The only problem with the housing market – houses cost too much

IveSeenTheLight

Get-real-buy-real wrote: »

This is the fundamental problem that no one wants to admit to. Houses cost too much, and the price needs to come down. And until that happens, the UK economy is going to be walking on eggshells.

http://www.moneyweek.com/investments/property/uk/first-time-buyer-scheme-uk-house-prices-14700

Of course most would be buyers would like prices to be lower but the fundamental catalyst is what can be done to make it happen.

I don't like the consensus of "hoping" prices will fall through unemployment, forced sales etc.

It's been said time and again that the only way to adress the price issue is to affect the supply / demand balance.

At the moment demand is subdued by lending restrictions and we have also seen a reduction in supply as sellers hold off.

Quite simply, to move the balance of supply and demand sifficiently to ensure prices are reduce, the level of supply needs to be radically addressed.

That then just poses the question, where would the funding come from for this radical change.

andybenw

Get-real-buy-real wrote: »

This is why the government are going to such efforts to try and keep prices propped up. One way or another no matter what the government does price will come down.

Disagree if you are talking nominal terms. The government has managed to control prices so far and as far as I can tell they are quite happy with nominal stagnation and real term falls. Shapps has pretty much said this is their desire.

The price will come down in real terms but it will be a drawn out process probably wit a long period of below inflation nominal rises included. Thats why the express article being promoted by Sibley although wrongly presented will I feel be pretty much correct.

paulmapp8306

MrRee wrote: »

Houses too expensive?

Compared to WHAT?

It's not the House Price which is stopping FTB's from buying - not in the slightest - it is simply the lack of finance to purchase.

The demand to buy is there, and being played out in the South with everything selling extremely fast, just the finance is tight.

But, since 2008, FTB's have had a chance to save - if they saved £1,000 a month (not at all remarkable), then they will now have around £36,000 ...... which, amazingly, is the about amount needed for a 20% deposit on the average house price.

This is why we are seeing movement in the market, the finances are now catching up.

House prices are where they have to be, I would suggest.

Compared to wages.

what you suggest is £180k mortgage for an average 3 bed semi - which is around £1000 pm (based at 5% interest). Average wage is £24k which is about £1530 pm after tax.

So - average housing costing 2/3 of the average wage ?? WAY too high.

im not saying the demand isnt there - the vast majority aim to own their own home, and are prepared to get into serious debt to achieve it. that doesnt meant prices are about right - its just that because of availability, there that price.

What needs to happen is more housing - LOTS, and fast.

IMO housing (whether rented or bought) needs to be as low as possible. that leaves more money available to actually spend - which will do much more for the economy that the housing market.

Personally, I believe 1/3 is teh absolute most you sould need to pay from your wage to cover housing. For the average wage thats only around £500pm - which equated to roughly £85k mortage. Add a 15% deposit and you get the £100k mark. THATS about right for an average 3 bed semi.

Of course the area makes a difference - because in some parts of the country you can already GET a 3 bed semi for £100k.

paulmapp8306

MrRee wrote: »

if they saved £1,000 a month (not at all remarkable), .

That bid there is boll**ks - and kind of shows where yourt comming from.

as I said above, the average wage pays around £1500pm after tax. If you can show how you can find a roof, pay food, utilities, transport to work etc and STILL have £1k a month left to save then fine.

The problem seems to be definitions. An AVERAGE house (3 bed semi - or even 3 bed terrace) needs to be in reach of the AVERAGE wage earner. Currently there not - by quite a bit.

As I also said - prices are where they are because there arnt enough of them - so the few% of peopl ethat CAN afford them, are buiying wehat is available - keeping the prices static. The only answer is build more house.

If you build 500,000 flat packed homes, on new estates, around all major towns (north and south) prices would come down to a realistic level.

andybenw

paulmapp8306 wrote: »

That bid there is boll**ks - and kind of shows where yourt comming from.

as I said above, the average wage pays around £1500pm after tax. If you can show how you can find a roof, pay food, utilities, transport to work etc and STILL have £1k a month left to save then fine.

The problem seems to be definitions. An AVERAGE house (3 bed semi - or even 3 bed terrace) needs to be in reach of the AVERAGE wage earner. Currently there not - by quite a bit.

As I also said - prices are where they are because there arnt enough of them - so the few% of peopl ethat CAN afford them, are buiying wehat is available - keeping the prices static. The only answer is build more house.

If you build 500,000 flat packed homes, on new estates, around all major towns (north and south) prices would come down to a realistic level.

A touch simplistic I feel. If you agree that there needs to be some form of flexible movement of labour then there is a need for rented accomodation. Therefore there need to be landlords of said accomodation. These landlords will buy and rent depending on the yield they receive. The prices will be pushed upwards due to this. The average property will never be in reach of the average wage.

A massive building programme would need to be paid for. Not just cheap homes but expensive infrastructure would need to be built, possibly even rendering some current paid for infrastructure obsolete. This could only mean raised taxes. Not many people are going to vote in a government promising to raise taxes a substantial amount.

paulmapp8306

Yes and no.

The point is that an average wage earner SHOULD be able to afford an average house. in days gone buy they couldnt, but renting was a cheaper option, these days renting is at least equivilant and usually more expensive.

If you want movement of labour - yes you need rented accommodation, but historically that was the cheap option. It needs to be so again for that system to work. Failing that you nee3d cheaper housing so if you move for work, you sell your existing home and buy in the new area. OR do like many many are already doing - continue to house your family in you existing home and rent cheap digs during the week in you rwork area. Its a ciompromise on family life but necessary for some to afford to home their families while actually being in work.

Cheaper rents in itself means fewer private landlords - which is the point. For rented accomodation to really work, it needs to be cheap social housing not expensive private rents.

As for infrastructure - Im not sure about that either. These people are already here - using existing infrastructure. Build the new houses where the people already are and you need no more infrastructure. There may be a need fo a little - but then there already is in many places.

The cost of the housing will pay for itself fairly quickly, as all HB payments currently made wont be paid (because its the councils houses not a private landlords - they would be paying themselves), and would actually gert an income from tennants who are not entitled to ALL their rent being paid. The income would cover maintenance while the savings from HB would initially pay for the building costs - then would be extra income for the government.

As for voting for higher tax's? depends I guess. On the face of it no - BUT if it was 2% on income tax, which will fund housing that will cost 50% less than now - Id think many would go for that deal.

MrRee_2

Paulmapp8306 - I agree with some of your points ... but feel you are way off in others.

I don't believe for one moment that a 3 bed semi is a FTB property, even 50 years ago it was a 2 up/2 down property!

Today's FTB has to be able to afford a 1 bed Studio or apartment, the more wealthy a 2 bed apartment, older and wealthier still a 2 bed semi. That's just how it is, I'm afraid (and how it always has been).

When I bought my first few houses, the mortgage always took half of my take home pay ... on the first three houses. Taking your take home pay as £1600 - that means it would be £800 today .... I would guess that is enough for a 1 bed Apartment/Studio.

Nothing has changed over the decades - but money is a LOT cheaper than it was, I remember a 15% Mortgage Rate!! Now, that was scary!

IveSeenTheLight

paulmapp8306 wrote: »

Compared to wages.

what you suggest is £180k mortgage for an average 3 bed semi - which is around £1000 pm (based at 5% interest). Average wage is £24k which is about £1530 pm after tax.

So - average housing costing 2/3 of the average wage ?? WAY too high.
.

Your figures are all over the place.

5% of $180k is £9k per year or £750 per month.
Of course your probably meaning a repayment mortgage which would come to just over £1000 per month.

But your £180k is the mortgage, hence your talking about £200k property with a 10% discount.

This is not the average house price which IIRC LR had it about £162k.

Then on to wages, you cite £24k per year, but this is not the average house purchaser wage.
The long term average wage which has been used to calculate against house prices is the full time mean male average which according to ONS is £35,814. Even the median is £28,091
http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-200444 (See table 1.7a)

so in essence you've over egged the average house price and under egged the average wage.

IveSeenTheLight

paulmapp8306 wrote: »

If you build 500,000 flat packed homes, on new estates, around all major towns (north and south) prices would come down to a realistic level.

I don't think even that is sufficient.

There have been reports that households are increasing to the tune of 250k per year, so 500k new properties would only dam the requirement for a couple of years, do nothing for the previous or future shortages

ukcarper

paulmapp8306 wrote: »

Yes and no.

The point is that an average wage earner SHOULD be able to afford an average house. in days gone buy they couldnt, but renting was a cheaper option, these days renting is at least equivilant and usually more expensive.

If you want movement of labour - yes you need rented accommodation, but historically that was the cheap option. It needs to be so again for that system to work. Failing that you nee3d cheaper housing so if you move for work, you sell your existing home and buy in the new area. OR do like many many are already doing - continue to house your family in you existing home and rent cheap digs during the week in you rwork area. Its a ciompromise on family life but necessary for some to afford to home their families while actually being in work.

Cheaper rents in itself means fewer private landlords - which is the point. For rented accomodation to really work, it needs to be cheap social housing not expensive private rents.

As for infrastructure - Im not sure about that either. These people are already here - using existing infrastructure. Build the new houses where the people already are and you need no more infrastructure. There may be a need fo a little - but then there already is in many places.

The cost of the housing will pay for itself fairly quickly, as all HB payments currently made wont be paid (because its the councils houses not a private landlords - they would be paying themselves), and would actually gert an income from tennants who are not entitled to ALL their rent being paid. The income would cover maintenance while the savings from HB would initially pay for the building costs - then would be extra income for the government.

As for voting for higher tax's? depends I guess. On the face of it no - BUT if it was 2% on income tax, which will fund housing that will cost 50% less than now - Id think many would go for that deal.

It has never been easy to get council accommodation despite what people might tell you and as for private rented accommodation there was very little available in the early 70s when I first bought with landlords unloading their properties as soon as they could because of the rental laws in force at the time.