Why exactly are houses so expensive?

abaxas

Self interest via protectionism.

Eellogofusciouhipoppokunu

Graham_Devon wrote: »

As another blow to the supply argument....

Between 1995 and 2007 the UK population increased by 5%, the housing stock increased by 10% and house prices increased by 350%, meanwhile mortgage lending by banks increased by 630%. Which of these figures is more likely to have led to a 350% rise in house prices: a 5% rise in population growth which is matched by an increase in supply of housing; or an unprecedented increase in mortgage lending from the banks?

Isn't the supply problem wider than just population growth? Too much demand in areas of higher employment such as the SE and a move away from nuclear families where the UK population numbers stay the same but 2 family homes are required instead of one; one for Mum and one for Dad, more couples than ever before divorcing in later life and buying separate retirement style homes.

An excerpt taken from an EU Review on the UK:
http://ec.europa.eu/europe2020/pdf/nd/idr2012_uk_en.pdf

"While there are currently few indications that housing demand or interest rates would surge in the near future, the insufficient and rigid supply of housing in the UK exposes the country to higher and volatile house prices"

"Households are now undergoing a deleveraging process and the government has published plans on how to increase the housing supply which should reduce risks going forward, especially if disposable income also recovers."

System

1) years of direct and indirect subsidies
2) years of restricted land availability
3) artificial enhancement of the required build quality,
4) encouragement of the concept of houses as a savings/investment medium
5) the housing industry has become so embedded into the coutry's economy that manipulation of the market has become a government goal in itself.


Try imagining what would happen if there were no planning restrictions, no building regulations, no qualifications needed for heating and electrical work, and no loans available.
There would be a complete spectrum of housing, from mansions for the very rich and shanty towns for the very poor.
But everybody would be able to afford a house.

Eellogofusciouhipoppokunu

Clifford_Pope wrote: »

1) years of direct and indirect subsidies
2) years of restricted land availability
3) artificial enhancement of the required build quality,
4) encouragement of the concept of houses as a savings/investment medium
5) the housing industry has become so embedded into the coutry's economy that manipulation of the market has become a government goal in itself.


Try imagining what would happen if there were no planning restrictions, no building regulations, no qualifications needed for heating and electrical work, and no loans available.
There would be a complete spectrum of housing, from mansions for the very rich and shanty towns for the very poor.
But everybody would be able to afford a house.

I was going to take issue with point 3 until I saw your shanty town comments. Totally agree. I've been impressed with the more stringent building regs especially those connected with energy efficiency and sound proofing of homes.

Lokolo

mustang121 wrote: »

It dosen't help that many people do not have the patience to save.

Many people want the latest gadets and cars and obtains these things on finance. I cannot believe some people actually get finance for sofa's, laptops etc. What the fudge is all that about?! Save aand buy what you can afford out right!

My advice to young people out there. Never accept credit cards, finance plans, overdrafts or what ever other BullSh@It there is out there. Life will be so much simpler for you.

The only debt a person should ever have is a mortage and even then it should be as little possible and short as possible.

(I'm not including student loan too much as its true debt as the rules differ, but I still reckon student should be scrapped. Instead relying on grants and sponsership for the intelligent, determined future doctors, engineers, physicist etc)

IMO that's too much of a generalisation.

I have taken on a lot of finance, and even splashed out on a couple of DFS sofas in the sale.

Why you may ask?

Well, if I have the choice of saving money then purchasing, or taking out credit at 0%, then paying back monthly, using savings money to put in a savings account earning me (although currently, only a little) interest - then why wouldn't I choose the latter? Surely I get more out of it that way?

By all means, if I got a discount instead of 0% finance, thats a different story, but the choice of pay it all, or take 0% finance, of course I will choose the latter, it makes more financial sense.

But going off topic here...

DervProf

Carl31 wrote: »

House prices are where they are as no one challenged them. Banks dished out the cash, buyers lapped up debt and sellers whacked their prices up. New buyers loved it, they thought they were sitting on a fortune as their 'investment' went skyward.

No one considered that wages couldnt substantiate such a market. So now we have a problem where the nations wealth is tied up in over priced bricks, instead of floating freely between income and expenditure, keeping employment high and the country buoyant.

A correction has to happen, many of us know it and can see it, and know why. unfortunately it will mean pain for some, they dont know why they will suffer, but its the same reason that their investment was going to make them 'rich'.

Excellent post.

One thing I would change though......

"A correction has to happen" could be changed to "A correction looks like it needs to happen, but everything is being done to prevent it."

CLAPTON

according to figures from credit action

-total personal debt rose to £1.458 trillion at the end of june 2012 a rise of 0.55% from 12 months ago.. i.e. so debt in 'real' terms fell.

-unsecured debt fell from 209 billion to 207billion over the last 12 months i.e a fall in nominal terms of 0.9% nominal but a fall of nearer 4% in real inflation adjusted terms.

as usually the value of assets: property, savings, pensions, stocks and shares isn't mentioned.

moneyinmypocket

I really don't think there will be a correction just like I don't see petrol dropping, electric dropping to early 2000 levels - we have gone too far no going back now

CLAPTON

Carl31 wrote: »

House prices are where they are as no one challenged them. Banks dished out the cash, buyers lapped up debt and sellers whacked their prices up. New buyers loved it, they thought they were sitting on a fortune as their 'investment' went skyward.

No one considered that wages couldnt substantiate such a market. So now we have a problem where the nations wealth is tied up in over priced bricks, instead of floating freely between income and expenditure, keeping employment high and the country buoyant.

A correction has to happen, many of us know it and can see it, and know why. unfortunately it will mean pain for some, they dont know why they will suffer, but its the same reason that their investment was going to make them 'rich'.

my understanding is that for every house bought there is a seller.

so for everyone paying silly prices there is some-one receiveing silly income

the total amount of money floating around in the economy is therefore the same

the problem with our economy is an excess of savings.

Graham_Devon

CLAPTON wrote: »

the problem with our economy is an excess of savings.

LOL.

This place gets better.