UK Property Prices

Discussion in 'Politics' started by Jason, May 16, 2010.

  1. Jason

    Gold Member

    Joined:
    Aug 26, 2004
    Messages:
    9,919
    Likes Received:
    639
    Gender:
    Male
    Location:
    London (GB)
    I'm picking this up from another thread as to discuss it there would go too far off the message of that thread.

    House prices in the UK are expensive. Eye-wateringly expensive. But just because something is expensive doesn't mean it is a bubble.

    The whole of the UK property market is skewed towards London and the SE, a tiny area up to about 80 miles from the City of London in which roughly half of the UK population lives. Pretty much every patch of land that hasn't been built on (and there is a lot) has a legal status that prevents building. The Green Belt (a ring of open land around London) has legislation which really works. We've even just created a new National Park in the SE (South Downs) which basically translates into forget even dreaming of building anything. In towns and cities in the SE local councils compete to be as obstructive as possible to new building schemes big and small. We're pretty new to tower-blocks in London (for long the rule was nothing taller than St Pauls and anyway the bedrock doesn't really suit tower blocks). Basically the supply of housing in this area is static.

    The we boost demand. We do it through immigration (which is mostly into London and the SE), willingness of banks to lend to buy (and they are now being encouraged to lend) and through the impact of London as a global financial centre. Add the Olympics and the demand gets a bit higher.

    In this situation the likelihood is that prices will go still higher. Indeed they are now going up and fast.

    This is only a bubble if the fundamentals are wrong and cannot justify the prices. I just don't see it. If we changed planning regulations today it would be at least 2-3 years to get planning permission through and build - and anyway we're not going to do this. The supply just isn't there. And while there is now talk of some modest restriction on immigration this is not going to be a big factor. Indeed as the City forges ahead driving the UK economy we are going to bring still more people into London and the SE.

    Now of course there will be investors and speculators who see that the fundamentals are driving the market up and go for risky borrowing to fund purchase of property on the basis that it will always go up. This froth will distort the market. At the top of the boom it will overshoot. In this limited sense there will be a bubble. We need to ensure that at the top of the boom the market has a soft landing - and that means we have to regulate just how much our banks can lend. We had a property bust in the early 1990s and have had a couple of years of stagnation now, but with the exception of the early 1990s we have been able to avoid major overshoots. It shouldn't be all that difficult.

    My feel is that we are looking at 5 years of double digit property price inflation in London and the SE (proably less elsewhere). By the time Cameron's goes to the country in 2015 prices will be maybe 75%+ up on their present levels. Right now London is the third most expensive city in the world (after Moscow and Tokyo). Maybe it will be first.

    This is going to do ghastly things to our society. The idea 1950-2003 or thereabouts was that it was reasonable for people to aspire to own their own home. We had the rule of thumb of borrowing 3x salary, and someone on a modest salary could save a modest deposit and find a modest home in their price range. Now that is just unthinkable. In London and the SE it is now very hard to buy anything without an inheritance or some form of windfall. We have a social divide that we haven't seen for a couple of generations. We have lots of people in their 20s and 30s who have so much to offer and are feeling increasingly alienated.
     
  2. Drifterwood

    Gold Member

    Joined:
    Jun 14, 2007
    Messages:
    15,724
    Likes Received:
    386
    Location:
    Fingringhoe (GB)
    I'll hold you to these predictions Jason.

    First off, 30 Million people do not live within 80 miles of London.

    Secondly, there is no mortgage product to allow the majority to buy property which is being touted at five times plus income.

    London is part of the Global property investment market, not part of the UK property market. But this doesn't stop Estate Agent cunts around the country lying.

    Auctions outside London are still seeing results at up to half of 2007 asking prices.

    If you think that UK property (excluding London) can still go up when there is absolutely no doubt that we are all going to be a lot poorer through a prolonged period of austerity, then please continue. A fool and their money are soon parted.

    You said it in the OP, we can't afford real market freedom in property. We have it in other areas, and we have been fucked.

    Let's just wait to see the tax rises and spending cuts.
     
  3. freyasworld

    freyasworld New Member

    Joined:
    Dec 2, 2009
    Messages:
    285
    Albums:
    1
    Likes Received:
    50
    Gender:
    Female
    Location:
    West Midlands United kingdom
    I agree with you to a certain extent, property prices have fallen in parts of the country in the past 18 months and of course property is only as valuable as people are prepared to pay for it. Other costs must be factored into the equation, parking, council tax, transportation, schooling etc. Employment, is the biggest single deciding factor that stimulates the housing market, if someone is concerned about their jobs then they are not going to spend all their hard earned saving on a deposit for a house if there is a risk that they maybe made redundant and loose everything.

    We have found that when there is uncertainty in the jobs market then there is a higher demand for rental properties similarly high unemployment leads to higher divorce rates and families spliting up, this again increases the demand for rental properties.

    Full employment results in higher demand for homes. People are more confident about their jobs and therefore are prepared to risk buying.

    But the crash of the past 2 years has made many people more careful, people are no longer looking to get on the housing ladder at any cost, people are buying property not as an investment that will appreciate in value, people are looking to buy a home.
    Hence why there are millions of properties left unoccupied around the country.

    So once employment starts to rise, then house prices will also rise, the housing market is closely linked to the jobs market. As the case of migrant workers, there are over 8,000,000 people economically inactive, the low paid jobs are filled by migrant workers, if there is high demand for low paid workers in a particular area, this fuels the rental market in that area.

    Conversely if a large employer leaves a particular area, the result is that people move to find work, hence there are thousands of properties left empty. The North East is a example of this. It is possible to buy a 3 bedroom house for less than £100k. £10k deposit and £450 a month mortgage. But there is no work! So why buy and live there or why buy to let? Wales also!

    Anyone that lives outside of London should not take any notice of the so called media or reports on the housing markets. The best indicator of a particular area is the cost of council tax! Higher unemployment results in higher costs for social services, which in turn leads to higher council taxes for those that are paying it, so low council taxes = high employment and a more affluent area, which in turn leads to higher house prices.
     
  4. TurkeyWithaSunburn

    Gold Member

    Joined:
    Mar 23, 2005
    Messages:
    3,543
    Albums:
    5
    Likes Received:
    252
    Gender:
    Male
    Location:
    Denver, Colorado
    Council tax is the local property tax?
     
  5. Drifterwood

    Gold Member

    Joined:
    Jun 14, 2007
    Messages:
    15,724
    Likes Received:
    386
    Location:
    Fingringhoe (GB)
    Yes.
     
  6. tomthelad91

    tomthelad91 New Member

    Joined:
    May 4, 2008
    Messages:
    122
    Likes Received:
    0
    Gender:
    Male
    Location:
    Birmingham, UK
    I'd hardly call everything 80 miles from London 'The South East', by that definition the fringes of Peterborough, Leicester, Coventry and Cheltenham are in the Southeast?

    I think the situation is more grave in Cornwall, where Londoners have brought up second homes turning entire villages into Ghost towns, as the locals cant afford to buy them and they're only inhabited in the summer.

    The real solution to this is to end our London-centric society. In the rest of the UK there is plenty of Brownfield land ripe for development, in other countries jobs are more spread out, this country lets the rest of the country rot - it's disgusting. The scots and the welsh moan but at least they Edinburgh & Cardiff get a hell of a lot of investment being capitals. Manchester is the token 'Northern' city which gets government investment to prove it's not london centric.

    Birmingham, Bristol, Leeds, Sheffield, Nottingham, Newcastle, Glasgow, Plymouth, Hull.
    All big cities which suffer from CHRONIC under investment.

    Did you know that in London transport spending is 10 times higher per head than anywhere else in the country? That money comes out the central pot. Every UK taxpayer is subsidizing Londoners getting on buses for £1 whilst we're paying through the nose at £4 / £5 for a similar journey.

    Our roads are clogged, whilst they're having tube expansions and DLR projects and High speed rail links.

    The continuous over investment in London by the government has caused this SE property crisis, your standard of living is higher, unemployment lower, public expenditure higher, why shouldn't you pay higher for housing as well?

    This is a market response which will help the rest of the UK gain from lower prices.
    Here's your comeuppance South East.

    Besides, it's useless to continue to invest in London. A combination of Post-Glacial Rebound and Rising Sea Levels mean that within a mere 100 years London won't be feasible for continued human habitation unless we invest Trillions in defences, which I suppose will be funded 'Nationally'

    Wake up and smell the coffee people. It's about time we demanded more devolution and stopped letting the Southeast fuck us over day after day.
     
  7. Jason

    Gold Member

    Joined:
    Aug 26, 2004
    Messages:
    9,919
    Likes Received:
    639
    Gender:
    Male
    Location:
    London (GB)
    Oops!:redface:
    Its just over 15m an therefore a quarter. I meant a quarter. Really I did!
     
  8. Jason

    Gold Member

    Joined:
    Aug 26, 2004
    Messages:
    9,919
    Likes Received:
    639
    Gender:
    Male
    Location:
    London (GB)
    I sort of agree. But how?
     
  9. tomthelad91

    tomthelad91 New Member

    Joined:
    May 4, 2008
    Messages:
    122
    Likes Received:
    0
    Gender:
    Male
    Location:
    Birmingham, UK
    I think it'd be quite easy really, firstly better transport links from the south east to the rest of the UK so that we're all better connected, and more importantly from Europe to the rest of the UK, when the Channel Tunnel was built there were promises of 'Regional Trains' from Paris to Birmingham, Bristol, Leeds and Manchester to get MPs to vote in favour of the scheme - this was then dropped.

    We need a High-Speed rail network spanning the whole country like France & Germany.

    Also, motorways, the West Midlands needs a proper orbital motorway, aka, make the M6 Toll free and then build the missing western section through south staffordshire bypassing Stourbridge & Dudley, we need to make the M5 reach Plymouth, we need a motorway from York to Edinburgh etc, the UKs roads a real mess.
    Secondly, we need to expand the scheme which already exists where companies receive subsidies to set up in certain areas - if we give companies tax breaks to set up outside of the South East, things will improve.

    And perhaps most importantly we need regional governments, we've already seen how well Scotland & Wales have done out of their parliaments, if each English region had a government, it would have its own rightful share of money which is then guaranteed to be spent in that region, this way London doesn't get a Lions share. This works very well in Canada, Australia & the USA with the state/provincial governments.

    If we spread the demand for housing out more, demand on London will fall - which will be to the benefit of Londoners. At the same time prices pick up nationwide to the benefit of everyone else :)

    We just need to look abroad a bit more, the UK is Europe's most centralized state, which is incredible thinking how in terms of population we're the third largest.
     
  10. dandelion

    Verified Gold Member

    Joined:
    Sep 25, 2009
    Messages:
    7,872
    Albums:
    2
    Likes Received:
    598
    Gender:
    Male
    Location:
    UK
    Verified:
    Photo
    Theres plenty of greenfield land within 80 miles of London too. Except,as mentioned, planning regulations prohibit building. Not on special reserved land, such as the green belt, but generally.

    Actaully, no. Londons taxes subsidise the rest of the country. Maybe it does spend more on transport, but whatever it spends its still subsidising transport in Scotland.

    well, specifically to that last point, because it is bad for everyone. bad for those having to pay the prices and bad for those who would otherwise have had a share of that money being spent on inflated house prices. London has three pluses. The government is there: the financial centre of the UK and arguably Europe is there: It is the nearest large UK city to Europe. Oh, and the climates better in the south. But, yes, one of those cost savings the political parties have mentioned recently is to move more government services elsewhere.

    yes I expect they will.
     
  11. dandelion

    Verified Gold Member

    Joined:
    Sep 25, 2009
    Messages:
    7,872
    Albums:
    2
    Likes Received:
    598
    Gender:
    Male
    Location:
    UK
    Verified:
    Photo
     
  12. Jason

    Gold Member

    Joined:
    Aug 26, 2004
    Messages:
    9,919
    Likes Received:
    639
    Gender:
    Male
    Location:
    London (GB)
    tomthelad91 - all good ideas in your post, but not much of this could happen say within 5 years, the present parliament. And I rather think ideas like high speed rail and road building will be way down the priority list, partly because the money just isn't there and partly because the lobbies against the building would be very loud indeed. I'm not saying it shouldn't happen, just that it won't.

    Drifterwood points out that London and around is part of the global property market. No doubt this is right. And I don't think it is about to change. Indeed is this the key to comprehending London and SE property prices? Do we have a market that isn't predicated on the ability of people who were born and bred there to afford homes but rather on the ability of the global property market to afford them?

    In the austerity years of 1945-1951 property prices in the UK rocketed up. This was quite simpy because of a lack of supply. I can't find a reference, but didn't UK property prices also go up in the Great Depression? I don't think that because we have austerity we should necessarily expect a levelling off or a fall in property prices.

    I know received wisdom is that UK property prices are overvalued. I'm taking a contrarian view, at least from a London/SE view, that prices will go up substantially in the next few years.
     
  13. Joll

    Gold Member

    Joined:
    Jan 28, 2009
    Messages:
    14,509
    Albums:
    1
    Likes Received:
    722
    Gender:
    Male
    Location:
    Wales (GB)
    I agree! But I'm not quiite sure why, lol. :tongue:

    Hmm, not sure about this. I can see the logic in Scotland, Wales and NI having regional governments...but the regionalisation of England was an EU initiative (partly designed to weaken sovereignty, by encouraging the regions to deal with Brussels individually, for Objective 1 funding, etc), and was rejected by public, when Prescott tried to pioneer the system in the NE.
     
  14. Jason

    Gold Member

    Joined:
    Aug 26, 2004
    Messages:
    9,919
    Likes Received:
    639
    Gender:
    Male
    Location:
    London (GB)
    The NE had a referendum on regional government. It was supposed to be the area of England most enthusiastic about regional government, yet it resoundingly rejected it.

    In theory a regional government for England would resolve the constitutional conundrum, though there is little enthusiasm for this. Of course adding the regional layer creates a lot of extra costs, so while it is an option it is not a particularly good one. An alternative is for a sub-set of the UK parliament - the English MPs - to be the only ones who can vote on measures which only apply to England (or England + Wales for Britain, E+W+NI for Britain and NI). This would seem fair for the individual decisions. However it would pose a conundrum if we had a Conservative majority in England and a Labour majority for the UK. (This would in effect have been the position had Lib Dems done a deal with Lab and SNP).

    There is a view that Scotland (the real friction surface) has to either accept it is part of the UK and take the rough with the smooth or go its own way.
     
  15. Drifterwood

    Gold Member

    Joined:
    Jun 14, 2007
    Messages:
    15,724
    Likes Received:
    386
    Location:
    Fingringhoe (GB)
    London property is cheap for overseas buyers. The market went down by 20% + and the £ devalued by 30% +, making prices around half within a three month period. London has a somewhat unusual situation of its prices being driven both by demand at the top and lack of supply at the bottom.

    I remember hearing Harold Wilson telling people that the £ in their pocket wouldn't be affected by the devaluation he was forced to make. Ha Ha. You can see how it isn't affected by the London prices.

    I would also like to point out that the banking crisis was caused by the Banks being allowed to leverage too much debt on people, mostly property related. When the Banks couldn't sustain this leverage, they had to dump it on the government. There is no way that the banks should do this again nor that Government should allow them.

    IMO the Banks will continue to lend at 3.5 times salary and if it is going to cost you more, then you will have to find the equity. At the moment, some people are finding that equity, but in many places they are not and there is almost no first time buyers. Prices will come down. A significant section of the market depends on mortgages.

    Politically and financially they need this to be a slow process rather than a crash and if you factor back inflation at 3.5% + per annum, then you can see the real picture. Prices are still down 10% over the last two years, despite the London effect. Add on 7% compounded inflation in this period and it is down 17%.
     
    #15 Drifterwood, May 18, 2010
    Last edited: May 18, 2010
  16. freyasworld

    freyasworld New Member

    Joined:
    Dec 2, 2009
    Messages:
    285
    Albums:
    1
    Likes Received:
    50
    Gender:
    Female
    Location:
    West Midlands United kingdom
    Think I have found the solution to the housing problem.......... polyandry!
    2 guys and a girl all working and playing....split the costs of buying and running a home 3 ways!
     
  17. Drifterwood

    Gold Member

    Joined:
    Jun 14, 2007
    Messages:
    15,724
    Likes Received:
    386
    Location:
    Fingringhoe (GB)
    Strange, a similar, but not quite the same idea, occurred to me.
     
  18. Jason

    Gold Member

    Joined:
    Aug 26, 2004
    Messages:
    9,919
    Likes Received:
    639
    Gender:
    Male
    Location:
    London (GB)
    This sounds right.

    We are likely to see some sterling devaluation and some inflation. We may also see more overseas buyers. Plus the effect of the Olympics. There are a handful of big new builds presently being built in the London area, but in London and the SE as a whole supply is pretty much static. We also have money moving out of stocks and shares and into residential property, sometimes kept empty because letting is considered unrewarding. Am I right in thinking all these factors will send prices higher?
     
  19. Drifterwood

    Gold Member

    Joined:
    Jun 14, 2007
    Messages:
    15,724
    Likes Received:
    386
    Location:
    Fingringhoe (GB)
    Well if you are an overseas buyer, then they are cheaper. If they don't rise above inflation, then they are also cheaper.

    If I had to predict, then I would say that pockets will continue to rise, much will stay about the same and some will fall, simply because there isn't enough mortgage product.

    In the rest of the UK, I expect residential to fall in real terms. The governement actually needs people to have more spare cash after mortgages so that they can take it in tax.
     
  20. dandelion

    Verified Gold Member

    Joined:
    Sep 25, 2009
    Messages:
    7,872
    Albums:
    2
    Likes Received:
    598
    Gender:
    Male
    Location:
    UK
    Verified:
    Photo
    So thats a pro-gay housing policy then? (or at least bi?) No, the conservatives will never accept that even if the libs might go for it.
     
Draft saved Draft deleted