The price of land....

grizzly1911

Graham_Devon wrote: »

Take a 10% LTV mortgage and it reduces the deposit required by £2,000 (or 12%). It reduces the mortgage payments on that 10% LTV from £894 per month to £728 per month. Thats a saving of £166 PER MONTH.

You are writing this all off as nothing. £166 per month is not nothing. That's what a 20k reduction in the house prices does to mortgage payments at 5.5% on a 10% LTV mortgage.

£166 a month is a good 10% of the average take home pay. Were talking big numbers once you get down to individuals Hamish.

Makes a big difference to affordability and a greater likelihood of banks being more willing to lend.

Somebody has pointed out on these threads that the capital requirement, that needs to be held for a 95% LTV is something like 6x that of a 90% LTV. Don't know how accurate that is but anything that make 105+ more doable has got to help matters.

One thing for sure if builders have brought land at peak and they also have older stuff at a lower cost they aren't going to building out on the new land if it will result in a loss.

HAMISH_MCTAVISH

Graham_Devon wrote: »

Hamish, it's not one thing or the other, and I fear you are in danger of becomign a little hypocritical, trying to define a 20k reduction in price as nothing, but a 20k deposit required by lenders as the work of the devil.

Not at all Graham.

We're discussing what is stopping hundreds of thousands more houses being built every year.

It isn't the price, it's the lack of available mortgage funding.

Let's put this into perspective.

Yes, lets do that shall we....

A 15K reduction in price, so 50% reduction in land cost from the examples I gave, would result in a typical newbuild house dropping from 186K to 171K.

The required deposit, using the current average FTB deposit size of 20%, would therefore fall from £37,200 to £34,200.

Now if you think it's easier in any meaningful way to save £34,000 instead of £37,000, quite frankly, you're living in La-La land.

It would take the best part of a decade for most average earners to save that kind of money, if they were also having to pay rent and living costs.

Whereas a 5% deposit of circa 9K could be saved in 2 to 3 years, or perhaps even 18 months if they were a couple where both earned.

The biggest obstacle currently is raising these high deposits, and mortgage rationing generally. I'm not saying that land prices are of no relevance at all, but they're not the biggest factor by a long shot.

If you want to help more people buy, then increase the amount of higher LTV lending, and the builders will build more houses, as they can actually sell them.

If you also want to tinker with land values, be my guest, but it won't materially change the number of houses being built on it's own.

HAMISH_MCTAVISH

grizzly1911 wrote: »

Somebody has pointed out on these threads that the capital requirement, that needs to be held for a 95% LTV is something like 6x that of a 90% LTV. .

Not quite.

It's 6 times what has to be held for a 60% LTV mortgage.

Graham_Devon

I must be living in la la land then.

It's probably easier to state that than debate AGAIN with you about how you DON'T need a 20% deposit, and 10% will do.

How half of around 40k ISN'T 15k.

How increasing lending DOESN'T automatically mean people can afford houses (yo uwon't look at monthly payments).

Infact, debating with you recently is a complete and utter waste of time and effort. You just change the goalposts somewhat constantly while screaming for more debt. Claiming 20k is loads of money one way, but irrelevant in another. Claiming lending hasn't been boosted as it's not gone over the amount of lending at the utter peak. The list just goes on.

IveSeenTheLight

HAMISH_MCTAVISH wrote: »

So here is a plot of land, with outline planning permission for a 3 bed detached house, within an easy 45 minute commute of Aberdeen.

http://www.aspc.co.uk/cgi-bin/public/SEARCH/ID?ID=281901

The price is £30,000.

Which funnily enough is almost exactly the average price that big builders are paying for plots of land. (£33K)

If I were to contract with a builder to build that house, I'd get a 160 sq metre detached built for around £160,000. On top of that I'd need to pay for planning and building warrant fees, architect designs, utility connections, sewage/septic tank, driveway, landscaping, and of course all internal fixtures and fittings such as carpets, kitchen, bathroom suites, etc.

The total cost would be in the region of £220K.

If the price of land fell by 50%, the total cost would be in the region of £205K.

Perhaps someone would like to explain how it is that the price of land falling would result in double or triple the number of houses being built as are today?

Or is it the case that the main obstacle to house building is in fact the mortgage famine, not land prices, as almost everyone except a few die-hard crashaholics now accepts is the case.

Come now Hamish, that's a bit more than 45 minute commute, Huntly is an hour away and this plot is further.

Plots change dramatically in price.
Here's one in Aberdeen which is under offer
http://www-q.aspc.co.uk/cgi-bin/public/LiveProperty/304668?ID=LABLEOEE#picture

John_Pierpoint

This old chestnut has been realised debated for getting on for 200 years.
http://en.wikiquote.org/wiki/David_Ricardo
The price of homes is what people are prepared to pay.
The supply of housing land is kept restricted by the planning system.
The London market inside the M25 is where the shortage of land is most obvious.
I watched a plot of land with a bungalow on it of 1/3rd of an acre. The bungalow sold for £700k and was replaced by a luxury 3 story 6 bedroom house on 3 floors.
This resulting mansion sold for £1.1million.
There were two large rooms and a bathroom on the 2nd floor in the flat topped roof-space, these "bedrooms" could have been used as a home gym or a home office if required.

Should the "mansion tax" reduce the desirability and thus price of "mansions", it is the seller of the land who has to take the cut in price.

KT10 postal area.