The discgrace that is the UK Property Market
Discussion
jdw1234 said:
I don't quite follow.
Is the value of a rental property not dictated by the rent it can command? Surley a rational landlord won't invest if yields get too low?
How are these immigrants commanding increasing wages?
Maybe you mean stuffing more of them into a single house or each immigrant spending a higher proportion their income on rent, but we can't be too far from the limit.
Almost every asset class has seen strong price growth. Once FLS ends, interest rates go back to doing what they're meant to do, I'd like to see how many landlords sit on 2-3% returns with bank interest running at 3-5% return.Is the value of a rental property not dictated by the rent it can command? Surley a rational landlord won't invest if yields get too low?
How are these immigrants commanding increasing wages?
Maybe you mean stuffing more of them into a single house or each immigrant spending a higher proportion their income on rent, but we can't be too far from the limit.
gumshoe said:
jdw1234 said:
I don't quite follow.
Is the value of a rental property not dictated by the rent it can command? Surley a rational landlord won't invest if yields get too low?
How are these immigrants commanding increasing wages?
Maybe you mean stuffing more of them into a single house or each immigrant spending a higher proportion their income on rent, but we can't be too far from the limit.
Almost every asset class has seen strong price growth. Once FLS ends, interest rates go back to doing what they're meant to do, I'd like to see how many landlords sit on 2-3% returns with bank interest running at 3-5% return.Is the value of a rental property not dictated by the rent it can command? Surley a rational landlord won't invest if yields get too low?
How are these immigrants commanding increasing wages?
Maybe you mean stuffing more of them into a single house or each immigrant spending a higher proportion their income on rent, but we can't be too far from the limit.
I do question the 2-3% return thing. Whilst that may represent an aggregated position nationwide, certain areas are seeing much better returns
Irrotational said:
As many have said on here - Mortgages are a bit like money - if the banks will only lend 2.5 times salary then houses can only cost 2.5 times salary
Mortgage multipliers don't dictate cost, its just a small part of the equation. Lots of buyers have equity, or old mortgages erooded by inflation, or are mortgage free etc.ClaphamGT3 said:
RealSquirrels said:
Countdown said:
Supply and demand I'm afraid.
supply of credit, and supply of houses, both of which are in easy government control.since the mid 90s, young people (pretty much anyone born since 1980) have been totally failed successive governments, the result of which is far, far more of their income going on housing (a pretty basic right...) than needs to.
http://www.theguardian.com/books/2013/aug/18/defau...
The issue with "the housing bubble" is that it's been bubbling for about forty years now. There was three to four years of downward pressure in the early nineties and another three to four from 2008 to 2012, but the trend has been inexorably upward for longer than could be described as a bubble.
In that time, interest rates, availability of credit, price/income ratios have all fluctuated and demand outstripping supply have remained constant. The only structural change in the market has been the repeal of the old rent acts creating a vibrant private rental sector. This has been a good thing economically as it has promoted mobility of labour and given many, many more 'grades' of property available to occupies beyond the stark council house/owner occupier choice available from 1945-1990. What this has meant is that houses that would originally only have found a retail market are now being bought as business propositions by landlords. This pushes property prices overall. This is good for some people and frustrating for others (those who would like to buy but can't afford to).
The reality is that, as a nation, we need to get over the idea that it is everyone's right to own their own home; it isn't. It is right that all should aspire to do so but it is economically and socially unwise to promote the idea that everyone should be able to do so and that the property market "must" undergo price correction to enable this, because it won't.
I completely agree with your last paragraph, but to suggest it's all a completely free market is far from the truth.
ClaphamGT3 said:
That will be a function of leverage. Highly geared landlords won't be making much, if anything out of it on income in your scenario.
I do question the 2-3% return thing. Whilst that may represent an aggregated position nationwide, certain areas are seeing much better returns
It isn't a function of leverage unless the interest rate -> rate of return. It would have the reverse effct in fact were returns->interest rate. In many cases that I know of, people are using residential mortgages on buy to lets and still getting 3% return. I do question the 2-3% return thing. Whilst that may represent an aggregated position nationwide, certain areas are seeing much better returns
I also know of people who bought properties 10-15 years ago (as I did) and now claim to be receiving 8-12% return, but that's only on the price they paid back then. Strangely they seem to think the rate of return should be calculated on the cost, not the "value" (I use that loosely) today.
The 2-3% returns are deemed worthwhile due to the capital appreciation element (hence why central London sees a lot of ~3%), which can results in tax free withdrawals as owners can "withdraw equity" for either reinvestment or to spunk it as they see fit.
98elise said:
Irrotational said:
As many have said on here - Mortgages are a bit like money - if the banks will only lend 2.5 times salary then houses can only cost 2.5 times salary
Mortgage multipliers don't dictate cost, its just a small part of the equation. Lots of buyers have equity, or old mortgages erooded by inflation, or are mortgage free etc.gumshoe said:
ClaphamGT3 said:
That will be a function of leverage. Highly geared landlords won't be making much, if anything out of it on income in your scenario.
I do question the 2-3% return thing. Whilst that may represent an aggregated position nationwide, certain areas are seeing much better returns
It isn't a function of leverage unless the interest rate -> rate of return. It would have the reverse effct in fact were returns->interest rate. In many cases that I know of, people are using residential mortgages on buy to lets and still getting 3% return. I do question the 2-3% return thing. Whilst that may represent an aggregated position nationwide, certain areas are seeing much better returns
I also know of people who bought properties 10-15 years ago (as I did) and now claim to be receiving 8-12% return, but that's only on the price they paid back then. Strangely they seem to think the rate of return should be calculated on the cost, not the "value" (I use that loosely) today.
The 2-3% returns are deemed worthwhile due to the capital appreciation element (hence why central London sees a lot of ~3%), which can results in tax free withdrawals as owners can "withdraw equity" for either reinvestment or to spunk it as they see fit.
For every person who says the market is going to crash and burn there's another who says it'll only go one way. Nobody knows. Each individual has to work out what's right for them and go with that.
I've got a pretty low ratio of borrowing to value (circa 20%), but am considering changing things a bit to end up at 63%. If I go ahead, will be interesting to see what happens!
ClaphamGT3 said:
The reality is that, as a nation, we need to get over the idea that it is everyone's right to own their own home; it isn't. It is right that all should aspire to do so but it is economically and socially unwise to promote the idea that everyone should be able to do so and that the property market "must" undergo price correction to enable this, because it won't.
Putting to one side the whole price correction issue, whilst I understand it's not a 'right', can you not see that renting for life isn't a viable option? Rent is a continuous monthly outgoing, in some cases in excess of a mortgage payment (at the moment I hasten to add). That's fine whilst you have an income stream to match it. So what happens when you retire? If you got a mortgage, paid it off, you have somewhere to live and only need to worry about fuel and food. On the other hand, if you rent, you have to keep on paying out - probably with much less money coming in. And it's not likely that renting long-term will give you a chance to put together an impressive pension pot. From where I'm standing, no it's not a right, no it's not a given, but show me a more viable, realistic alternative than aiming to buy a home. Not to mention of course reducing your exposure to (hyper-)inflation and the rest. I am slowly saving a deposit, but don't expect to be getting onto the property ladder any time soon as a first time buyer. My concern is that when I do finally get into the position to buy, interest rates will be higher and it will be expensive to service the mortgage, nevermind the high entry barrier, and the fact that currently inflation is eroding the value of my savings despite my efforts (well, short of playing with risky investments). It annoys me that being in debt is seemingly better than being in credit right now, especially when it comes to housing, and that's just strikes me as morally wrong.
In answer to the poster above, the unpalatable reality is that a lot of people are going to have to get used to a much lower standard of living than their parents enjoyed.
The only way out is to enable robust and sustainable economic growth in real terms so that wages can rise without causing undue inflation. To do that, we have to work out what we can make or do that other countries want to buy from us. That is what our politicians should be focusing on, not fiddle-round-the-edges intervention in specific areas of the economy
The only way out is to enable robust and sustainable economic growth in real terms so that wages can rise without causing undue inflation. To do that, we have to work out what we can make or do that other countries want to buy from us. That is what our politicians should be focusing on, not fiddle-round-the-edges intervention in specific areas of the economy
king houses)Countdown said:
Supply and demand I'm afraid.
The trouble is a very limited supply of housing and a very elastic supply of credit. In fairness this sort of apartment is absolutely ideal for someone moving out of home for the first time and taking a job or going to college in Taunton. More often people end up sharing a terraced house or in a grotty bedsit converted from a 100 year old house.
Unfortunately the planning laws and people who want to "preserve the character of the neighbourhood" prohibit this, meaning there is always more demand than supply.
ClaphamGT3 said:
By that, do you mean directly build more public housing or indirectly manipulate the housing market?
He probably means for them to stop manipulating the market, as they have been for the last few years. I like how you refer to a cessation to government manipulation as "manipulation".Let's be clear here. Currently, the government is heavy on manipulation. What most sensible people want is a cessation to the ridiculous extent of their intervention.
What some others (i.e. you) see that as is "a bad thing". One can only assume you benefit personally from it. It isn't rational, and although I benefit from the price support (on paper) I think it is stupid, and actually doesn't help me from a business perspective. I want return on equity, not borrowing against equity.
It always makes me smile to see UK landlords moan about things being skewed in favour of tenants -- try France (or almost any other European country. It is a nightmare for landlords. You can't evict between October and April because it's considered inhumane to make people homeless in winter. Some people just stop paying in January, knowing that you can't do anything quickly enough to get them out before October, so they're good until April. Insurance against it is a chunk of change, and really affects profitability. Some landlords don't bother, and just make sure they have the best tenants. They demand (illegally) parental guarantees, employment contracts, payslips, bank statements, etc etc!
In the UK, there is still an increasing population, changing society (divorce, now you need two houses, etc) doesn't this mean demand will not drop? If that assumption is correct, without massive building, nothing will change the supply side, either. So barring intervention, the only way is up?
In the UK, there is still an increasing population, changing society (divorce, now you need two houses, etc) doesn't this mean demand will not drop? If that assumption is correct, without massive building, nothing will change the supply side, either. So barring intervention, the only way is up?
A common lawyer said:
It always makes me smile to see UK landlords moan about things being skewed in favour of tenants -- try France (or almost any other European country. It is a nightmare for landlords. You can't evict between October and April because it's considered inhumane to make people homeless in winter. Some people just stop paying in January, knowing that you can't do anything quickly enough to get them out before October, so they're good until April. Insurance against it is a chunk of change, and really affects profitability. Some landlords don't bother, and just make sure they have the best tenants. They demand (illegally) parental guarantees, employment contracts, payslips, bank statements, etc etc!
In the UK, there is still an increasing population, changing society (divorce, now you need two houses, etc) doesn't this mean demand will not drop? If that assumption is correct, without massive building, nothing will change the supply side, either. So barring intervention, the only way is up?
In the UK, there is still an increasing population, changing society (divorce, now you need two houses, etc) doesn't this mean demand will not drop? If that assumption is correct, without massive building, nothing will change the supply side, either. So barring intervention, the only way is up?
The British love a good moan……..it’s the same in business, Business owners constantly whinge about red tape and all the add on costs of employing people. The cost of employing somebody in France is about double their wages and if you want to make somebody redundant, you have to find a job for them first.
A bigger problem for this country is we have allowed the creation of a litigious society. There are too many lawyers …….a great example is that you are 30X more likely to have a neck injury in the UK than you are in Germany.
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