Is ignorance the cause of high house prices?

michaels

I don't think it is just Inner London. I would say any area where prices are more than 1.5x reinstatement costs there must be some sort of constraint on supply. As you rightly point out, in Inner London there is no suitable land but for most areas the constraint is artificial, there is plenty of land to build on but planning rules do not allow it.

I still comtend that there are more losers than winners from overpriced housing and that the reason why people put up with the situation is the mistaken beleif that Britian is already over urbanised as revealled in the bbc research.

Herzlos

GreatApe wrote: »

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

No the solution is to either build more social housing stock of an appropriate size/type for people, or to encourage better use of it. Offer the retired incentives to move from the working zones to the outer zones with lower rents / better views / properties / amenities.

If you sell of the social stock (likely to the current tenants, at well under market rates via RTB), then you're just going to make the problem worse as there's even less incentive for people to move to more appropriate areas. If you're talking about kicking tenants out in order to sell at market rates, you're going to have to put them someone else anyway so you may as well just keep it social.

ukcarper

michaels wrote: »

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.



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

The national figures are very misleading take Farnborough 57% built on 23% green urban or Elmbridge an area I know very well 36% built on 28% urban green most of the remaining is flood plane and National Trust.

Out,_Vile_Jelly

Yes, huge swathes of the country are green, but most people don't live in the "proper" countryside. They live in towns, where their perception of the rise of concrete is backed up by what they see every day. Most councils have waiting lists for allotments. A common reason cited for our fat unhealthy kids is the lack of playing fields, much sold off for housing. Horse riders of a certain vintage never had to ride on the roads to get access to bridleways/open country in the way they are forced to now (nobody likes riding on modern roads; it's terrifying!).

I live on a 1930s council estate that was built to deliberately provide green public spaces and decent sized gardens, and where roads were routed round mature trees (nearly 20% of the estate is green space). When visiting friends on modern new build estates I was depressed by how tiny the "gardens" are, and how claustrophobically close the houses are, with roads choked with cars. Remember most households now seem to have at least two cars; they all have to be parked somewhere. The concreting over of front gardens for cars is cited as an aggravating factor in urban flooding.

steampowered

GreatApe wrote: »

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.

You have absolutely no idea what you are talking about.

Firstly, the Mayor of London does not control the various London councils. They are completely separate institutions. The Mayor does not run social housing.

Secondly, the 50% was a vague target for affordable homes. The Mayor said he would fast track applications to build on public land if they contained 50% affordable housing.

It has absolutely nothing to do with social housing.

It also has absolutely nothing to do with planning permission (which is handled by councils) and absolutely nothing to do with non-public land (which is most of it).

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

Once again, this is nonsense. According to the latest stats Berkley has an operating margin of 30% and Taylor Wimpey has an operating margin of 20% (which is still very good). See https://uk.finance.yahoo.com/quote/TW.L/key-statistics?p=TW.L and https://uk.finance.yahoo.com/quote/BKG.L/key-statistics?p=BKG.L.

GreatApe

michaels wrote: »

I don't think it is just Inner London. I would say any area where prices are more than 1.5x reinstatement costs there must be some sort of constraint on supply. As you rightly point out, in Inner London there is no suitable land but for most areas the constraint is artificial, there is plenty of land to build on but planning rules do not allow it.

I still comtend that there are more losers than winners from overpriced housing and that the reason why people put up with the situation is the mistaken beleif that Britian is already over urbanised as revealled in the bbc research.

People don't put up with it
Only 3% of people rent long term
The other 97% want prices not to fall

Also the 1.5x reinstatement cost is irrelevant
When you build properties you don't just pay for the materials an labour
You have to pay for the land and the ridiculous council bribes
How are builders meant to build at 1.5x reinstatement when they are forced to pay for local infrastructure local schools local parks local motorway junctions and give as much as half their output to the council at below costs.
As I keep saying Berkeley Group build and sell £1m + flats. That is probably 8x reinstatement value but they only have 20% margins. Even if they were a charity working for 0% margins they would have a cost of 6.4x reinstatement so can't build below that

The solution to both housing and some economic job distribution is to reverse the ridiculous state of inner London social hosuong fr 40% of the stock to less than 10%. Imagine that was the policy from 2000 the state would have sold about 400,000 properties in London since 2000. What would that have done to price. Well with 400,000 more supply prices would be a good amount lower. Also with a proper cap on hosuong benefits it would have meant about 1 million fewer people in London and 1 million more in rUK

With aprox 1 million fewer people in London and 0.5 million fewer jibs in London yet with the se 3.5 million homes you can be sure prices and rents would have been lower. The amount is anyone's guess but I reckon 1/3rd less than they are. So £500k properties for £350k

Going forward that is the only viable solution
Sell off the social homes in London as they become vacant so no borough has more than 10% social and have a £1000 hosuong benefit cap. That way London population growth will stop. New builds will continue. House prices and rents will fall in real terms perhaps Even slowly in nominal terms to. Hopefully no more than 1% nominal fall per year. You could get a 30% real crash in a decade.

Herzlos

Have you ever corrected your view based on feedback?
I'm just trying to gauge if it's worth responding to all of the repeated inaccuracies.

GreatApe

steampowered wrote: »

You have absolutely no idea what you are talking about.

Firstly, the Mayor of London does not control the various London councils. They are completely separate institutions. The Mayor does not run social housing.

Secondly, the 50% was a vague target for affordable homes. The Mayor said he would fast track applications to build on public land if they contained 50% affordable housing.

It has absolutely nothing to do with social housing.

It also has absolutely nothing to do with planning permission (which is handled by councils) and absolutely nothing to do with non-public land (which is most of it).


Once again, this is nonsense. According to the latest stats Berkley has an operating margin of 30% and Taylor Wimpey has an operating margin of 20% (which is still very good). See https://uk.finance.yahoo.com/quote/TW.L/key-statistics?p=TW.L and https://uk.finance.yahoo.com/quote/BKG.L/key-statistics?p=BKG.L.

Berkeley average selling price £720,000
30% margin means their costs are £504,000 to build a property
This is a company that famously was buying land during the financial crysis so have better margins than most.

Why are costs so high?
By comparison the same figure for Taylor Wimpy is £215,000

GreatApe

Herzlos wrote: »

Have you ever corrected your view based on feedback?
I'm just trying to gauge if it's worth responding to all of the repeated inaccuracies.

What feedback has been given to change my views on this thread?

Homes are affordable in most the country
They are expensive in inner London
What is special about inner London? Well it has about 40% social homes vs closer to 15% for rUK
Does that contribute to higher rents and prices in London and more people living in London than have to? Sure

What's more realistic build 50,000 more homes in inner London per year than we do or sell and move out 30,000 social homes. Both ha e about the se impact on supply and demand. The first is impossible the second is possible but unlikely the state will want to spook the sacred cows

GreatApe

Herzlos wrote: »

No the solution is to either build more social housing stock of an appropriate size/type for people, or to encourage better use of it. Offer the retired incentives to move from the working zones to the outer zones with lower rents / better views / properties / amenities.

If you sell of the social stock (likely to the current tenants, at well under market rates via RTB), then you're just going to make the problem worse as there's even less incentive for people to move to more appropriate areas. If you're talking about kicking tenants out in order to sell at market rates, you're going to have to put them someone else anyway so you may as well just keep it social.

Why do you feel inner London councils need 40% social homes? That is about 3x the rUK average

It is stupid we have a million people commuting into zone 1 for work sometimes doing be 100+ miles on trains daily while a million people who do not need to be in inner London are given sacred cow status and can live there no matter what.