London property bubble 'about to burst'

Darthvader

drc wrote: »

In January 2012, the housing benefit caps for existing tenants will come into effect.

It's interesting to see that because of the way areas were assessed for local housing allowance (LHA), some areas quite a bit out from what is normally perceived as Central London will see a big cap. For example, if you look on the LHA website and you click on the maps, "Inner North London" which includes places like most of Golders Green, Highgate, Archway, Hampstead Garden Suburb are going to see big caps.

For example, the 2 bed rate for this area (NW11) in Nov 2010 was £330 per week. The new rate for a 2 bed in the Inner North London area is £290 so a cut of £40 per week. The 3 bed rate drops from £440 to £340, so £100 less per week. I can imagine this would affect quite a lot of people living in these outer suburbs who thought the caps would not affect them that much. In my opinion, this is definitely going to affect rents and house prices although it will take time for these changes to come through.

What will all the low income families do when they find out they will get £100 less per week housing benefit? They will move, it is going to make supply go up as all these empty properties come on the market at the same time. Demand will go down as only those who can pay out of their own pocket will still live there.

drc

Darthvader wrote: »

What will all the low income families do when they find out they will get £100 less per week housing benefit? They will move, it is going to make supply go up as all these empty properties come on the market at the same time. Demand will go down as only those who can pay out of their own pocket will still live there.

I think that there will probably be quite a bit of movement with lots of the people who currently rent in the suburbs with no help, slowly moving into more central areas and lots of those currently heavily reliant on LHA moving from more Central areas into the suburbs, so a population exchange of sorts. The rental market will find a natural equilibrium after a few months but obviously people will only need to move when their LHA is next up for review which will happen from Jan 2012 onwards.

Darthvader

drc wrote: »

I think that there will probably be quite a bit of movement with lots of the people who currently rent in the suburbs with no help, slowly moving into more central areas and lots of those currently heavily reliant on LHA moving from more Central areas into the suburbs, so a population exchange of sorts. The rental market will find a natural equilibrium after a few months but obviously people will only need to move when their LHA is next up for review which will happen from Jan 2012 onwards.

People paying rent out of their own pockets will only choose to move closer if the rents are less.

So yes an equilising high rent areas becoming cheaper and lower rent areas maybe going up, but if too much then the LHA crowd will choose somewhere else.

rizla01

I think that the caps are great for the system and will make LL's improve their properties or sell them to someone that will.

For too long run down props have been lived in by the poorer in our society whilst the (Invariably foreign) LL's cream high rents off the state.

If this reduces that kind of event or better still, totally eradicates it, then that will be a HUGE plus IMO.

Property prices in the capital cannnot plummet as some are predicting for as soon as they drop in price they will be snapped up by the moneyed in London.

Its called Prime Real Estate and will ALWAYS command a premium.

Why is it that people think a reduction in buyers will bring prices crashing?

They simply wont be sold - End of!

drc

rizla01 wrote: »

I think that the caps are great for the system and will make LL's improve their properties or sell them to someone that will.

For too long run down props have been lived in by the poorer in our society whilst the (Invariably foreign) LL's cream high rents off the state.

If this reduces that kind of event or better still, totally eradicates it, then that will be a HUGE plus IMO.

Property prices in the capital cannnot plummet as some are predicting for as soon as they drop in price they will be snapped up by the moneyed in London.

Its called Prime Real Estate and will ALWAYS command a premium.

Why is it that people think a reduction in buyers will bring prices crashing?

They simply wont be sold - End of!

Prime real estate i.e. Central London is a market unto itself. However, there are a finite amount of rich people willing to pay £800k plus for a standard Victorian terrace in the London suburbs or a £200k flat in Walthamstow.

Darthvader

drc wrote: »

Prime real estate i.e. Central London is a market unto itself. However, there are a finite amount of rich people willing to pay £800k plus for a standard Victorian terrace in the London suburbs or a £200k flat in Walthamstow.

The elephant in the room is the governemnt paying up to £4000 per week for some families to live in said prime real estate.

These caps will force a lot of people out of these areas, and average rents will collapse bringing with them house prices.

I think it was the mayor of London Boris who said there would be a Cosavo style cleansing of nice areas of London if these cuts went ahead. Looks like he was right.

This is why the smart money is getting out of property and waiting for the bottom to get back in.

chewmylegoff

Darthvader wrote: »

The elephant in the room is the governemnt paying up to £4000 per week for some families to live in said prime real estate.

These caps will force a lot of people out of these areas, and average rents will collapse bringing with them house prices.

I think it was the mayor of London Boris who said there would be a Cosavo style cleansing of nice areas of London if these cuts went ahead. Looks like he was right.

This is why the smart money is getting out of property and waiting for the bottom to get back in.

Hello Lord Vader, I'm thinking of investing in a BTL portfolio on Alderon, are there any risks to my strategy that you can think of?

I'm also thinking of investing in silver. Do you have any information on the amount of silver required to construct an Imperial Star Destroyer? In light of the current starfleet building programme and dwindling production of silver, silver seems a one-way bet.

rizla01

drc wrote: »

Prime real estate i.e. Central London is a market unto itself. However, there are a finite amount of rich people willing to pay £800k plus for a standard Victorian terrace in the London suburbs or a £200k flat in Walthamstow.

Do you think that these values are over-inflated because of the likely yield based on what the LLs can screw the Govenmenmt for? Surely. when that is ended then the rent yields will become more realistic and those inflated values will drop.

Personally, I doubt that they will affect the TRUE values that most property in London is priced at.



I rarely gamble but am happy to put my money on a cert and here is one that I will happily stake my hard earned on.

I BET THAT a lot of the hard up, on the doll, renters, suddenly find an income and manage to pay the rents being asked rather than have to move.

I'll even stick my neck out and say a minimum 25%!

Any takers?

What are the odds against?

drc

rizla01 wrote: »

Do you think that these values are over-inflated because of the likely yield based on what the LLs can screw the Govenmenmt for? Surely. when that is ended then the rent yields will become more realistic and those inflated values will drop.

Personally, I doubt that they will affect the TRUE values that most property in London is priced at.



I rarely gamble but am happy to put my money on a cert and here is one that I will happily stake my hard earned on.

I BET THAT a lot of the hard up, on the doll, renters, suddenly find an income and manage to pay the rents being asked rather than have to move.

I'll even stick my neck out and say a minimum 25%!

Any takers?

What are the odds against?

Maybe? It will be interesting to see. Tbh, families who have 3 or more kids and live on benefits could probably do as you suggested as they would be in receipt of child benefit x 3 (approx £46 per week), child tax credits x 3 (approx £150 per week), income support (£105.95 per week), no council tax to pay, plus possible other benefits, so a minimum "income" of £300 (not including LHA). I suppose deducting £40 or £50 from that income to stay in Central London would definitely be do-able if the LL doesn't reduce the rent.

Flight2quality

For a while maybe they could spend their other benefits on rent. But cost of living is going up and wages and benefits are going down going forward. Also the proposed 500wk total benefit cap means that they would not be able to spend more than 250-300 on rent and still be able to pay council tax and bills and food off what benefit is left after rent.

I dont think people would choose to use up so much of their benefit cap on rent, they would choose to move somewhere cheaper and get to keep more of their 500 wk.