Why is property unaffordable for even the relatively well-off among the population?

DervProf

julieq wrote: »

More houses than households where there are big falls. Less houses than households here and planning restrictions. Nothing more complicated than that.

This is bad news. Or is it ?............


"More good news, property prices went up again last month".

Never mind why prices went up, they just did, so let's interview a grinning estate agent or property "expert".

Property shortgage = higher prices = :beer: (for those that don't have to pay the higher prices).

julieq

Virtually no-one benefits from higher property prices or seeks them because a house isn't a liquid asset, HPI is an irrelevance. They just happen as a consequence of supply and demand. If you want prices to fall like they have in Ireland, you just build more houses than are needed.

This is why the tulip references are misleading when considering house prices in the UK. The condition for a bubble is an increase in prices beyond what supply and demand would dictate, it's an irrational increase in prices. Tulip supply wasn't constrained, but buyers acted as if it was. The same is true with housing in Ireland, or condos in China and other Far Eastern countries where there is little to restrict building. Tech stocks were in no shortage leading up to 2000, yet generated little value, even so there was massive competition to buy them. In a bubble, demand feeds further demand. When the supply situation is properly understood in the market, there's a rapid deflation. It often takes a lot longer than seems reasonable.

In UK housing, the rate of household creation exceeds the rate that new homes are created. Under those circumstances, since everyone has to live somewhere, demand increases directly or indirectly (via purchase or via rental which provides a return for property investors). It's not a bubble here. That's why there hasn't been a crash despite one of the worst recessions there has ever been.

Malcolm.

julieq wrote: »

Virtually no-one benefits from higher property prices or seeks them because a house isn't a liquid asset, it's an irrelevance.

Is this true jules? Many BTL landlords and people looking to retire abroad have benefited from higher house prices. As have those looking to release equity rather than leave all the monies to family.

Arguably, there's increased upward pressure on rental yields (good news for BTLers) due to the cost of homes being out of reach for many.

julieq

I'm not saying that no-one profits from HPI, that would obviously be ridiculous. But in general people don't. They live in their houses.

Incidentally, if there is a trend towards downsizing to fund retirement there may well be a situation where larger houses are worth proportionately less than smaller ones (downsizers' money competing for small houses, larger houses being sold off into a thin market). That one is worth watching, certainly. I suspect what will happen is the houses will be divided into flats or bought for redevelopment, but I'd imagine those hoping for a bonanza on retirement will be disappointed.

C_Mababejive

The cost of housing is a form of societal control and enslavement.

Whilst people are tethered to fat mortgages they are more compliant and fearful for their futures.

Malcolm.

C_Mababejive wrote: »

The cost of housing is a form of societal control and enslavement.

Whilst people are tethered to fat mortgages they are more compliant and fearful for their futures.

I agree. Ever since people could no-longer discover land, claim it, and live of it. People have been enslaved (in one form or another) by society. High rental costs and/or large mortgages lead to a form of financial enslavement for many.
(there must be a better term than enslavement - I can't think of it at the moment)

Conrad

julieq wrote: »

But in general people don't. They live in their houses.

I take the view most people benefit as they end up with a Tax free asset and in most cases people can downsize / move to a cheaper area at retirment - hence why we get towns on the coast with an elderly population.

It's a typica world view where I live - you put your neck out for the best property you can in the knowledge it will look after you long term. This is in East Herts and Surrey - the 2 areas I know.

As such that makes property even more desirable and worth sticking your neck our for.

Lastly the economists underestimate the pension factor. A commonly held view is that you cannot trust city slickers to invest your money (think endowment and pensions here) so ORDINARY folk simply invest in the only thing they understand - property. This is a major factor to the UK in particular - not so much the US or Germany.

Conrad

C_Mababejive wrote: »

The cost of housing is a form of societal control and enslavement.

Whilst people are tethered to fat mortgages they are more compliant and fearful for their futures.

Then you have not taken the trouble to read your history.

Look into the formation of Building Societies - they were co - operatives where locals clubbed together so that each in turn could borrow from the pool IN ORDER TO AT LAST ESCAPE THE CLUTCHES OF THE FEAUDAL LANDOWNER - and at last enable ORDINARY folk a bit of security and self determination.

Seriously, this is how the property market began here.

Conrad

Malcolm. wrote: »

I

agree. Ever since people could no-longer discover land, claim it, and live of it. People have been enslaved (in one form or another) by society.

Ok so follow your argument by looking back into history to the time we roamed free and laid claim to land.............. your life then became about building defences and hopefuly attracting others to ward off enemies that also wanted your pile. You think that was a nice secure life?

Malcolm.

Conrad wrote: »

I take the view most people benefit as they end up with a Tax free asset and in most cases people can downsize / move to a cheaper area at retirment - hence why we get towns on the coast with an elderly population.

It's a typica world view where I live - you put your neck out for the best property you can in the knowledge it will look after you long term. This is in East Herts and Surrey - the 2 areas I know.

As such that makes property even more desirable and worth sticking your neck our for.

Lastly the economists underestimate the pension factor. A commonly held view is that you cannot trust city slickers to invest your money (think endowment and pensions here) so ORDINARY folk simply invest in the only thing they understand - property. This is a major factor to the UK in particular - not so much the US or Germany.

A risk with property investment is it relies on people and weath wanting to continue to stay here. While the governments pumping money into the wider economy I can see why this is the case. When it comes to continual fiscal tightening accompanied by higher taxes, creaking infrastructure, and an ageing population (to look after), this could potentially change?