Twenty years on – the winners and losers of Britain’s property boom

cells

mwpt wrote: »

Mortgage rates were slashed, owners didn't have to sell. BTL products introduced in the 90s, rates on these also slashed and they allow IO. Properties start taking off in value again too because of the slashed rates. Of course the sector started to balance towards BTL because of all this. Your view is supported not by evidence but how you choose to interpret it.

If a floor had been set on mortgage rates, then prices may not be so stratospheric and perhaps MMR wouldn't be proving so restrictive. I honestly don't know where to from here but I think it's pretty clear that the private sector is not producing the housing we need. Why is demand so high yet the private sector is not willing to build at the correct prices to enable sales? Surely in any properly functioning market, supply rises to meet demand at the prices people can actually pay.

Why Dont the private builders build more homes?

They build pretty much as much as the councils will allow them. You can see evidence for this if you look at the approval and build rate by councils. Also to a smaller extent until recently it was not very profitable to build just look at the profits of the big builders averaged over the last 5 years. Although London looks great building a new home in say stoke-on-trent and selling it to the locals is a tough task as the local could just buy an average terrace for £45k and you cant build a new house at prices that low

Mortgage rates were slashed, owners didn't have to sell.

That was always going to happen. Why would an owner sell you their property for two shillings? If mortgage rationing pushes up yields so far then owners wont sell so volumes will crash and what comes to the market will be bought by rich people for cash. I bought a London property during the credit crunch for over 10% yield I couldn't get a mortgage for it at the time nor could most other people but well before prices fall to two shillings people who can buy cash will step in

Properties start taking off in value again too because of the slashed rates

What is the alternative? owners wont give them away for two shillings. So if you put rates high and and restrict mortgages you will have all the owners sell to cash buyers at cheap-ish prices but you wont be buying at two shillings.


If a floor had been set on mortgage rates, then prices may not be so stratospheric and perhaps MMR wouldn't be proving so restrictive


prices are cheap in about half the country.
mortgage rationing has still resulted in lower ownership in those places too. the idea that price will determine the mix of owners vs renters is true to a degree but so is mortgage availability. take away IO take away self cert and you force people who can only buy that way to become renters

thequant

redux wrote: »

I said the example I was thinking of, with the compulsory purchase at 175k and the new flats cost over £400k, with £10,000 repair fees only 8 months ahead of demolition, is in a Conservative controlled council.

Apparently you don't know where this is, or you would not falsely impute that I was lying.

Edit: one place I did actually name was Poole. This is not a Labour area either.

Homeowners in south London have hit out after being told to pay up to £14,000 to fix damp and leaks — before their houses are demolished.

Lambeth council plans to knock down Cressingham Gardens, where about 1,000 people live in 306 homes, as part of a £100 million regeneration.

Homeowners claim the estate, near Brixton, has suffered years of neglect by the council. The Labour-run local authority’s cabinet has voted to press ahead with replacing all existing houses and flats, and adding 158 new ones.

http://www.standard.co.uk/news/london/homeowners-told-to-pay-14000-for-repairs-on-condemned-estate-10417920.html

Rather than quoting hearsay and accusing other people of not knowing their facts, any chance you could back up your own ?

mwpt

cells wrote: »

Why Dont the private builders build more homes?

They build pretty much as much as the councils will allow them.

What has this got to do with "mortgage rationing"?

Mortgage rates were slashed, owners didn't have to sell.

That was always going to happen. Why would an owner sell you their property for two shillings? If mortgage rationing pushes up yields so far then owners wont sell so volumes will crash and what comes to the market will be bought by rich people for cash.

And again, you frame it in your own view. Why mortgage rationing? Why not cheap credit pushing up prices and no-one wanting to sell such a good asset. You say mortgage rationing, I say cost of credit. My anecdotal stories of speaking to people moving and keeping their existing houses was never anything to do with mortgage rationing or lack of buyers (there are buyers at the right price), it was always because BTL was the thing, earning rent on their old property, new mortgage secured on the asset, etc.

I bought a London property during the credit crunch for over 10% yield I couldn't get a mortgage for it at the time nor could most other people but well before prices fall to two shillings people who can buy cash will step in

I'm not even sure what to make of this. You managed to buy, cash, from a seller who apparently you say didn't exist because why would someone sell for two shillings. Yet if I look at mortgage lending and transactions during that short period, they were not non-existent. We had a global credit crunch, of course lending was tougher, but that didn't last very long.

If a floor had been set on mortgage rates, then prices may not be so stratospheric and perhaps MMR wouldn't be proving so restrictive

prices are cheap in about half the country. mortgage rationing has still resulted in lower ownership in those places too

I think this all came from your debate on another thread where a bunch of people disagreed with you and the result in you just claiming it as fact anyway. If I remember, it was prices are cheap in places people don't really want to live or doesn't make sense to live. But I don't want to go through that again, we can go back to your old thread for that. Even if we accept you are right (not sure I do) then where is your evidence that mortgage rationing is "a thing" except for in the short year or two after the crunch. We have lowest ever rates and a range of products available from 95% LTV onward. What stats do you have to compare decline to lend results now vs historical (I'm not talking about the ultra loose 125% loan period)?

wotsthat

mwpt wrote: »

Even if we accept you are right (not sure I do) then where is your evidence that mortgage rationing is "a thing" except for in the short year or two after the crunch. We have lowest ever rates and a range of products available from 95% LTV onward. What stats do you have to compare decline to lend results now vs historical (I'm not talking about the ultra loose 125% loan period)?

You've seen the graph Hamish supplied showing mortgage lending?

You could try a thought experiment. If mortgages are cheap and readily available why is the ratio of renters increasing? You might answer that prices are simply too high and buyers are on strike but that's at odds with the idea that people will use available credit to bid up prices.

I think we probably both suspect that if credit wasn't being restricted lending would be higher. Unless the UK is now populated with cautious debt junkies.

mwpt

wotsthat wrote: »

You've seen the graph Hamish supplied showing mortgage lending?

You could try a thought experiment. If mortgages are cheap and readily available why is the ratio of renters increasing? You might answer that prices are simply too high and buyers are on strike but that's at odds with the idea that people will use available credit to bid up prices.

I think we probably both suspect that if credit wasn't being restricted lending would be higher. Unless the UK is now populated with cautious debt junkies.

I've addressed these points in previous posts, if you can't be bothered to read them I won't bother to reply to someone who just seems to be regurgitating what Hamish and cells spoon fed him.

wotsthat

mwpt wrote: »

I've addressed these points in previous posts, if you can't be bothered to read them I won't bother to reply to someone who just seems to be regurgitating what Hamish and cells spoon fed him.

With respect you haven't. The number of times you've mentioned how cheap mortgages are indicates you can't get your head around the possibility that mortgages could be cheap AND restricted. Success bias - I got a cheap mortgage therefore anyone can.

Plus the usual cross purpose arguments about more stringent lending requirements being entirely sensible and not restriction even though the effect on potential buyers is the same - no mortgage - hence the increase in renting.

What do you think the reason is for the decline in owner occupiers? I find it hard to believe that mortgages are cheap and plentiful but culture has changed so dramatically that people are effectively refusing to borrow.

mwpt

wotsthat wrote: »

With respect you haven't. The number of times you've mentioned how cheap mortgages are indicates you can't get your head around the possibility that mortgages could be cheap AND restricted. Success bias - I got a cheap mortgage therefore anyone can.

Plus the usual cross purpose arguments about more stringent lending requirements being entirely sensible and not restriction even though the effect on potential buyers is the same - no mortgage - hence the increase in renting.

What do you think the reason is for the decline in owner occupiers?

I'm still waiting for someone to show me some stats on mortgage rationing, not stats on what people are actually borrowing. I want to see something showing that someone trying to borrow to buy a house within historically average price multiples is being refused a mortgage more often now than what was historically normal. I'm not wanting to relate it to the boom of easy credit and 125% loans in 200x-2007. Bottom line: I want you guys to prove your assertion.

But since I'm so nice I'll repeat myself for you regarding why I think we have a rise in private renting:

Rise of BTL as an investment. BTL do not sell. Fewer transactions. Extremely low tracker rates encouraged existing owners to sit on their current house and low rates rather than move. If they did move many people keep existing house as BTL. Decline in ability of OO to afford the houses on sensible lending multiples where they actually want to buy. I don't really care about an affordable house in Stoke on Trent if no-one really wants to buy there at current prices.

I find it hard to believe that mortgages are cheap and plentiful but culture has changed so dramatically that people are effectively refusing to borrow.

And this is the part that I am flat out mystified that we can't seem to communicate on. People don't refuse to borrow, they can't borrow because prices are too high! If you allow people to borrow more easily and more cheaply, prices WILL absolutely guaranteed rise at faster rates than they are now and what then? What is the plan for the next bunch of buyers who are priced out? When is this fabled building from the private sector going to take place? We've had 20 something years of supposed private sector building through times of normal, then incredibly easy, then tough credit, and it hasn't met the demand at any point.

wotsthat

mwpt wrote: »

I'm still waiting for someone to show me some stats on mortgage rationing, not stats on what people are actually borrowing. I want to see something showing that someone trying to borrow to buy a house within historically average price multiples is being refused a mortgage more often now than what was historically normal. I'm not wanting to relate it to the boom of easy credit and 125% loans in 200x-2007. Bottom line: I want you guys to prove your assertion.

I'm not sure those stats are available - we're left with a graph showing falling lending and asking ourselves why. I'm reasonably happy with the assertion - I find it a stretch to believe that people who were willing to use easy credit to get a house still have access to cheap and plentiful mortgages but think prices are too high so aren't bothering. Does that sound realistic.

mwpt wrote: »

Rise of BTL as an investment. BTL do not sell. Fewer transactions. Extremely low tracker rates encouraged existing owners to sit on their current house and low rates rather than move. If they did move many people keep existing house as BTL. Decline in ability of OO to afford the houses on sensible lending multiples where they actually want to buy. I don't really care about an affordable house in Stoke on Trent if no-one really wants to buy there at current prices.

You make my point here. The decline in the ability of OO to afford houses on sensible mortgages is your own assertion/ opinion and although you don't want to call it restriction the effect is the same. Less people can get mortgages so they have to rent. I think BTL is a symptom and it's a mistake to think of it as the disease.

I know we have a laugh about Stoke-On-Trent but contrary to popular belief it isn't a city where everyone wants to rent because they plan to move somewhere nicer at a later date.

If your life, family, job and future are in Stoke and prices are very affordable with mortgages available then why wouldn't you buy. It doesn't make much sense not to. I would've thought mortgage restriction would be a sensible avenue to explore to work out why

mwpt wrote: »

And this is the part that I am flat out mystified that we can't seem to communicate on. People don't refuse to borrow, they can't borrow because prices are too high! If you allow people to borrow more easily and more cheaply, prices WILL absolutely guaranteed rise at faster rates than they are now and what then? What is the plan for the next bunch of buyers who are priced out? When is this fabled building from the private sector going to take place? We've had 20 something years of supposed private sector building through times of normal, then incredibly easy, then tough credit, and it hasn't met the demand at any point.

Yes, increased lending will put an upward pressure on prices so it needs to be combined with increased building rates. Wouldn't be good for BTL so I'm surprised more don't fancy giving it a go.

cells

MWPT..... why is renting increasing in the cheap parts of the nation you know that half of the nation no one supposedly wants to live in but contains half the jobs and half the people

In parts of the country where the average terrace costs £100,000 or less and is well within the 4 x salary multiple of a full time employed male and the mortgage is about £400 a month or less than 20% of take home pay

Why is renting increasing there?
Where are people not buying?

your argument of prices are too high falls down in half the country as prices are cheap there. Your argument that people are choosing to rent because prices are too high in the south also makes no sense s a mortgage is cheaper than to rent even in the south.


The reality is that mortgages are rationed and if you want max ownership you need regular folk to have access to self cert interest only loans underwritten by rentable value. Yes that will likely result in marginally higher prices which is why you are so adament that there is no mortgage rationing because you dont like the outcome of removing those mortgage rationing limits

HornetSaver

Your argument that people are choosing to rent because prices are too high in the south also makes no sense s a mortgage is cheaper than to rent even in the south.

And therein lies the problem. Prices are already too high for the median earner to get a mortgage at 4-4.5 times salary. Renters cannot get onto the mortgage ladder due to the multiple rule, and therefore have to pay even more than they would be paying if they had a mortgage, to rent. That situation is fine if average prices are say, 5-6 times median earnings, and a responsible saver can get themselves into a position where they can get a large enough deposit together to get mortgage within a reasonable period of time (obviously undoubtedly far longer than they would have hoped, but nonetheless it's acheiveable). It's not fine where prices are 8-9 times median earnings and the need to provide for a family limits your ability to cut back on expenditures such as housing and transport.