The 50 year bubble

macaque_2

The housing bubble is a vulcano that has been swelling for 50 years. Sustained by a growing army of vested interests, only firm government action (as Gordon promised in 1997) or a calamity was going to stop it. Sadly we got the latter. The pressures to extract the last drop from home buyers has been a slow and often insideous process:

Garden size
Garden size was the first victim of the housing bubble. 100 foot gardens disapeared 40 years ago to be replaced with 40, 30 and then 20 foot ones.

House size
Even modest homes in the 60s had 1000 square feet to spread out in. By 2005 this has fallen to 350 square feet.

Family size
As the demand for living units became saturated new ways were found to increase demand. Grand parents enouraged to move into sheltered housing, children were encourage to leave home earlier and parents were encouraged to divorce.

The ladder
The greatest benefit to vested interests however lay in home moving rather than home ownership. Estate agents invented the ladder and encouraged people to move every two years.

Shared ownership
As the bubble grew, home prices oustripped even wealthy FTBs. FTBs then started clubbing together to buy flats.

Big mortgages
Mortgage multiples grew as house prices rose. Borrowing levels moved from 90% mortgages at 3.5X the primary income (plus a bit from the second income) to 120% mortgages for 4X both incomes.

Part equity
As the prices showed no signs of stopping, flats became too small for shared occupancy. Buyers were invited to share ownership with the builder and pay rent for the bit they could not afford to buy.

BTLs
As FTBs were driven out of the market altogether, a new cash crop was discovered in the form of BTLs. They could leverage equity in existing property and were willing to pay more in borrowing costs than they could earn in income. Mana from heaven to the property industry.

Spin
The fuel for all this madness was ignorance, lies and spin. Parents gave their children bad advice out of ignorance, lenders used spin to distort reality and estate agents did their usual thing of bare faced lies. People learnt new phrases like 'I'm in it for the long term' and 'my home is my pension' to rationalise putting all their eggs in one basket.

In 2008 the vulcano popped. It was not a percussive eruption but an abrupt halt to price rises. Without rising prices however sentiment died. Without sentiment, house prices will inevitably fall back to levels which can be justified on the fundamentals (i.e. a fall of 60 to 80%).

Yesterday I posted a link which quiety died (as often happens).
http://forums.moneysavingexpert.com/showthread.html?t=1565687
For me however, it was an extrodinary report. It turns out that many house sellers have convinced themselves that it is only a matter of time before the perpetual motion machine of ever rising house prices will return to test new highs. Have they not heard about changes to lending rules, the credit crunch, unemployment, the loss of industry, falling salaries, overmanning in the public sector and chronic debt? We are rapidly becoming the sickest member of a fairly sick developed world. The housing bubble has gone on for so long however that people's belief in patterns now overrides rational thought and common sense.

Cleaver

Is there a point to your post? Apologies, but I can't really see what there is to discuss about a number of factors detailing what has happened in the property market over the past x years.

Is the point, "the housing market will always evolve and have good points and bad points along with ups and downs?".

Really2

macaque wrote: »

The housing bubble is a vulcano that has been swelling for 50 years. Sustained by a growing army of vested interests, only firm government action (as Gordon promised in 1997) or a calamity was going to stop it. Sadly we got the latter. The pressures to extract the last drop from home buyers has been a slow and often insideous process:

Garden size
Garden size was the first victim of the housing bubble. 100 foot gardens disapeared 40 years ago to be replaced with 40, 30 and then 20 foot ones.

House size
Even modest homes in the 60s had 1000 square feet to spread out in. By 2005 this has fallen to 350 square feet.

Family size
As the demand for living units became saturated new ways were found to increase demand. Grand parents enouraged to move into sheltered housing, children were encourage to leave home earlier and parents were encouraged to divorce.

The ladder
The greatest benefit to vested interests however lay in home moving rather than home ownership. Estate agents invented the ladder and encouraged people to move every two years.

.

It's not true though is it.

I live in a new build,
It is just under 2000sq ft, it as got good size garden and our mortgage is no where near 4X joint salary.

There as been stupid bubble in the south east and 9ft X 8ft boxes sold for £200K but belive me it is not like that everywhere.

sabretoothtigger

Your reasoning on smaller gardens, etc just explains the reason for the elevated prices.
Growing population and greater demand and also factors like divorces and rising living standards mean everyone is paying more and are able to pay more for their housing then the slums of 50 years ago


Land and housing is one of the best if not the best long term investments if only because it is the most practical, you will use it every single day after all

Really2

sabretoothtigger wrote: »

Your reasoning on smaller gardens, etc just explains the reason for the elevated prices.
Growing population and greater demand and also factors like divorces and rising living standards mean everyone is paying more and are able to pay more for their housing then the slums of 50 years ago

Now STT we won't have sensible point on here please

macaque_2

Cleaver wrote: »

Is there a point to your post? Apologies, but I can't really see what there is to discuss about a number of factors detailing what has happened in the property market over the past x years.

Is the point, "the housing market will always evolve and have good points and bad points along with ups and downs?".

Is there a point to your post? Apologies, but I can't really see what there is to discuss about a number of factors detailing what I wrote over the past x hours.

Is the point, "posts will always evolve and have good points and bad points along with ups and downs?".

Or to put it another way, if the OP was pointless, then your whining about it possilbly qualifies as pointlessness raised to the power 2.

PasturesNew

Really2 wrote: »

It's not true though is it.

I live in a new build,
It is just under 2000sq ft, it as got good size garden and our mortgage is no where near 4X joint salary.

There as been stupid bubble in the south east and 9ft X 8ft boxes sold for £200K but belive me it is not like that everywhere.

2000 square feet... is it a town house?
Can we play 20 questions?

I was looking at new flats yesterday that have come to market where I moved from.

£405k would buy you 1500 square feet and a balcony.

I think the average salary in the town is allegedly £20k, although I never encountered many people who earnt more than £12k.

Just found another. 2-bed flat, 950 square feet, £410k... the town's full of them... all empty though.

baileysbattlebus

Garden size
Garden size was the first victim of the housing bubble. 100 foot gardens disapeared 40 years ago to be replaced with 40, 30 and then 20 foot ones.

Do you mean middle class homes - there are countless houses in this country that are turn of the century or older that may have small yard at the back and open on the street. Towns in the North are full of them.

zcacmxi

The original post accurately describes the situation in the suburbs of London.

Lots of infill properties, demolition of a couple of houses with 120+ feet gardens and replacing them with a small estate of several new builds, all built like boxes with next to no garden at all.

In fact, the new builds in this area are now built in such a configuration that the front garden of one house is also the driveway to the other houses, etc..

whathavewedone

Small gardens for family sized houses are nothing new.

In towns it is very common to have 4 or 5 bedroom Georgian/Victorian houses with little more than courtyard gardens. Tunbridge Wells is a good example of a town like this.

Our house was built in 1901, is a 4 bedroom 3 storey house - only has a 30ft garden though as do all the houses on our road.

Degenerate

zcacmxi wrote: »

The original post accurately describes the situation in the suburbs of London.

Lots of infill properties, demolition of a couple of houses with 120+ feet gardens and replacing them with a small estate of several new builds, all built like boxes with next to no garden at all.

In fact, the new builds in this area are now built in such a configuration that the front garden of one house is also the driveway to the other houses, etc..

All things which indicate a higher density of property, ie more houses available in a given area - something which would work to drive down house prices, yet macaque seems to be attributing this as one of the factors that created the boom.