Will there really be a crash?

GreatApe

Herzlos wrote: »

Why increase ownership though? What's wrong with not owning

More overheads, less freedom. Basically the argument of capitalism vs communism

We need vastly more social stock, evidenced by the huge waiting lists to get any of it. At least they are building social housing up here but still at a pretty pathetic rate compared to the private new builds (maybe 1:5)

Add waiting lists as one of the indicators which mean nothing. like how street sleepers is no indicator of housing needs but of drug addiction or how empty homes figure is not a figure of empty surplus homes but mostly a figure of the stock of homes that are dilapidated and awaiting refurbishment

We do not need more social homes we need to sell off the majority of the existing social homes or gift them to the poor

Malthusian

ukcarper wrote: »

So you don't think house prices are basically determined by supply and demand, it's obvious that if prices were dramatically lower they would be more affordable but some other means would need to be found to allocate those homes.

If house prices reduced by 5% across the board every year, how much do you think would home ownership increase by?

Quite obviously, the answer is not at all. Home ownership would plummet, as no-one would want to destroy their wealth by buying an asset which will lose value every year.

Nor would mortgage lenders lend for the same reason.

A sustained, consistent decrease in house prices would make home ownership totally unaffordable. If houses consistently decreased in value, only the very rich could afford to own their own home, as they would be the only ones who could swallow the loss of hundreds of thousands of pounds.

Everyone else would rent, although rents would have to go up to pass on the cost of depreciation, so everyone would lose out from a continual decrease in house prices.

Thankfully, in reality, houses are not a depreciating asset. Which makes the dream of owning your own home and being able to paint the walls whatever colour you want affordable for the masses, not just the rich who could afford to wave hundreds of thousands of pounds bye-bye.

The alternative to a sustained decrease in house prices is a one-off temporary crash. This would not alter home ownership statistics one iota, as almost nobody would sell unless they were desperate - they would hold onto the house and wait for the recovery. As the HPinCels found out in 2008.

The idea that house prices are too high comes entirely from Generation X snowflake middle-class journalists who think they should be able to afford the same kind of three-bed semi they grew up in despite having much lower earnings and savings than their parents at the time.

Herzlos wrote: »

We need vastly more social stock, evidenced by the huge waiting lists to get any of it.

No we don't. There will always be huge waiting lists for properties available for less than market price, often for free. If we built vastly more social stock then more people would apply for council housing instead of renting privately or saving up to buy a house and waiting lists would remain at equilibrium. Same thing that happens with the NHS when you increase funding.

If you wanted to eliminate the waiting list you would charge more rent, although that would defeat the entire object of social housing.

GreatApe

Malthusian wrote: »

If house prices reduced by 5% across the board every year, how much do you think would home ownership increase by?

Quite obviously, the answer is not at all. Home ownership would plummet, as no-one would want to destroy their wealth by buying an asset which will lose value every year.

Nor would mortgage lenders lend for the same reason.

A sustained, consistent decrease in house prices would make home ownership totally unaffordable. If houses consistently decreased in value, only the very rich could afford to own their own home, as they would be the only ones who could swallow the loss of hundreds of thousands of pounds.

That is a very good point. Affordability should also take into account price movements. Housing is affordable if prices are going up and less affordable if prices are going down for the exact reasons you cite.

There is also another argument in that houses might be overpriced or not however the capital to buy a house is virtually free. You can borrow at 2.65% interest fixed for a decade with just 15% down. That is more or less what inflation is so buying a home is effectively free so really the only cost is the cost of price depreciation (if house prices fall in real terms)

Everyone else would rent, although rents would have to go up to pass on the cost of depreciation, so everyone would lose out from a continual decrease in house prices.

Thankfully, in reality, houses are not a depreciating asset. Which makes the dream of owning your own home and being able to paint the walls whatever colour you want affordable for the masses, not just the rich who could afford to wave hundreds of thousands of pounds bye-bye.

The alternative to a sustained decrease in house prices is a one-off temporary crash. This would not alter home ownership statistics one iota, as almost nobody would sell unless they were desperate - they would hold onto the house and wait for the recovery. As the HPinCels found out in 2008.

all very good points

The idea that house prices are too high comes entirely from Generation X snowflake middle-class journalists who think they should be able to afford the same kind of three-bed semi they grew up in despite having much lower earnings and savings than their parents at the time.

In times gone by a couple who were 25 had 20 years combined work and savings behind them likely with much of that time living frugally with their parents nowadays a couple who are 25 have maybe only 5 years combined work and savings and lots of student debts thanks to their decision to spend an additional 10 combined years not working but instead studying some pointless degree

ukcarper

Malthusian wrote: »

If house prices reduced by 5% across the board every year, how much do you think would home ownership increase by?

Quite obviously, the answer is not at all. Home ownership would plummet, as no-one would want to destroy their wealth by buying an asset which will lose value every year.

Nor would mortgage lenders lend for the same reason.

A sustained, consistent decrease in house prices would make home ownership totally unaffordable. If houses consistently decreased in value, only the very rich could afford to own their own home, as they would be the only ones who could swallow the loss of hundreds of thousands of pounds.

Everyone else would rent, although rents would have to go up to pass on the cost of depreciation, so everyone would lose out from a continual decrease in house prices.

Thankfully, in reality, houses are not a depreciating asset. Which makes the dream of owning your own home and being able to paint the walls whatever colour you want affordable for the masses, not just the rich who could afford to wave hundreds of thousands of pounds bye-bye.

The alternative to a sustained decrease in house prices is a one-off temporary crash. This would not alter home ownership statistics one iota, as almost nobody would sell unless they were desperate - they would hold onto the house and wait for the recovery. As the HPinCels found out in 2008.

The idea that house prices are too high comes entirely from Generation X snowflake middle-class journalists who think they should be able to afford the same kind of three-bed semi they grew up in despite having much lower earnings and savings than their parents at the time.



No we don't. There will always be huge waiting lists for properties available for less than market price, often for free. If we built vastly more social stock then more people would apply for council housing instead of renting privately or saving up to buy a house and waiting lists would remain at equilibrium. Same thing that happens with the NHS when you increase funding.

If you wanted to eliminate the waiting list you would charge more rent, although that would defeat the entire object of social housing.

I'm not arguing for a crash I'm just making the point many people can't afford to buy a house. I'm a long way from a generation x snowflake. A house is more that an asset it would make no difference to me if house price had only kept up with inflation and for the majority of people buying a home that would be beneficial. I do not want a crash as I believe it would be detrimental to people who have bought recently.

Malthusian

ukcarper wrote: »

I'm not arguing for a crash I'm just making the point many people can't afford to buy a house.

I agree. The issue is the idea that this is a problem. Many people can't afford lots of things. Many people don't want to own houses. They don't want the investment risk that you are exposed to if you need to move in the short term, they don't want to be in the position where if the roof starts leaking there is no-one on the end of the phone who is responsible for fixing it.

For those who don't want to be tied down there is the rental sector, and for those who aren't mentally equipped for the responsibilities of home ownership there is social housing.

ukcarper

Malthusian wrote: »

I agree. The issue is the idea that this is a problem. Many people can't afford lots of things. Many people don't want to own houses. They don't want the investment risk that you are exposed to if you need to move in the short term, they don't want to be in the position where if the roof starts leaking there is no-one on the end of the phone who is responsible for fixing it.

For those who don't want to be tied down there is the rental sector, and for those who aren't mentally equipped for the responsibilities of home ownership there is social housing.

The problem as I see it is there are more people who want to buy but can't afford it than there was in the past, I don't see an easy solution to this not in the short term anyway. As things are the rental system does not serve tenants who want long term accommodation well, I think we need more security of tenure combined with protection for landlords from bad tenants. In many parts of country rents are so high that people on reasonable income are able to get housing benefit I don't see that as a good thing either.

GreatApe

ukcarper wrote: »

The problem as I see it is there are more people who want to buy but can't afford it than there was in the past

Most of this increase are recent migrants not uk born brits
But even the recent migrants will go towards owning/social in time it just takes a bit longer
For uk born persons ownership levels are close to all time highs only a handful of years were marginally better because of the pre crash practice of giving black market workers mortgages via self cert

I don't see an easy solution to this not in the short term anyway.

There are easy fast solutions if you aim is to decrease private renting and increase ownership. You just need to make temporary private renting so bad that people buy sooner.

You could do this for instance by increasing the cost of renting privately. One way to do it would be to charge for instance a £1k per year per property licence fee to landlords. This will feed into rents and make renting less desirable so more renters will buy more quickly

Another is to bring back self cert mortgages

Another is to bring back 100% LTV mortgages

Another is to decrease stamp duty for FTBs

Another is to introduce a negative stamp duty to FTBs

Not that I think these need to be done I think the fact that 95% already own (or have a free social house) or will do soon means there is no real problem that needs solving

As things are the rental system does not serve tenants who want long term accommodation well

,

That is because almost no private rental tenant wants longer terms in all my years as a landlord I have only managed to convince 1 family to opt for a 3 year AST rather than a 6/12 month one and I did that by offering them a discount of 5% if they went for a longer term tenancy. The idea that there are hordes of disgruntled private renters who want long term rentals is a myth.

I think we need more security of tenure combined with protection for landlords from bad tenants.

Sure that would be good

In many parts of country rents are so high that people on reasonable income are able to get housing benefit I don't see that as a good thing either.

Housing benefits are capped maybe reduce it
The problem isn't rent levels rents are set by supply and demand and it is a very competitive market with literally thousands of suppliers all competing not to be the one with the void

lookstraightahead

triathlon wrote: »

Ditto!!!

You mentioned two men, both rich

I mentioned no such thing lol :rotfl:

ukcarper

GreatApe wrote: »

Most of this increase are recent migrants not uk born brits
But even the recent migrants will go towards owning/social in time it just takes a bit longer
For uk born persons ownership levels are close to all time highs only a handful of years were marginally better because of the pre crash practice of giving black market workers mortgages via self cert



There are easy fast solutions if you aim is to decrease private renting and increase ownership. You just need to make temporary private renting so bad that people buy sooner.

You could do this for instance by increasing the cost of renting privately. One way to do it would be to charge for instance a £1k per year per property licence fee to landlords. This will feed into rents and make renting less desirable so more renters will buy more quickly

Another is to bring back self cert mortgages

Another is to bring back 100% LTV mortgages

Another is to decrease stamp duty for FTBs

Another is to introduce a negative stamp duty to FTBs

Not that I think these need to be done I think the fact that 95% already own (or have a free social house) or will do soon means there is no real problem that needs solving

,

That is because almost no private rental tenant wants longer terms in all my years as a landlord I have only managed to convince 1 family to opt for a 3 year AST rather than a 6/12 month one and I did that by offering them a discount of 5% if they went for a longer term tenancy. The idea that there are hordes of disgruntled private renters who want long term rentals is a myth.



Sure that would be good



Housing benefits are capped maybe reduce it
The problem isn't rent levels rents are set by supply and demand and it is a very competitive market with literally thousands of suppliers all competing not to be the one with the void

In my area the cheapest 1 bed flat is £180k median so with 10% deposit you would need to earn £40k median full time earningsis £34k. The 70 percentile is £40k so only the top 30% of earners can afforded the cheapest property.

Have you got children if so you might realise the problems it can cause if you have to move.

If there is a excess of supply we could reduce LHA and landlords would have to lower rent but of course in many areas there is not an excess of supple.

GreatApe

ukcarper wrote: »

In my area the cheapest 1 bed flat is £180k median so with 10% deposit you would need to earn £40k median full time earningsis £34k. The 70 percentile is £40k so only the top 30% of earners can afforded the cheapest property.

And yet ownership rates are near all time highs for uk born persons with only a handful of years were ownership was higher mostly becuase self cert loans back then meant the 10% of the nation that earns their bread from the black market could also buy

So whats going on?
How can property be so unaffordable, according to you, yet ownership rates be at near record highs for uk born persons?