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How I won the housing market without trying

theguardian.com

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Re: How I won the housing market without trying

#41

Post by brianmcc »

jgraham wrote: post #32
awjr wrote: post #23

Earlier quoted context omitted.

My mother just recently bought a studio flat in Wales for 31k. Prices are dropping around the country. London prices are forcing people away from living in London. Businesses are moving away. (If you are a young developer, I'd suggest moving to Bristol.)

The data doesn't seem to support that view [1]. The headline claim there is that average property prices across the country rose by 7% last year, with London more than double that and no area showing an annual fall. It seems like your example of Bristol is only becoming cheaper relative to London, not cheaper in any absolute sense. [1] https://www.gov.uk/government/uploads/system/uploads/attachm...

Agreed; in Scotland, we're now seeing steady, but not excessive, growth in volumes and prices. I'd say it's recovering, not worsening.

Re: How I won the housing market without trying

#42

Post by lentil_soup »

matthewmacleod wrote: post #33
junto wrote: post #14

What is interesting, is that the policy makers have a financial interest in ensuring that the housing market does not crash. Therefore every time it should have crashed big time (2001, 2008), the BoE has propped it up by making sure that borrowing remained dirt cheap and the government made sure that the market stayed liquid (raising stamp duty levels for example). Every time they do this, they just exacerbate the pr…

I don't think you achieve much by 'letting it burn,' as it were. All you do is force a large number of people into a bad financial situation – that's not good for anybody. The market needs correction, but it needs to be well-managed. That basically means long-term house price stagnation and investment in social housing to remove the incentives for buy-to-let landlords and multiple property owners.

On the other hand, the rising prices are leaving a lot of people in bad a financial situation already as they can't afford a house/rent. So "letting it burn" would benefit some people.

Also, I would imagine people in this second group struggle more than the ones that already have a house or are using it as an investment. I would expect a government to enact policies that benefit them the most.

Re: How I won the housing market without trying

#43

Post by deepvibrations »

awjr wrote: post #23
brianmcc wrote: post #19

Earlier quoted context omitted.

In many places in the UK, it did crash big time. Plenty of people I know even today are in homes well below their 2007 levels or have sold for painful losses. London is unusual in that many properties sell for cash, to investors, and in fact the BoE and mortgage lenders have surprisingly little influence in terms of rate changes. Not sure letting anything "burn" particularly helps anybody. Edit: I suspect "let it bur…

My mother just recently bought a studio flat in Wales for 31k. Prices are dropping around the country. London prices are forcing people away from living in London. Businesses are moving away. (If you are a young developer, I'd suggest moving to Bristol.)

I second that! Best city in the UK in my opinion- It has an amazing selection of bars, clubs and independent shops, a buzzing music scene and of course a great tech scene with plenty of meetups etc. Compared to London I would say it's much more friendly, you can cycle from one side to the other in under an hour, escape to the countryside or the coast in under an hour and you never feel trapped in a towering concrete jungle (often felt this in London!).

Re: How I won the housing market without trying

#44

Post by justincormack »

NotableAlamode wrote: post #21
suvelx wrote: post #12

Earlier quoted context omitted.

Use diminishes value. Having tenants requires work, adds cost, and might just not be worth your time. You might just want a house for a weekend, and not want plebs messing your shit up. And it probably has some degree of truth, You can stand outside 'new' buildings for a week and never see lights on in some windows.

Use diminishes value, but this is nicely compensated for by rent, and more than compensated by London rental levels. Leaving a property empty is also not without problems (think heating, burglary, squatting, taxes). The number of people rich enough to buy pied-a-terres in (one of) the world's most expensive real estate markets is too small to justify the 40% figure (or anything like it).

There is not much of a rental market for these £1m flats which to cover costs would have to rent at £40-50k a year. The number of people who can afford this us minute.

Re: How I won the housing market without trying

#45

Post by barrkel »

awjr wrote: post #23
brianmcc wrote: post #19

Earlier quoted context omitted.

In many places in the UK, it did crash big time. Plenty of people I know even today are in homes well below their 2007 levels or have sold for painful losses. London is unusual in that many properties sell for cash, to investors, and in fact the BoE and mortgage lenders have surprisingly little influence in terms of rate changes. Not sure letting anything "burn" particularly helps anybody. Edit: I suspect "let it bur…

My mother just recently bought a studio flat in Wales for 31k. Prices are dropping around the country. London prices are forcing people away from living in London. Businesses are moving away. (If you are a young developer, I'd suggest moving to Bristol.)

You'll severely limit your career and earning potential if you do that, particularly if you're not a founder or otherwise in a position to insulate yourself from pure market salaries.

Dev salaries are not high in Britain as a whole, outside of London.

Re: How I won the housing market without trying

#46

Post by lmm »

NotableAlamode wrote: post #11
awjr wrote: post #4

In the UK it's normal practice to get in a chain. You sell yours, line up the one you want to buy, and all 14 people in the chain complete on the same day. Not sure you should be selling your house, then deciding to look. You have to ask yourself what changed in the UK mortgage market to create this increase in housing value. It comes down to a bank regulation change the government put in place in 1996. Banks were ab…

I seriously doubt that 40% figure. Why would "foreign buyers" who by flats as investments not take home the (very substantial) London rents? It would be financially imprudent. I suspect that this is really a form of xenophobia, used, among other things, to sensationalise newspaper articles.

> I seriously doubt that 40% figure. Why would "foreign buyers" who by flats as investments not take home the (very substantial) London rents? It would be financially imprudent.

Would they be? What's a realistic amount of rent to charge on a GBP 5,000,000 flat? How many people can afford that and are looking to rent?

(Also I think many appreciate having their London flat available for the few days a year they're in town)

Re: How I won the housing market without trying

#47

Post by DanBC »

NotableAlamode wrote: post #11
awjr wrote: post #4

In the UK it's normal practice to get in a chain. You sell yours, line up the one you want to buy, and all 14 people in the chain complete on the same day. Not sure you should be selling your house, then deciding to look. You have to ask yourself what changed in the UK mortgage market to create this increase in housing value. It comes down to a bank regulation change the government put in place in 1996. Banks were ab…

I seriously doubt that 40% figure. Why would "foreign buyers" who by flats as investments not take home the (very substantial) London rents? It would be financially imprudent. I suspect that this is really a form of xenophobia, used, among other things, to sensationalise newspaper articles.

They've already shown financial imprudence by buying property at over the market rates.

Re: How I won the housing market without trying

#48

Post by NotableAlamode »

AmirS2 wrote: post #37
NotableAlamode wrote: post #21

Earlier quoted context omitted.

Use diminishes value, but this is nicely compensated for by rent, and more than compensated by London rental levels. Leaving a property empty is also not without problems (think heating, burglary, squatting, taxes). The number of people rich enough to buy pied-a-terres in (one of) the world's most expensive real estate markets is too small to justify the 40% figure (or anything like it).

These buy-to-leave flats are generally newly built (and were bought off plan), in high rise buildings with concierge / security, so there are no worries about heating, burglary or squatting... I'd guess the price of these is around £350k - £1.5m (for a reasonable 1 - 3 bed flat in a new build), which is well within the reach of well off foreign middle class investors.

It is within reach, but it would be financially wildly imprudent to forgo the £1000 - £3000 monthly rental income that such properties would fetch. Bear in mind that you will have to pay council tax and other fixed costs anyway. It would be a desperately terrible investment, much worse than other, more liquid assets. The global middle class cannot afford such investments. Maybe members of the Saudi royal family, but they won't be that interested in 1 bedrooms in Islington.

Re: How I won the housing market without trying

#49

Post by jussij »

yummyfajitas wrote: post #29
stana wrote: post #22

Thanks to banking deregulation housing has become an investment commodity. In major cities in Australia at the moment half the purchases are for investment rather than owner-occupier. Government incentives like first-home buyer grants (if you can't save for a deposit) have only lifted the prices and helped vendors. Another one is negative-gearing introduced a couple of decades ago allowing tax deduction for investmen…

Why would housing not be an investment commodity if banks were more strongly regulated? What specific regulation do you propose that would prevent housing investments?

In Australia we have negative gearing. In layman's terms it means you can offset property expenses against your real income.

So if you have a big income with a corresponding big tax burden, you can reduce you extra income to purchase a property and by using the expenses of that investment, reduce you net income and hence reduce you net tax burden.

So rather than paying the tax man, you end up paying the bank, which for you the rich investor, is not bad since the value there is a chance that second, third, forth property that you are now gearing will appreciate in value.

So while the tax receipts of the country go down, your paper wealth goes up, that is until the next GFC.

So the end result is the rich continue to reduce their tax burden, reducing the tax income of the country, hence passing the tax burden onto the middle and lower classes and in the process the rising house prices encourage those same rich to invest in yet another property as their paper wealth continues to climb.

Any one can see that is not good for the country, not good for the community and also not sustainable.

It's easy to create a bubble but at some time the buble has to burst.

Re: How I won the housing market without trying

#50

Post by NotableAlamode »

justincormack wrote: post #44
NotableAlamode wrote: post #21

Earlier quoted context omitted.

Use diminishes value, but this is nicely compensated for by rent, and more than compensated by London rental levels. Leaving a property empty is also not without problems (think heating, burglary, squatting, taxes). The number of people rich enough to buy pied-a-terres in (one of) the world's most expensive real estate markets is too small to justify the 40% figure (or anything like it).

There is not much of a rental market for these £1m flats which to cover costs would have to rent at £40-50k a year. The number of people who can afford this us minute.

True, but rent and property value are strongly positively correlated, so there would also not be a very liquid market for buying and selling such flats. That would make it even worse as a speculative investment. `

I'm not saying such speculative investment doesn't exist, I just doubt it is as ubiquitous a phenomenon as claimed.

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