Why are property prices so different in the north?

westernpromise

GreatApe wrote: »

Not as affordable as London

2009 Buy a house for £250,000
2019 Sell it for £500,000
Cost of interest paid on the mortgage £70,000
Cost of housing = NEGATIVE £180,000

So London housing cost -£18,000 a year

The same is actually true in either place but very much more so in London.

In 1988 I sold a 3-bed semi in Staffs for £46,500 and bought a 1-bed flat in London for £85,000.

Over the next 25 years mortgage rates probably averaged about 8%. The total cost to my buyer of buying my Staffs house was thus just under £108,000 and it's now worth about £158,000, so it cost -£50,000 to own it.

The London flat would have cost £197,000 to own but would have been worth £475,000 so it cost -£278,000 to own it.

I know these values because both properties sold recently.

If we rebase those numbers to equalise them, then per £100k of initial value, we can see that Staffs housing would have cost -£108,000 to own (-£4k a year), and London housing -£327,000 (-£13k a year), i.e. London performed 200% better.

At any time in the 25 to 30 year period the London owner could have cashed out and moved to Staffs. At any time, the size and quality of property the London buyer could afford would be better than what the owner who never left Staffs could afford.

The Staffs buyer can now afford £158,000 of Staffs housing whereas the London buyer can afford £475,000 of Staffs housing, which is the difference between this
https://www.rightmove.co.uk/property-for-sale/property-72003511.html
and this
https://www.rightmove.co.uk/property-for-sale/property-71705590.html
So all things considered you actually pay a very, very high price for your "cheap" northern housing.

(Yes yes, I know Staffs isn't the north but it's well north of London)

GreatApe

Also it has not always been like this.

From 1951 to 1991 the population of London declined from 8.6 to 6.4 million the result was 1.8 million fewer people and 40 years of new builds added to the London stock. Such that early 1990s London was very affordable especially inner London and especially the areas which were mostly social stock (Hackney Islington Tower Hamlets etc)

There were lots of reasons for this decline but I think the two big ones were, this was a period of manufacturing boom and you would not site your steel plant or coal mine or paper mill or aluminium smelter or kettle factory in London. Plus there was some element of racism as the foreigners made London and esp inner London their home the whites wanted to move out

However from 1991 to today that all reversed with London going from 6.4 million to now soon 9.2 million.

The reason for the change of fortune. Globalization and the boom in wealth tourism services migration universities and the decline in manufactured goods and agriculture

Seems obvious but the big difference over the 20 years is

+ huge numbers of students
+ huge increase in migration
+ huge increase in service sector jobs and industries (software finance film media legal internet tourism)
+ a decrease in racism and not wanting to be in mixed communities
- relative decrease in agriculture farming and food production (in £££ not necessarily in kg produced)
- relative decrease in manufacturing (in £££ not necessarily in kg produced)

The result was a boom in London jobs driving the population up nearly 45% over a three decade period compared to ~15% for the same period in rUK


As for the idea that London or the political class has somehow screwed rUK and given it all to London, its nonsense. Look at tourism numbers. They are up about 3 x over the 30 years. That a tourist from the states or France wants to visit London and not port talbot is no conspiracy theory. Likewise the decline in manufacturing thanks mostly to robots hit London less hard because it had fewer mass manufacturing jobs to begin with. The finance industry expanded massively becuase the world finally started to leave poverty and electrify and thus London services boomed because they were already there and expanding a given business is easier than setting up one in Yorkshire where all the staff would spend 90% of their time complaining about the pits being closed.

GreatApe

westernpromise wrote: »

The same is actually true in either place but very much more so in London.

In 1988 I sold a 3-bed semi in Staffs for £46,500 and bought a 1-bed flat in London for £85,000.

Over the next 25 years mortgage rates probably averaged about 8%. The total cost to my buyer of buying my Staffs house was thus just under £108,000 and it's now worth about £158,000, so it cost -£50,000 to own it.

The London flat would have cost £197,000 to own but would have been worth £475,000 so it cost -£278,000 to own it.

I know these values because both properties sold recently.

If we rebase those numbers to equalise them, then per £100k of initial value, we can see that Staffs housing would have cost -£108,000 to own (-£4k a year), and London housing -£327,000 (-£13k a year), i.e. London performed 200% better.

At any time in the 25 to 30 year period the London owner could have cashed out and moved to Staffs. At any time, the size and quality of property the London buyer could afford would be better than what the owner who never left Staffs could afford.

The Staffs buyer can now afford £158,000 of Staffs housing whereas the London buyer can afford £475,000 of Staffs housing, which is the difference between this
https://www.rightmove.co.uk/property-for-sale/property-72003511.html
and this
https://www.rightmove.co.uk/property-for-sale/property-71705590.html
So all things considered you actually pay a very, very high price for your "cheap" northern housing.

(Yes yes, I know Staffs isn't the north but it's well north of London)

When you account for the fact that the change in the price of housing is a real cost then London has been cheapest by far especially if in London you had to max out (say 5 x joint income £250k purchase in 1995) and in the norf you settled for something much easier in your budget (3 x single income £60k purchase in 1995).

The result would be you are a millionaire now in London with the property worth £1-2 million while your cousin in the north keeps saying why do people live in London when housing is so expensive....


Also London has definitely been two tier system. With inner London prices up about 10 x vs the 1990s and outer London closer to 5 x both have done much better than rUK but inner London has done much better than outer London

Same story as the whole of London. Inner London jobs and industries have boomed much more so than outer London. Tourist and student numbers booming helped most of Zone 1 & much of zone 2 but did little or nothing for Enfield..... The big employment hubs of Westminster Docklands and the city have boomed while the normal jobs of zone 5-6 increased at normal rates

Mistermeaner

GreatApe wrote: »

Not as affordable as London

2009 Buy a house for £250,000
2019 Sell it for £500,000
Cost of interest paid on the mortgage £70,000
Cost of housing = NEGATIVE £180,000

So London housing cost -£18,000 a year

increases in londons house prices have been good for those that were in the right place at the right time

However for a first time buyer in 2019 london is more expensive now than cheshire

313X 4 bed houses for less than 200K in mid cheshire and surrounds :

https://www.rightmove.co.uk/property-for-sale/find.html?locationIdentifier=OUTCODE%5E587&minBedrooms=4&maxPrice=200000&radius=15.0&propertyTypes=&includeSSTC=false&mustHave=&dontShow=&furnishTypes=&keywords=



Same search but for central london: (5 properties)

https://www.rightmove.co.uk/property-for-sale/find.html?locationIdentifier=POSTCODE%5E4105866&minBedrooms=4&maxPrice=200000&radius=15.0&propertyTypes=&mustHave=&dontShow=&furnishTypes=&keywords=

chelseablue

Today I cant wait to move, the thought of another 29 years of £800 a month mortgage (and that's if we stay in this house) is filling me with dread


If we stay here I'll be 66 by the time its paid off and my son will be 34 :eek:


If I can be mortgage free in 10 years then my son will be 15, so would be able to help him out with things like uni etc (if he goes of course)

harz99

chelseablue wrote: »

Today I cant wait to move, the thought of another 29 years of £800 a month mortgage (and that's if we stay in this house) is filling me with dread


If we stay here I'll be 66 by the time its paid off and my son will be 34 :eek:


If I can be mortgage free in 10 years then my son will be 15, so would be able to help him out with things like uni etc (if he goes of course)

Housing in the North East (County Durham and surrounds) is very cheap in comparison with South East, perhaps more so than the North West, obviously a move depends on job requirements and so on though. As an example have a look at Homes by Esh, at their Heighington development. Or Story Homes at their Middleton St. George site.

westernpromise

harz99 wrote: »

Housing in the North East (County Durham and surrounds) is very cheap in comparison with South East, perhaps more so than the North West, obviously a move depends on job requirements and so on though. As an example have a look at Homes by Esh, at their Heighington development. Or Story Homes at their Middleton St. George site.

As discussed above that "very cheap" housing has historically worked out to be very expensive.

MaxiRobriguez

westernpromise wrote: »

The same is actually true in either place but very much more so in London.

In 1988 I sold a 3-bed semi in Staffs for £46,500 and bought a 1-bed flat in London for £85,000.

Over the next 25 years mortgage rates probably averaged about 8%. The total cost to my buyer of buying my Staffs house was thus just under £108,000 and it's now worth about £158,000, so it cost -£50,000 to own it.

The London flat would have cost £197,000 to own but would have been worth £475,000 so it cost -£278,000 to own it.

I know these values because both properties sold recently.

If we rebase those numbers to equalise them, then per £100k of initial value, we can see that Staffs housing would have cost -£108,000 to own (-£4k a year), and London housing -£327,000 (-£13k a year), i.e. London performed 200% better.

At any time in the 25 to 30 year period the London owner could have cashed out and moved to Staffs. At any time, the size and quality of property the London buyer could afford would be better than what the owner who never left Staffs could afford.

The Staffs buyer can now afford £158,000 of Staffs housing whereas the London buyer can afford £475,000 of Staffs housing, which is the difference between this
https://www.rightmove.co.uk/property-for-sale/property-72003511.html
and this
https://www.rightmove.co.uk/property-for-sale/property-71705590.html
So all things considered you actually pay a very, very high price for your "cheap" northern housing.

(Yes yes, I know Staffs isn't the north but it's well north of London)

Past performance isn't indicative of future success.

With the rise of home working, self employment and the upcoming internet of things world we're about to inherit, the need to base yourself close to London will start to reduce, because fewer top jobs will be there. This will be the same in London as it will be in San Francisco, New York etc.

It'll be interesting to see how long investors hold onto London assets given there's been little growth for 2-3 years. If it continues that way for a while then you might start to see the initial pullback followed by the general public who finally cash in on decades worth of accumulated gains and make their way north and west.

harz99

westernpromise wrote: »

As discussed above that "very cheap" housing has historically worked out to be very expensive.

Except that the OP wants to both reduce their outgoings and become mortgage free.

Not everyone has the same needs, or concerns about theoretical gains or losses...

Zero_Sum

GreatApe wrote: »

Not really, London is actually cheaper to live in for most people than the north is

Sure homes cost more but London home owners have had negative housing costs for at least as long as I have been an adult. The cost of housing is both the interest on the mortgage but also the change in asset values. So while a Londoner might pay 5 x the interest on their house which cost 5 x as much, their housing cost was actually less because their house appreciated in value more than the northern house

And some 50% of Londoners own their own home so housing costs for them have been lower than the north

about 25% are in social flats/houses and they pay more or less nothing to live in London (something like £80-100 per week and most are on housing benefits anyway)

The only group that pays more are private renters. Which is about 25% of London housing stock. But even then many get a portion paid for via housing benefits. Many have no choice in the matter eg the huge number of students in London cant live in Yorkshire if their university is in zone 1 London.

Also the higher housing cost for private renters is often offset by simply living more dense in London. When I was in the north I rented a flat with a friend. The two of us shared bills. When I was in zone 1 London as a student I rented a flat with 3 other friends and the four of us shared bills. Overall cost was probably more or less the same. So the difference was not that housing cost more...it didn't...the difference was we had a little less space per person

So the idea that London costs more, is mostly not true
London costs nothing for owners in fact they made money living in London this is 50% of London
London costs the same for social renters which is about 25% of all homes in London
Private renters ~25% of London, they pay higher rents but many make up for this by living a little denser rather than actually paying more for their rent and household bills

Massive flaw in your argument is that;
A) you're talking about what has happened historically and prices over last few years. Yes those who bought in the last 10 years have done well, but its not guarenteed. If Brexit causes a 10% reduction, then loss of value in London is going to be 6 or 7 times as much than the north. The price to wage ratio in London is pretty much at breaking point that even those on decent wages can only afford to rent a bedroom in a house share.

you're not comparing like for like. Take for example a couple who are both teachers. In the north they can easily buy a nice 3 or 4 bed detached house with drive & garage. In London they'd be looking at 2 bed ex council flat. Thats a pretty big drop in living standards. Not everything is about long term financial value. You're basically suggesting that people live in a bedsit for 20 year to get a bigger payout at the end.

At the end of the day, life is still for living. For me the idea of scrimping & scraping to get by in a small London flat just to end up with a large pension pot when I can a nice family home & live is just mental.

Yes mortgage interest is a cost, but have you considered that its far easier to get it paid off in the north? Can be mortgage free by early 40's then chuck money into investments that you otherwise would be paying towards mortgage. Whilst on London still paying interest on a mortgage at 65.

My brother actually lives in London & pays 4 times as much in rent for a bedroom than I do on my mortgage for a 3 bed semi with garage, drive & ensuite bedroom