Now that everyone is renting their music and cars
Discussion
Wombat3 said:
TooMany2cvs said:
Gregmitchell said:
I'm praying for a massive house price correction!
I mean our 3 bed end of terrace is worth over £600k??
So let's say there's a 50% reduction in house prices.I mean our 3 bed end of terrace is worth over £600k??
How much will that wipe off your equity?
Right question: how many people will that send into massive negative equity & what effect will that have on the housing market, house builders & the economy generally?
TooMany2cvs said:
Meanwhile, in another place, somebody is asking about whether they can possibly get a mortgage and become FTB... Household income of damn near £80k, no mention of any savings at all towards a deposit - and recent payday loans and defaults...
What the hell are they doing with their money to need payday loans on that income? Surely that's just living beyond your means and being a muppet.Wombat3 said:
TooMany2cvs said:
Gregmitchell said:
I'm praying for a massive house price correction!
I mean our 3 bed end of terrace is worth over £600k??
So let's say there's a 50% reduction in house prices.I mean our 3 bed end of terrace is worth over £600k??
How much will that wipe off your equity?
Right question: how many people will that send into massive negative equity
Wombat3 said:
& what effect will that have on the housing market, house builders & the economy generally?
Ah, now that's an interesting one. Will the market thrive on the back of all those people who couldn't get on the first rung and now can? Or will it collapse on the back of those in massive -ve equity who can no longer move up the ladder?Gregmitchell said:
I'm praying for a massive house price correction! It's just not sustainable, how many families are earning 6 figures to buy all these houses down south? I mean our 3 bed end of terrace is worth over £600k?? It's just mind boggling that there are enough people out there to buy them... bring on the crash and interest rate increases!
Think you will praying for a while. Short of a world war, what event can possibly cause a 50% reduction in value?nickfrog said:
Indeed 6% 20 years ago, the period I refer to. Which doesn't make much of a dent in the massive delta of house prices vs income progression over that period.
Interest rates were 6pc for first time buyers with a small deposit as recent as 2010/2011. It's only since mid 2012 through to 2013 that the cheap money started to get pumped in
Wombat3 said:
TooMany2cvs said:
Gregmitchell said:
I'm praying for a massive house price correction!
I mean our 3 bed end of terrace is worth over £600k??
So let's say there's a 50% reduction in house prices.I mean our 3 bed end of terrace is worth over £600k??
How much will that wipe off your equity?
Right question: how many people will that send into massive negative equity & what effect will that have on the housing market, house builders & the economy generally?
A bad property correction typically sees about a 30% drop in values and then a period of stagnation. The Govt have spent the last 8 years de-leveraging the result market and the reason for that is that they and we all know that the synthetic delay of the asset correction in 2008 by devaluing key currencies to stave off the essential debt defaults we regularly need to maintain a healthy market where shorting isn’t possible is going to finally hit at a point in the upward rate cycle. Very large numbers of homes have no leverage and the bulk after that have at least 20% or more. Those with less than 20% and held by households unable to raise their incomes will be defaulting and their properties passed on to those waiting in the wings with the capital and clean credit scores to secure finance. And there will be little competition from BTL as the market sentiment will be negative and they will not be freaking bullish enough to go on the kind of buying sprees we’ve been seeing.
For 8 years the Govt have been very clear in their actions and that there won’t be a bail out again for the over leveraged. Lenders have been forced to hold more capital and had the regulation put back in place that prevents innapropriate lending. At the same time the top end of the market has been stamped out, BTL speculators pushed out and investors forced to massively reduce leverage. In short, the odds of a storm coming in the next decade are very high and the market has been deleveraging so that we can clear out the over leveraged and let in the new owners without triggering an economic collapse.
So, I don’t subscribe to the belief that my children won’t be able to afford to buy property. They will. They will understand that if they expect to buy then they must have proper and suitable incomes and sensible spending habits. They probably will own smaller properties than I have, like I have owned smaller properties than my father and he owned smaller properties than my grandfather and he his father but they won’t be growing up ever thinking that my lifestyle is normal and that they are entitled to anything thing like it without the work and education that is required.
For 8 years the Govt have been very clear in their actions and that there won’t be a bail out again for the over leveraged. Lenders have been forced to hold more capital and had the regulation put back in place that prevents innapropriate lending. At the same time the top end of the market has been stamped out, BTL speculators pushed out and investors forced to massively reduce leverage. In short, the odds of a storm coming in the next decade are very high and the market has been deleveraging so that we can clear out the over leveraged and let in the new owners without triggering an economic collapse.
So, I don’t subscribe to the belief that my children won’t be able to afford to buy property. They will. They will understand that if they expect to buy then they must have proper and suitable incomes and sensible spending habits. They probably will own smaller properties than I have, like I have owned smaller properties than my father and he owned smaller properties than my grandfather and he his father but they won’t be growing up ever thinking that my lifestyle is normal and that they are entitled to anything thing like it without the work and education that is required.
Gregmitchell said:
Wombat3 said:
TooMany2cvs said:
Gregmitchell said:
I'm praying for a massive house price correction!
I mean our 3 bed end of terrace is worth over £600k??
So let's say there's a 50% reduction in house prices.I mean our 3 bed end of terrace is worth over £600k??
How much will that wipe off your equity?
Right question: how many people will that send into massive negative equity & what effect will that have on the housing market, house builders & the economy generally?
That said no argument that the market is badly out of whack. The Help to Buy scheme is the best indicator of that - all it is is a massive sticking plaster over the fact that first time buyers are struggling to get in.
.......and then where my partner's son has bought (near Woking) they have sold about 15 new build flats at £300K plus off plan in "blink and you missed it" time.
There are over 500,000 empty homes in the U.K. It’s not so much that there is a shortage of properties but that the last 30 years of economic and political policy of not countering the economic weight of London over the regions has lead to there being a huge employment imbalance and this property demand.
There are actually enough properties in the U.K. and I’ve always argued that ‘lack of supply’ is a spurious argument and a very dangerous solution. A lack of reality plays a very strong part in the argument of supply and so you’d be creating supply where there is no real demand.
The actual solution to the U.K. is to temper investment money into the residential market so that prices are not driven by the global investment market but by regional employment and then to migrate employment opportunity out from the South East to the regions to utilise all the spare capacity and bring employment wealth.
There are actually enough properties in the U.K. and I’ve always argued that ‘lack of supply’ is a spurious argument and a very dangerous solution. A lack of reality plays a very strong part in the argument of supply and so you’d be creating supply where there is no real demand.
The actual solution to the U.K. is to temper investment money into the residential market so that prices are not driven by the global investment market but by regional employment and then to migrate employment opportunity out from the South East to the regions to utilise all the spare capacity and bring employment wealth.
DonkeyApple said:
There are actually enough properties in the U.K. and I’ve always argued that ‘lack of supply’ is a spurious argument and a very dangerous solution. A lack of reality plays a very strong part in the argument of supply and so you’d be creating supply where there is no real demand.
Real demand is the key point to me. My local council in outer London are merrily approving massive residential schemes and allowing the developers to bypass most of the affordable housing targets on the basis of the 'housing shortage' and then the tiny flats go up for sale from £500k upwards. They are selling so far, but that is only really because og Help to Buy, fractional 'ownserhip' schemes and a cheap & plentiful supply of debt.
If any of those factors were to change the demand to buy would still be there, but it is no longer real demand because it isn't backup up buy the financial ability to buy at those prices.
The problem is that the industry has got too used to the good times, and everyone will suffer if those good times go away, perhaps with the exception of a few who have positioned themselves correctly to take advantage.
DonkeyApple said:
So, I don’t subscribe to the belief that my children won’t be able to afford to buy property.
As you say, it all depends on how it is managed. Stagnation of prices and the continuation/expansion of props like Help to Buy will help new buyers stay in touch. They will be buying smaller properties in worse areas, but I don't understand why we would expect anything else in the face of massive population growth. There is only so much land to go around.If, at the other extreme, the next twenty years follows the pattern of the past twenty with massive house price growth and little wage inflation, then I can't understand how anyone will afford anything. Basic one bed flats in my area that were £80k in 1998 were £400k by 2015 against minimal change in local salaries.
If that continued, the flats would cost £2m by 2032 and the potential buyers would be on salaries of about £50k. You'd need more than Help to Buy and low interest rates to bridge that gap...
At the moment, the signs are that won't be the case. Those flats are now back at more like £325k now and sticking on the market because the funded (BTL) buyers aren't as interested any more and there is still a lack of FTBs who can afford them.
kingston12 said:
DonkeyApple said:
So, I don’t subscribe to the belief that my children won’t be able to afford to buy property.
As you say, it all depends on how it is managed. Stagnation of prices and the continuation/expansion of props like Help to Buy will help new buyers stay in touch. They will be buying smaller properties in worse areas, but I don't understand why we would expect anything else in the face of massive population growth. There is only so much land to go around.If, at the other extreme, the next twenty years follows the pattern of the past twenty with massive house price growth and little wage inflation, then I can't understand how anyone will afford anything. Basic one bed flats in my area that were £80k in 1998 were £400k by 2015 against minimal change in local salaries.
If that continued, the flats would cost £2m by 2032 and the potential buyers would be on salaries of about £50k. You'd need more than Help to Buy and low interest rates to bridge that gap...
At the moment, the signs are that won't be the case. Those flats are now back at more like £325k now and sticking on the market because the funded (BTL) buyers aren't as interested any more and there is still a lack of FTBs who can afford them.
Like neon is a very complex market because at the bottom income end it is fuelled by immigration that is far more willing to live ten to a bed and therefore easily and naturally outcompete the indigenous worker through no fault of their own. But then the indigenous worker used to live in dorms not so long ago. But this makes it all the more important to migrate lower end, white collar employment out to the regions where such workers can benefit from not having to migrate to London for work and spend a wholly inappropriate level of income on their housing needs.
On a slightly separate note, I don’t think it has helped the first time buyer market that so much demand has arisen in their market from older men who are no longer living in the family home. Aside from BTL and other competition at that end of the market place I suspect the army of modern divorcees are supply demand also.
But, you say you live on the outskirts of central London? If prices remain as they are or continue to grow without a correlating wage inflation or reduction in borrowing costs to retain affordability then there is actually a very simple solution and it’s one that Zone 1 did 70 odd years ago, Zone 2 shortly after and Zone 3 since the 70s and that is the subdivision of large family homes into multiple residences, thus increasing bottom end supply enormously.
DonkeyApple said:
But, you say you live on the outskirts of central London? If prices remain as they are or continue to grow without a correlating wage inflation or reduction in borrowing costs to retain affordability then there is actually a very simple solution and it’s one that Zone 1 did 70 odd years ago, Zone 2 shortly after and Zone 3 since the 70s and that is the subdivision of large family homes into multiple residences, thus increasing bottom end supply enormously.
I'm out in zone 6, so right on the very edge as Greater London turns into Surrey.The fast train link into central London means that the market probably acts more like that of a slightly more central suburb. Certainly, most of the bigger houses within half a mile or so of the station were converted into flats or torn down and replaced with blocks of flats from the 1960s onwards.
That part of the area is probably 90% flats, 10% houses now, and that means that the houses that do survive command a large premium (often higher £ per sqft when you would normally expect them to be lower). Further conversion of houses to flats is unlikely because of that.
The increase in supply is coming from large tower block developments, but they aren't really at the bottom end. They are marketed as luxury with price tags to match, even though they tend to be on main roads and lack facilities. A lot of them qualify for Help to Buy, but increasingly they are going to be above the £600k threshold, so it will be interesting to see what happens then.
DonkeyApple said:
On a slightly separate note, I don’t think it has helped the first time buyer market that so much demand has arisen in their market from older men who are no longer living in the family home. Aside from BTL and other competition at that end of the market place I suspect the army of modern divorcees are supply demand also.
I have seen quite a lot of newly single Dads move into my area, and I put it down to being next to the affluent commuter belt that contains mainly large houses and hardly any flats, the opposite of this area. Most of them seem to rent rather than buy, but I guess they might enter the market to buy in the longer term.It will certainly have an effect, but perhaps not enough to take up the slack caused by BTL not being so interested in adding to their portfolios anymore. That has definitely had a downward effect on the price of1/2 bed flats, whilst houses seem to be storming ahead after a lull for the past couple of years.
Of my group of friends there is a mix of renters/owners (however it's mainly the latter). Late 20/early 30s.
ALL of my close friends who have houses have done so by contributions from parents/inheritance towards deposits.
I was very fortunate to be given a small amount by my parents to help with the deposit, although i saved the majority of it myself, my girlfriend saved her share, although she was in a higher earning job, whilst living at home.
The main issue is that once you get to a certain age, you don't really want to live at home & you want freedom, so you move out, however it's very hard to rent & save a deposit at the same time.
I looked at what our mortgage would get us if we rented locally & it'd get you a knackered 2 bed terrace in the worst part of town.
I look at a lot of 'non-skilled' jobs local to me, say the average salary for something more than a receptionist, but not a CEO is £25,000 PA.
Bare with me on the fag packet maths below, based on 2 sharing p/month:
Take Home £1700
Rent: £350ea
Household bills: £200
Car: £150
Car Insurance: £50
Food: £200
Other bills (mobile etc): £100
Allow £200 P/Month for some socialising/clothing/holiday/un-forseen circumstances (repair bills, car etc).
The above figures don't allow for things like CSA either or any other debts/bills.
You're left with in the region of £400 towards saving for a deposit.
I've looked at Rightmove & something that looks 'okish' locally is going to set you back around £180k.
With both of you saving as above for a 10% deposit, it's going to take you the best part of 2 years to save the deposit, let alone the additional required to furnish, pay the solocitors fees etc.
I know a lot of people who don't even earn as much as the figures above as they're in un-skilled roles (secretarial/general office etc/delivery driver etc.)
ALL of my close friends who have houses have done so by contributions from parents/inheritance towards deposits.
I was very fortunate to be given a small amount by my parents to help with the deposit, although i saved the majority of it myself, my girlfriend saved her share, although she was in a higher earning job, whilst living at home.
The main issue is that once you get to a certain age, you don't really want to live at home & you want freedom, so you move out, however it's very hard to rent & save a deposit at the same time.
I looked at what our mortgage would get us if we rented locally & it'd get you a knackered 2 bed terrace in the worst part of town.
I look at a lot of 'non-skilled' jobs local to me, say the average salary for something more than a receptionist, but not a CEO is £25,000 PA.
Bare with me on the fag packet maths below, based on 2 sharing p/month:
Take Home £1700
Rent: £350ea
Household bills: £200
Car: £150
Car Insurance: £50
Food: £200
Other bills (mobile etc): £100
Allow £200 P/Month for some socialising/clothing/holiday/un-forseen circumstances (repair bills, car etc).
The above figures don't allow for things like CSA either or any other debts/bills.
You're left with in the region of £400 towards saving for a deposit.
I've looked at Rightmove & something that looks 'okish' locally is going to set you back around £180k.
With both of you saving as above for a 10% deposit, it's going to take you the best part of 2 years to save the deposit, let alone the additional required to furnish, pay the solocitors fees etc.
I know a lot of people who don't even earn as much as the figures above as they're in un-skilled roles (secretarial/general office etc/delivery driver etc.)
So buy the knackered 2 bed end of terrace, do it up and in 2-3 years you can sell it for a much better equity on the next place, rather than holding out for the okish place.
That's how the majority of my friends including me have managed it.
As did my parents 30 years ago, it's not a new concept, just most people now think they should be able to afford a nice 2 bed on a new build estate.
That's how the majority of my friends including me have managed it.
As did my parents 30 years ago, it's not a new concept, just most people now think they should be able to afford a nice 2 bed on a new build estate.
WolfieBot said:
So buy the knackered 2 bed end of terrace, do it up and in 2-3 years you can sell it for a much better equity on the next place, rather than holding out for the okish place.
That's how the majority of my friends including me have managed it.
As did my parents 30 years ago, it's not a new concept, just most people now think they should be able to afford a nice 2 bed on a new build estate.
Somewhat ironically, after years of propertyporn on the telly, and with HtB incentives, the newbuild is often more attainable. Which, tbh, is probably the right way round, since it's made of damp kleenex and will be shagged in a decade or two.That's how the majority of my friends including me have managed it.
As did my parents 30 years ago, it's not a new concept, just most people now think they should be able to afford a nice 2 bed on a new build estate.
I'd like to know how those bemoaning "generation snowflake" would interpret this graph:
If you got on the ladder before '98 you were playing the game of life on easy mode. Even at low to moderate income, and saving just 5% of disposable income, a first time buyer could buy a house in 3 years
If you got on the ladder before '98 you were playing the game of life on easy mode. Even at low to moderate income, and saving just 5% of disposable income, a first time buyer could buy a house in 3 years
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