London's luxury property market is crumbling - Terrible news for affordable housing

wotsthat

martinsurrey wrote: »

for most of the London market that may as well be on the moon...

I love London and love to visit but Luton's 30 minutes away by train and houses seem to be at least half the price. Is this the London bug in action or am I missing something fundamental?

Luton ain't no London but it's not Stoke either!

wotsthat

cells wrote: »

That house you posted is 50 sqm bigger than the one Generali posted and that might just be a little exaggeration by the agents while the new build is probably going off blue prints

So a 155 sqm house at £850k vs a 210 sqm house at £800k

Or £5.5k v £3.8k on a sqm basis


The London home is thus 45% more expensive.
For that you get
1: Cheaper transport costs
2: A new build (this one is important)
3: Lower council tax
4: Lower Heating bills (possibly less than half)
5: 10 year guarantee on defects

Also in my experience going from a typical 75sqm house to a 150sqm house is a good boost in quality of life. Going from a 150sqm to a 210sqm is not all that big a difference you tend to just store junk in the excess rooms or have 'guest rooms' that might be used one week a year.

But Cells dramatically cheaper 150sqm new builds are available outside of London which takes care of (2), (4), and (5) and (3) is pennies in the scheme of things.

Which means Londoners must value their travel time very highly plus, of course, there's that certain 'I don't know what' attached to living in London.

cells

wotsthat wrote: »

It could just be that London prices are ripe for a crash.

Not predicting it mind but I suspect you'd use your same logic if London prices were double. Also don't forget London isn't a thing - it's a place and not too many miles away from places where prices are dramatically cheaper.

Even as close as Luton this is available for £800k.

http://www.rightmove.co.uk/property-for-sale/property-57660179.html

There seems to be a steep gradient in price when moving out of London. The steepness of that graph would worry me as a London investor.

Get up to Leicester and for £850k you get this..

http://www.rightmove.co.uk/property-for-sale/property-41277213.html

It's actually a struggle to spend that much money on a house. A season ticket would cost £9k and it's 72 minutes Leicester to St. Pancras.

I agree there are obviously some fundamentals to explain London prices but there's more than a sniff of the London bug coming into it i.e. London or nothing.

a 30% London crash would take Generali posted house to the same price as the one you posted on a sqm basis.

Then for the same price you get a new build, lower transport costs, lower running costs and you get to live in a city with higher wages.

That basically says to me there wont be a 30% crash its impossible at least without the SE crashing too big time too.

You can also do the comparison with smaller homes. Typical two up two down terraces in Luton seem to be in the £200k mark. However you need 3 of them to make a house the size of the one Generali posted which takes it to £600k. So £600k in Luton for 100 year old crap terraces v £850k for a new build in London close to a station....

Browntoa

I'd love to see the face of some of the rich residents/owners if the developers start to fill vacant flats with "affordable" renters to avoid going bust

cells

wotsthat wrote: »

But Cells dramatically cheaper 150sqm new builds are available outside of London which takes care of (2), (4), and (5) and (3) is pennies in the scheme of things.

Which means Londoners must value their travel time very highly plus, of course, there's that certain 'I don't know what' attached to living in London.

Can you find a 155 sqm (or thereabouts) new build is the SE for dramatically less?

Looking at Luton for New Builds as you picked Luton,

http://www.rightmove.co.uk/new-homes-for-sale/property-40862445.html?premiumA=true


£615k and about the same size


So £850k v £615k

or London is 38% more expensive.

However that 38% is not wasted money. Its better to look at the cost of the interest lost in paying more. £235k not in the bank earning a generous 3% = ~£4,000 after taxes

So the London home is paying £4,000 more per year to be in London. It does not seem that two adults working would not be willing to pay £4k more to be in London.


One of the big problems with...oh London is too expensive is that people do not compare like with like. People post a million pound terrace in London and say oh crap looks its so expensive without looking at the fact that the £1m house is 2-3x the size of a typical house.

cells

wotsthat wrote: »

I love London and love to visit but Luton's 30 minutes away by train and houses seem to be at least half the price. Is this the London bug in action or am I missing something fundamental?

Luton ain't no London but it's not Stoke either!

wages are lower in Luton.

Also London is not one place its lots of Markets.


A 3 bed house in Luton is about £300k
A 3 bed house in Enfield is about £400k
A 3 bed house in Haringey is about £500k
A 3 bed house in Hackney is about £600k

(not many comparable 3 bed homes in Hackney they tend to be larger twice the size types. You have to look at ex council houses to get comparable sizes which are in the £500k region but I put down £600k to factor in a shift from private build to council)


A 2 bed Flat in Luton is about £150k
A 2 bed Flat in Enfield is about £225k
A 2 bed Flat in Haringey is about £300k
A 2 bed Flat in Hackney is about £375k



Also the structure of ownership is different as you move towards the centre. Inner London is more expensive and is mostly renters living more wage earners to a house. This makes logistical sense to have high density renting near the centre to minimise transport stress and costs

dekoder

wotsthat wrote: »

I love London and love to visit but Luton's 30 minutes away by train and houses seem to be at least half the price. Is this the London bug in action or am I missing something fundamental?

Luton ain't no London but it's not Stoke either!

You have considered the cost but not the extra time. My colleagues that commute take at minimum extra 30mins up to 1.5 hours more than my door to door. That's a big hit on social/family/free time thus quality of life and mental health!

cells

Browntoa wrote: »

I'd love to see the face of some of the rich residents/owners if the developers start to fill vacant flats with "affordable" renters to avoid going bust

most developers 'hedge' by forward selling off plan sometimes 2 years ahead.

To date its been a costly mistake for the developers they would have made a lot more profit just selling on completion but that is the nature of insurance it costs you most of the time.

And an owner of a £1m property isn't going to rent it out for £25k they will leave it empty or sell. The higher end of the spectrum is not BTL land its owners and or cash purchase land

cells

wotsthat wrote: »

Which means Londoners must value their travel time very highly plus, of course, there's that certain 'I don't know what' attached to living in London.

In my example above of the Luton New build vs the Generali New build you have a £4,000 annual difference.

For two adults it is £2,000 each. Probably transport will cover a lot of that. The little that remains will be covered by the 50-100 hours a year less travel time and stress.

If you expect house prices to go up by just inflation. Then the cost difference falls to zero. Actually it becomes a net cost benefit

mwpt

cells wrote: »

That basically says to me there wont be a 30% crash its impossible at least without the SE crashing too big time too.

Prices rose 30% in two years. Wages did not rise much, population has risen but not that much. Why are houses worth 30% more and why could they not revert to a value from two years previously?

I'm not saying they will, I'm questioning why not.