Coalition Government want lower house prices

Linton

julieq wrote: »

.......
Over 5-10 years, expect the following to happen:

1) Shift towards urban living in larger blocks of flats. It's easier to get planning permission for brownfield developments and anyone doing that will want to maximise the return (=high density). If you look at the other places where building is constrained and prices are high (Japan, Hong Kong, New York are good examples) that is the model that's used.
2) Conversion of 3 and 4 bedroom houses into flats
2) Shift from freehold to leasehold tenure, probably on a 50 year basis on all properties (including those traditionally freehold). Gives some degree of flexibility and security of tenure over rental, and allows property to be retained by the owners and passed on.
3) Freehold out of the reach of anyone not already on the ladder, and a split between property owning and non-property owning classes (i.e. the historical norm).

..........

IMHO very good analysis - agree completely. A bit to add: large blocks of new flats and conversion of houses into flats presumably means a higher proprtion of people renting.

But then we have the strong public dislike of flats: building large blocks of luxury flats in city centres doesnt seem to have been a great business proposition. However economics usually wins in the end.

IveSeenTheLight

des_cartes wrote: »

He spoke of a "rational" market in which house prices fell in real terms, by increasing by less than earnings.


Anyone still believing that house prices can only go up better start thinking again. The only way is DOWN.:money:

Prices falling in real terms does not equate to falls nominally.

If the government really want to do something about it rather than just paper talk, I guess we'll see them mass building social housing then.....................

chucky

des_cartes wrote: »

Anyone still believing that house prices can only go up better start thinking again. The only way is DOWN.:money:

lots of political brownie points being secured in that speech and will do wonders for his career.

i'm sure that the points that he made sound really good but what is he saying that they is going to do. i can tell you now, they'll be doing very little if anything at all.

he even says that housing will fall in real terms but doesn't say they will fall notionally - that does nothing for FTBs and helps the home owner.

even the building more houses does nothing in the short/medium term.
how do you get builders and construction companies to build more houses for less value and even profit than they have been building recently... it's not really going to happen unless the government subsidises it which they won't especially with their 'cuts' policy and culture due to the lack of cash.

IveSeenTheLight

chucky wrote: »

how do you get builders and construction companies to build more houses for less value and even profit than they have been building recently... it's not really going to happen...

The only way would be for government contracts to build the quantity needed.
Builders would still bid for the contracts to ensure a steady stream of work.

The reality is however, that the government don;t have the money to fund such house building requirements

abaxas

IveSeenTheLight wrote: »

The only way would be for government contracts to build the quantity needed.
Builders would still bid for the contracts to ensure a steady stream of work.

The reality is however, that the government don;t have the money to fund such house building requirements

Building plots + self build.

Problem SOLVED.

Linton

Generali wrote: »

Why a state driven increase in house building? These guys can build you a house in Australia for $1600/m^2 or roughly £1,000 per square metre so say £100,000 for a 100 sq metre house. I see no reason why UK builders would be less efficient than Aussie ones.

The current average sized new build house is 76 square metres so that would be a pretty decent sized house. The rest of the cost of the house is in the land.

As it is so ridiculously hard to get planning permission in the UK, the private sector is unable to build the houses people want to buy and so are able, on the odd occasion that they force through planning, can sell a crap house at an eye-watering price.

Free up the land in the South of England (ie the area where the jobs are) and builders will build the houses. The market will take care of price discovery.

Releasing more land for building is surely the main answer.

BUT the market cannot do it on its own. Think of the infrastructure development needed for the millions more people attracted to the SE once the price of housing ceases to be a major deterrent.

What about the positive feedback of jobs bringing in people, which in turn creates further jobs having major effects on the rest of the country - perhaps not an issue in a country the size of Australia.

Would the voters in either the SE or the rest of the country in any case allow this free market scenario to happen?

StevieJ

The guy (reviewing the newspaper stories) on Sky last night described it as the most irresponsible statement he had ever seen.

julieq

As Gen points out, the issue isn't the cost of building, it's the cost and difficulty of accessing land.

In a free market, innovators will provide what the market wants under the constraints they work under. For housing, the areas for innovation are in the types of housing provided in the places they can be built and the way the finance needed to access them is structured. You don't need Governments to build, but they do have to force a framework that means that people aren't excluded at the margins.

If we see a massive relaxation of planning policy the situation changes, but that is politically impossible because of the flip/flop nature of the currently highly populist politics on both sides. One Goverment may do structurally the right thing but it's unpopular, the opposition campaigns against it and reverses it - it's purely a matter of timing as to which party takes on a policy, so that Labour rather surprisingly but correctly brought in tuition fees but are now campaigning against them!

You can see that happening universally, and it's utterly crippling. So you have to assume that however stupid current planning rules are, they're the ever present backdrop. It would be great if farmland could be developed, but if you try, a committee of nimbys will spontaneously create itself to point out it's an area of outstanding natural ancient scientific wonderfulness and the process will take years to resolve. Particularly if (horror of horrors) there's some "affordable" housing in the plan.

It's interesting that in many other places, the favoured housing is urban condos. These offer high density to high standards with a great deal of comfort and security and they're a product that's popular with residents just as much as developers. You can see this tendency here too - for example in the developments around Brighton station which are aimed at young professional families often working in London.

In terms of what you can do about innovating around finance, it is things like shared ownership, expansion of leasehold, and more granularity and analysis when assessing risk - good risks can be offered higher multiples if they can be identified, the same as higher risk drivers can get cheaper insurance. Higher risk customers will either have to pay a premium (higher deposit or higher rates). That is the natural progression of any risk based business over time.

Looking at this morning's statement, possibly one explanation is that prices are going to stagnate for at least a year or two until mortgage rationing eases, whatever the government does. So they may as well say it's part of the plan. As I said a couple of days ago, the most important general aspect of house prices for everyone is that secured debt doesn't become unsecured to a level that would destabilise the banking industry (which is what happened in the US with securitised debt and triggered the crisis). I'm pretty sure that those called bulls here would be perfectly happy with nominal stability in house prices, what we don't want to see is generalised financial chaos because banks are failing. Having said that, my money is on real terms inflation because the desire to make money from lending (not least to feed the proceeds back to savers) will act faster than any structural reforms.

Graham_Devon

des_cartes wrote: »

Mr Shapps said it was "horrendous" that house price growth had outstripped earnings since the 1990s.
"This government absolutely supports peoples' aspiration to own a home," he said.
"But we also believe that (property) should be primarily thought of as a place to be your home."
The MP for Welwyn Hatfield told the paper he wanted people to look to investments that are supposed to offer security in old age, rather than rely on housing.
'Basic need'

It's good to hear an MP say that. That's been the biggest problem, and something can be done about it.

But I fear it's merely a soundbite to appease, and nothing more.

Generali

Linton wrote: »

Releasing more land for building is surely the main answer.

BUT the market cannot do it on its own. Think of the infrastructure development needed for the millions more people attracted to the SE once the price of housing ceases to be a major deterrent.

What about the positive feedback of jobs bringing in people, which in turn creates further jobs having major effects on the rest of the country - perhaps not an issue in a country the size of Australia.

Would the voters in either the SE or the rest of the country in any case allow this free market scenario to happen?

Over here the land is released to a company that has the right to sell on plots of land in return for building roads, schools etc that the community will require.