Is ignorance the cause of high house prices?

michaels

http://www.bbc.co.uk/news/uk-42554635

In some but not all of the country, house prices are much higher than build costs and there is a huge premium for land designated for house building over farmland.

The reason for this is draconian planning controls.

But why when the majority do not benefit from this restriction in land use and the resultant high prices is this so politically popular?

WE now have the explanation - people think that the country has been concreted over even though it hasn't and thus don't think there is room for more development.

This misunderstanding is suggested by new survey data produced by Ipsos Mori. Asked how much of the UK's land area is densely built on, the average estimate was 47%. The far more accurate figure - based on satellite images - as highlighted in my blog last November, is 0.1%.

I wonder if this is also fed by the narrative of a rising population and a lack of infrastructure which fed the Brexit vote.

Butti

Draconian planning controls is the answer the house builders want you to come to. The small number of major housebuilders and the huge land banks they are sitting on to restrict supply is another one. Look up the bonus of the Chief Exec of Persimmon if you don't believe me. It is basically a supply and demand equation with very restricted supply and it is in the housebuilder's interest to keep the supply very restricted.

I believe the brexit vote was about people feeling they were being ignored by the government and an increase or perceived increase in immigrants who were 'taking' their jobs. The irony of those areas that voted most strongly to leave is that these are the same areas that get the higher level of EU subsidy (but have seen central government grant funding to tackle deprivation massively cut!)

Thrugelmir

michaels wrote: »

there is a huge premium for land designated for house building over farmland.

Hardly new news.

Eric_the_half_a_bee

michaels wrote: »

But why when the majority do not benefit from this restriction in land use and the resultant high prices is this so politically popular?

Most households own their own homes. So perhaps the majority do benefit from a restriction in land use and the resulting house price inflation?

kabayiri

There are homes being built up here in the NW, but the corresponding access routes to the main road network are well behind. I can see only frustration for the new commuters in the area.

But....why bother in the NW/NE at all? Most population growth is down in Londinium. 1/3 of all grads now head to London. You might as well focus on where the demand is coming from.

There are reasons why people don't appear keen on living on the remote moors beyond Oldham and the like. It's grimble!

Cakeguts

kabayiri wrote: »

There are homes being built up here in the NW, but the corresponding access routes to the main road network are well behind. I can see only frustration for the new commuters in the area.

But....why bother in the NW/NE at all? Most population growth is down in Londinium. 1/3 of all grads now head to London. You might as well focus on where the demand is coming from.

There are reasons why people don't appear keen on living on the remote moors beyond Oldham and the like. It's grimble!

The problem is being caused by the grads who move to London to get what they think it a well paid job. Many of them will be from the kind of university where no one can get a graduate level well paid job but they think that because they have a degree that is the kind of job they will get so they move to London. Unfortunately because they have come from these non universities and are not all that bright they don't realise how expensive it is to live in London and they don't do any research. So they actually cannot afford to live in London because they don't earn enough. The only way to get a higher salary in London is if people stop moving there to get low paid jobs which forces companies to pay higher salaries to get the people they want. Once we leave the EU and these jobs can't be filled by someone from Eastern Europe where they think that a London salary will make them very rich compared to what they can get at home companies might either have to move to a cheaper part of the country or pay a much better living wage.

In the past people didn't move to London if they couldn't afford to live there on the salary that was being offered. They did their research. London has always been expensive. It was expensive in the 1970s compared to the rest of the country. Most capital cities are more expensive than other areas of the countries they are in.

The entitled generation need to stop being so entitled and research and think more about what they are doing before they move to an area that they can't afford to live in. I would like to live in Monaco but I know that I can't afford it. You can't just live wherever you want to you have to find out if you can afford it first.

michaels

kabayiri wrote: »

There are homes being built up here in the NW, but the corresponding access routes to the main road network are well behind. I can see only frustration for the new commuters in the area.

But....why bother in the NW/NE at all? Most population growth is down in Londinium. 1/3 of all grads now head to London. You might as well focus on where the demand is coming from.

There are reasons why people don't appear keen on living on the remote moors beyond Oldham and the like. It's grimble!

But in many parts of the country as Cells ?Great Ape always points out house prices are not actually hugely out of whack from build costs so even if more of the mostly unbuilt on land was freed up the price for building plots would not fall and thus the price of new homes would also not fall.

michaels

Eric_the_half_a_bee wrote: »

Most households own their own homes. So perhaps the majority do benefit from a restriction in land use and the resulting house price inflation?

But most households are not 'long' property. They need one house to live in and they own (with the mortgage company) one house. It is only those with more than one house or ho are planning to downsize and are thus long property who benefit form property price increases.

If I need one house and own one house, apart from negative equity which impacts if I want to move, the number of GBP per house doesn't matter to me. (Except perhaps the higher prices are the higher transaction costs and taxes are which is a negative not a positive of high prices.)

GreatApe

:

michaels wrote: »

But most households are not 'long' property. They need one house to live in and they own (with the mortgage company) one house. It is only those with more than one house or ho are planning to downsize and are thus long property who benefit form property price increases.

If I need one house and own one house, apart from negative equity which impacts if I want to move, the number of GBP per house doesn't matter to me. (Except perhaps the higher prices are the higher transaction costs and taxes are which is a negative not a positive of high prices.)

Most UK born Brits are long housing because they only have about 1.7 kids

So UK born Brits do better from HPI
Really the only losers are migrants and some hpc loons

GreatApe

michaels wrote: »

But in many parts of the country as Cells ?Great Ape always points out house prices are not actually hugely out of whack from build costs so even if more of the mostly unbuilt on land was freed up the price for building plots would not fall and thus the price of new homes would also not fall.

Also what many do not realise is that a lot of the uplift in land goes to the council not the developers

In London the developers need to give 50% of their builds to Mr Mayor Khan at below cost. They also need to give Mr Khan a community levy and give Mr Khan a s106 and god knows what else.

In Luton its only 20% social homes given below cost
In stoke its probably zero


You can see this from the margins the developers have.
Berkeley a London only builder has about 20% margin more or less the same as Taylor Wimpy a national developer. One sells homes for £800,000 the other for £200,000 yet they have almost identical margins

GreatApe

Most the country has no housing problem. Places like the north wales and much of the Midlands and Scotland homes cost not much more than reinstatement value

The only area that needs more housing in inner London.
But that is a very difficult task. No free land so you need to buy very expensive homes knock them down and rebuild at 3x the density. Slow and expensive.

The real solution and the real problem is the communist councils like Abbots Hackney and Corbyn Islington grossly over built social homes. You have 40% of the homes in inner London as social homes and now many of them filled with retired folk. They sit within walking distance of the big employment hubs of Westminster City Docklands while the workers need to take the trains 100 miles a day to get to work.

The solution to the housing problem is to sell down the social stock in London so no borough has more than 10% of its stock as social. Do it as the tenants die or leave. Also cap housing benefits to no more than £1000 per month per household

But of course 'the poor' are sacred cows. Why should they leave inner London? Its not like normal working people have to move to areas they can afford.....oh wait they do have to do that but not the sacred cows!

To put it into context that would free up about 40,000 homes (mostly in inner London) each year.
That would crash London prices in real terms by 30%. Thanks but no thanks I like that the sacred cows will keep being housed in inner London without them my investment properties would be worth 30% less.