Proportion of cash buyers increasing

julieq

Just to hammer home the point that not everyone needs a mortgage, and that if you reduce mortgage lending without increasing supply of homes all you do is exclude a section of the population at the expense of another:

http://www.bbc.co.uk/news/business-13116262

"Figures compiled by the Council of Mortgage Lenders (CML) show that in January 2011, nearly 40% of buyers did not need a loan to buy their home.

"This means the proportion of cash buyers has more then doubled since 2005, when the records began.

"This in turn suggests the market is increasingly the domain of the cash-rich, with many other buyers shut out"

And this also supports the analysis that owner occupation can fall when prices are stable because of competition in the rented sector:

"The proportion of people owning and actually living in their properties has been steadily falling, having peaked at 71% in 2004 and fallen back to 67% last year.

"Robert Bartlett says this has led to a big increase in the private rented sector and a greater acceptance that an Englishman's home may no longer be his castle.

""We are heading towards a more European set-up where we rent all our lives and people have their wealth tied up in other things," he says.

"However, this raises the spectre of increased competition for the available rented properties, pushing up the level of rents.

""There is a finite stock and a desperate need to build new housing in the UK," Mr Bartlett says.

""There is a real danger people who cannot afford [rental prices] will become marginalised.""

DervProf

40% of buyers not needing a loan to buy their homes is not suprising when there are so few homes being sold anyway (mainly due to high deposit/price ratios).

"There is a finite stock and a desperate need to build new housing in the UK," Mr Bartlett says.

Now, let's see if those in authority can do something about it. The government/FSA sat back and did very little in the lead up to the banking crisis (even though I could see it coming). The property crisis is even easier to predict, so they have a golden opportunity to show that they are worth their votes and salaries. Building more homes should be a very, very high priority. If there are genuine reasons why it is impossible to do so, then population control should be planned and implemented. Otherwise we are sleepwalking into another massive problem.

Wait a minute - if they do what I suggest, house prices might fall. What a fool I am, especially as a homeowner myself.

julieq

Derv, it's the proportion of the total which is the important part, and that's showing a steady increase. That strips out market fluctuations. If there was a basic floor level of cash transactions you'd see an elbow as they increased in proportion to the total.

Building has been a policy priority for years for all flavours of government (up to the Cameron nimby charter), but very difficult to get past the voters. That's not entirely because of direct house price concerns, it's because people fear an influx of competition for schools, or fear noise or the wrong sort of neighbours. It's fear of change essentially.

And you're quite right, it's scandalous to be taken by surprise by an unsurprising problem. But on the other hand there is a lot of denial going on, and without wanting to get into a ding dong, there is a large section of opinion amongst the bearish that prices will just automatically correct downwards without the need for more building. Can't happen. The correction will be in rates of owner occupation, which is going down very quickly on the numbers in that article, with corresponding increases in the cost of rental. It's very bad for the young.

I still like your idea from a couple of days ago by the way.

kabayiri

Why is it bad to have a large mobile young workforce ?

Who is to say the government isn't set to continue a policy of moving specific types of civil service jobs to the regions, to bolster dips in the economies there ? This is potentially a much easier method of easing housing demand in hotspots like London.

Really2

Fits in with the "BTL replacing FTB's" Thread. https://forums.moneysavingexpert.com/discussion/3186628

julieq

Why it's bad for the young is that they have a classic double whammy. They're excluded from the property market because of lending restrictions and high prices, but they're also seeing rents going up because of competition for housing of all sorts.

It certainly isn't bad to be flexible, and renting is a sensible choice for many. But the problem is that unless you address the fundamental supply problem in the UK you create a captive market of young renters who are essentially stuck for life into ever increasing rental costs.

Graham_Devon

Good, the less debt, the better.

julieq

The less debt the more people locked into paying rent for longer, and the more that property concentrates into the hands of the wealthy. And without debt of some kind or another, there's no way of generating returns for savers.

If that's what you want then fine, but I doubt many people would want that as an outcome.

Loopgames

Interesting article. In our case we can't afford a home without a mortgage but we aren't able to get one either due to income uncertainty. With our deposit we can buy a one bedroom flat without a mortgage in the outerskirts of london. But we want a 3 bedroom house for our 2 kids in the same area.

So we will have to wait and rent in the mean time.

julieq

The article notes that some areas of London are seeing cash buyers for 80% of transactions, I suspect a great deal of that is foreign investors.

Graham_Devon

julieq wrote: »

The less debt the more people locked into paying rent for longer, and the more that property concentrates into the hands of the wealthy. And without debt of some kind or another, there's no way of generating returns for savers.

If that's what you want then fine, but I doubt many people would want that as an outcome.

It's not what I want. And neither do your wild theories actually work in practice.

What you are basically saying is more debt = more wealth.

What I'm saying is, more debt = bigger problems. My evidence? 2007-2011 (and to drag on for a good few years yet).

If people are buying homes with cash, brilliant! No problem with that, it's great news. That's a market working for you.

The issue comes when vested interest are coming along, squeezing out potential buyers and trying their absolute best to squeeze them until the pips squeak while cheering the practice on with a sense of "i'm better than you, I know whats best for you"...and those pips will inevitably squeak.