders and banks have too much to gain from the current system to want any real change but that doesn't magic away the (justified) anger of those who've lost out and they're a huge voter bloc.
Yes but as we've seen recently, that's a "huge voter bloc" that for a large part doesn't vote. The older generations, those whose housing is already sorted to the extent that many are able to own more than one property, are extremely unlikely to vote for any party likely to damage their "investment" aka house prices. And so the cycle continues.
The traditional non voters voted for Brexit and in America a similar demographic got out and voted for Trump. The right politician/party could mobilise them again by promising to relieve the more affluent members of society of their 'investment' gains.
Yes, there is now a gap for a party/politician to make promises. Not promises that can be kept. Without commenting on the Brexit election outcome - I found it interesting that both sides could make calims that they knew were not true. The NHS advert was ridiculous for instance. If you can get away with this, you can just promise unhappy people what they want. In Brexit, the public rebelled against experts - wow - that was used by politicians - it is a very dangerous tool to use and opens up a can of worms. Sort of what Trump has done. Nobody really expects him to deliver for the people who voted for him do they.
I believe on of the biggest dangers for the Conservative party is that the Labour party is useless. Basically they have to deliver in the eyes of the people who are not happy with their lot or the reaction will come. But from somewhere that catches the disaffected public's imagination. Housing is a major issue. I am ok - I own my property with mortgage paid off - but our housing system is broken and it has to be fixed in a serious way which will probably put a lot of influential/rich people out of joint a bit. Papering over the cracks is what governments tend to do even though it never works.
It's a good thing water is currently not treated the same way as land/property is - a finite resource necessary for happiness and well-being. Imagine the rich buying up all the reservoirs and lakes using debt leveraged against the next generation then charging through the nose for water even of an average quality. No doubt there would still be the same people on here chortling and saying 'Water isn't a god-given right, if you can't afford it, move somewhere where the water is cheaper or get a better job'.
You've mentioned this a couple of times now, can you explain to me, please, how individuals can leverage against the next generation? I just can't imagine any financial institution lending me money based on the assumption that my son will pay for it.
It's a good thing water is currently not treated the same way as land/property is - a finite resource necessary for happiness and well-being. Imagine the rich buying up all the reservoirs and lakes using debt leveraged against the next generation then charging through the nose for water even of an average quality. No doubt there would still be the same people on here chortling and saying 'Water isn't a god-given right, if you can't afford it, move somewhere where the water is cheaper or get a better job'.
You've mentioned this a couple of times now, can you explain to me, please, how individuals can leverage against the next generation? I just can't imagine any financial institution lending me money based on the assumption that my son will pay for it.
Debt in two ways. Firstly, actual debt in the years after World War 2 saw a massive expansion in spending to finance building, social programs, infrastructure etc. using long term loans (gilts, foreign investment, loan aid etx.) by the Government to avoid immediate tax rises. Over the last few decades, taxes have had to go up on the lowest earners or social spending be cut as this level of borrowing becomes unsustainable. For example, the end of free university tuition and the deteriorating NHS. Also, the banks' failure to manage their own debt and the Government having to bail them out, meaning yet more taxes and cuts that disproportionately impact the young and poor.
Then there's generational rent. As reported by the news last week, last generation's young earners were better off than than this generation's, due to a mixture of better wages, better job access and cheaper rent/house prices, amongst other things. It was also easier to save risk free. Now the capital is largely concentrated in the hands of wealthy baby-boomers who are able to charge extortionate rents or otherwise able to restrict access to younger people accessing capital. If they did not have access to the amounts of wealth made available at the expense of future generations, there's no way this capital could be concentrated in such a fashion.
Political will. Make it that properties not lived in have to pay 10 times regular council tax. It would soon alter the economics around hoarding homes.
There are a number of things I would want to see the government do that ultimately, is interfering in the free market so will never happen and I'm probably looking at it too simplistically, so what in my head is a good idea, wouldn't work in practice.
Basically I'm 110% with @Fiiish on this subject. I agree with pretty much everything he's written, particularly the bit about property not be used as an investment vexhicle. However I know that viewpoint would not be welcome by a number of people
I am certain that governments will eventually see they have no alternative but to interfere in the free market.
The free market and free movement of capital has allowed owners of financial assets to prosper at the expense of all other stakeholders in society.
It should not make financial sense for an investment in a property to yield less than 5% before costs. The property should be yielding 10% which means the price of the property must fall as must all assets.
They are valued by reference to an unsustainable zero interest rate which distorts the market perception of risk/reward and has diverted capital away from infrastructure towards financial assets which do not add to productivity.
Low interest rates have allowed property to become a financial asset, not an asset to provide an affordable home.
Rented properties should provide a revenue stream for the landlord which reflects costs and risks. Setting rental levels by reference to say a 10% yield automatically sets the price a landlord will pay for a property, half what he would pay for the current 5% yield. That then allows home owners to compete with financial investors for the same asset.
Incredible. New homes and property ownership was spurred on by leveraging debt and a boom in borrowing, leaving a lot of people very wealthy at the expense of a house of cards debt system that kept kicking the can down the road for the next generation to pay. Now that all the money has dried up, this generation has been told to lift itself up by its bootstraps.
Ok this I get. The Governments trying to build a new country after WW2, with insufficient resources, decided to borrow as much as possible and, potentially, misjudged how long the benefits of the investments would last. Social housing that takes 50 years to pay for needs to last for longer than 50 years. If it does, of course, then the next generation gets to benefit from it though, surely? The fact that there is not enough social housing, assuming that is true, is more a miscalculation of not spending (and borrowing) enough than spending too much?
I would be tempted to ask just what the alternative was though as we needed housing and infrastructure badly, and it could be argued we still do.
I do get that the current generation at c. 70 years old have the benefit of high property prices and didn't have to pay that much for them. Even more so that they will have benefited from inheriting their parents' properties and having that money to spend - money that has come from the later generations having to pay silly money for their first properties both in terms of £s and in terms of relative ratios to income etc.
It's a good thing water is currently not treated the same way as land/property is - a finite resource necessary for happiness and well-being. Imagine the rich buying up all the reservoirs and lakes using debt leveraged against the next generation then charging through the nose for water even of an average quality. No doubt there would still be the same people on here chortling and saying 'Water isn't a god-given right, if you can't afford it, move somewhere where the water is cheaper or get a better job'.
This is where I struggle, a little. The suggestion that the rich can make investments using debt leveraged by the next generation, and profit from it. If they are investing in industries that supply goods or services that are more necessary than discretionary then the cost of acquiring them should be reflected in the price of purchase. I can't see how any institution other that central or local government can purchase things that would have to be leveraged or funded from rising taxes. Thus the only entity that can spend, leveraged against future tax revenues, opposed to raising tax revenues now is government.
Debt in two ways. Firstly, actual debt in the years after World War 2 saw a massive expansion in spending to finance building, social programs, infrastructure etc. using long term loans (gilts, foreign investment, loan aid etx.) by the Government to avoid immediate tax rises. Over the last few decades, taxes have had to go up on the lowest earners or social spending be cut as this level of borrowing becomes unsustainable. For example, the end of free university tuition and the deteriorating NHS. Also, the banks' failure to manage their own debt and the Government having to bail them out, meaning yet more taxes and cuts that disproportionately impact the young and poor.
Then there's generational rent. As reported by the news last week, last generation's young earners were better off than than this generation's, due to a mixture of better wages, better job access and cheaper rent/house prices, amongst other things. It was also easier to save risk free. Now the capital is largely concentrated in the hands of wealthy baby-boomers who are able to charge extortionate rents or otherwise able to restrict access to younger people accessing capital. If they did not have access to the amounts of wealth made available at the expense of future generations, there's no way this capital could be concentrated in such a fashion.
I don't doubt this news report, although I am, always, sceptible about the agenda of researchers that provide the conclusions from raw data, but there are other things to consider. As has already been mentioned on this thread, sacrifices need to be made to own one's own home. I don't, personally, know anyone that doesn't have a Smart Phone. In fact, most of the people I know have an iPhone. These devices retail at c. £800 and few people keep one for as long as three years. I don't know many people that don't own a car (or couples that own one each), or a wide screen TV, do not have foreign holidays. Almost every household has a computer and/or an other device that can access the internet. All these things come at a cost.
When my parents first got married that didn't even have a fridge. My Mum, regularly, tells me how they used to hand milk out the window. When I was fifteen my Dad still wore the same sheepskin coat to football that he'd got for his 21st birthday. He drove an old banger and our holidays were two weeks in Devon in a crappy, second hand caravan that leaked. Just to put things into context, my dad was an Accountant, and a very successful one at that, but in the 70s and much of the 80s no one had any of the 'luxuries' that the current generation of 20s and 30s take for granted. One can't have it all today and then expect to have a deposit present itself when they want to buy a house. Even renting would be much easier without the monthly cost of Sky TV, a mobile phone, broadband, loan repayments on the new car, saving for that foreign holiday, a designer handbag twice a year and a new wardrobe every season. Not to mention the need to eat out at a restaurant twice a month.
I do have sympathy for people that don't have enough money to 'live' but I struggle to relate to people like my niece and nephew (who I, obviously, love and respect) who grew up with much more than my sister and I had and they already have things in their early twenties that I didn't have until I was nearly forty. However, I do own my own home and they are going to struggle to buy one but they both have brand new cars - something that I could have only dreamed of.
I think I might have gone a little off topic there. Also I wasn't having a pop at you Fiiish, I just think I see things from a slightly different perspective to you.
Another good link - report by Aviva into low levels of saving(s) for U.K. Families. This of course has an impact on home ownership and contributes to a vicious circle re: wealth divide.
Comments
If you had bought a small flat as an intermediate step to the 3 bed you could have sold that after a few years and used the money as a deposit on the house. Crazy that a 3bed is £280k in Maidstone, that would only get you a studio flat in South London!
Definitely need more council flats and to prevent oversea investors buying up entire blocks and leaving them unoccupied.
I'm not a BTL landlord and never will be because I find it to be a wholly unattractive investment offering returns which do not get close to compensating for the risks, especially on a levered basis and factoring in the illiquid nature of the investment.
Just to use an example using similar numbers to those I used in an earlier post, imagine a BTL landlord financing a £400k property with a typical 75% LTV interest-only mortgage at say 3.3%:
- deposit £100,000 (effectively the 'investment');
- annual interest £9,900;
- annual rent at 5% yield £16,500 (assume 1-month void and 10% management fee);
- maintenance/insurance/other (eg. legal fees) £1,500 (estimate);
- stamp duty £1,000 (£10k upfront amortised over 10 years)
- net income: £4,100
- gross return: 4.1% (ie. £4,100/£100,000)
Personally I don't find a 4.1% gross return (before any taxes) to be remotely interesting importantly on a levered investment.
Now I'm sure some people will reassure me that house prices never fall (they do and they are falling) and I need to factor the capital appreciation into my calculation, but a 10% fall in house prices would wipe out 40% of my investment and still leave me stuck with an illiquid investment and a £300k mortgage.
What about the house down the road from me, where the owner bought it for around £400k, split it into 2 properties and now has two properties worth around £300k each around rents them out at that value accordingly. He is definitely getting the returns I stated.
In my area, house prices are definitely not falling. Had I moved down South 3 years earlier than I did I would have saved a lot of money.
It's been tried (sort of), and failed - vested interest always gets in the way.
Don't get too salty. It is perfectly feasible for property investors to get very good returns on their investment.
However unfortunately in the real world there is asymmetric information, irrational behaviour etc.
Secondly. Which politicians exactly are going to try to mobilise the marginalised into voting to relieve the more affluent in society of their investments when those politicians are in the main doing quite nicely Thankyou.
If foreign speculation was blamed for pushing up prices throughout London (the ripple effect) then surely it works the other way too....
Not sure what angle you're playing NYA? Do you think the UK has a housing problem? And if so what's the solution? Is it sustainable that house prices in London and the South East are continuously rising out of the reach of younger first time buyers?
I don't think we have a significant housing problem - we just need to rethink our attitude towards property ownership.
I am not predicting a crash at all but high prices cure high prices.
I can see it maybe plateauing but that's it
The Brits are fixated with owning property (thanks Maggie) whereas the Germans for example are more than happy to rent and as such have one of the largest rented sectors in Europe. But rents are regulated by local/regional government, the law favours tenants, and tenancies are for much longer, usually a minimum of 2 years. Revenge evictions are never heard of in Germany.
Building properties for affordable rental is the solution - in areas on the edge of towns and cities (green belt if necessary) and also ensuring transport infrastructure is in place for commuting to where the jobs are located. That can be social housing, housing associations, and/or private developers - the latter needing perhaps incentives with carrots and perhaps the odd stick e.g. planning permission is only granted for rental properties. Property developers also become estate managers. Land costs greatly reduced by using public sector land and compulsory purchase of brown fields which would be worthless to private owners because the planning regs would only allow rental properties to be built. A move away from short-term lets to longer term tenancy agreements giving greater security of tenure. Fair rent regulation that allow developers to get a return on investment but also allow the man on the Clapham omnibus to afford them.
The above, in turn, would naturally regulate property prices.
Ho hum - it won't happen though!
I believe on of the biggest dangers for the Conservative party is that the Labour party is useless. Basically they have to deliver in the eyes of the people who are not happy with their lot or the reaction will come. But from somewhere that catches the disaffected public's imagination. Housing is a major issue. I am ok - I own my property with mortgage paid off - but our housing system is broken and it has to be fixed in a serious way which will probably put a lot of influential/rich people out of joint a bit. Papering over the cracks is what governments tend to do even though it never works.
Then there's generational rent. As reported by the news last week, last generation's young earners were better off than than this generation's, due to a mixture of better wages, better job access and cheaper rent/house prices, amongst other things. It was also easier to save risk free. Now the capital is largely concentrated in the hands of wealthy baby-boomers who are able to charge extortionate rents or otherwise able to restrict access to younger people accessing capital. If they did not have access to the amounts of wealth made available at the expense of future generations, there's no way this capital could be concentrated in such a fashion.
The free market and free movement of capital has allowed owners of financial assets to prosper at the expense of all other stakeholders in society.
It should not make financial sense for an investment in a property to yield less than 5% before costs. The property should be yielding 10% which means the price of the property must fall as must all assets.
They are valued by reference to an unsustainable zero interest rate which distorts the market perception of risk/reward and has diverted capital away from infrastructure towards financial assets which do not add to productivity.
Low interest rates have allowed property to become a financial asset, not an asset to provide an affordable home.
Rented properties should provide a revenue stream for the landlord which reflects costs and risks. Setting rental levels by reference to say a 10% yield automatically sets the price a landlord will pay for a property, half what he would pay for the current 5% yield. That then allows home owners to compete with financial investors for the same asset.
I would be tempted to ask just what the alternative was though as we needed housing and infrastructure badly, and it could be argued we still do.
I do get that the current generation at c. 70 years old have the benefit of high property prices and didn't have to pay that much for them. Even more so that they will have benefited from inheriting their parents' properties and having that money to spend - money that has come from the later generations having to pay silly money for their first properties both in terms of £s and in terms of relative ratios to income etc. This is where I struggle, a little. The suggestion that the rich can make investments using debt leveraged by the next generation, and profit from it. If they are investing in industries that supply goods or services that are more necessary than discretionary then the cost of acquiring them should be reflected in the price of purchase. I can't see how any institution other that central or local government can purchase things that would have to be leveraged or funded from rising taxes. Thus the only entity that can spend, leveraged against future tax revenues, opposed to raising tax revenues now is government. I don't doubt this news report, although I am, always, sceptible about the agenda of researchers that provide the conclusions from raw data, but there are other things to consider. As has already been mentioned on this thread, sacrifices need to be made to own one's own home. I don't, personally, know anyone that doesn't have a Smart Phone. In fact, most of the people I know have an iPhone. These devices retail at c. £800 and few people keep one for as long as three years. I don't know many people that don't own a car (or couples that own one each), or a wide screen TV, do not have foreign holidays. Almost every household has a computer and/or an other device that can access the internet. All these things come at a cost.
When my parents first got married that didn't even have a fridge. My Mum, regularly, tells me how they used to hand milk out the window. When I was fifteen my Dad still wore the same sheepskin coat to football that he'd got for his 21st birthday. He drove an old banger and our holidays were two weeks in Devon in a crappy, second hand caravan that leaked. Just to put things into context, my dad was an Accountant, and a very successful one at that, but in the 70s and much of the 80s no one had any of the 'luxuries' that the current generation of 20s and 30s take for granted. One can't have it all today and then expect to have a deposit present itself when they want to buy a house. Even renting would be much easier without the monthly cost of Sky TV, a mobile phone, broadband, loan repayments on the new car, saving for that foreign holiday, a designer handbag twice a year and a new wardrobe every season. Not to mention the need to eat out at a restaurant twice a month.
I do have sympathy for people that don't have enough money to 'live' but I struggle to relate to people like my niece and nephew (who I, obviously, love and respect) who grew up with much more than my sister and I had and they already have things in their early twenties that I didn't have until I was nearly forty. However, I do own my own home and they are going to struggle to buy one but they both have brand new cars - something that I could have only dreamed of.
I think I might have gone a little off topic there. Also I wasn't having a pop at you Fiiish, I just think I see things from a slightly different perspective to you.
Another good link - report by Aviva into low levels of saving(s) for U.K. Families. This of course has an impact on home ownership and contributes to a vicious circle re: wealth divide.