Is property in a bubble?

cells

Most people have no idea how much London has changed economically and demographically. Train station entries and exits usage data

Chingford Station (outer London)
1997 = 861,422
2014 = 1,766,848
up 2x

Homerton Train station (inner London)
1997 = 137,414
2014 = 5,240,202
Up 38x

Liverpool st Station (central London)
1997 = 9,788,913
2014 = 63,631,246
Up 6.5x



This indicates that the number of jobs in Central London has boomed over the last 20 years and a lot of them have decided to make inner London their home much more so than outer London.
So the income of inner London has boomed a lot more than that of otter London and this is clear in house prices with places like Hackney up twice as much as places like Enfield

So just by looking at a place like Hackney you may think !!!!!! has happened to justify prices increasing so much. Look at economic activity eg train line use going up 10-40x and its easier to see whats going on.

Generali

cells wrote: »

London and especially inner London was under priced for two decades.

I'm not talking about two decades I'm talking about at least since the war and most probably forever.

There is absolutely no way that any sort of value or fundamental analysis of London house prices can support current prices. It's ridiculous.

The only possible explanation to make London house prices (and Sydney ones for that matter) reasonable is that if everyone born before 1970 is a complete idiot. No other explanation can stand up.

cells

westernpromise wrote: »

Add in, too, the affordable homes you're required to provide in every new development - which you have to sell below cost. This simply goes onto the price of all the others, which in many cases then never get built.

Along with traffic planning, housing must be the only area of public policy where every single government intervention ever has made the situation worse for everybody.

The Mayor needs to step in and get rid of parking provision in Zone 1 to 2 and maybe even out to 3

The social homes quota which is 50% in London should be reduced to 0%. If need be the government/London can place a tax/levy on the developments instead. Something like £200k a unit in inner and £100k a unit in outer London. That will bring in close to £4 billion a year which is an absolutely massive amount of money which can be used to improve the whole of London with more tubes/trains and public spaces/parks. It will also mean London very slowly reduces its 24% social homes whereas now its actually increasing it.

Also with all the ~25k units built in London now for sale that will limit house price increases whereas at the moment half are for sale and half are to be filled by council with poor non working not needing to be in inner London families.

michaels

Generali wrote: »

I'm not talking about two decades I'm talking about at least since the war and most probably forever.

There is absolutely no way that any sort of value or fundamental analysis of London house prices can support current prices. It's ridiculous.

The only possible explanation to make London house prices (and Sydney ones for that matter) reasonable is that if everyone born before 1970 is a complete idiot. No other explanation can stand up.

I wonder if Mr G was a child of the 70s?!

cells

Generali wrote: »

I'm not talking about two decades I'm talking about at least since the war and most probably forever.

There is absolutely no way that any sort of value or fundamental analysis of London house prices can support current prices. It's ridiculous.

The only possible explanation to make London house prices (and Sydney ones for that matter) reasonable is that if everyone born before 1970 is a complete idiot. No other explanation can stand up.

You can not have cheap prices in a physically limited space plus more homes.

London was cheap after WW2 because the population tanked while there was still a lot of space both in inner and outer London so much so that lots of semis and even some bungalows were built after ww2 in north London. Does NY or Tokyo have many bungalows with 100 meter long gardens? The situation in London in the 1990s was an excess of homes it was artificially too cheap and too much stock thanks to the overbuilding by the councils and population decline for a couple of decades.

How do you imagine London will build 1 million more homes over the next 30 years? The only way is to buy up existing stock, knock it down and rebuild at higher density. Can that ever be cheap in a city that already has a shortage of homes? Each and every year it gets more difficult to add to the stock as more and more of the brownfield/greenfield and easy to develop estates are already redeveloped.

Cornucopia

Generali wrote: »

The only possible explanation to make London house prices (and Sydney ones for that matter) reasonable is that if everyone born before 1970 is a complete idiot. No other explanation can stand up.

Well, in a sense they (that is people now in their 30s and 40s) are. Or at least they have been part of a major turnaround in housing fashion from "moving out" to the home counties or leafy suburbs to raise children, to staying put in Z1/2/3, and raising them there.

This alone must have put massive pressure on house prices in central London, and especially in those previously run-down Z2 & Z3 areas that are now very fashionable.

This kind of thing is about changes in fashion and lifestyle, and looking at it by economic analysis will not make sense.


More generally, some of the comments in this thread are completely wrong-headed. The only thing we have that can even come close to validating house prices is the market itself - that's why it's virtually impossible to determine when/whether it is overcooked.

cells

Generali wrote: »

The only possible explanation to make London house prices (and Sydney ones for that matter) reasonable is that if everyone born before 1970 is a complete idiot.

If you mean why didn't the people able to buy in the 1990s see the opportunity? They did and they took the opportunity to buy which is why prices went up so much continuously since 1996 in inner London

Hackney prices doubled between Jan 1996 --> March 2000 which is just 4 years a 2 months.

westernpromise

Generali wrote: »

I'm not talking about two decades I'm talking about at least since the war and most probably forever.

There is absolutely no way that any sort of value or fundamental analysis of London house prices can support current prices. It's ridiculous.

The only possible explanation to make London house prices (and Sydney ones for that matter) reasonable is that if everyone born before 1970 is a complete idiot. No other explanation can stand up.

I don't follow that at all. People over 46 mostly already have their own home if they want one. It's people under that age who are bidding those houses up. The sellers, if any, just sit there passively taking the highest bid.

MARTYM8`

Of course property in much of the UK is overpriced - supported by money printing, artificially low interest rates, restrictive planning laws, funding for lending and help to buy, £25 billion of housing benefit and more.

No other sector benefits from such a misallocation of taxpayer resources.

But while people continue to pay the ridiculous prices they won't go down.

paddyrg

The other option, as the BBC have, is to reduce the jobs in London over time, and rebalance the country a little. There's no housing or space shortage in the country once you get up North and can buy a family home for the price of a couple of years London rent. Or a couple more terrorist attacks on the city may make it seem less attractive, or a repeat of the blitz.

Farnborough was a sleepy village before the GLC estates were built to relieve pressure in the centre, I can imagine the same happening again, too.

Is London in a bubble? Probably too strong a word for it, as bubbles are all about speculation with the hope of finding the bigger idiot, so gold and bitcoins certainly were ripe for it, property at least you could live in (assuming you weren't a speculator investor) so still had some intrinsic purpose which had a very real value