MSE News: Risky mortgages to face new crackdown, George Osborne says

HAMISH_MCTAVISH

CLAPTON wrote: »

reducing the 500,000 people that come migrate to the UK will reduce demand and reduce price

It would reduce the rate at which demand is increasing, which at current build rates would only result in the rate of price increases reducing. Not prices reducing.

If net migration were zero we would still need more houses being built than are built today.

mobfant

HAMISH_MCTAVISH wrote: »

How many Russian Oligarchs buying in Kensington and Chelsea will be affected by mortgage restrictions do you think?

And meantime back in the real world outside of prime central London, ordinary people are competing with each other and landlords to buy houses in short supply.

So restricting high LTV or LTI mortgages prevents young FTB-s from buying houses for themselves but keeps them paying rent and therefore buying houses for their landlords.

And it therefore allows property wealth to consolidate in the hands of fewer, richer people, as we've seen from the last 7 years.

Honestly, some people never learn....

Two major London property owners (Land Securities and one other I can't remember) both called top of the prime market and sold a huge swathe of their property portfolio. So, even though the wealth of Russians and Gulfies is more than enough to pay for a few more £5m houses, the two biggest property organisations don't think price rises will continue.

As for the normal London market, rental yields have been falling and rents have been rising at a far lower rate than house prices. Being a landlord is less profitable, and increasing regulation etc makes it a more difficult activity. So if major house price rises are no longer seen as a sure thing, people are less likely to continue bidding 10+ % above asking to secure properties. That doesn't mean that the properties won't be bought, it just means that the prices paid for them will fall.

CLAPTON

HAMISH_MCTAVISH wrote: »

It would reduce the rate at which demand is increasing, which at current build rates would only result in the rate of price increases reducing. Not prices reducing.

If net migration were zero we would still need more houses being built than are built today.

indeed so, reduce demand will reduce prices
demand growing at a lower rate will mean prices growing at a lower rate

HAMISH_MCTAVISH

mobfant wrote: »

.... the normal London market.....

if major house price rises are no longer seen as a sure thing, people are less likely to continue bidding 10+ % above asking to secure properties..

Of the sometimes hundreds of people attending many of those London open days in non-superprime areas, most will be people in need of a house, not investors.

And there's only so many times ordinary young couples are willing to go through the disappointment of being outbid on a place they really like and can see themselves living in or starting a family in.

It doesn't take many nights of your spouse being upset over yet another failed purchase attempt before you are willing to go all in so as not to be disappointed again....

Speculation has little to nothing to do with it.

As a poster pointed out earlier.....

Quite frankly, given the choice between paying 'MORE' and being excluded from buying, I'd choose paying more.

Most rational people would.

That's not speculation. It's providing for your family.

And it's such an integral part of human nature you'll never overcome it through mortgage rationing.

The only way to tackle a housing shortage is to build more houses.

It really is that simple.

LydiaJ

J_i_m wrote: »

Why are lower prices not a good situation?

If the amount of what people can borrow is to be restricted then surely it makes sense of prices to be low enough for those people to be able to buy?

Or are we thinking that only wealthy people should be allowed to buy?

Falling prices create problems because people are trapped and won't or can't move. Those in negative equity can't move, and even the ones who aren't in negative equity tend to be very resistant to selling for less than they bought for. So everything stagnates.

I remember a few years ago feeling the way you describe - hoping that prices would fall and thinking that it was quite obvious that if they did then I would be able to buy. People on this board at the time explained to me that the only way prices would fall would be if the prices became less affordable to people - interest rate rises, or wage stagnation coupled with a rising cost of living, or mortgage lending restrictions or whatever - in which case I'd be just as much less able to buy a house as the next person.

In a market like this with a limited number of houses available, it's essentially a competition: If there are x houses available, then the x people that are most well off will be able to buy them - prices will adjust until this is so. The only way you or I get to buy a house is by passing other people to get ourselves further up the list into the top x people, and factors like interest rates and income multiplier rules and so on tend to affect everybody, although not always equally. Or if more houses are built then x gets bigger and it's easier for us to get into the top x.

mobfant

HAMISH_MCTAVISH wrote: »

Of the sometimes hundreds of people attending many of those London open days in non-superprime areas, most will be people in need of a house, not investors.

And there's only so many times ordinary young couples are willing to go through the disappointment of being outbid on a place they really like and can see themselves living in or starting a family in.

It doesn't take many nights of your spouse being upset over yet another failed purchase attempt before you are willing to go all in so as not to be disappointed again....

Speculation has little to nothing to do with it.

As a poster pointed out earlier.....

Most rational people would.

Quite. But when you lose that fear that you're going to be excluded completely, you're unlikely to pay MORE. Which is also rational.

The market in London has been insane for the last 12 months. People have been under huge pressure to buy (lots of viewings at once, open days, fear of Help to Buy's impact even if the facts were different, BTL'ers eyes lighting up on the promise of investment gains).

But the situation on the ground is changing now.

There are fewer open days, fewer prospective buyers registering with estate agents, MMR affecting how much buyers will be allowed to stretch themselves, threat of interest rates going up sooner than expected, a growing sense that government is going to do something about the supply shortage (though god knows what), and a limit on what funds people have to offer.

As per that link, there is evidence of house price falls in certain previously crazy areas (e.g. Hackney and Lambeth), RICS reporting this week that new buyer enquiries are starting to fall and they are revising their future property price forecasts accordingly, etc etc.

None of this is to dispute that there is a housing shortage and many more houses need to be built. But there are already signs that prices aren't going to continue to rise at this level forever. And only a few years ago, they fell by around 10% in London. So it could easily happen again.

J_i_m

Also, I would question why it seems to be thought by some (in this case seemingly misters Osborne and Cable), that effectively keeping prospective buyers in rented accommodation is more affordable.

When I rented a flat worth approximately £115k (the similar neighbouring flats were selling around that mark) I used a range of mortgage calculators and they all came out with monthly repayment projections of £200+ less than my actual rent.

So I ask society in general, how is paying more on rent, more affordable than paying less on a mortgage repayment?

And don't say renters have free maintenance, because any vaguely coherent landlord would factor some maintenance cost into the rent

Graham_Devon

HAMISH_MCTAVISH wrote: »

It is frankly bonkers that some people on here believe the answer to a housing shortage is to prevent large number of people from buying houses.

No one is suggesting its the answer to the shortage of housing.

However, it is one solution to the risk being taken on when it comes to financing the house. That risk effects us all as it could endanger the economy. You may not agree with that, but a growing number of people and institutions do, including the BOE it appears.

the_flying_pig

HAMISH_MCTAVISH wrote: »

...rational...

genius to use that word in a post where every other word is dripping with nothing other than unadulterated womb-trembling pathos :rotfl:

HAMISH_MCTAVISH

mobfant wrote: »

But when you lose that fear that you're going to be excluded completely, you're unlikely to pay MORE.

That fear can only really be addressed by more houses being built.

Until then, many people WILL be excluded completely.

And the only way to ensure you're not one of them is to be the highest bidder for one of the limited stock available.

the situation on the ground is changing now.

Yes.

As you'd expect after 50%+ price rises in a few short years.

Enough people have been excluded by those prices rises that supply and effective demand are coming back into equilibrium, temporarily.

It won't last though.... Unless we build more houses.

there are already signs that prices aren't going to continue to rise at this level forever.

They never do.

Prices don't rise in a straight line and rising markets often pause for breath on the way up.

But nothing will change meaningfully until we build a few million more houses.