We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
Debate House Prices
In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non MoneySaving matters are no longer permitted. This includes wider debates about general house prices, the economy and politics. As a result, we have taken the decision to keep this board permanently closed, but it remains viewable for users who may find some useful information in it. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Supply and Demand in action......
Comments
-
HAMISH_MCTAVISH wrote: »So I was having a conversation recently with some family friends. They live in the village where I grew up, about 40 minutes drive from Aberdeen. The topic of conversation came around to their son, late 20's and still lives at home.
He wants to buy a house, but can't afford a house in the village of his birth, where houses sell for between 125K and 400K depending on size and condition. There are about 450 houses in the village, which has a population of about 1500 people, and also functions as the hub for the surrounding rural area, with a pub and a couple of shops.
He can afford a small flat in a nearby town 6 miles away, starting from 60K, but feels like he should be able to afford a house in the village, being in full time work and earning around 20K a year in a local job for the council.
Unsurprisingly, this was a topic of conversation I took great interest in, and so asked them a few questions about what they thought the problem was.
Well, they said..... High house prices of course. It's ridiculous how expensive houses have become.
Ah, I see..... So how many similar kids are there in the village, and what do they all do? I asked.
Well, there's easily a dozen young people in a similar situation in the village, they explained, with jobs ranging from pulling pints at the pub on minimum wage, through farming jobs, and some that work offshore, probably on 35K a year as a starting salary. They felt that everyone should be able to afford a house.
By this point, I was wondering if they understood the problem was supply and demand, so I asked how many houses had come up for sale in the village in the past year?
Three, was the answer. All sold to "outsiders" commuting to Aberdeen.
So, if there are a dozen local kids looking for a house, plus however many hundreds of "outsiders", and only three came up for sale last year, and the income of the dozen or so local kids ranges from 11K to 35K a year, and the income of the "outsiders" ranges from perhaps 25K to 100K, how do they propose that the available houses that do come up should be allocated, if not by price?
Needless to say I got a blank stare in response........
So I tried again. OK, I asked, there's one small cottage for sale just now in the village, and it's on for offers over 120K.
But thats too expensive for some of the local kids, they interrupted.
Yes, I understand, but let's say it was on for offers over 80K instead. Do you not understand that with 12 local kids competing for that one house, the one that makes the most money can afford to pay three times as much as the one that makes the least money? And in a competitive bidding situation, for scarce resources, that is exactly what happens and prices inevitably rise?
More blank stares..........
So moving swiftly on, perhaps the proposals to build 100 new houses at the back of the village were a good thing?
Ohhhh no, they responded. That would spoil the view, and ruin the village.
I gave up.......
I had a similar conversation with my mother when my sister was trying to buy a house. The planning laws in the UK are a joke, I suspect because people just don't make the link between price and supply and demand. Especially in the South East - it's very hard to afford a house with a decent commute into Central London because of the Green Belt.0 -
>I gave up<
Time to return the English settlers to their ancestral homeland and reallocate their former houses. Scottish bothies for Scottish people!0 -
Hamish, I can't disagree with your original post. What I don't get is why it's a good thing to be celebrating this fact? I understand that a nice village, in a nice place will have lots of nice houses in it which will be full of people with lots of money. That makes sense, and I'm happy with that. But a lot of people are priced out of normal houses in normal areas, and I'm not sure why you perceive this as a 'good thing'.
I know you'll come back to this and tell me that normal people can buy normal houses in normal areas, so let's not worry about it too much.0 -
Shakethedisease wrote: »Hmmmm...
How about another perspective. That perhaps there are in fact another, hypothetically speaking, 100 properties close by, however they are all owned by BTL investors ( ie Ashford/Wlisons 900 properties etc etc)..multiply that by the average btl portfolio across the country ???
Induce goverment level legislation to limit these portfolio numbers..due to the supply factor.. and start limiting housing benefits to cover them ( already started in a somewhat crappy fashion, but sets a precedent at least )..
et viola ! Your guy gets a fair chance at buying a house/flat in his local area.
Simple yes ?
Simple except for being totally innacurate. (but nice hypothetical;))
1. There are only half a dozen houses in rental use in the village. One is a holiday cottage. Two are rented out whilst their owners work overseas, the owners intend to move back and live there permanently at some point in the future. Two are indeed BTL. And I don't know much about the final one, but I think someone inherited it and rents it out. Although for all I know they may be planning to retire there in the future.
Of these half a dozen, only two are of any relevance to most FTB's. The others are large 4/5 bed detached, 250K plus, rented to families who commute to Aberdeen. Probably Oilies on fixed term contracts.
2. There are plenty of flats and houses available for rent and purchase in the small town a few miles away. Flats for sale from 60K, flats to rent from 300 p/m.
There has been significant building of new houses in the town, but not the village.Take the massive investment portfolio's out. Stop the housing benefits (via the tax payer) to cover the ridiculous mortgages some btl'rs have taken out to buy. Those that don't accept social with have to 'fall in line' with those that do to compete..ie landlords that own outright and just want any income they can get <--- Govt will soon set this as the 'benchmark' for local rental levels ( to save what they can in paying out benefits)... and then bring the ftb's back in at realistic income levels.
Supply problem solved !
There are no massive investment portfolios. There is hardly any rental activity at all.
But changing this to a national scale, whilst it may seem that there are massive numbers of investment properties nationwide, the reality is a bit less dramatic.
There are 2 million rental properties nationwide. About a million of these are BTL. (ie, bought in the last 15 years specifically to rent out)
The only study I have seen on the matter, concluded that the price of houses has only risen by 7.5% because of BTL investment.
But the doubling of rental stock in just 15 years has surely kept rents far lower than they would have been without this doubling. 20 years ago rental yields of 10% or more were common. Now the average is more like 5%.
Would you be happy to see rents double, if house prices could decrease by 7.5%? Because realistically, that is the consequence of returning these million BTL's to O/O use.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
Hamish, I can't disagree with your original post. What I don't get is why it's a good thing to be celebrating this fact? I understand that a nice village, in a nice place will have lots of nice houses in it which will be full of people with lots of money. That makes sense, and I'm happy with that.
But a lot of people are priced out of normal houses in normal areas, and I'm not sure why you perceive this as a 'good thing'.
Ahhh, but that's the thing. 30 years ago, this was not a "nice village, in a nice place", it was a "normal" village, with "normal" people, that was actually cheaper than the nearby town where you can now get a flat for 60K, whereas 2 bed cottages in the village are 125K and up.
My parent actually both grew up and worked in the nearby town, and moved to the village as they got more for their money. That situation has now reversed.
The only differences between then and now is that almost no houses were built in the village, whereas lots were built in the town. And the village is closer to Aberdeen, which puts it in the outer ring of the Aberdeen commuter belt, whereas the town is just those few miles too far out, for now. Although this commuter belt has grown steadily for years, and I would assume it will keep growing.I know you'll come back to this and tell me that normal people can buy normal houses in normal areas, so let's not worry about it too much.
Not quite.
Many people on here claim that "my parents were able to buy a nice house at my age on one normal salary, and now it's worth 350K" etc etc.....
WHat they don't see is that the area they are discussing has become that expensive only because of supply and demand.
And if they are willing to move 20 or 30 minutes down the road, away from the employment hubs, they'll find a house for 200K, not 350K, in most areas.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
HAMISH_MCTAVISH wrote: »
And if they are willing to move 20 or 30 minutes down the road, away from the employment hubs, they'll find a house for 200K, not 350K, in most areas.
Yes, and they will find that their commuting bill sky rockets. Remember that discussion about "people don't need two cars" etc. You were right behind that.
Yet now you suggest that people simply moved 20 or 30 mins away.
So they will need either cars, or transport, to go to work. Their commuting bill will go up, and they are no better off. Their same money is now going towards transport instead of housing.
I do wish that life was as simplistic as you make out, as in all honesty, it would be so much easier for ALL of us. But, to put it bluntly, it's not.
People have a set amount of money coming in. If more of that money goes on fuel, or transport, they have less for housing. It goes round and round in circles.0 -
Graham_Devon wrote: »Yes, and they will find that their commuting bill sky rockets. Remember that discussion about "people don't need two cars" etc. You were right behind that.
Yet now you suggest that people simply moved 20 or 30 mins away.
So they will need either cars, or transport, to go to work. Their commuting bill will go up, and they are no better off. Their same money is now going towards transport instead of housing.
.
Exactly right Graham. Which is why those houses are cheaper. People realise this, and also realise that they'd be just as well buying the more expensive house closer in. So more do, and prices rise further. That puts them out of reach, so more people move further out, and then those prices rise too. Then population grows, more wealthy people exist, and they bid up prices all over again.
It's the ripple effect, and it happens around every employment hub in the UK.
It's supply and demand in action. And it's why your parents house in the suburbs, bought 30 or 40 years ago on one "normal" salary, when population was a good few million lower, is now in a sought after and much more expensive area, populated by young doctors, lawyers and bankers that can no longer afford to live in the city centres.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
HAMISH_MCTAVISH wrote: »Exactly right Graham. Which is why those houses are cheaper. People realise this, and also realise that they'd be just as well buying the more expensive house closer in. So more do, and prices rise further. That puts them out of reach, so more people move further out, and then those prices rise too. Then population grows, more wealthy people exist, and they bid up prices all over again.
LOL, I do admire what you have done there.
That wasn't quite the point that I was making.
The point I was making is if they can't afford the house in the village at say 250k, the house with the extra 30 min commute at 210k isn't likely the be affordable either, due to the fact they will have so much more expense in terms of transport per month.
The point for me would be how much of my life do I want to sacrifice travelling to and from work every single day, just to be able to service a mortgage.
Building more houses simply isn't the only answer. Houses have been built around here, I put the google maps up a while ago on this forum showing them, I could now put streetview up. 40 completed in 2007. Only 8 occupied.
If your supply theory was the be all and end all, these 32 places would not be unoccupied. They are unoccupied because of policy restraints, a ludicrous price, and developers held at ransom as they can't sell them for what people can and are willing to pay, as they would end up out of pocket.
Price is a major key in supply and demand, one which you completely refuse point blank to acknowledge.0 -
Graham_Devon wrote: »LOL, I do admire what you have done there.
That wasn't quite the point that I was making.
I'll bet it wasn't....:D
But it makes it no less true.;)The point I was making is if they can't afford the house in the village at say 250k, the house with the extra 30 min commute at 210k isn't likely the be affordable either, due to the fact they will have so much more expense in terms of transport per month.
The point for me would be how much of my life do I want to sacrifice travelling to and from work every single day, just to be able to service a mortgage.
Interesting.
You say this as if you have a choice in the matter, or as if there was another way. When the reality is that as long as we build less houses than people need, prices will behave exactly as I have described over the long term.
Sure, we may see short term fluctuations, and tinkering with rules and lending may slow things down a bit. But HPI is very much an unstoppable force of nature as long as we continue to underbuild by as much as we have done, and still do.
As I have said many time on here, whether HPI is a good thing or a bad thing is utterly irrelevant.
HPI is absolutely inevitable, so people can either position themselves to take advantage of it, or not. And if they choose not, then they can't complain when rents inevitably rise, or prices soar out of their reach.
That always has been, and always will be, the only choice anyone has.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 352K Banking & Borrowing
- 253.5K Reduce Debt & Boost Income
- 454.2K Spending & Discounts
- 245K Work, Benefits & Business
- 600.6K Mortgages, Homes & Bills
- 177.4K Life & Family
- 258.8K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.2K Discuss & Feedback
- 37.6K Read-Only Boards