Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

How I won the housing market without trying

theguardian.com

Post reply on HN
Print view View original

21–30 of 116 posts

Re: How I won the housing market without trying

#21

Post by NotableAlamode »

suvelx wrote: post #12
NotableAlamode wrote: post #11

Earlier quoted context omitted.

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.

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).

Re: How I won the housing market without trying

#22

Post by stana »

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 investment properties making a loss (after rent), pushing prices higher. Only a few years ago the rules were changed around Australian pension funds (superannuation) allowing leverage. Property purchases from these funds sky-rocketed. All of this while Foreign Investment Review Board (who should be in charge of making sure foreign investors only buy new properties) has not had a single prosecution in last 8 years making you wonder if the rules are being followed at all. It is hard not to make a connection between constantly rising house prices and baby boomer generation dominating the government. It has been recently estimated Australian politicians hold a $300m property portfolio. Talk about conflict of interest..

Re: How I won the housing market without trying

#23

Post by awjr »

brianmcc wrote: post #19
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…

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.)

Re: How I won the housing market without trying

#24

Post by frobozz »

nodata wrote: post #3

I don't get it: she sold up and made a profit, but unless she downsized, the profit is gone on buying a new place.

It isn't so much about the profit from sale, but about being able to buy in the first place. 10 years after graduation, she bought a two-bed flat in Herne Hill. Such a place wouldn't leave much change from £600K today.

For context. Assuming a 3-year course and no gap year, that would make her 31 when she bought.

Were she in the same position today, she'd need to have saved up at least £60K for a deposit (90% LTV) and have a salary of £135K (4x is a common salary multiplier). Given that that's more than a top decile _couple_ in London currently earns, that's not likely. The average salary today for her job at the time, is less than £24K, less than a fifth of what she would need.

Given the high cost of private rent, and the fact that social housing is only available for existing tenants and people who _really_ need it, saving up that much in only 9 years is difficult.

Meanwhile, house prices continue to rise faster than incomes, the longer you wait, hoping for a crash, the less likely it looks that you'll be able to afford a place even after the crash happens.

Even as a direct response to your point, moving out of London makes your money go much further. With that money, you could get a pretty nice house even as close to London as Reading, Maidenhead or even the outer London Boroughs. Not to mention what you could do with the money if you moved away from the south east entirely. At an estimated 61 years old, she's in a position to think about retiring soon, and considering she's not from London, she might well be considering moving away when she no longer needs to be here for work.

http://www.zoopla.co.uk/for-sale/property/london/dulwich-roa...

http://www.theguardian.com/money/2014/mar/25/uk-incomes-how-...

http://www.payscale.com/research/UK/Job=Communications_Offic...

Re: How I won the housing market without trying

#25

Post by onion2k »

jeffwass wrote: post #17
nodata wrote: post #3

I don't get it: she sold up and made a profit, but unless she downsized, the profit is gone on buying a new place.

Or you upgrade to a bigger house, and roll the profits into a bigger down payment on the next property, keeping a similar sized mortgage. My friend did this, sold his old place and bought a bigger nicer house, keeping his monthly mortgage payment roughly the same, which now is well below market rent.

Except as all equivalent property prices have also gone up, and consequently the price differential between a flat and a house has probably led to a bigger gap in the prices than than the profit than the flat in 1995 and 2015. Eg

£32,000 flat in 1995 -> £660,000 flat in 2015 is an increase of 2062%, or £628,000.

£100,000 house in 1995 increasing at the same rate of 2062% now costs £2,062,000, up by £1,962,000.

To move from the flat to the house you now need to find that additional £1,962,000.

Obviously not all properties increase at the same rate, and presumably the author of the article got a quite lucky with her 2062% increase. But even if the house only increased at half the rate of her flat it still costs £1,000,000 now, so she's £300,000 short.

Price increases only benefit you if the lower end moves up faster than the higher end (which is very rare) or if you're cashing out.

Re: How I won the housing market without trying

#26

Post by awjr »

blakef wrote: post #16
slap wrote: post #8

Earlier quoted context omitted.

"Apparently 40% of new build apartments are bought and never lived in" : this is totally incorrect

Can anyone provide a more accurate figure?

I posted above but here are a couple of links on "buy to leave" http://www.theguardian.com/business/2014/dec/04/property-inv... http://www.theguardian.com/commentisfree/2014/dec/08/islingt...

I'm guessing it very much depends on the development with some stating sales being 85% to foreign investors.

Re: How I won the housing market without trying

#27

Post by AmirS2 »

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…

> Not sure you should be selling your house, then deciding to look.

It's buying a house before you've sold yours that's a problem, not this way around (think cashflow), especially if you don't mind putting your furniture in storage and renting for a few weeks in between.

Re: How I won the housing market without trying

#28

Post by arethuza »

CmonDev wrote: post #6
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 thought a major reason was Thatcher letting people who should not be owning a house buy one at a cut price?

"who should not be owning a house"

I think that's a bit harsh - my wife's parents bought their house under the Thatcher Right to Buy scheme and they were both hard working and financially prudent - they could have purchased a house but it wasn't what skilled working class people did in Glasgow so they didn't do it for cultural, not financial, reasons.

People used to joke that you could tell council houses where the owners had purchased because they had a new front door - and that is true - people look after property a lot more when it's there and whole neighborhoods have been improved that way.

What I do think was wrong with the Right to Buy Scheme was that it didn't spend the money raised on building new social housing.

Re: How I won the housing market without trying

#29

Post by yummyfajitas »

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?

Re: How I won the housing market without trying

#30

Post by teh_klev »

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.

Because it's probably less hassle to sit on the property while it increases in value. Seriously, this is becoming a major problem in London, especially from overseas buyers.

There was an article posted on HN a few months back (which I can't locate right now) which explained this problem.

Post reply on HN