Why are house prices still so high?

Goldman2020

When many people in the UK are on a low wage, working the Gig Economy or earning the basic UK salary (which I believe is in the region of £27,271) why are property prices (especially in London) still as high as they are? I would have thought that because owning a property is out of reach of many people, especially the young, this would have driven property prices down further than they are at present.

Your constructive and well meaning explanations are appreciated.

Guerillatoker

A pretty useless addition here, as I know little about house prices overall, but as someone who is recently on the market I was pleasantly surprised by the quantity of low priced housing in my area (3-bed semis for <£80,000).

I live in South Yorkshire, so well away from the southern bubble but I wonder how high the house prices really are once you remove London and other high-demand southern areas.

Herzlos

The drop in value of the GBP post Brexit made London property significantly cheaper for foreign investors, which is propping up the higher end, but still seems to be tailing off. That said, a lot of luxury developers are in a position where stuff can be taken off the market to sit empty rather than having to take a price cut.


Lower down the chain, there's still a lot of demand, and people are still managing to buy, just later and usually with help (bank of mum & dad, inheritance, or buying a property with a partner).

worried_jim

Goldman2020 wrote: »

When many people in the UK are on a low wage, working the Gig Economy or earning the basic UK salary (which I believe is in the region of £27,271)

That is the U.K. average salary. Plenty of places in the U.K. where housing isn't expensive. Use Sunderland as an example not the South East.

Arklight

Goldman2020 wrote: »

When many people in the UK are on a low wage, working the Gig Economy or earning the basic UK salary (which I believe is in the region of £27,271) why are property prices (especially in London) still as high as they are? I would have thought that because owning a property is out of reach of many people, especially the young, this would have driven property prices down further than they are at present.

Your constructive and well meaning explanations are appreciated.

Because the supply of housing has been artificially constrained to create demand and inflate prices. Ostensibly this has been done to buy the votes of the boomer generation, who historically will vote for whichever government promises them the biggest handouts. It also, for a while, papered over the very large cracks in Britain's economy that began emerging when our industry was systematically closed down, sold off, and outsourced in an attempt to make people who might vote for socialist governments disappear.

AnotherJoe

Because people sell them for as much as they can get. Just a slow motion auction. The price wont fall until the supply of people willing to pay whatever price it is you deem to high, falls.

HAMISH_MCTAVISH

Goldman2020 wrote: »

I would have thought that because owning a property is out of reach of many people, especially the young, this would have driven property prices down further than they are at present.

Your constructive and well meaning explanations are appreciated.

Home ownership in the UK never got much above two thirds of the population, so the lowest earning third of people have, by and large, never been homeowners.

This then feeds into the earnings/house-price ratio.

When you remove the lowest earning third of people and also add in the fact that many/most house purchases are on the basis of dual income (couples) you come to the reality that houses are, on average, being bought by a smaller group of people (homeowners) with a much higher household income than the 'average salary' of all people (including the lowest paid third who have never been homeowners).

This is largely driven by a structural shortage of housing in the UK going back at least 2 decades, and it's been compounded over the last decade by the shortage of mortgage and development funding as a result of the GFC.

Or to put it another way, if you only build a third of the houses we need, only the highest paid third of people have to be able to afford to buy them.

So the average salary of all people, compared to average house prices, is a pretty meaningless statistic.

AG47

Goldman2020 wrote: »

When many people in the UK are on a low wage, working the Gig Economy or earning the basic UK salary (which I believe is in the region of £27,271) why are property prices (especially in London) still as high as they are? I would have thought that because owning a property is out of reach of many people, especially the young, this would have driven property prices down further than they are at present.

Your constructive and well meaning explanations are appreciated.

Interest rates were kept too low for too long, this caused the unnatbubble in property.

Now they are slowly going back up to normal levels property will correct to normal levels related to berate earnings

homeless9

- I am not sure how significant this is, but I assume it's quite significant - People in later life have been dying off and they have passed on property to their children, who have already done well out of property as prices have shot up significantly since they bought in the 80's and 90's, so they pass a lot of money down to their children who can then afford to buy.

- I assume the UK has become a more desirable place to live for foreigners. Countries in Europe have high levels of unemployment so many people come here to work and live.

- Low interest rates.

- The government keep saying they will build more houses, but they don't..... seems they want house prices to stay high so us sheep work harder, take up extra jobs, push ourselves as hard as possible, just to get a 1 bed flat for £245,000 in an average town in the South East.

- Help to buy equity loan and Shared Ownership schemes make it possible for us sheep to buy a home. It's just a rip-off way for us to get a property.

Thrugelmir

homeless9 wrote: »

- I am not sure how significant this is, but I assume it's quite significant - People in later life have been dying off and they have passed on property to their children, who have already done well out of property as prices have shot up significantly since they bought in the 80's and 90's, so they pass a lot of money down to their children who can then afford to buy.

People have been living longer. Though the post war baby boomers are reaching their peak.

sevenhills

homeless9 wrote: »

- The government keep saying they will build more houses, but they don't......

Do Government build houses?


In the past councils have built houses, but these days its 95% capitalism, so its left to the private sector.
The planning system has obstructed house building for years.