Home ownership drops faster in Greater Manchester than in London

cells

Since 2003, level of home ownership dropped 14 percentage points to 58%, Resolution Foundation says

https://next.ft.com/content/008a7bc2-57f7-11e6-9f70-badea1b336d4

Outer London now at 58% too.

cells

This should surely be enough evidence that price is not the primary driver of affordability.

With the average terrace in Manchester costing £136.5k and the average flat at £133k prices are very affordable so much so that the interest on the mortgage is less than the cost of renting from the local social landlords.

If people want affordability to return people need to be able to afford to buy which means lowering the upfront cost of buying. The report itself says one of the factors was that 100% mortgages are no longer available although the FT didn't mention that part.

Midas

Link to the full report

mwpt

cells wrote: »

This should surely be enough evidence that price is not the primary driver of affordability.

With the average terrace in Manchester costing £136.5k and the average flat at £133k prices are very affordable so much so that the interest on the mortgage is less than the cost of renting from the local social landlords.

If people want affordability to return people need to be able to afford to buy which means lowering the upfront cost of buying. The report itself says one of the factors was that 100% mortgages are no longer available although the FT didn't mention that part.

Why are prices biblical truths and we have to set credit level to adjust to prices?

In other words, how is the price the price if no-one can afford to pay it?

cells

Midas wrote: »

Link to the full report

Thanks

I think the report itself is not all that accurate.
It doesn't even consider one very important factor in all its calculations which is the working occupancy rate. That will be an important factor for all the regions but especially London.

Around 500,000 jobs have been created in London over the last 10 years while closer to 200,000 new homes have been built. The national average is about 1.15 worker per home (~28 million homes and ~32 million workers) while in London the marginal addition has been ~2.5 workers per home

This means the average household income has shoot up faster than the average individual income.

Graham_Devon

cells wrote: »

This should surely be enough evidence that price is not the primary driver of affordability.

Err, why?

On pretty much all levels, as the price has increased, home ownership has declined.

Sure, I understand what you state about mortgages and deposits, but that is all a reflection of the price.

whatmichaelsays

I think it's dangerous to assume that every private renter is a frustrated FTB, which I think this report is perhaps inferring. Of course, lots will be, but there will be plenty for whom renting is ideal for them at this present time.

Manchester, like London, has seen a big movement of young people towards it due to strong job opportunities, their universities and the lower cost of living compared to the South East. These people will tend to rent accommodation - at least in their first years in a city.

Young people generally are now much more transient that they once were. We've moved on from the era where you left school at 16 and bought one of the terraced houses next to the factory where you'd work until you retire. We move around the country a lot more, we move jobs more and so, in that environment, renting will be more attractive than home ownership.

Renting also allows people to perhaps live in an area in which they'd struggle to buy. Speaking about Leeds (as I know the city well), housing is still relatively affordable - a three bed semi with a garden in a decent area can be had for under £150k very easily - but if you want to live in the more fashionable postcodes (Horsforth, Chapel Allerton, etc), then like anywhere else, that's going to cost you. Renting is a way into those areas for a lot of people.

That isn't to deny that there are issues with the housing market - there undeniably is. It is tough for renters to save a deposit - the biggest barrier to home ownership in this part of the UK (I appreciate that in the South, it's a different environment all together), but I think that there are far more reasons to explain why more people are renting. Some of those reasons are simply that more people may prefer renting as it better suits their lifestyle. The challenge to overcome is to aid the transition from renting to purchasing when those people get to the position where they want to settle in an area.

cells

mwpt wrote: »

Why are prices biblical truths and we have to set credit level to adjust to prices?

what 'we'? You and I should have no say. A bank should be free to lend at 100% or IO or self cert. It can do this by doing a little lending at those levels and look at the data and price the risk accordingly. Your biblical truths is that banks should be forced to set credit criteria to adjust prices in that the hpc view is easy credit = higher prices. while the real world data is coming in that hard credit = lower ownership

mwpt wrote: »

In other words, how is the price the price if no-one can afford to pay it?

clearly people can afford housing else we would have hordes of homeless sleeping on the streets. we do have some homeless but thats more to do with drug/alcohol/family-breakdowns.

a person who needs a home will get a home one way or another

1: they can buy directly
2: they can buy indirectly by going through an intermediary (aka Landlord or social)

If you take away 100% mortgages at competitive rates thanks to silly over regulation you will force more of 1 to become 2
If you take away 20% down self cert mortgages at competitive rates thanks to silly over regulation you will force more of 1 to become 2

Why do you find that so difficult to accept?

cells

Graham_Devon wrote: »

Err, why?

On pretty much all levels, as the price has increased, home ownership has declined.

Sure, I understand what you state about mortgages and deposits, but that is all a reflection of the price.

but it clearly price is not the dominant factor

If you look at Manchester mid 2007 to Manchester mid 2016 we see that prices for the average terrace home are £2,000 less than today.

Why is it then that ownership has fallen? Desipre both lower prices and much lower mortgage payments (5-6% interest v 2-3% interest)

And that is in nominal terms, in real terms prices are a good deal lower and mortgages are cheaper

mwpt

cells wrote: »

what 'we'? You and I should have no say. A bank should be free to lend at 100% or IO or self cert. It can do this by doing a little lending at those levels and look at the data and price the risk accordingly. Your biblical truths is that banks should be forced to set credit criteria to adjust prices in that the hpc view is easy credit = higher prices. while the real world data is coming in that hard credit = lower ownership

Could I suggest that we approach this debate in a manner that is free from the HPC shadow? Just look at things as simple questions, not as some desire by me for a crash.

So forget what a bank should or shouldn't be able to do, forget moralising or whatever.

Can we examine the simple question, how is the price of the property determined? My trivial guess is, a match of a seller and a buyer determines the price.

So you are saying that the price X is the true price and buyers are not able to afford it because they do not have enough credit. They previously had enough credit apparently (for a few years) but no longer. So how has the price remained X if people can't afford that price?

If instead of adjusting credit, the price became Y = X - 30% (as an example only) then perhaps people may be able to purchase on the new price of Y.

Why is it that prices don't fall to Y so that people can buy with the current credit levels?

cells

For London one of the biggest overlooked factors is the number of workers per household.

London has gone from about 3.9 million workers to 4.4 million workers while the housing stock has gone from about 3.3 million to 3.5 million over the last decade.

What that means is there are now ~7% more wage earners per property. Not only have wages increased in nominal terms, but the wages of London households have increased by another 7% on top of that.

Whats more this wont be an average spread across the housing sector. For instance that 7% is likely to be lower in the social and owned outright sector (less of a need to cram) which means its likely to be far higher in the rental and newly bought sector. So it might be that the rental and new purchase sector has 10% household income

And if a household gets a 10% increase in income they can spend 30% more on housing (assuming 1/3rd of income goes to housing) without an overall impact on their purchasing power. This 30% is a real term increase in prices not nominal.

Wages are up about 20% nominal. The above explained factor allows people to bid 30% more while maintaining the same expenditure. Both combined allows a London household in 2015 to pay 55% more nominal than a household in 2005 while being no worse off. That is before you even consider that a mortgage is a lot cheaper now than a decade ago so in real terms for a London household paying 55% more nominal they still have more disposable income.