UKC

Could someone explain this to me in English?

http://news.bbc.co.uk/1/hi/business/6932304.stm

If average house prices are now 11 times the average wage, where is the demand going to come from that will see them grow by 40% over the next 5 years?

In reply to Jon Dittman: bloody buy to let landlords, because all the would-be first time buyers who can no longer afford house prices are forced to rent instead. (speaking as someone very relieved she didnt wait for the 'inevitable' price crash before buying a few years back)

In reply to Jon Dittman: Doesn't make much sense to me either. Looking on this page gives you the average house price now:
http://news.bbc.co.uk/1/shared/spl/hi/in_depth/uk_house_prices/html/houses....
Presumably the only people who will be able to afford to buy a house will be those who have one to sell. Not far off the current situation. I'm just really glad I bought my first house when I did, it seems ridiculously cheap now!

In reply to Jon Dittman:

It is simply a case of supply and demand. There simply arent enough houses. As a developer I beleive the main reason for this is the lengthy planning process, and contradictions between planning policies and govt policies.

I only develop brownfield sites, one prime site I recently bought has so far taken 3 planning applications and 6 months and we are no closer to getting planning. The reason is that the council want us to contribute towards traffic calming measures by a local school, which we are happy to do, but it will take them 6 months to produce the agreement to do so , and we cannot commence on site until they have done that.

We are trying to build 'affordable' family ecohomes (170k for a 3 bed semi) which is what the area desperately needs, but by the time we have factored in the cost of the delays caused by the council, along with the cost of the section 106 agreement for maintenance of public open space the proce may well be closer to 190-200k.

It is very frustrating.

In reply to Psychopathic_Barbie:

You dont read the guardian by any chance do you?

As a btl landlord all of my properties are rented by families who simply do not want to buy, or cannot get a mortgage through bad credit/ divorce etc. In addition they have no chance of getting social housing and are glad of the opportunity to rent from a fair landlord at a sesible rental level. Where would my tenants live otherwise?

Houses are still cheap to build. The cost of land and lack of supply to meet the demand of the increased number of people living on their own through choice or separation/ divorce is what is driving up prices.

In reply to Psychopathic_Barbie:


Not necessarily, if you think about it, in order to yield 6% return (what you'd ge tif you put your capital into a standard savings account) you'd have to rent a £250K flat out at £1250 and that just isn't attainable in most places. Most buy to lets are being run at a 'loss' but are being kept on as landlords expect to make more money through an increase in the capital. So far they have done ok through this..........

In reply to Jon Dittman:

I think we are slowly, but surely, moving to the European model in cities at least: most people will end up with long-term rented accommodation.

Buy-to-let, second homes, people wanting to have a shorter commute to work, planning restrictions, increasing longevity, greater population and more divorced couples all contribute.

Round us there's an awful lot of in-filling - lovely old edwardian houses with decent gardens being flattened for flats and gin-palaces (with small gardens). Not pretty, but inevitable I guess.

J

In reply to Moacs:

maybe we indeed should be giving accommodation tax breaks to families who live together to reduce the number of sole households

In reply to Jon Dittman: Don't worry, we are soon to see lots of cheap housing for sale, both new and second hand, slight snag is it will all be on flood plains.

In reply to Jon Dittman:

I've just bought my first house. I'll be well please if it increases in value by 40% in the next 5 years!

In reply to peterjb: no, I dont get my info off the guardian, though I do tend to pay quite a lot of attention to my pal who is a former housing association worker and now works as a proffesional housing researcher. And I also have a fair few discussions with a friend who IS a buy to let landlord. And while he isnt making a great deal of money from it at present - he's doing it as a retirement investment - he does have rather a lot of houses for one person. I'm also going on the experience of a friend who was trying to buy a house at the cheapest end of the market, but found it very difficult to compete with BTL landlords in the area.

Its not actually a legal requirement to 'read the guardian' before coming to the conclusion that the BTL boom is pushing house prices up!

In reply to Psychopathic_Barbie:

It is a free and open market and investors should not be prevented from purchasing residential properties.

Your pension btw, will be growing nicely thanks to rental and capital growth in the all of the property sectors recently.

Without house price growth aka developer's profit, many of the urban regeneration schemes in the UK would not be viable.

In reply to Psychopathic_Barbie:

btw - BTL is only a fragment of the wider market, and it is at more risk thanthe private market due to the rate premium paid on debt.

In reply to Moacs:>

mmm, near me too. lots of former local authority housing with decent size gardens gradually budding off little mini-me houses squeezed alongside them in the former gardens.

In reply to Glen:

If you are planning a long term future in the UK (ie you're not emigrating), then a house price crash would suit you better.

In reply to John Rushby: you'll doubtless be even more horrified to hear that I think the tax perks private landlords get (unlike private owners who lost mortgage tax relief during the 80s, private owners can offset the interest paid on BTL mortgages as a business expense) should be ended. Which would not 'unfairly penalise' private landlords, it would simply help level the playing field.

In reply to peterjb: What do you mean by families wanting "social" housing? Is that kinda like dodgy geezers wanting antisocial housing?

In reply to John Rushby:

This may be a bit of a 'lefty' view, but I do find it odd and a bit distateful that people seem to think that their home/other people's homes are simply commodities to be bought and sold and screw the consequences. Decent and fair-priced housing should be a human right in a so called 'civilized' society, rather than a play thing for the middle classes who have a bit of equity to play with.


Here in Manchester, a significant number of properties in various urban regeneration areas have been bought up by investors who have no intention of either renting them out or living in them. This when homelessness is on the increase.

In reply to Papillon:

How exactly? Then I'll just have a large loan that I can't repay even if I sell the house.

In reply to Psychopathic_Barbie:

Why not offset interest on BTL mortgage as a business expense ( assuming you are a business, otherwise it one would be unable to claim)? Private BTL landlord also pay capital gains tax on the capital uplift.


Interest on plant and equipment can be offset agaiinst tax, pretty much standard business practice. Why single out one market sector?

In reply to Glen: Why?

In reply to Daz H:


So what are they doing with them? So far as I am aware, the major regen schemes in the north west have primarily been driven and supported by developers able to extract sufficient value from residential property so as to be able to absorb the very high cost of reclaiming brownfield land.

I wish people would not see housing in isolation, it is part of the wider UK economy.

In reply to Glen:

So presumably after 5 years you're going to sell your house and go and live in a tent? Either that or you're going to take out an even bigger loan to release the equity or your house will be the only one to rise in price whilst everyone else's stays the same or reduces.

In reply to Glen: You will always want somewhere to live, and if this is your first home, you will probably want to upgrade. If prices fall the difference between the house you have and the next one will be smaller. So for slightly higher mortgage payments you could get alot more house. If they go up the difference will increase.

Of course if you plan to downgrade then increased prices will suit you but given your age I doubt it.

Your money lender will have made sure you could pay back your loan whatever happens.

In reply to Daz H:
I do find it odd and a bit distateful that people seem to think that their home/other people's homes are simply commodities >

me and all, we live in a tiem when a necessity is a luxury item?

were heading back toward serfdom where future sooutions include housing provision as part of employment terms

In reply to John Rushby:

So called 'buy to leave'. They're banking on the capital gain alone making it worth their while, with the property remaining empty.

In reply to Daz H: exactly! the whole "rising value" thing only works for homeowners who are moving from an expensive area to a cheaper one or from a big home to a small one. Otherwise for every rise in your own house price there is a corresponding rise in the price of the house you hope to move to - the main winner is the bank.

In reply to deepsoup:

A very dangerous game to play and not a particularly commercial approach.

As for housing being a commodity, yes it is. It is also a major employer driven by the private sector, unless someone wants to put together a workable central government housebuilding programme.

In reply to peterjb:
"factored in the cost of the delays caused by the council, along with the cost of the section 106 agreement for maintenance of public open space"

Don't knock Sect. 106! It's often the only way to get less enlightened developers to remember that there's a world beyond their development. Public open spaces are hugely important and unfortunatly the 'stick' approach has to be used sometimes to ensure that some provision is made.
I agree with council foot-dragging tho'. I wonder what they do all day sometimes. Probably on a forum or something

In reply to Psychopathic_Barbie:

..but many people do relocate and or downsize, and the growth in their house price is probably the largest cash sum they will ever gain.

this frees up capital in the market and drives consumer spending (not debt - differant argument). With higher levels of disposable income come higher levels of spend across the economy, be it cars, meals out, holidays etc.

as already identified house prices are determined by supply and demand. now supply changes occur more slowly so the main driver of the cyclical boom/bust pattern we always see in housing is primarily on the demand side. for instance with the current boom, the explosion of btl demand, increasing immigrant population, household size etc.
the limiting factor on demand is of course money. now for the article to ring true we would have to see the availability of money to housebuyers increasing (it's no good demanding the property if you can't pay for it). this of course happens in a number of potential ways, e.g:
- cheaper credit. well this looks unlikely, in fact we're in a trend the other way at the moment.
- loosening of lending criteria. well certainly partly responsible for the mess we have now but the current US sub prime disasters may impact on this.
- real wage increases. i.e must be driven by an increase in the value of the skills of the populace in the world market place.
- legislation. government tinkering, key worker loans etc. distort the market by giving people more money to spend thus pushing up the prices.
- outside help, parental etc. again just a market distortion pushing up the price.
- fall in other unavoidable expenses. well the tax burden is rising and will do so more to und the pensions calamity which can only get worse, as well as the current govts heavy borrowing and extensive use of PFI.

even bullish commentators are largely talking of slow growth for a few years, suspect this "research" is more politically motivated. saying that I thought prices would have fallen before now and although they are starting to do so in many areas who knows???

In reply to fijibaby:

Stuff 'em with a Section 52.

Ah, that makes that property unsaleable, still once the vandals have got hold of it, the pigeons in it and the weather all over it, it will live on, as bits in a themed pub.....

In reply to John Rushby:

Most private individuals are not in the market for large scale plant and equipment, and these things, unlike housing, are not a basic human need. However for the first few years at least most of the cost of the monthly mortgage repayment is interest repayment rather than capital. so being able to offset this against tax gives landlords a huge advantage over private tenants. Up to the 1980s this was not the case - any private home owner paying a mortgage could claim tax relief on it. But the abolition of mortgage tax relief did away with this for owner-occupiers whilst leaving the "business expense" loophole in place for landlords. Getting rid of this would not unfairly penalise landlords, it would simply get rid of a glaring inequity.

In reply to Jon Dittman:

if rates continue to rise the ability of btl landlords to maintain their properties on rents less than monthly mortgage costs, in anticipation of capital growth, will be diminished.

only those who have been in the game a long time and have a small mortgage or those who are willing to reducethe number of properties will be able to maintain.

thus more houses will come onto market but will still be unnafordable for most due to rate rises and thus may sit there unsold and we will have a house price slump / readjustment

In reply to paulguy:

Not really, simply people who are looking for a landlord who will take dss, yet still has properties in what you would call 'nice' areas.

Fortunately prices are still reasonably sensible around where I live, so 1st time buyers can afford to buy. Unlike London etc. Many of the people I let to have simply chosen not to buy.

Undoubtably there are unscrupulous landlords out there, and in places demand is driving up prices. I steer clear of these areas. In addition I do have a social conscience and will only buy a property to let if it will not be betrimental to the area.

In reply to John Rushby:


But it does go on, a lot. Particualrly with large investors such as pension funds for whom the hassle would be too much to administer and unecessary in times when capital growth alone was >10%

there are also many instances of investors retaining land for development until such times as it becomes more viable. COmmon sense really and inevitable but that doesn't mean the need for social housing goes away. Selling off council houses always seemed an incredibly short sighted policy to me.

In reply to John Rushby: The only way I have ever benefited from house prices rising without downsizing, was to move countries, using the equity on my house to buy a similar property abroad with only a tiny mortgage.

In reply to John Rushby:


Hey, in a free and open market investors should not be prevented from purchasing high value commodities such as crack cocaine to sell at vast profit.

What, crack is illegal? But that unfairly singles out one market sector for something silly like social harmony.

Sheesh!

In reply to Psychopathic_Barbie:

nut tax law should be fair to all businesses, and if a food producer can claim interest back on debt why shouldn't another market sector?


However for the first few years at least most of the cost of the monthly mortgage repayment is interest repayment rather than capital.

A modern captial and interest not configured that way, unlike a loan.

so being able to offset this against tax gives landlords a huge advantage over private tenants.

It is a business. you might not like it, but it is perfectly acceptable. As I keep trying to say, it is fine to moralise about the housing market, but without investment into the sector there would be no workable regen schemes, and affordable housing would be uneconomic because the developer's return would be too small to cover the subsidy.

You can't have it both ways either, complain about house price growth then hark back to the glory days of mortgage tax relief, which make borrowing more affordable.

Up to the 1980s this was not the case - any private home owner paying a mortgage could claim tax relief on it. But the abolition of mortgage tax relief did away with this for owner-occupiers whilst leaving the "business expense" loophole in place for landlords.


see above

Getting rid of this would not unfairly penalise landlords, it would simply get rid of a glaring inequity.


how so?

In reply to seankenny:

I think we can both see that argument is silly.

In reply to fijibaby:

I am not knocking the section 106, just the time it takes. Incidentally my original proposal included a (fenced off) wildlife pond to increase the biodiversity of the site. The council said they would not adopt it because of health and safety probs.

Also I feel on this site, as there is a leisure center and park next door, the public open space would be better utilised to put in an extra pair of houses as all of the houses have decent sized gardens. However my rational argument fell on deaf ears because it 'goes against the policy'.

As it is my business I a not under shareholder pressure to generate profit and my conscience dictates that I deliver a quality development which serves the needs of the community and reduce my usual moargin of around 25% to 12%. This isnt a great return on my investment, but it is justifiable.

In reply to John Rushby:

Don't get me wrong, I have no problem with people buying their own houses. I just think that it's a crazy situation when the only people who can afford to buy a house are the people who already have one! Surely the priority should be that everyone has access to decent and affordable housing, rather than being at the mercy of either unscrupulous professional landlords or incompetent amateur buy-to-letters.

In reply to Tyler:

land banking, still happens. Plenty of companies do it. Buy when the market is low, then develop when high. All these handwringing liberals would do well to look at their own pension, as that makes property development and ultimatly investment viable.


THe need for social housing may never go away, the crux is who is best able to pay for it and the private sector can cross subsidise the public sector.

In reply to Daz H:

I agree, that decent housing should be open to all, I just get tired of the same old hackneyed stereotypes of Rachman like landlords and grasping class buy to let investors.

The market is much wider than that and much more complex.

In reply to John Rushby:

Its all very well banging on about the free market economy but that's not really the case with housing as supply is restricted by govt policy through planning (not something I disagree with BTW!) so this leads to upward price pressure. Fair enough with things luxuries like diamonds and rare works of art but when you're talking about necessities then there has to be something done level off prices for everyone, in the same way as we do with cancer treatments, water suppiles to remote areas etc.

I don't know what the answer is but it'll have to be something pretty draconian if we, in one of the richest countires in the world, aren't to have third world housing for a lot of people.

In reply to John Rushby:

So let me get this straight John. You think that high house prices are a good thing? Yes?

As a matter of interest, do property developers still look for a 100% profit on their developments these days and is there no evidence whatsoever that housebuilders are deliberately keeping the number of new homes built low in order to maintain high prices?

In reply to Daz H:

Maybe there should be a specific accredited association for landlords with housing standards that should be met by landlords in order for them to qualify for mortgage interest releif.

That way unscrupulous landlords would be easier to single out or would pull up their socks. It might make the speculative landlord think twice.

I sometimes buy properties that are already let and am often astounded at the por quality of the accomodation/ danger of electrical apparatus/ gas apparatus/ etc. More often then once I have put the tennant into a hotel for a month and refurbed the place before letting them back in.

In reply to Tyler:
works of art but when you're talking about necessities then there has to be something done level off prices for everyone, in the same way as we do with cancer treatments, water suppiles to remote areas etc.

I think this was one of the very first things that Gordan Brown said he was going to do something about.

For myself I can't see house prices falling for years to come. I think the best we can hope for is that they remain stable only rising in line with inflation or at best, a little below that.

In reply to Removed User:

I am happy with a 20% margin. I know some developers break even or have a small (5%) margin but their profit is the number of units.

Speculative developing is risky (there is exposure to wider market economics and threat of a downturn) and often requires outlay of a couple of million over a year of two before anything comes in.

In reply to Tyler:


I suppose I am banging on a bit, but the point I keep trying to make is that we don't have a major public secotr housebuilding programme, and that affordable housing has to be met through the private sector. Most if not all local authorities have a social housing policy which require a developer to provide say 25% of new stock as affordable housing. this requires the returns to be sufficient so as to make the development viable.

I personally would be happy to pay my extra 2p income tax and see better social care and housing provision, but it just is not going to happen.




Well, we have an expanding population, a reasonably robust planning policy in favour greenbelt and all within a very small island. not sure what the answer is.

In reply to John Rushby:>

Or indeed a workable local council one. Which I would be very happy to see. In fact there did used to be such a thing - much of the the whole local authority housing shortgage is the result of 1980s social engineering by the thatcher government. Local authorities were obliged to implement Right To Buy schemes. Now i dont have aproblem with long standing tenants being allowed to buy their homes at a discount, provided the money is reinvested into replacement public sector (affodable) housing. But instead the proceeds were ring fenced to prevent the money being reinvested by councils into building new public sector housing, because this fitted with the government strategy of the time to cut the power of local authorities.

And on many estates what we saw a lot of was dodgy property developers moving in. The developer would loan the tenant the money to buy their house, on the condition that as soon as the two year ban on reselling the house was up, the tenant would resell to the developer at a very low price. The developer would then let out the property as a shared house or as individual bed sits at a huge profit - remember, he had bought it at a discount rate, not the market value - and receive from each individual tenant per room the equivalent of the amount nearby council tenants were paying for the whole house. Which I have on very good authority - my own eyes - because i worked in housing benefits throughout the 1980s and saw the rent agreements for both private and public sector tenants.

In reply to peterjb:
Hmmm fair enough. Could you have included the Wildlife pond under some sort of SuDS arrangement? In the light of recent events I'm sure they'd be happy to see it!
Coucils can be a pain in the arse tho'. It's all done by commitee where no-one has the power or inclination to make a decision.
Proves the old 'a camel is a horse made by commitee' thing eally

In reply to Removed User:

No, appropriate pricing yes, but just want to expand the argument a bit.




A typical developer building say 100 resi units of 70 sq m will also be required to provide 25% as social housing, and look to a profit of 20% of the gross development value. The GDV is the total value of the individual units and of course, the affordable are effectively nuilt at cost and nil profit.

In reply to Psychopathic_Barbie:


I agree with what you say in your post, only this is 2007 and a lot of what you outline above is no more and the market very much differant.

In reply to John Rushby:


I think we are probably all in agreement then that this is what is required and even then it's no good just selling it freehold to those in need, as lets face, they are only going to take sell it at a market rate further doen the line. Actually, that's a point, what do you have to do to qualify for affordable housing and what's to stop you selling it on? If you are building 2 houses or converting a house into 4 flats do you still have to provide 25% affordable housing or does it just apply to new builds over a certain amount?

In reply to John Rushby:

Anyhoo, I am off home. Before I am accussed of being the bastard child of Sloper, I wanted to put another view from t he property sector into the debate.

btw - anyone know how to get a prole of of the nose cone of a 996?

In reply to Tyler:

Each LA is differant, but it tends to kick in with schemes of 20 units of more. A decent developer and ergo a sensible lender will not have a problem with affordable housing. Yes they would prefer none, but the value of private housing is such that they can incorporate the 25% or so, and still get an appropriate return.

In reply to John Rushby:

Don't drive in poor areas in the first place. Three wheel buggies and yummie mummies in Crocs can still be a pain to remove though.

In reply to John Rushby: you are the bastard child of sloper (sorry, just had to get there first)

In reply to John Rushby: Leave them there as it stops paint getting damaged by tar/ chips.

In reply to John Rushby:

You're older than Sloper, so you must be his older brother...

and what're you doing driving a prole magnet?

In reply to Jon Dittman:

It is called a ponzi scheme. For the majority of human history money was actually worth something, for example gold. Now money is created on the idea that it will be repaid sometime in the future. Banks are able to lend vast sums, so creating 'money' yet we don't count this extra money in our idea of inflation. This confuses me.

In the US it was possible to get a loan without proof of income. These loans are now worthless, the money doesnt exist, as the borrowers were depending on their house appreciating ( ie someone else borrowing even more to inflate the price - the ponzi scheme).

The lenders sold this money on to other people, for example to hedge funds and investors. Unfortunately, these investors are looking after your pension. The initial lenders have no problem, they have made lots and lots of money if they got out early. The risk and imaginary money has been transferred to other people.

Even lending to borrowers with a proper income is strange. I am really confused about when all this debt is going to be paid back. The Economist this week revealed that even the economists don't know were the debt has gone and who is in charge of the risk. Debt in the US and Britain is historically high, actually make that astronomically high.

Anyway, the answer to your question is that people are assuming credit will remain cheap, no one will ask when it will be repaid and people think that houses are worth the money. A game of monopoly anyone?

In reply to Jon Dittman: that report is probably biased as the federation who commissioned the report obviously wants government support to build more houses....probably located on flood plains!

In reply to Jon Dittman: It'll all come crashing down soon. The Inland Revenue have worked out that of the 800,000 buy-to-let people only 60,000 are declaring their buy to let income.

In reply to TimR:I heard on the radio that house repossessions have gone up again. It's just a thought but the demographic gap caused by less people having as many children which needs to be filled by immigrants could maybe help keep demand for houses up,i don't know if there's enough immigrants needed who are also able to earn enough to keep house prices from crashing,or gradually dscending as some people predict they might do.
Cheers
Tim

In reply to TimR:

good point

ataking pack payments will cause a lot of them to g obelly up

force them to sell

In reply to Jon Dittman:
Don't buy a house made from straw. Especially if you live near Ralphy the huffer of puffer!

In reply to TimR:

interesting, do you have a link for that info.

In reply to Psychopathic_Barbie:

rubbish....the btl'rs are only a small fraction of the whole market and on their own cannot possibly force prices up in the way they have....

Its a free market after all.

I agree however that it does seem amazing because without first time buyers coming into the market we have no market and so you and I cannot therefore move !

So somebody is buying these houses, and thay cannot ALL be btl'rs can they ?

One problem as I see it is the lenders being willing to lend say 5x salary etc. Perhaps we should go back to the days of mortgages being based on ONE income only. Painful at first, but when the ftb's cannot get onto the market, the market will slow and prices fall....of course the trouble with that is that people who have mortgaged up to their necks in this way will be facing negative equity !

Finally on the subject of people buying cottages in rural areas as second homes, and apparently pricing locals out....do NOT forget that it was locals who sold these cottages in the first place !

In reply to Kevin Livingstone:


Depends which locals own the cottages. My grandfather was desperate to buy his home (in a tiny village about 10 miles west of Pembroke, where our family had lived for about a couple of hundred years) but like much of the property there it was owned by a local landlord, who refused to sell to local inhabitants. As each occupant died off he sold the property to be developed, usually as holiday cottages. Admittedly after my grandparents died the landlord did let my great uncle live in the cottage for a pittance of rent, until he also died in the 1990s.

In reply to Kevin Livingstone: Don't forget the 9x salary 50 year mortgages too.

In reply to Kevin Livingstone:
>>

Ultimately they are priced out of the market because the planners restrict supply surely ?

In reply to TimR:

Presumably the remaining 740,000 aren't claiming tax relief on their mortgage interest either. Or do HMRC work on the basis that these people are all "buy to leave" investors?

There is an argument that the drop in rental yields (mentioned elsewhere on here) means that there isn't a housing shortage per se, since the law of supply and demand doesn't allow for prices to go down when supply is restricted. However, there may be other forces at play in this instance.

There was a figure quoted somewhere on the Guardian web site that buy-to-let only accounts for about 3% of the current ownership of residential property. That wouldn't seem to be enough to skew the market as much as some people suggest. On the other hand if, as is also suggested, buy-to-let properties are concentrated heavily towards the first time buyer market then that could explain why young would-be owner occupiers are being priced out.

I do think there is a significant difference between rental housing and other things that you can rent, like cars for example. If you need to rent a car you tend to rent it and then give it back when you're finished with it. You don't finish with your home until you move out, and then you generally need to find another another one pretty much straight away. I think there is a case to be made for providing better security of tenure for people who choose or who have no option but to rent, but it's difficult to get the balance right so that too many landlords don't pull out of the market.

The current housing market is not a Ponzi scheme because there are tangible assets involved which investors have to sell in order to realise their paper returns. It does show signs of being a bubble, especially if you support the argument that current residential property prices are unsustainable.

In reply to Kevin Livingstone:

they are an important factor though as the price of property is set at the margin, i.e. the small proportion of overall properties for sale. a 1% change in supply or demand for property will strongly unfluence prices and the increase in btl demand has exceeded that comfortably over the last ten years. so not the sole reason for price explosion but undeniably a strong factor.

In reply to Kevin Livingstone:
"Finally on the subject of people buying cottages in rural areas as second homes, and apparently pricing locals out....do NOT forget that it was locals who sold these cottages in the first place "

is that your apologistic view of the situation? Something that excuses it?

In reply to Anonymous:


Yeah...We're having "CO2 camps" at airports, suggestions for aircraft fuel tax, road pricing plans, etc: Lots of sticks and carrots to try and engineer how we travel.

But at the same time, this "joined up thinking" government is simply saying that "we must build 4 million new homes not because the population's rocketing, but because people want to live alone". Regardless of the fact that their policies have *encouraged* people to live alone (I know at least 3 couples locally who live separately because to move in together would slash benefit levels for one or both of them).

I believe that 2 people sharing a one bedroom flat only increases the energy footprint of that flat by 14%, whereas if they're in separate flats, the footprint is "double plus extra construction footprint".

In reply to Rob Naylor:
I can see it among our kids friends.

several couples have split up in the last couple of years and they each then live in a house that has enough accommodation for them and the kids they share.

It's the only way to get a council house, and housing is very scarce round here - over half the houses in the village are holiday homes - and a good few buy to lets bought up by farmers wives after the last F & M

buying is pretty well impossible except for people coming from more prosperous areas

In reply to Rob Naylor:

(sample from one tiny village school, so it could be a distorted picture - maybe we live in a den of sin

people say that tax breaks won't make people stay together but the other side of the coin is that financial pressure can contribute to family problems

In reply to Kevin Livingstone:

BTLers are not a 'small fraction'. In 2006 there were 410800 mortgages given to first time buyers. There were 330300 BTL mortgages. That is a large fraction - easily capable of having an impact on house prices.

http://money.guardian.co.uk/property/buyingtolet/story/0,,2141162,00.html

In reply to practicalcat:

Agree with your point, but at the end of the day...local people, local landlord, local laird etc.....they're local.
Its a free market we live in after all, and I think getting into the realms of "if you're an outsider, you cannot buy" is getting into sticky territory.....
Certainly so long as you are going to actually live in an area and be part of that community then I see no problem (like me wishing to move to Cumbria once the kids have left home).....

Trouble with this view of outsiders buying up property...what next ?.....non local climbing clubs buying an outbuilding on a farm to convert to a hut ?

In reply to Postmanpat:

Supply is a problem and totally agree with you there

In reply to Anonymous:

not excusing it at all, but what do you suggest ?
Everybody keeps harping on about bloody outsiders buying up the local property , but the point I am making is that these properties ARE SOLD BY LOCALS in the first place !, so they are partly to blame are they not ?

You and I can at present buy/sell any goods or services to anyone we wish (legally that is) within the UK and I don't see why property should be any different. Fine, enforce certain restrictions like local occupancy I accept, but trying to stop people from one area buying something in another is not in my view the way to go.

Supply as has been already stated above is the main culprit here !

In reply to El Greyo:

So what ?.....410800 ftb's got onto the properety ladder then ?

In reply to Kevin Livingstone: just in case anyone is wondering....NO I do not own a second property !

In reply to Kevin Livingstone:
the key bit is "In 1999 there were 592,000 mortgages given to first-time buyers, and just 44,400 to buy-to-let landlords. By 2006, the number of loans given to first-time buyers had fallen by nearly a third to 410,800, while the number awarded to buy-to-let landlords had jumped to 330,300."

this illustrates perfectly where the demand has increased, that has driven the current price levels.

In reply to Kevin Livingstone:

Down from 592000 in 1999.

As I'm sure you can see, my point is that BTL make a very significant contribution to demand and that has helped fuel house price inflation. Demand from first time buyers has decreased.

In reply to El Greyo:

But the only reason they want to buy the properties (apart from holiday properties) is because they can rent them out .aka.They have not created demand .They are acting as intermediaries to supply rental property to those who represent the ultimate demand.

The basic problem comes back to the artifically created supply shortage.

In reply to Postmanpat: but part of the reason the demand is there is that people cant afford to buy a house/flat of their own and move out of the rental market. Some tenants do rent out of choice, but many would prefer to buy if they could afford to.

In reply to Psychopathic_Barbie:

I take your point,but in terms of the overall suply/demand equation for accomodation it has not been changed.

It aso begs the question as to whether the UK obsession with ownership over rental has any merit.It seems to me it is largely a hangover from a long period of favourable tax treatment for ownership and very unfavourable treatment for landlords which reduced the suply of rental property.

Most Europeans seem perfectly comfortable with the idea of rental.

In reply to Postmanpat: They are renting them out so they aren't creating a housing demand - but they are increasing house purchase demand and does contribute to fueling house price inflation.

It will reduce rental inflation though and, from what I can tell, has done.

In reply to Postmanpat:

not so. we can see the total demand has increased as has the proportion due to btl. the assumption of your statement is that housing demand is equivalent wether the house was purchased as a PPR or for BTL. this may be distorted by a number of factors. e.g. many btl's lay empty for a number of reasons.
additionally much btl is financed by equity release from other properties (i.e. a cyclical bidding up of prices). which many ftb's cannot compete with.

In reply to Postmanpat:

what securrity do teneants have in other parts of Europe?

In reply to Kevin Livingstone:

I am fairly libertarian, so I wouldn't prevent people from buying, but I might distort the market so it doesn't favour second home owners/ or buy to let where there are people who would like to buy but can't because of undue demand

In reply to erikb56:
Only the "buy to leave" portion of btl is taking supply off the market surely ? How significant is that?

In reply to :

Two points:

Home ownership both in overall and proportional terms is higher than it has ever been. People aren't being priced out its just that people have seen how much house prices are increasing and now everyone wants bit of it. People who would have ben happy to spend their days in rented accomodation (partly because council housing guarunteed cheap, decent accomodation) now watch Property Ladder and think 'I'd ik a bit of that'

Holiday homes have been bought in rural areas for years becuase their populations have been in decline, younger people move away. As a result properties were lying unwanted and semi-derelict in the countryside and bought as holiday homes by those who wanted them and put effort in to restorng them. Since then prices have gone through the roof and locals in rural areas have been kicking themselves and whinging about incomers when the real reason for their disgruntlement is jealousy because they suddenly realise they've missed out on a bit of a bonanza.

In both instances many who are complaining do so because they feel they've missed out on a chance to make a lot of cash, or at least a lot of capital gain.

In reply to El Greyo:

But surely if the BTL'rs did not buy those houses, they would have been bought by FTB's etc.....either way that house is bought.......so by whom I do not see how fuels the price rises....either way the house is sold. You could say that if those houses had only been bought by FTB's then the rental market would pretty limited at present?

In reply to Postmanpat:

even without buy to leave a rental property will spend a greater proportion of time unoccupied due to the nature of letting. thus a decrease in overall housing supply. not saying that's the sole reason but is another small factor.

In reply to Tyler: I think I tend to agree

In reply to Kevin Livingstone:
if more people want to buy a limited commodity of course prices rise. with something like housing lets not forget the proportion of potential ftb's living at home into late twenties, sharing etc.

In reply to Postmanpat: from the point of view of personal experience (and i realise this is anecdotal) what tipped the balance into buying for me was a combination of quarterly inspections by the letting agents, whose only purpose seemed to be to police my use of the house as no work was ever done to address the serious damp problems, combined with constant uncertainity about whether the lease would be renewed at the end of the rental period. Its not just an abstract concept of ownership so much as the feeling that you are constantly vulnerable to someone elses goodwill - whether to make repairs, renew the lease etc. In contrast while I was a council tenant in london and had security of tenure etc i was very happy to continue to rent.

In reply to erikb56:

Do we have any evidence that the average age of first time buyers has risen over the past 50 years ? I strongly suspect that it is is expectations that have risen more than the age of buyers (but I can't prove that either)

In reply to Postmanpat:
yes - "the average age of FTB’s has increased from. around 30 in the mid-1980’s to 34 in 2004"

In reply to Kevin Livingstone: ut surely if the BTL'rs did not buy those houses, they would have been bought by FTB's etc.....either way that house is bought.......so by whom I do not see how fuels the price rises

simple enough surely? more would-be buyers (ie would be owner occupiers PLUS RTLers ) = more competion to buy = houses sell at higher prices.

In reply to Tyler:

the other thing that has changed is reduction of security of tenure apart from social housing- this has a negative impact on family well being - one reason for the increased demand for social housing

In reply to Psychopathic_Barbie:
spot on

In reply to Anonymous:

It also has the effect of creating a rental market inthe first place which ,amongst many other benefits, gives people mobility largely denied to those in social housing.

In reply to Postmanpat:
fwiw, i don't believe btl to be the dominant factor just and important factor and am also anti govt. fiddling.

In reply to Postmanpat:


Nice sweeping generalisation, but it may not be entirely accurate.

“As a consequence of economic, social and housing policies in many European countries the rental market has split into two segments. It offers high quality dwellings to high income people who do not want to buy, on the one hand. They are people who do not need long-term security of tenure and do not look for it because of their professional mobility or life-style preferences. On the other hand, it offers low-quality housing at disproportionately high prices to people who have low job security and whose only social mobility is between unemployment, casual jobs and welfare benefits.”

http://www.coe.int/t/e/social_cohesion/hdse/2_hdse_reports/2_thematic_repor...

In reply to Kevin Livingstone:

No, if a BTL did not buy the house the vendor might have to accept a lower offer or keep it on the market for a long time.

There are more people in 2006 wanting to buy than in 1999. That increase has come from BTL. For each house on sale, more people will view it and more people put in an offer. Houses sell quicker, vendors do not have to drop the price in order to sell or accept a lower offer. There may be a bidding war or a gazumping, leading to a higher purchase price.


Yes, this is true and I believe rents have had quite low inflation in recent years.

In reply to erikb56:

Interesting but how about 50 years ? (or are we saying the Thatcher era was the greatest period for ftbs?)

In reply to Anonymous:

I agree so if the govt can't do anything to lower house prices and seems unwilling to invest heavily in social housing it must do something to ensure those in rental accomodation feel secure and are well cared for. People keep pointing out that in France people are happy to rent but, there, circumstances may be different in terms of how the tenant is protected. Anyone know?

In reply to Postmanpat: I do think its a combination of factors - the decline of the public sector housing not only in quantity but also in quality is also important. At one time much larger amounts of people lived in good standard council housing and living on an estate did not have the stigma it does today. As the decent stock was sold off by and large only the sink housing and the poorer tenants were left, leaving council estates with a reputation for petty crime and poverty, and councils unable to offer tenancies to anyone but those classed as most vulnerable. So apart from housing associations and co-ops that leaves the main alternatives for young people as 1) continue to live with your parents (to what age?) 2)rent privately or 3)buy. It does now seem to have become much more common for people to continue living with parents till later in life while saving for a house or flat of their own.

Only got time for a drive by, but, the increased demand for housing and house price growth spun out of the fact that equities were on their arse in late 90's and early 2000's. This triggered a switch from institutional pensions to private pensions and SIPPS.

Just a thought

ta ta

In reply to Psychopathic_Barbie:

Well,it will not surprise you that although I believe a government has a duty to ensure that adequate housing is available for all it should only be the provider of last resort.

Mass social housing of the post war years not only distorts the housing market,but distorts the labour market and makes people unhealthily dependent on the state.

If the number of hhs rises faster than the available housing stock ,as it has,so prices will rise.The key reason for the restriction of supply seems to be planning persmissions(unless somebody has another explanation) so why not change the planning laws?

In reply to Postmanpat: why do you see social housing provision as equivalent to a dependency on the state (or more usually a local authjority in fact) that is more unhealthy than a dependence on a private landlord?

For that matter, if someone is paying their own rent then surely it is a simple commercial transaction no matter who they are paying it to, and no more sinister than paying for a loaf of bread (dependency on the baker) or litre of petrol (dependency on the garage)

In reply to Postmanpat:
some more bearish reading to counteract yesterdays strangely bullish piece.
http://business.guardian.co.uk/story/0,,2142976,00.html?gusrc=rss&feed=...

In reply to Tyler:

My partners sister is a landlord in France and she is constantly moaning about the protection her tenants get against eviction. In one case a tenant she inherited from the previous landlord when she bought a property hadn't paid any rent in years and it took her over a year and a lot of money in legal fees to evict the tenant. I'm not sure if this is typical for France but it would seem that tenants are protected to a significantly higher degree than they are here.

In reply to Psychopathic_Barbie:

Haven't read the whole thread, so maybe someone else has already picked up on this, but landlords may get tax relief on the interest, but will pay 40% Capital Gains Tax when they sell up. Private owners get to trouser the growth in the value of their property as long as it's their primary residence.

In reply to Psychopathic_Barbie:

In reply to Postmanpat: actually I think your freedom to break a dependence on any landlord, private or public sector, is largely affected by the economics of the alternative. ie the size of likely mortgage repayments vs your own income, the size of the deposit required, and whether you are able to save towards the neccesary deposit. And as far as that last is concerned, I would have thought subsidised or low cost housing increased your freedom as the biggest chunk out of anyones income is generally housing costs. Of course, if social housing is good quality, affordable and secure then the tenant may well choose to remain as a tenant rather than buy. Thats not dependancy, thats exercise of free choice, which I take it both you and I are in favour of.

In reply to Psychopathic_Barbie:
If the supply of social housing (as it was in the past)is almost exclusively state provided then you are effectively dependent on a monopoly landlord.The landlord can therefore (and did) decide where you lived in the local area and massivily restrict you ability to move to a new area whre you would fall to the bottom of the rationed housing list.

The growth of a large and varied private rental sector has created choice and flexibility to the benefit of both tenants,landlords and society at large.

In reply to Postmanpat:
"landlord can therefore (and did) decide where you lived in the local area and massivily restrict you ability to move to a new area whre you would fall to the bottom of the rationed housing list."
that wasnt actually true. most people were tenants of local authorities rather than national government, and there was a whole bunch of mobility schemes which allowed tenants to swap houses, both between Local Authorities or, by mutual agreement, arrange tenant to tenant swaps. Some of these were officialy organised (eg the Local Area Mobility Scheme aka LAMS) lists of tenants looking for swaps, others unoffocial - my local paper was full of ads by tenants wanting a swap; you looked at each others houses or flats, if you decided the swap suited you both you went to the council who were usually happy enough to agree to the transfer - it was no skin off their noses after all.

In reply to CENSORED elsewhere:
Do landlords pay tax on the rental income and at what rate do they pay this tax?

In reply to Andy Kassyk:

20% trading as a company

or applicable income tax rate is a private individual and thus declared as other income on a tax return ( and HMRC are very good at finding you....)

In reply to Psychopathic_Barbie:

But nevertheless,because successive governments had destroyed the private rental market large numbers were forced to rely on council housing and ended up on waiting lists for anything "appropriate" which as often as not turned out be in some ill designed and entirely inappropriate high rise block so beloved of Whitehall and local governments in the 60s .

In reply to John Rushby:

Usually offset significantly against expenses like repairs. There are also captital gains offsets in some circumstances.

On the OP's original question on those weird predicted rises: its clearly not true. Its similar to the victorian prediction that the streets would be metres deep in horse shit from increases in horse drawn traffic.

In reply to Offwidth:

Now you have my interest again, what did happen to all the horse shit?

In reply to Tyler: I once read that there is enough cow shit produced in the UK every year to cover all 6 lanes of the M1 from London to Leeds to a depth of 30 feet.

In reply to Tyler: Trams.

In reply to Tyler:

It decays, it washes away, if it reaches a certain depth someone needs to move it to allow a horse to get there to shit... etc.

There should be some law somewhere about loopy predictions based on mindless extrapolation of data.

In reply to Offwidth:


Where I live a low house price is about 11 times the annual salary. A typical flat price (small 50m flat) is about 8 times the annual salary. Prices have doubled on flats in two years due to foreign investment, and the boom on land and house prices (when foreigners are allowed to buy land) will be next.

In reply to Witkacy:

Prices have not doubled because of johnny foreigner; prices have doubled because of easy credit and speculation.

youtube.com/watch?v=SWksEJQEYVU&

As rent is not covering mortgage payments (historically low ratio at the moment) speculators will soon have to sell.

In reply to John Rushby:

And the important bit is that the tax you pay is on the rental income, NOT AFTER expenses, mortgage payments etc! Which is why so many people don't think they need to declare it. They think that they are making such small amounts after expenses that they don't need to declare it.

BTL have more purchasing power than FTB. They can use other properties as security and borrow at a lower interest rate.

In reply to Offwidth:


Always with an air of unchallengable certainty of course! Must be divine revelation to the predictor.

The reality is that nobody knows what houseprices (or shareprices, or any other prices) are going to be in 5 years time - if they did, they would be multi-millionaires. There have been wildly different projections from supposed experts for house prices at the end of the year, let alone in 5 years time. Most projections, or alleged statistical declarations about social issues come with so much baggage they might as well have "furniture van" written on the side.

In reply to wilding:


Here in Poland they have indeed, Johnny Foreigner often being British. As soon as foreigners entered the property market, prices shot up by 33% in one year. The easy credit came earlier, but without spiralling prices.

It’s funny to read this presented as a great situation:

“One consequence of this has been that Polish homebuyers are increasingly being priced out of the property market, which has led to new growth in the rental sector. All of this buoyancy in the property market . . . “

http://www.larionovo.com/poland.php?action=page_display&PageID=116

I suppose for a few rich foreign investors it is great. They’ll now be waiting for the land grab.

In reply to TimR:
No it's not .It's net of mortgage interest(not capital repayment),agent's fees and reasonable costs up to 10% of the rental income .

In reply to Witkacy:

use of words like "benefited" and buoyancy are such lies!

In reply to Witkacy: yes, it seems that having priced FTBers out of our own market, british property speculators are now busy exporting our house price explosion to the rest of europe. Which might be welcomed in rural areas with declining populations, but I can see it leading to real resentment in other areas

some more reading:
http://www.bloomberg.com/apps/news?pid=20601039&sid=axWmsMHJDjiQ&re...
debatable of course.

In reply to erikb56:
How you doing doc? When are we off climbing then?
Thanks for the updates on property market.

In reply to Frankie boy:
as always take anything i say with a pinch of salt old chap. i've been a doom monger for ages and not right yet!!!
we're off climbing when you return from sunning yourself in the states!!!

In reply to erikb56:
24th me old china. Have mailed yee.
Shall be a reet grand tea party.