London Has Peaked

Jason74

padington wrote: »

Nadeem wyat (sp?) is predicting only plus 5% rises in poor London area's. Anything else will be under 5% for the next three years. With houses trouncing flats generally in London and everywhere outside London doing better.

After that he's predicting Calais like camps inside the uk and societal breakdown from creaking services and rising tensions from over immigration, which could lose London it's safe haven status.

That doesn't sound too far wrong imho. The sheer level of prices in London now mean that they surely have to be near a peak. If we take a single person earning £35k (a pretty decent wage) and with a £20k deposit, the most they could afford would be something like this.

http://www.rightmove.co.uk/property-for-sale/property-51402709.html

A small one bed flat above a shop a long way from main transport links in one of London's cheapest areas (which is also close to my own local market, so an area I keep an eye on). And even a couple both earning that kind of money who'd saved 20k each would be limited to something like this.

http://www.rightmove.co.uk/property-for-sale/property-51585829.html

A small 2 bed ex council house in a barely half decent location within a historically cheaper area. Probably the bare minimum space wise if that couple wanted a family, and then they'd probably struggle to afford both the house and a child.

When we reach that point, we just can't have that much further to go. Anything nice in a nice area is basically already out of reach to anyone who doesn't either earn big money or have "prior" (eg inheritance, bomad etc.) funds. And as the above examples show, even compromised properties in cheaper areas are only just affordable to people on average incomes.

But against that, I thought we had to be near a top 18 late summer last year, and since then local prices are up 15 - 20% in some cases, having already had similar rises in the previous 18 Months. Now surely that can't continue for too much longer, but my local market is surprisingly buoyant for this time of year.There were a couple of houses that might have even tempted me to move that had reductions to sell before Christmas. Both were gone before I could even look at them. This suggests that the market hasn't stopped yet.

So the suggestion of another 5% or so next year (possibly a little more) in some cheaper markets while more established areas flatline is probably about right. My best guess will be that most of those rises will come relatively early in the year, with a medium term peak being reached by the summer. But frankly, that's just an estimate, and having been wrong before, I wouldn't be too confident in my own prediction.

padington

The temporary letting a market is something that's not really being reported very loudly ( probably for obvious reasons ) but I can report in Hove it's going Balistic. An £800 a month one bed flat can pull in £100 a day or more. My neighbours can't wipe the smile of their face.

I appreciate there are lots more costs and bother and I don't have time for it at the moment but for well placed popular places, there's a very substantial side income to be had.

Basically if you own two flats in hove you don't have to work, three and your made.

cells

mwpt wrote: »

Yes. Rents have for too long been subject to the aberration of market forces "affordability". What we need is to introduce credit into rents to allow hard working families to afford the home they deserve and allow hard working landlords to rent out the property for the price they deserve.

In London BOTH rents and low rates are driving prices

Homelet rental index shows Nov this year is +7.5% for London vs Nov last year which itself was up +12.7% from the year before.

So rents were up ~20% over two years. Prices could not have gone up as much if rents had stayed flat


And yes rents are a reasonably free and reasonably liquid market in London. So why did rents go up so much over the last two years?

cells

Jason74 wrote: »

That doesn't sound too far wrong imho. The sheer level of prices in London now mean that they surely have to be near a peak. If we take a single person earning £35k (a pretty decent wage) and with a £20k deposit, the most they could afford would be something like this.

http://www.rightmove.co.uk/property-for-sale/property-51402709.html

A small one bed flat above a shop a long way from main transport links in one of London's cheapest areas (which is also close to my own local market, so an area I keep an eye on). And even a couple both earning that kind of money who'd saved 20k each would be limited to something like this.

http://www.rightmove.co.uk/property-for-sale/property-51585829.html

A small 2 bed ex council house in a barely half decent location within a historically cheaper area. Probably the bare minimum space wise if that couple wanted a family, and then they'd probably struggle to afford both the house and a child.

When we reach that point, we just can't have that much further to go. Anything nice in a nice area is basically already out of reach to anyone who doesn't either earn big money or have "prior" (eg inheritance, bomad etc.) funds. And as the above examples show, even compromised properties in cheaper areas are only just affordable to people on average incomes.

But against that, I thought we had to be near a top 18 late summer last year, and since then local prices are up 15 - 20% in some cases, having already had similar rises in the previous 18 Months. Now surely that can't continue for too much longer, but my local market is surprisingly buoyant for this time of year.There were a couple of houses that might have even tempted me to move that had reductions to sell before Christmas. Both were gone before I could even look at them. This suggests that the market hasn't stopped yet.

So the suggestion of another 5% or so next year (possibly a little more) in some cheaper markets while more established areas flatline is probably about right. My best guess will be that most of those rises will come relatively early in the year, with a medium term peak being reached by the summer. But frankly, that's just an estimate, and having been wrong before, I wouldn't be too confident in my own prediction.

My guess is that Most of London will become a renters city. I think ~20% will own and 80% will rent. The reason is fairly simple, lots of jobs and not enough homes to go around. The result is that renters wiling to live 3-4-5 wage earners per house will outbid (via their landlords) owners only able to a max of two wage earners.

The next twenty years will be interesting. Either London is going to start building 3 x as many new builds or we are going to see prices double in real terms (quadruple in nominal terms) and a rapid shift to more renters and less owners.

Jason74

cells wrote: »

My guess is that Most of London will become a renters city. I think ~20% will own and 80% will rent. The reason is fairly simple, lots of jobs and not enough homes to go around. The result is that renters wiling to live 3-4-5 wage earners per house will outbid (via their landlords) owners only able to a max of two wage earners.

The next twenty years will be interesting. Either London is going to start building 3 x as many new builds or we are going to see prices double in real terms (quadruple in nominal terms) and a rapid shift to more renters and less owners.

You may be right, but I really hope you're spectacularly wrong as that would be a very grim future for my home city. I would hope, and perhaps even expect that the politicians would legislate to change direction long before we got to that point.

onthehill

Jason74 wrote: »

And even a couple both earning that kind of money who'd saved 20k each would be limited to something like this.

http://www.rightmove.co.uk/property-for-sale/property-51585829.html

A small 2 bed ex council house in a barely half decent location within a historically cheaper area.

estate agent blurb seems to describe that as 1930s. Surely not?

CLAPTON

mwpt wrote: »

Yes. Rents have for too long been subject to the aberration of market forces "affordability". What we need is to introduce credit into rents to allow hard working families to afford the home they deserve and allow hard working landlords to rent out the property for the price they deserve.

no, we need more properties and/or fewer people

lisyloo

Fewer people seems extremely unlikely to happen.

CLAPTON

lisyloo wrote: »

Fewer people seems extremely unlikely to happen.

I'm not sure whether more properties is likely to happen either.
Fewer people is simply a matter of political will

mwpt

CLAPTON wrote: »

no, we need more properties and/or fewer people

No no. We just need to create more money, i.e. debt. We've seen how it's sorted out the owner occupier side. The only problem, as Hamish points out, is that we're not lending enough. We need to lend more to both renters (hard working families) and buyers and this will result in more houses being built with no downsides whatsoever. Debt is cheap, the future is rich!