Age of home ownership coming to an end...

HAMISH_MCTAVISH

TDS wrote: »

Largely because the extraordinary taxes on home ownership, rather than the 'wealth' of those that own. Renting is a viable alternative since long term contacts are the norm. Gettin. Onthe illusive 'property ladder' is not the be all and end all as in the UK since house prices rise with inflation rather than boom and bust cycles.

Not entirely correct.

France saw the biggest boom in percentage terms of any country in Europe in the latter part of the last cycle despite having more secure tenancy laws. Bigger even than Britain.

And Germany is a unique case because of reunification causing mass population movements and a dramatic shift in the housing stock, and a decreasing overall population.

Yes, the rental laws are different, but it's far from the primary reason for the German housing stocks long term decline in real value as a national average.

The_White_Horse

FATBALLZ wrote: »

The difference being that in Europe tenants are not seen as scum with laws backing up that viewpoint.

tenants aren't seen as scum here. they have far too many rights.

if you rent your property to someone for 6 months, when you return, on 6 months, that tenant should leave.

if they do not, you should have the right to throw them out, and if they won't leave peacefully, for the police to throw them and their stuff in the road.

meanwhile, in headcase Britain, the owner has to sleep in a tent homeless whilst the tenant refuses to leave. the Owner cannot enter their own home. THEIR HOME.

the country is mad. far too many rules for the protection of scum and dregs than for the protection of the decent.

Graham_Devon

Right, gonna try and blurt out my thoughts on this.

1. If we did go down the route of renting instead of owning, we would need measures put in place to give some security to the tennant, much like Europe.

2. Rent's do have an upper limit. That is, what people can pay, out of their wages. This is very different to what the housing market has seen over the past decade. I.e. the limit is what you can borrow. So anyone cheering on such a situation because they already own, would probably be majorly dissapointed when they find their investments struggle to keep up with wage inflation. Infact, I personally feel we would see a long fall in house prices if we returned to rentals instead of home ownership.

3. Opportunistic landlords would simply be wiped out of the market. You cannot be opportunistic when your tennants have say 3 year terms. The landlords would be, in essence, locked in to the deal, unlike now.

4. Rents would HAVE to be lower than they are now. People would still need to be able to save and plan their retirement. They would have no asset as their retirement plan. So for rents to be lower, asset prices would have to be lower.

In my humble opinion, houses would have to decrease for investors to take on all this, give the tennant more security, and allow the tennant to actually save. Would be nothing like it is now, as the benefit system (which was absolutely key in increasing rents) could no longer push up rents, as hundreds of thousands not on benefits could only pay what they can pay from their wages.

In other words, assets would become pretty much solely linked to wages. Not going to help HPI at all. Like I say, I think it would bring on a huge decline in asset prices, as people could only pay what they could afford to pay....and the true value would be found. That value is no where near todays value.

HAMISH_MCTAVISH

IveSeenTheLight wrote: »

The answer is simple, build more properties to cater for the demand then house prices would not inflate as much.

It's the only thing that will make any significant difference to prices over the long term.

Simply tightening credit only limits the demand which can control HPI but also severly restricts asperational homeowners

Tightening credit cannot control HPI over the long term. At best, it can artificially lower demand for a short while, and delay HPI for a few years until people save up the deposit.

For example, let's say a typical 30 year old had saved a 10% deposit to get the best rates in 2007, and then the goalposts changed to a requirement for a 25% deposit to get the best rates. That 30 year old will continue saving and will likely achieve a 25% deposit by the age of 35, sometime in 2012. The 29 year olds in 2007 will have their deposits saved by 2013, the 28 year olds in 2007 will have theirs saved by 2014, etc etc etc......

Increasing deposit requirements does not reduce effective demand. It merely delays effective demand.

The side effect, of course, is that doing so also increases social inequality and widens the gap between the haves and have nots. Particulary when, as is happening today, both house prices and rents are rising faster than wage growth and real savings returns are negative.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Tightening credit cannot control HPI over the long term. At best, it can artificially lower demand for a short while, and delay HPI for a few years until people save up the deposit.

For example, let's say a typical 30 year old had saved a 10% deposit to get the best rates in 2007, and then the goalposts changed to a requirement for a 25% deposit to get the best rates. That 30 year old will continue saving and will likely achieve a 25% deposit by the age of 35, sometime in 2012. The 29 year olds in 2007 will have their deposits saved by 2013, the 28 year olds in 2007 will have theirs saved by 2014, etc etc etc......

Increasing deposit requirements does not reduce effective demand. It merely delays effective demand.

The side effect, of course, is that doing so also increases social inequality and widens the gap between the haves and have nots. Particulary when, as is happening today, both house prices and rents are rising faster than wage growth and real savings returns are negative.

Oh come on Hamish, even you know that's a complete load of tosh.

We will never get back to the type of lending that we saw running up to 2007. Therefore, this is not an artificial reduction in demand. For it to be artificial, we'd have to forsee a return to "normal", which, in these terms, would be 100%+ mortgages on the market.

Though it is interesting to see you talk about "artificial reductions" in demand. As it seems you are now willing to look in to what makes up demand, which is welcome.

HAMISH_MCTAVISH

Graham_Devon wrote: »

Right, gonna try and blurt out my thoughts on this.

1. If we did go down the route of renting instead of owning, we would need measures put in place to give some security to the tennant, much like Europe.

2. Rent's do have an upper limit. That is, what people can pay, out of their wages. This is very different to what the housing market has seen over the past decade. I.e. the limit is what you can borrow. So anyone cheering on such a situation because they already own, would probably be majorly dissapointed when they find their investments struggle to keep up with wage inflation. Infact, I personally feel we would see a long fall in house prices if we returned to rentals instead of home ownership.

3. Opportunistic landlords would simply be wiped out of the market. You cannot be opportunistic when your tennants have say 3 year terms. The landlords would be, in essence, locked in to the deal, unlike now.

4. Rents would HAVE to be lower than they are now. People would still need to be able to save and plan their retirement. They would have no asset as their retirement plan. So for rents to be lower, asset prices would have to be lower.

In my humble opinion, houses would have to decrease for investors to take on all this, give the tennant more security, and allow the tennant to actually save. Would be nothing like it is now, as the benefit system (which was absolutely key in increasing rents) could no longer push up rents, as hundreds of thousands not on benefits could only pay what they can pay from their wages.

In other words, assets would become pretty much solely linked to wages. Not going to help HPI at all. Like I say, I think it would bring on a huge decline in asset prices, as people could only pay what they could afford to pay....and the true value would be found. That value is no where near todays value.

That is a bear's wish list, but has absolutely no relevance to the market fundamentals of supply, demand and population growth.

It would also require a major shift in government policy and a change of laws to prioritise renting over owning and penalise existing proprty owners, which is extremely unlikey to happen.

Graham_Devon

HAMISH_MCTAVISH wrote: »

It would also require a major shift in government policy and a change of laws to prioritise renting over owning and penalise existing proprty owners, which is extremely unlikey to happen.

Why would it be unlikely to happen, considering the shift to mass rentals we are talking about?

What makes the owners so special in this country?

It's also not a bears wish list. Can you actually argue the points?

HAMISH_MCTAVISH

Graham_Devon wrote: »

We will never get back to the type of lending that we saw running up to 2007. Therefore, this is not an artificial reduction in demand. For it to be artificial, we'd have to forsee a return to "normal", which, in these terms, would be 100%+ mortgages on the market.

Good going Mr Muddle...... If I didn't know better I'd think you were deliberately conflating quality of lending with quantity of lending.

But you'd never do that to confuse our readers......

To be clear, the 125% mortgage deals were a TINY percentage of the market. It does not require those deals to return for the quantity of lending to return to "normal".

That we will see lending quantities exceed 2007's is absolutely certain. The only question is when.

Though it is interesting to see you talk about "artificial reductions" in demand. As it seems you are now willing to look in to what makes up demand, which is welcome.

I've posted at length on the differences between demand, desire and need, as well as the components which make up effective demand. Perhaps you should use the search button if you wish to insinuate I don't understand the difference.

DervProf

I was going to raise a similar issue/question this morning, before I saw this thread.

The question is - Why do the bulls "celebrate" property shortgage in the UK and therefore rising house prices ?

I mean, if there was a food shortgage, not enough for people to starve, but for more and more people to have to live off small rations or poor quality food, would there be so much support for that particular situation ? Would there still be some people who support the best/most food being bought up by the wealthiest, and disagree with those who oppose the situation ?

While I can understand someone predicting a continuation HPI (and I admit that having seen what has gone on over the past couple of years, I can now see that virtually nothing will be allowed prevent this), I still can`t see why they would try and rub people`s noses in it if/when their predictions become reality, and mock those who decided not to buy, or couldn`t afford to buy. I find people with that kind of attitude quite unpleasant, to be honest. HPI certainly seems to reveal the greedy nature of certain individuals.

Damaged

Arcaine wrote: »

Just a point but if houses cannot be bought by people who are on an average wage, then surely houses cannot increase much more in value because the same people would not be able to afford the rent on those same houses? The landlords simply will not be able to make enough out of the tenants to cover the mortgage they have to pay for the property.

True enough, but in some cases and this is certainly from my own point a view, our mortgage is £600 pcm and we'll be charging £1175 pcm the rent. Granted this is on a residential mortgage, so the figures are a bit skewed, but it shows that their is margin to be made.