Home ownership drops faster in Greater Manchester than in London

cells

mwpt wrote: »

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?

imagine a household. David his wife and their kids

They either buy with a 100% mortgage or they go to a rich man and ask him to buy outright with his savings and rent the property to Davids household. Of course naturally the rich man will want some compensation for the risk/time/overheads so David household is worse off as they pay for the housing and the overheads

A house is purchased in either version of events. Demand for housing does not decrease or increase if bob purchases directly or asks a landlord to do it

The price does not fall 30% for families like David to buy at a lower price because the demand has not fallen.


What we, by which I mean the silly government and its supporters have done is say to David and his family. Sorry buddy if we lend you a 100% mortgage there is an insignificant risk to the banking system (or rather the shareholders) and then the government so we will have to screw you and your family by forcing you to go to a landlord who will buy outright. The risk there to the banking system instead of being virtually zero is zero. We avoid a tiny risk with a tiny consequence at the expense of a large burden on you and your family. I hope you understand its for the greater good and yes I am happy that this has no cost on me and my buddies and all on you and people like you on the margin. chin up

mwpt

cells wrote: »

imagine a household. David his wife and their kids

They either buy with a 100% mortgage or they go to a rich man and ask him to buy outright with his savings and rent the property to Davids household. Of course naturally the rich man will want some compensation for the risk/time/overheads so David household is worse off as they pay for the housing and the overheads

A house is purchased in either version of events. Demand for housing does not decrease or increase if bob purchases directly or asks a landlord to do it

The price does not fall 30% for families like David to buy at a lower price because the demand has not fallen.


What we, by which I mean the silly government and its supporters have done is say to David and his family. Sorry buddy if we lend you a 100% mortgage there is an insignificant risk to the banking system (or rather the shareholders) and then the government so we will have to screw you and your family by forcing you to go to a landlord who will buy outright. The risk there to the banking system instead of being virtually zero is zero. We avoid a tiny risk with a tiny consequence at the expense of a large burden on you and your family. I hope you understand its for the greater good and yes I am happy that this has no cost on me and my buddies and all on you and people like you on the margin. chin up

I'm going to assume that neither you nor I know the true risk to the banking system. So leaving that subjective point aside, in absolute terms, the cost and availability of credit at this present point in time is both cheaper and easier than at times earlier than the year 2000. Did we have the problem you describe above in the years prior to 2000?

cells

mwpt wrote: »

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.

no because that 30% fall in prices results in about a 30% fall in upfront costs.

Going from an 80% mortgage to a 100% mortgage results in closer to a 100% fall in upfront costs even if the price of homes goes up 10%

We can also look into the real world to see proof of this. Look at location x in the uk and location y where the two differ in price by 30%. Wages are quite uniform in the country but you can even take that into account if you want. Then look at ownership v renters in the two locations. If your theory held you would find that places with cheaper prices had higher ownership. Well does it?


Also I think this is the order of importance as far as mortgage availability and ownership goes

Self cert
100% LTV
IO

So the biggest factor is availability or not or self cert. followed by 100% followed by availability of IO or not. As a guess the first one is responsible for a swing of 9% the second a swing of 3% and the last a swing of 1%.

They sound small percentages but even a swing of 1% of nearly 300,000 households

cells

mwpt wrote: »

I'm going to assume that neither you nor I know the true risk to the banking system. So leaving that subjective point aside, in absolute terms, the cost and availability of credit at this present point in time is both cheaper and easier than at times earlier than the year 2000. Did we have the problem you describe above in the years prior to 2000?

yes we did its why during the period 1995-2005 ownership increased.

In many parts prices went up a lot but so did ownership

This again is further !!!!!! that mortgage availability determines the ratio of owners to renters far more than price.

repeating my post earlier I guess the order of impotence is
self cert, 100% LTV, IO with a swing of 9% 3% 1% respectively.

That means close to 90% of households can get a mortgage under todays system as under the system of a decade ago. the 10% is the swing in credit criteria or some 3 million households.


The report also suggests the fall in ownership has now slowed or even stopped. coincidence that once ownership fell about 10% (the 10% locked out of self cert, IO, 100% LTV) it falls no more?

Graham_Devon

whatmichaelsays wrote: »

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.

I'd agree to an extent.

And that "extent" is that the generations haven't changed all that radically in the last few years, which has seen the biggest decline in home ownership.

So from my perspective, I don't think that the "young mobile professional" will make too much difference overall to the figures. There were young and mobile a decade ago too, and I don't think that trend has increased dramatically since then.

cells

Graham_Devon wrote: »

I'd agree to an extent.

And that "extent" is that the generations haven't changed all that radically in the last few years, which has seen the biggest decline in home ownership.

So from my perspective, I don't think that the "young mobile professional" will make too much difference overall to the figures. There were young and mobile a decade ago too, and I don't think that trend has increased dramatically since then.

age of marriage is a big factor. or if people get married at all as that is one factor which changes people from renters to owners

If the age of marriage goes up by 2 years thats is about 2 million more renters. And it might have gone up by that sort of scale over the decade. 2 million more renters at 2.4 per home is a shift of about 800,000 properties into rentals to cater for them or almost a 3% shift in owners to renters

I think that is some of the reason maybe a significant part of it but clearly not all of it

Graham_Devon

cells wrote: »

but it clearly price is not the dominant factor

It is the dominant factor.

Credit is simply a tool. A tool which expands and contracts as it's also a highly volitile and potentially dangerous tool.

The restrictions in credit at the moment are an anomaly only when you compare it to the last 10 years. Go back to the 70s, 80s and 90s and credit is easier to get today than it was then.....

The crucial point here is that although credit was harder to get back then, ownership was higher.

The reason for this is the price. The price determines everything. Take your 130k example. Knock 60k off that price and suddenly the credit available today is perfectly adequate. Nothing has changed credit wise, only the price has changed.

Credit, which you appear to assume determines everything is elastic....it contracts and expands based on other issues. Stretch it too far and it snaps.

The rest of the stuff you are talking about on this thread is the absolute minute detail and may apply to a handful of family or friend samples across the country. (Not many people actually want to buy with their friends or work colleagues, for example, yet you seem to imply there some sort of scope of huge shift here) Getting bogged down in such minute detail is pretty pointless and seems to be clouding your view.

Graham_Devon

cells wrote: »

age of marriage is a big factor. or if people get married at all as that is one factor which changes people from renters to owners

If the age of marriage goes up by 2 years thats is about 2 million more renters. And it might have gone up by that sort of scale over the decade. 2 million more renters at 2.4 per home is a shift of about 800,000 properties into rentals to cater for them or almost a 3% shift in owners to renters

I think that is some of the reason maybe a significant part of it but clearly not all of it

Marriage will have even less to do with anything. Marriage doesn't determine whether people will buy or not.

Fewer people are getting married regardless. It doesn't mean there are less couples willing to buy. It just means theres far less pressure (and perks, for that matter) to justify marriage today.

westernpromise

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.

Another possibility is that nobody's buying in those places because they're all scared of a house price crash. If so, they are tragically - or perhaps comically? - financially illiterate.

mwpt

cells wrote: »

yes we did its why during the period 1995-2005 ownership increased.

In many parts prices went up a lot but so did ownership

This again is further !!!!!! that mortgage availability determines the ratio of owners to renters far more than price.

repeating my post earlier I guess the order of impotence is
self cert, 100% LTV, IO with a swing of 9% 3% 1% respectively.

That means close to 90% of households can get a mortgage under todays system as under the system of a decade ago. the 10% is the swing in credit criteria or some 3 million households.

The report also suggests the fall in ownership has now slowed or even stopped. coincidence that once ownership fell about 10% (the 10% locked out of self cert, IO, 100% LTV) it falls no more?

I'm posting all of this in short breaks as I don't have time for much research. I'm not understanding your answer to the question. We have availability of 95% mortgages at around 4% interest rates. That is better than at any other period (except if you count 100% LTV IO mortgages available for a few short years in first half of 2000s). So why if we have cheaper and easier credit available now, than in the 90s for eg, is ownership declining?