BBC: Where property prices are set by what local people earn

Altior

That's correct, we hear the 'build more houses' mantra repeatedly, however I fail to see how that resolves anything. The level of house building that would be needed in desirable areas to make prices so depressed that they would become affordable to locals would make them no longer desirable, and flood those areas with people without the infrastructure and furniture to support them. 

Any 'rigging' of the system that allows, in theory, local people to buy below the market price, such as the scheme in the OP are unworkable on any scale. 

[Deleted User]

Altior said:

It's a good rant, rigolith. However, this trend of property/asset inflation is mirrored across almost all western developed economies. The common denominators are next to zero interest rates, vast money printing leading to the devaluation of fiat currency, the monumental increase in state debt and mass immigration. And more recently, the quest for 'net zero'. 

Now, a proper long term increase in the cost of borrowing would most likely see a 'correction' in house price vs income multiples, however the population as whole are unlikely to tolerate it. They didn't even tolerate the relatively trivial increases so far since late last year. So, 'we' are stuck with this, and can only use the options that are available to us at the time. And yes, it will likely include some sacrifices and compromise. Which, to be honest, it always has.  

One key difference in other countries is that they have an actual social housing and mixed income policy. It's not like here where the developers are technically required to build "affordable" houses, but by affordable they mean insanely expensive, and often they never get built due to shenanigans anyway.

Japan has the right idea. Houses are depreciating assets. On average significantly larger than British homes, much better designed, and almost universally detached. The depreciation ensures that prices don't get out of hand, and property cannot be used as an investment in the way it is here.

Because property keeps increasing in value, and because people keep inheriting it, it's taken much longer for a critical mass of people unable to afford a first home to build up. Gen Z are really feeling it, because their parents already drained the bank of mum and dad and the inheritance. Hard to know if it will ever correct though, or if because Gen Z delays having kids due to lack of suitable housing it will perform a kind of "reset" with the inheritance wealth.

Sadly you are right, the British electorate will never tolerate anyone who would actually fix this.

[Deleted User]

Gavin83 said:

It’s also worth pointing out that there isn’t an option that doesn’t result in some category of people seriously losing out.

If house prices massively dropped the real losers would be recent FTBs or those with large amounts remaining on their mortgages. You could get situations where large numbers of people have mortgages twice the value of their house which would cause chaos.

Ideally house prices would never have risen as much. But they have and now with the situation we’re in it’s basically impossible to reverse it. 

House prices will never drop by any notable amount and in all honesty I’m glad of it.

It would be far better to see massive price drops and relief for people with excessively large mortgages. Of course, politically it would be impossible.

Sarah1Mitty2

MobileSaver said:

Yellowsub2000 said:

If mortgage is set by 3.5X earnings then house prices need to get back down to there too

Over a million people in the UK manage to buy a property every single year, even in the current climate.

So the obvious answer for those complaining they can't afford to buy is for them to either buy something cheaper or instead better themselves to improve their earnings. Why should the rest of us be brought down to the lowest common denominator?

 Rising interest rates are designed to bring down prices, all people need to do is wait, they won`t need a wage rise or even to lower their expectations.

Sarah1Mitty2

Gavin83 said:

It’s also worth pointing out that there isn’t an option that doesn’t result in some category of people seriously losing out.

If house prices massively dropped the real losers would be recent FTBs or those with large amounts remaining on their mortgages. You could get situations where large numbers of people have mortgages twice the value of their house which would cause chaos.

Ideally house prices would never have risen as much. But they have and now with the situation we’re in it’s basically impossible to reverse it. 

House prices will never drop by any notable amount and in all honesty I’m glad of it.

The situation is being reversed with every interest rate hike. There was never "chaos" before when people had negative equity, why should it be different now?

Altior

This article is over two years old, but pertinent. 

Billions of dollars are currently being transferred to wealthy New Zealanders in the government’s attempts to stimulate the economy. The Reserve Bank has essentially committed to printing up to $128bn (US$90bn) of new money, lending much of it as cheap credit to banks, who then lend it to those who can afford to buy more and more houses, and thereby grabbing the capital gains.

The result is rocketing house prices, making accommodation unaffordable, especially for those seeking to buy a first home or rent accommodation. In fact, this week New Zealand was named as the seventh most expensive place in the world to buy a house.

Although the finance minister, Grant Robertson, has just written to the Reserve Bank to suggest they need to consider their impact on house prices, in reality there seems little that Labour is prepared to do to fix the escalating crisis. In fact, it’s as if the government is shrugging its shoulders, believing that market forces alone can somehow magically correct the crisis.

...

The current government is building new state houses – but the numbers are piffling: about 4,000 were built in Ardern’s first term, and although they are committing to build more over the next few years, this is on such a small scale it will hardly be noticed. The waiting list of families most severely in need has tripled under Labour’s watch, and stands at about 20,000.

Current state housing stock levels are entirely inadequate: New Zealand has one state house for every 70 citizens, when even in the 1990s there was one for every 50. Labour and National governments have both failed to build houses to keep up with both population rises and increased need. We have the lowest level of state houses since the 1950s, and the OECD tells us we are now trailing other countries instead of leading.

BobT36

housebuyer143 said:

MobileSaver said:

Yellowsub2000 said:

If mortgage is set by 3.5X earnings then house prices need to get back down to there too

Over a million people in the UK manage to buy a property every single year, even in the current climate.

So the obvious answer for those complaining they can't afford to buy is for them to either buy something cheaper or instead better themselves to improve their earnings. Why should the rest of us be brought down to the lowest common denominator?

I do feel that many first time buyers have unrealistic expectations, wanting to purchase a 3 bed semi as thier first house or larger, all done out immaculate etc. 
It's called a ladder for a reason and people need to have realistic expectations when buying their first place if they don't have the money to buy what they are dreaming of. 

If we ignore the south east it is very possible to get on the housing ladder if people set their sights a little smaller initially.

The average age of FTBers is now 34... Most of those will be renting and putting off having kids due to that. Dangerously close to infertility years (especially if not had the first already). 

Guess what happens when no-one is having kids anymore as they can't get anything better than a 1 bed flat in dangerous areas... No more pensions being paid for current retirees! 

That, or even more mass immigration. 

FTBers are no longer 19 year olds wanting to get their first foot on the property ladder and happy with a small 1-2 bed flat/terrace..

Altior

Do you have a link to the data on that, BobT36? The earliest I can see after a quick search is that it has increased by 4 years outside London in the last three decades? Of course, the numbers of people going to university has significantly increased over that period, meaning they postpone full time work for three years. That won't be all of it, but of course there are multiple factors at play. 

The average age of a first-time buyer in the UK has been steadily creeping up over the years. As of 2021-22, the average first-time buyer outside London is 33.4.

However, the average age of first-time buyers has been increasing for some time. For example, in 2005-06, the average age was 30.6 (outside London) and was as low as 29 in the 1990s.

MobileSaver

[Deleted User] said:

MobileSaver said:

Yellowsub2000 said:

If mortgage is set by 3.5X earnings then house prices need to get back down to there too

Over a million people in the UK manage to buy a property every single year, even in the current climate.

So the obvious answer for those complaining they can't afford to buy is for them to either buy something cheaper or instead better themselves to improve their earnings. Why should the rest of us be brought down to the lowest common denominator?

It's really sad that people think this is acceptable. ... It's not at all wrong to want the same opportunities your parents and grandparents had.

Young people have far more opportunities and a much easier and more comfortable life than their parents and grandparents ever had.

I find it really sad that some people just focus on high house prices and ignore everything else when they could be appreciating all the incredible benefits and improvements introduced by the hard work, tenacity and inventiveness of previous generations.

Up until the age of around 11 our home was one bedroom which was shared by us five children while our parents slept on a sofa bed in the lounge. Today's generation come on to this forum asking how they can get an extra bedroom because they have a newborn on the way, the sense of entitlement is palpable!

silvercar

MobileSaver said:

[Deleted User] said:

MobileSaver said:

Yellowsub2000 said:

If mortgage is set by 3.5X earnings then house prices need to get back down to there too

Over a million people in the UK manage to buy a property every single year, even in the current climate.

So the obvious answer for those complaining they can't afford to buy is for them to either buy something cheaper or instead better themselves to improve their earnings. Why should the rest of us be brought down to the lowest common denominator?

It's really sad that people think this is acceptable. ... It's not at all wrong to want the same opportunities your parents and grandparents had.

Young people have far more opportunities and a much easier and more comfortable life than their parents and grandparents ever had.

I find it really sad that some people just focus on high house prices and ignore everything else when they could be appreciating all the incredible benefits and improvements introduced by the hard work, tenacity and inventiveness of previous generations.

Up until the age of around 11 our home was one bedroom which was shared by us five children while our parents slept on a sofa bed in the lounge. Today's generation come on to this forum asking how they can get an extra bedroom because they have a newborn on the way, the sense of entitlement is palpable!

You’d never get a landlord to rent a one bed to a family of 7 today! And a mortgage lender would probably think that you intended to let the property rather than live in it!