Rising rents pushes 100,000 more into flatshares

IveSeenTheLight

Road_Hog wrote: »

Look at this graph to see the change since 1975, although there up variations, earnings and house prices are diverging.

Query: -
What's the divergance between joint income mortgages since 1975

nickmason

And the notion that somehow because multiple occupation is increasing in the rented sector we're on the way to a price drop ignores the fundamental fact that the same pool of housing is shared between landlords and owner occupiers, so increased rental demand feeds increased investment demand.

Genuine question - how strong is the relationship between number of houses and housing capacity? Surely housing capacity can increase without new houses being built; for instance:
1) fewer second homes (increased supply in the purchasing property market)
2) people staying/moving back to parents' (reduced demand in the purchasing property market)
3) increased flatshares (reduced demand in the purchasing property market)
Although these will cause some increase in rental demand, it's challenging to believe that that increase will feed sufficient investment demand.

nickmason

FWIW, I can't see property prices dropping any more in notional terms in the near future, as long as there is no pressure to dump stock, and there are bulls who have access to credit and think that one day the prices will rise again. However, I can't see prices going up either. My guess is is that eventually people will stop believing that the prices have to go up eventually. And when that happens, the number of B2Ls will drop, allowing FTBs back into a market, even though it's falling. The question then will be whether it will simply keep falling, as happened in Japan, at which stage not even the FTBs want to be owners, because ownership is hugely expensive in equity loss.

But my crystal ball's no better than anyone else's.

julieq

Well we're seeing how capacity is increasing beyond actual stock, occupancy levels increase per dwelling. Without that, ultimately people live on the street. But these dwellings are owned by someone. If they're owned by a shared purchase scheme then the demand for a purchase hasn't decreased. If they're owned by a landlord the demand for purchase hasn't decreased.

Second homes are a red herring, the effects are highly regional anyway. Discourage second homes and you might persuade a few people to sell up but it would be a marginal effect. Reducing non EU immigration as others have suggested essentially closes the door to young talented people who will on balance return home before the expensive phase of their impact to society - old age and retirement - and is self defeating.

The only real solution is to build more. It really is as simple as that. And we will have to accept higher densities (or decide to build on the green belt).

nickmason

I'm in favour of building more; and I'd rather have maximum densities than minimum densities. The green belt is very, very big (unless you're a nimby). The problem is that those with a vested interest in property prices - including the government - don't want to see prices drop. If for instance we did build on the green belt but with maximum densities, which would improve the housing stock, then the existing housing would drop in value.

So those who want to retain high prices will argue that the only solution to the housing problem is to build more, in the knowledge that this is unlikely actually to happen.

I agree that targeting non EU immigration is the wrong approach. I'm not sure that second homes are a red herring - while the effects will be regional, there is a sufficient level of mobility these days that you'd probably find more people retiring to traditionally second home areas, thus freeing up stock in their "work" environment. But you still haven't answerd the argument that if people are happier with a smaller share of the housing stock, then the demand drops for housing - which will impact the market forces which drive the investment demand to buy. Ultimately, an incomplete substitution effect will mean a reduction in aggregate demand. It just takes a while for people to stop thinking that buying property is guaranteed to be a good bet in the long run, because while they believe that then they are happy to behave irrationally now.

Turnbull2000

It's looking likely that once again, property is gonna be the investment of the decade. Even many of those who bought at or near 2007 peak are sitting very pretty as prices continue to edge upwards and mortgage rates hit their lowest level in history. Those that tried to sit it out on the other hand may pay the financial price for the rest of their lives.