London help-to-buy scheme to launch in February

mwpt

Graham_Devon wrote: »

They are determined in part by rising house prices though.

HTB is widely accepted (apart from on here, obviously) to have increased house prices.

Correlated, not caused. How can high house prices increase rents?

Wait... I sense a Hamish moment coming on.

Fewer people can afford to buy, more need to rent, more pressure on rental market. Right?

This economics stuff is simple.

Midas

mwpt wrote: »

Correlated, not caused. How can high house prices increase rents?

Wait... I sense a Hamish moment coming on.

Fewer people can afford to buy, more need to rent, more pressure on rental market. Right?

This economics stuff is simple.

exactly. Higher rents mean they struggle more to save up a deposit, locking more higher earners out of ownership for longer, driving up competition for rental properties and therefore rents, increasing yields for landlords, driving up prices yet further...

Things that could break this cycle:
1. Rent controls (very unlikely in current political context)
2. supply of property outstripping demand (new build)
3. Big increase in availability of social rented sector, to undercut private rented sector (current government appears to be pursuing the opposite policy)
4. Declining population (very unlikely given immigration levels, rising life expectancy etc)
5. reduced supply of credit/cheap money (possible in medium term, but politically disastrous as would probably cause one hell of a recession).

wymondham

As long as schemes are directed at New Build only, then it is not to benefit the buyer, but the developer. It makes no odds if a first time buyer purchases a new or old home, so why is the scheme suspiciously only aimed to help them if they buy a new (overpriced) one ?

the_flying_pig

this scheme is awful from a taxpayer value-for-money perspective, but its narrow focus on newbuild means it shouldn't cause too many wider distortions.

cells

mwpt wrote: »

Correlated, not caused. How can high house prices increase rents?

Wait... I sense a Hamish moment coming on.

Fewer people can afford to buy, more need to rent, more pressure on rental market. Right?

This economics stuff is simple.

firstly you need to understand that landlords do not set the rent, renters set the rent by bidding against each other

if we are in a shortage of homes situation (which with +500,000 people and only +150,000 homes is the case) then the rental sector must expand as renters live more dense

For the rental sector to expand renters need to bid a price whereby it is worth it for a landlord to buy a owner home and convert it into a rental

cells

Midas wrote: »

exactly. Higher rents mean they struggle more to save up a deposit, locking more higher earners out of ownership for longer, driving up competition for rental properties and therefore rents, increasing yields for landlords, driving up prices yet further...

Things that could break this cycle:
1. Rent controls (very unlikely in current political context)
2. supply of property outstripping demand (new build)
3. Big increase in availability of social rented sector, to undercut private rented sector (current government appears to be pursuing the opposite policy)
4. Declining population (very unlikely given immigration levels, rising life expectancy etc)
5. reduced supply of credit/cheap money (possible in medium term, but politically disastrous as would probably cause one hell of a recession).

the government can roll back some regulation and red tape so the banks can offer competitive priced 5% deposits

If you want to buy it should not take more than a year if you have the option to live rent free (say with parents) or just rent a cheap room. Half the time if you are a couple buying. And of course much less if you have relatives or friends who could give you some or all of the 5% down.

Also in about half the country starter homes (eg the average terrace) is not much more than £100k so its a matter of getting £5k in savings. In some parts of the country the average terrace is less than £50k

PasturesNew

A sustainable model would be if they sold property to people by the square metre, with a 250 year lease. In that way you could buy your first square metre and rent the rest.... then, over the years, buy more square metres.

The ultimate goal of this is that, if you kept the property in the family for 6 generations, some future descendant might actually be lucky enough to own it all if all the other generations had pulled their weight and continued to re-mortgage to buy the next square metre throughout their lives.

mwpt

cells wrote: »

firstly you need to understand that landlords do not set the rent, renters set the rent by bidding against each other

if we are in a shortage of homes situation (which with +500,000 people and only +150,000 homes is the case) then the rental sector must expand as renters live more dense

For the rental sector to expand renters need to bid a price whereby it is worth it for a landlord to buy a owner home and convert it into a rental

You need to understand satire.

mwpt

cells wrote: »

the government can roll back some regulation and red tape so the banks can offer competitive priced 5% deposits

You think 95% LTV with interest rate of 4% is not competitive?!!!

mwpt

PasturesNew wrote: »

A sustainable model would be if they sold property to people by the square metre, with a 250 year lease. In that way you could buy your first square metre and rent the rest.... then, over the years, buy more square metres.

The ultimate goal of this is that, if you kept the property in the family for 6 generations, some future descendant might actually be lucky enough to own it all if all the other generations had pulled their weight and continued to re-mortgage to buy the next square metre throughout their lives.

Yes exactly. Prices are not yet high enough and I hear rumours that those who control many dwellings are struggling to make the step up the ladder to the 70ft super yacht. I don't think it's reasonable to expect them to have done all that hard paper work and taking out loans, just to sit on a piddly 50ft yacht or drive any old BMW 4x4.