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Debate House Prices
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Supply and Demand in action......
HAMISH_MCTAVISH
Posts: 28,592 Forumite
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.......
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.......
“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”
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”
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Comments
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Nice to see that your obssession with house prices extends to your social life as well as your online life.
I will respond to this post, but that great program about the solar system is starting and I want to watch it.0 -
**** Aberdeen, I'm sick hearing about it.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.0 -
Nice to see that your obssession with house prices extends to your social life as well as your online life.
I was quite surprised actually, it rarely comes up IRL. Well, outside of dinner parties, obviously.;)I will respond to this post, but that great program about the solar system is starting and I want to watch it.
Thanks for the tip. Great programme.“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 -
Get them to move to Aberdeen. Heard that house prices are about to triple there.0
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Get them to move to Aberdeen. Heard that house prices are about to triple there.
Interesting.
You posted on hpc about house prices. You post on MSE about house prices. You even popped on over to pricedout to post about, house prices.
And yet when a thread, discussing the real cause of high house prices comes up, the best you can respond with is a sarcastic remark.
What's the matter pobby, something beyond a trite one liner all a bit too much for you is it? Facing up to the facts, the real causes of high house prices, all too difficult to deal with?
If you believe high house prices are a problem, then there is only one way to fix them. Triple the rate of housebuilding in the UK, and build a few million more houses over the next 20 years.
Nothing else will work, and the chances of building that many is close to zero.
Probably why so many of you seem so very desperate to cling onto any other explanation for high prices, no matter how fanciful or absurd.;)“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 -
Oh, er, you are even freakier than I though McTavish. Following me around. Yes I used to post on HPC.
I made one post pricedout I believe. Do you think that the base rate of 0.5% is normal? Do you think that billions, pumped into the economy is normal?
Can you not accept that that HPI is a bubble? It looks look like it. A bubble that if it pops ( it might do, I`m not certain, too much voodoo economics in play ) would bring this country to its knees. As for building millions of homes, I live in an average city. Pages in the local paper of properties to let.
Anyway, my answer might have been trite. It is based on all the daft posts you make, time after time. I asked you a question in another post about this obsession of yours. Why do you keep on about house prices that keep on going up? Not normal.0 -
Hopefully most people already know how supply and demand works. If they haven't worked it out yet it probably explains why they can't afford a house.
This example though is about a scottish town miles from anywhere so doesn't really apply to the rest of the country.0 -
This example though is about a scottish town miles from anywhere so doesn't really apply to the rest of the country.
Exactly the same thing happens in almost every area of the UK.
We've all seen the ripple effect happening around almost every city in the UK over the last 30 years.
Population growth drives up house prices. People move further and further out in search of cheaper housing, driving up prices wherever they go, because the shortage of supply has bid up prices as the city grows and doesn't build enough new houses.
It really is that simple.“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: »Interesting.
You posted on hpc about house prices. You post on MSE about house prices. You even popped on over to pricedout to post about, house prices.HAMISH_MCTAVISH wrote: »You're getting a bit weird with the whole online stalking thing now.....
couldn't have said it better myself Hamish0 -
So moving swiftly on, perhaps the proposals to build 100 new houses at the back of the village were a good thing?
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 ?
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 !
ps there are 46 new houses being built just now in my area.. all social housing. First since 1981. It's a start at least !It all seems so stupid it makes me want to give up.
But why should I give up, when it all seems so stupid ?0
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