Amen to this. Two case studies from the UK I've been thinking about recently:
1) Visiting London and spending time in South Kensington - walking back to hotel at night, only about 30% of houses had any lights on. Suggestion is the others are effectively uninhabited, and a search on RightMove shows properties sell for £20-£30m for a 4/5 bed. This isn't normal Londoners, it's outside investment.
2) Cornwall, where I live - an insane house price rise over lockdown as city dwellers aim for the beautiful bits of the country. Literally no way now you could afford your first home round here on minimum wage, and some towns have a high (>50) % holiday or second homes.
It's an untenable situation. I think my generation (I'm nearly 50) are probably the last to be able to afford their own home on anything other than a massive wage.
Round here in Cornwall the jobs are things like surf instructor, supermarket worker, barperson, etc. That's not gonna stretch to the local house prices.
Another Cornishman here (Par). The financial destitution and how much harder they have to work for the same things I do in the South East is unsustainable. Cornwall has Luther to the right politically and that’s because there’s been some useful scapegoats. Now those scapegoats have been slain and things are getting worse not better I hope we’ll see policies that are focused on root cause issues instead of ideology (left or right). Property is an obvious example. Dormant second home now means the Cornish rent or live in low quality new build accommodation (hello Wainhomes) but when communities are hollowed out and empty through winter local businesses fail and the destitution affects even the pretty locations. Those people wonder what happened to the quaint fishing village their second home is in. Why is cafe closed, the nearest shop a supermarket that is a 30 min drive away. Why is their a drug problem? Why are the pins all boarded up etc etc. I hope Cornwall and it’s political representatives can act before the bust comes and find a balance between tourism and building sustainable local businesses in different sectors. The obvious place to start is accommodation. If people cannot put a roof over their head how can a community function least of all an economy.
Unfortunately, the British press and all the wealthy people with second homes still have Brexit as a scapegoat for why cafes and shops in tourist destinations can't find staff. Never mind the fact that AirBNB and second homes have pushed up house prices and rents to the point that it's impossible to live there on the kind of pay those jobs have, according to the media it's all the fault of Brexit driving away the foreign workers who had to do the jobs because all the Brexit-voting morons who were brainwashed into blaming the EU are too lazy to do them.
There's a dead comment later in this thread which using directed abusive language towards another commenter while linking to a Louis Rossmann video.
The video [1] was interesting, although the dead comment seemed to completely ignore the video's [1] main point, where Louis talks about a hypothesis [2] where in New York City there may be an incentive structure between real estate investors and banks which is creating a market failure. The hypothesis [2] is that a building's assessed value is based on the rental prices that the landlord asks for even if nobody will reasonably pay those rents. The hypothesis speculates that, if a building's assessed value is lowered, it could trigger conditions in loan contracts that penalize the landlord or investor. Because of this, there may be an incentive for the landlord to keep buildings vacant instead of lowering their prices to market rate.
I am not a housing investor, but I see many misguided articles claiming housing investors are driving prices up.
The factors that primarily control pricing in the housing market are supply and demand.
In Seattle, London, Los Angeles and elsewhere demand has risen steadily but supply has not. This causes prices to increase sharply.
The solution is to increase the housing supply. If the government removes regulations preventing developers from building new houses and apartments, many more will be built and prices will drop.
Many young people prefer to live in inexpensive high density housing. I remember looking at renting an apartment without a kitchen (there was a big shared kitchen for the whole floor) and without its own bathroom in my early twenties. Monthly rental price on this is around $300 per month as compared to $1,600 for a single bedroom apartment. Why aren’t there more of these? Government regulation prevents them from being built.
Government permitting processes take years to go through and cost millions of dollars for big new apartment buildings or for residential developments. If we lighten / remove these regulations, housing supply will decrease dramatically.
If you don’t want housing investors bidding up housing prices, then allow the supply to continuously increase. This will continuously drive down prices and no investors will want to buy.
Here in Australia we are seeing remarkable growth in property prices over the last quarter!
Sydney prices grew at $AU1200 per day!
In the residential housing market there just isn’t enough supply!
I can say anecdotally that’s younger buyers are being accompanied by their parents, who are assisting with finance.
Its well observed that people are queuing down the street to inspect properties, and literally writing offers out on the kitchen table!
Properties are selling on minutes, with prices being pushed up by desperate buyers with access to finance from loans with low interest rates with deposits from their parents!
When you take a 20 or 30 year mortgage, what’s $20 or $30k here and there!
It's trying to run away from inflation. USA and others have been printing outrageous amount of money, huge inflation is coming, sometimes it's already there. Solution is not to build more homes ad infinitum, but to curb the printing and get back to responsible fiscal policy without bailouts.
Two of the homes on my block here in an inner Seattle suburb are owned by Chinese investors and have never been lived in or rented.
The owner of one property owns 8 other newly built homes within the city. The 2nd property is owned by a person that has 14 other properties listing them as the registered owner.
I miss the people that lived in the homes that were razed to make way for these million dollar blights on the neighborhood.
These vampire homes just accrue damage (whether the glass garage door panes start shattering, or the siding starts going, or the owner decides the landscaping should be ripped out and redone again for god knows what reason?) followed by the sons or cousins of the property owners dealing with it a few weeks later.
No value is gained by these vagrant properties existing. Less people live in my neighborhood due to it, housing is harder to find, the city and county have less reason to invest in making local transit infrastructure better.
We need to tax vagrant properties. USPS has the data on which units are not collecting their mail on a daily basis, SPU/City Light knows who is not putting their trash out or using any power or water, and voter registration records are public. We could easily start assessing a 3 cent per square foot daily vagrancy tax until residency is established at the formerly vagrant address.
While this is true for supply, the same can be said about demand. Foreign investors drive prices up by seeing some other county's housing as an investment. If taxes were increased for these investors, or some other disincentive was in place, demand would fall driving prices down
> The hypothesis speculates that, if a building's assessed value is lowered, it could trigger conditions in loan contracts that penalize the landlord or investor.
This is the issue exactly. A commercial mortgage lender will insist on a certain maximum Loan-to-Value ratio. The value of the property is directly related to the long-term income that it generates (i.e., the net present value of all future cash flows). If the amounts of cash flows go down, then the value of the property goes down and the loan-to-value ratio goes up. In a commercial loan, the lender can often call the loan due at certain times during the term of the loan for any reason. One big reason to do so is if the loan-to-value ratio goes up beyond the level that the lender was comfortable with. Refinancing in such a circumstance could be very expensive. Thus, it may make more sense for an owner to keep a property vacant and lose money temporarily than to take on a tenant at a lower rent and possibly cause the lender to call the loan.
I have heard this explanation a few times, but what i don't get is why doesn't a long term vacancy trigger an adjusted loan to value ratio? Seems like it would cause an appraisal to be much lower than just charging less rent and actually getting a tenant.
The present value of an income stream starting in the future at the established rate may be higher in some cases than the present value of an income stream at a lower rate that starts immediately.
Well, when you apply for loans the bank will want to know (and will send an appraiser) to estimate sales and rental values. If the developer's expectations on rental or sales income on a multifamily property are higher than the reality, and they lower sales prices (condos) or rental amounts, there's potential for them to get called to provide more capital. Because they may reappraise. What I've just explained probably has its own vocabulary I'm not using in the commercial real estate world, but my experience here is that my building has this problem and the brokers explained why they preferred to leave things vacant.
As it turns out, after 18 months, as the city comes back after the pandemic, the vacancies are now suddenly much lower. The building for 1/3 full for years.
The primary driving force was nativism. Even right up to the end the UK wanted to remain in the common market, but part of being in the common market is freedom to migrate.
It also exposed the loss of influence the UK had in the EU. Many provisions were carved out for them in the 80s. But when it came to the EC the EU was not making any exceptions for them this time.
Of course nobody wants these jobs. A lot of positions were filled by tourists and travelers who stayed there for a little while and worked a bit to earn side money.
- Staff at a restaurant is £8 an hour, that is minimum wage.
- Expect two shifts far apart, around 11am-2pm and 7pm-11pm.
- Work on Saturday and Sunday and some of the week. You will never know more than a few days ahead when you are expected to work.
It was, especially getting rid of the kind of immigration that turned blue-collar working-class jobs into something that no-one local could possibly live on. Perhaps more importantly, all the educated influential opponents of Brexit insisted that this wasn't happening, that the idea EU immigration was driving down wages was a cynical lie. I'm pretty sure that it is not lost on most of the supporters of Brexit that the media is trying to spin the fact companies are having to put up wages now we've left as further proof Brexit was based on lies.
> that the idea EU immigration was driving down wages was a cynical lie
It was a lie, EU citizens in the UK earn significantly more than the locals. If I wanted to be a member of the underclass, say a cleaner, I’d be in Germany, where I wouldn't have to pay 6K£ for pregnancy and 12K£pa to send a child to a half-decent primary school.
The thing is, from what I can tell the migrant workers doing these kinds of poorly-paid jobs didn't have to worry about the cost of pregnancy or sending kids to a half-decent primary school because their families weren't actually living here - they came over, worked, and sent money back home to their families in their home countries with lower cost of living. It's that which made it possible for them to work for less. You're right that if they and their families had to live in the UK permanently they'd need to be paid a lot more.
I am not saying that the set of poor Europeans living in the UK is empty, nor I’m saying that no grocer in the UK ever hired a Spaniard or a Frenchman for 11.1£ per hour while a local would have cost 11.6£ per hour, or whatever the poor earn in the UK, but that’s not a social phenomenon, it’s a guy, it’s at best an anecdote. Similarly EU citizens living under bridges to send remittances home, is not a social phenomenon in the UK, it’s a Brexit myth. You can check the data yourself. Again, you may know a guy that…, but that’s an anecdote. The mythological poor EU citizen that goes abroad to send money home and live in a rathole with 17 other poor souls, assuming it exist, is way better off going to Germany than to the UK. On a side note, remittances from Germany are 2.5 times those from the UK, from France 1.5.
EU citizens living in the UK on average earn a lot more than the locals and are better qualified. So saying that migration from the EU was driving down wages was indeed a lie.
But even if we assume that the UK had been swarmed by millions of illiterate cretins, there isn’t any evidence anywhere in the world that immigration suppresses wages permanently (there may be some temporary short term effects, but before, you say anything, the UK has been in the EU for decades, so we are indeed in the long run).
No, it was recovering the freedom that was getting eaten by Europe, and listening to the vote of the UK people again. Whether it ends up in “getting rid of foreigners” or anything else would only be a second-order result of listening to the Englishman’s vote, if that is what they still vote for in 10 years. The goal of Brexit was democracy, not particular measures left or right.
I understand there are other factors at play (to say the least) in NI, but can you explain the incentive Scotland and Wales have to stay in the UK? I'd have thought they'd be gearing up for full scale separation referendums by now.
I’m equating democracy with listening to the most numerous. You have been thoroughly defeated with 3 blatant-majority votes in 4 years. If you don’t like it, you were never in favour of democracy, and if you are not in solidarity with your English mates, tell me about solidarity with an entire continent.
Name a single country that succeeded to leave EU without retaliation from said EU and I’ll eat my hat. EU is not a choice for most of us on the continent. We’re not free to leave, and we were manipulated into joining.
Long story short: The simple fact that it required not 1 but 3 blatant-majority votes for elites to register that yes, UK people wanted to leave EU, is a sufficient proof that EU is not listening to the most numerous.
And let’s not even talk about the quantity of funding, sponsorship and 4x3 billboards it took to swerve Scotland’s, Wales and NI in favor of EU. Manipulation is in plain sight here.
Personally I see the b/s scaremongering, the likes of the Farage bus and the hateful rhetoric of the Daily Heil as the "plain sight manipulation" in creating a manufactured problem with the EU which simply never existed, but each to their own.
> Forgive me since I’m American, but wasn’t getting rid of foreigners taking jobs one of the selling points of Brexit?
That's what the media like to repeat, but I would suggest that you ignore them and take a broader view.
Reality is that both the UK and EU government failed to keep the population happy and continuously messed up. So much so, that the majority of people voted to leave the EU as they were discontent with their current situation. As someone who lives in the UK is that very little really has changed yet pre-brexit and post-brexit. It turns out outside of some temporary instabilities, things aren't doom and gloom. They're still crap like before though.
The only place where housing was really affordable in the UK was in Northern Ireland and sure enough, it's still very affordable in Northern Ireland.
General rule for getting on the housing ladder in the UK is the best time to buy was yesterday, the next best is now. Even if the housing market has a price crisis. It will never return to pricing to match up a decade ago; so don't live a fantasy waiting for it.
AirBNB, second homes, and rentals aren't pushing up rents and house prices even a fraction as much as central banks artificially lowering interest rates, zoning laws, and NIMBYism.
Population growth and lower family formation rates - which is hard to blame on anyone but women actually having a choice for their own lives - are much bigger reasons for price increases than AirBNB and second homes pretty much everywhere outside of the most touristy vacation destinations.
That's a self-correcting problem, isn't it? Either those cafes and shops will raise prices and pay their staff more, or they'll close down. I've never understood why we're supposed to feel bad for "small business owners" who won't find staff when paying peanuts for their crappy jobs.
Your solution is the problem. The house prices are a blood-sucking squid, and you are pay for them every time you get a coffee or get any service - half the money is going to the labdowner that contributes nothing to the economy. That's why a coffee costs £5 and a plumber charges £100 an hour
But we have fools that celebrate rising house prices because their nominal net worth went up
Certainly yes, it would be better - the value of a car goes down, do you still make an 'investment'? No, you buy a car if you need a car, we don't call buying a car 'investment', we don't encourage people to hoard cars they don't need, it contributes nothing to the economy.
The optimal situation is for cars and houses to be as cheap as possible relative to earnings, that's what we call economic growth and improved quality of life.
By this logic no one would buy food, as it drastically depreciates in a minuscule amount of time.
The real economy is the one that fulfills people's needs. Real-estate investment is parasitic to the real economy - it locks money away and artificially increases the price of a basic necessity. This has always been recognized in even basic economics with the concept of "rent-seeking" - unproductive activity that still makes money, such as literally charging rent.
>If prices were going down would things be better? You bought a 500,000 and in ten years it will be worth 100,000 would you still make that investment?
The idea that holding a property and doing absolutely nothing with it is an "investment" is absurd. The only people who would buy that home are those who want to live in it or who want to rent it out to someone who wants to live in it.
No I wouldn't make that "investment". I would just rent the property out without "investing" the property.
That's exactly the problem right there. A house can be a place to live or an investment, but not both. I myself think it's a bit to silly to spend labour and resources building a concrete box for the latter purpose, so I'd much rather houses fulfill their purpose as homes for people to live in.
You missed the point - a plumbing business is an investment, just like a construction business. But no-one buys an old set of pipes and calls that an investment, and we understand that would be dumb.
If houses are to be an investment, their prices will keep rising and they become unaffordable. When consumer goods themselves are an investment, standards of living fall
Sure, they can raise prices but the customers who paid £350,000 for their charming holiday cottage won't pay £35 for a cup of coffee. The house prices are so out of touch with the rest of the economy, there's no way to catch up for normal people. So the cafe closes.
The self correction should actually be the house price crashing, but the UK government consistently props up, and pumps, the market.
The average house price in Salcombe (Devon) is £950,000! That's 30 average salaries.
We’re in a suicide spiral where fiscal policy has staved off economic malaise by kicking the can down the road.
Interest rates have been kept low, which drives real property prices up. Everyone intuitively knows that collapse or high inflation is the endgame, so money flocks to property, which drives up demand.
The issue isn’t the coffee shop in the fishing village, it’s that the fishermen are selling real estate now and nobody actually lives in the village.
You can see this in many places. Lake George, NY is a great example - beautiful village, great location, but can only support tshirt shops from Memorial Day to Labor Day. Manhattan is the same way — the Lower East Side is like a museum of what Manhattan was like, with $2M condo apartments being randomly dropped in and 1/3 of the storefronts vacant.
Low interest rates have made everything cheap but the supply of housing (specifically land) is extremely inflexible. You can make more cars but not land. The location value of your house skyrockets at the expense of everyone else.
However, make no mistake. The problem isn't money. Even if you buy your house with Bitcoin you will run into the same problem. The problem is that location is a a monopoly. You can tax it or let it run wild.
I’m not making any mistake, cheap money is absolutely the biggest problem that we have today.
My former mentor bought a house on Nantucket for $150k in 1990, sold for $3.5M earlier this year. That appreciation isn’t due to inflation or the constrained supply of homes — it’s always been constrained. It’s due to increased demand fueled by excess capital.
There’s no money in traditional banking. Even with negligible interest, the spread is very tight. The only way to compete is with volume, aggregation and fee for service, and the only way to get volume is to lower standards.
IMO, we’re in an economic time period similar to the 1860’s.
> My former mentor bought a house on Nantucket for $150k in 1990, sold for $3.5M earlier this year.
That is literally a luxury good with a fixed supply. As the # of people who desire that good has sky rocketed generation to generation, of course the price went up.
There are limited production run cars from that era that underwent similar price inflation.
For someone who wants to live in Nantucket, there is literally no substitutable good!
> That is literally a luxury good with a fixed supply. As the # of people who desire that good has sky rocketed generation to generation, of course the price went up.
We’re arguing the same thing. Everyone wants to go to the beach. The ability to get cash to do so increased demand.
But the number of people that can pay 3.5 million dollars for an house is much smaller than the number of people that can take have a 3.5 million house financed. If interest rates were sufficiently low (maybe negative) everybody would be in the second category.
Having more people willing to pay contributes to price increases
Not a 19th century scholar; can you provide a couple links to the current situation?
Or reference the points you are trying to make to make it easier to search? For instance, most of my results right now are pertaining to the civil war economies of the north / south United States
I think the the internet and technology is the equivalent to the railroads and industrialization in the 19th century. You also have the currency issues with silver and gold standards which may play out similarly to some of the crypto issues of today.
I’ve worked in a large enterprise for a long time, going from project to project that essentially automated away some semi-professional human work with automation at a 50-90% savings. Over 15 years, there’s about 35% fewer people doing 50% more work.
That trend is only speeding up. I don’t see how the current model of using cheap money to prop up real estate is a sustainable economic model.
Take with appropriate grain of salt. I’m not an economist, and my understanding is that of a layman.
Lots of land exists, the issue is desirable cities, and western countries have gotten really bad at making those.
China spent the first decade of the 21st century creating urban cities left and right, ignore the western propaganda of "ghost cities", and also spent time urbanizing what America would consider "suburban" towns.
Meanwhile western nations are dead set on never increasing the # of desirable urban environments, and then it is all surprise Pikachu when house prices skyrocket.
Nothing that a wealth tax on the current value of land won't fix. Make property taxes to the value of the number of people that land should support in a highrise configuration, and let the current owners pay it.
Compared to a small business the "big chains" might be able to operate with smaller profit margins, or have lower non-labor costs, or profit from owned real estate, but it isn't enough for long term viability. Excessive rents are going to turn any neighbourhood into a desert like South Kensington.
And yet they pay substantially better wages with better benefits on average. Even labor law compliance is much better (not to mention that small businesses are exempt from many regulations in the first place).
Not sure about that. The benefits are better and more structured and there are multitudes of articles about how they are much much harder to access, leaving most workers partially dependent on state benefits
Mom and pop shops often just don't offer benefits at all. Go slightly bigger and they'll have a health plan that's easy to enroll in but the premiums and co-pays will make your eyes water.
Thats true, but they also arent usually sophisticated enough to use a LEAN scheduling approach and combine it with budgeted hours that keep you under the benefits line + an approach of expendability to their workers.
Until one of us creates a free-ish software to help them do that ofc.
From my gut feeling it doesn't seem that small business owners actually get the funding they deserve from banks. Only big businesses actually get those low interest rates.
The point is that before there existed an ecosystem. That “peanuts” is what the business owner was able to afford to pay which was enough for the employees to make a somewhat decent living. Now that isn’t possible anymore. The objection is to the change/disruption of a local ecosystem by outsiders.
Consider a community of 10000 households. 5000 rent their housing, 4500 own their own place, and 500 own more than one place. Now outsiders enter the picture and buy property driving up the prices. The 5000 renting households are now in trouble. If rents go up they are squeezed that way. With rent control there are still issues: Their kids are unable to move out, and separations become tricky. For the 4500 it's a mixed bag. They have the same issues with splitting the household, but they also have advantages. They can do a reverse mortgage and live well. Or they call sell and live well elsewhere. For the 500 elite households it's a pure win, they can buy more yachts than before.
> spending time in South Kensington - walking back to hotel at night, only about 30% of houses had any lights on.
South Kensington is a bit of a curiosity.
It is predominantly bordered by Chelsea and Knightsbridge.
Chelsea is Russian country, if you are a wealthy Russian, Chelsea is the place to be. Unless you are a Russian oligarch, in which case there are one or two spots a bit further away where you can splash super serious cash on rarer properties.
Knightsbridge is wealthy Arab country, when it gets too hot in the Middle East summer, they flock to Knightsbridge with their imported Ferraris to stay in their London houses.
But South Kensington is a bit different. Its not attractive to the Russians or Arabs. Not many of the properties there remain single occupant, they've been mostly subdivided in to individual flats or re-purposed for office (or educational use ... there are lots of cram-schools, colleges and nurseries round there).
What about Notting hill, a bedsit can go for 2000 quid per week there, it's in Kensington.
Average London rent prices are 1600 quid, that is before council tax, internet and the dreaded tv licence.
A more granular overview is
Location Studio One bedroom
Kensington and Chelsea £1,427 £2,062
Islington £1,383 £1,565
Tower Hamlets £1,398 £1,547
Westminster £1,371 £2,113
Lambeth £1,240 £1,595
One bedroom is not sufficient to raise a family, I think that's safe to say.
So let's move on to the 2 and 3 bedroom properties
These are before council tax and other costs, which are gonna be laughed at by oligarchs but they do count for normal people.
The new houses nnextto Westfield shopping centre cost around 2000 quid before council tax , zone 3 classic houses with a garden go for 1500 before council tax.
its really bad in all London, unless you make 50k after taxes and most devs don't make that money there.
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Aside from the Chelsea and Knightsbridge style stories, overall London suffers from a problem of (a) too much buy-to-let nonsense going on (b) off-plan new-build developments which are sold off-plan predominantly to offshore buyers (mostly Chinese using it as a way to get chunks of money out of China, but also other nationalities too). All those new-builds South of the River for example, almost exclusively off-plan jobs.
The present government is not helping either. They are unashamedly on the side of the property developers out there to make a quick buck, not Londoners.
I absolutely do feel for those on low / minimum wage in London who are pushed out of the market and having to face horrible commutes to be able to live somewhere remotely affordable.
Yeah a lot are not residential, a lot of those that are are subdivided into flats, and a chunk of those that remain may just not be occupied outside term time or during a pandemic.
But mostly it's that they're not residential to begin with. Many more are linked to an embassy, restaurants, clubs, nurseries, storage, etc. than you'd realise from 'walking back to hotel at night'.
Not sure why the amen is applicable to Dutch cities. I'll take the local perspective from Amsterdam as an example, but it applies more broadly to the other cities as well here.
Regarding point 1:
There's no real issues with long-term vacancies (the municipality already has laws in-place which fine owners of vacant homes), typically sits between 1 and 2%. That should obviously go down to 0 as much as possible, but it's clear that (1) the problem has an extremely minor effect on the market, (2) it's not exclusively caused by investors, a lot of them are pied-a-terres or homes owned by temporary migrants working abroad and (3) the problem of vacant homes that can be attributed to investors, can be addressed in many other ways than a total ban.
In other words, not an effective or suitable policy on this point.
Regarding point 2:
The price increases aren't caused by investors in Amsterdam, studies have shown this over and over again. If buy-to-let is banned, rental supply drops, rental prices go in overdrive, and there'll be more pressure to buy under any circumstance. The have-nots who're unable to buy will be even worse off. There's no magical panacea to a lack of sufficient supply.
You mention a couple points around 2nd homes, which are fair. I think in a world where there isn't enough housing for everyone, we should at minimum disincentivize owning second homes that go unused most of the time. But apart from the fact that Amsterdam is the capital, a working town, not a place where people have second homes that they enjoy on the weekend, this policy doesn't address 2nd homes at all. You're not banned from buying and owning a 2nd home in Amsterdam after this policy goes into effect.
In other words, an entirely ineffective policy regarding point 2.
Studies have shown that in the Netherlands only a tiny part of the rapidly increasing price is due to shortage and the majority due to investers. The exact opposite of what you say.
I'm not saying you are wrong. I'm saying that what you pose as established facts are highly debated in the Netherlands at the least.
So the study you referenced was ordered by the Minister of the Interior, and it's been the most heavily cited study in the past few years.
If you read it, you'll find it explicitly states they could not establish a causal relationship between investors and increased prices. (i.e. it says exactly what I stated).
They do find a correlation (which is heavily referenced in the news and misinterpreted), which would be expected. Investors who study the market and are investing professionally, are more likely than the average, and definitely more likely than below-average, to invest in neighbourhoods which turn out to see more price increases than neighbourhoods that investors chose not to invest in. That's of course because it's their job and their expertise. It doesn't mean they're causing the price increases.
It's a bit like saying there's a correlation in prices between prices of stocks of companies that professional investors choose to invest in or not. That's obvious, professional investors seek returns, and are expected to invest in such companies. But the investors aren't causing the tech stocks to become valuable. They simply are, by way of their profits. Google (once established) isn't high-value because investors choose to buy its shares. Investors detect the value and pursue to own it. Real estate is no different. Which is why the study found a correlation, but explicitly did not establish a causal relationship.
Both supply and demand are incredibly constrained: building new houses is slow and not exactly being stimulated by the government, whereas demand is fixed because people need a place to live.
Property rental is an extremely attractive investment opportunity. Demand is guaranteed and due to the low cost of obtaining money it is basically risk-free. Even at near-zero rent you'll still make a profit - as long as the housing market doesn't crash.
On the other hand mortgages always carry some risk, and banks are aware of this. There are quite strict limitations on the amount you are allowed to borrow. This directly means that individuals will always be outbid by investors.
This directly results in price increases. Individuals are now no longer able to buy a home, forcing them to rent. Landlords, in turn, are happy to let you rent a property which you wouldn't be able to afford because it is way easier to evict you. And because demand is higher than supply, they'll happily increase the price. Rent prices are already in overdrive.
So now you're paying €1200 in rent instead of €800 in mortgage payment - for the same property.
Banning buy-to-let would result in a sale of the properties currently being rented out - which means a drop in the housing price. Rental supply will drop, but those houses don't magically disappear! People who previously were unable to get a mortgage can now suddenly afford to buy instead of rent. This lowers the demand for rentals, which decreases rent.
People don't need landlords - they need homes. With the exception of a very small number of short-term rentals, landlords provide zero value. Removing them from the equation decreases the prices for everyone.
If "rental supply drops", that means the people who own apartments they don't live in won't let them out. If they don't let them out, they're subject to the anti-empty-apartment laws.
No, the owners who are grandfathered in rub their hand in glee, as over time only own-to-occupy buyers are allowed, thus the supply of rentals goes down and rentals become more expensive, thus making their rents higher and more lucrative.
The answer is to reduce the centralization of jobs and other factors that cause everyone to want to live in Amsterdam, e.g. building out Lelystad or Buitenveldert. To a certain extent, COVID and WFH has started doing that.
I lived in Amsterdam in 1999 and house prices there seemed quite reasonable to me compared to Paris where I was coming from, but of course many things may have changed in two decades.
> The answer is to reduce the centralization of jobs and other factors that cause everyone to want to live in Amsterdam
Obviously I'm not against that happening but it's not either-or.
> but of course many things may have changed in two decades.
Oh, you have no idea. It was hard to even get the owners to get back to you, because they'd already accepted an offer; and I was being asked for 1,500 EUR - 1,650 EUR/month for a bedroom+living room apartment. And while that wasn't in Diemen or Bijlmer, they weren't in posh super-central locations.
The problem is that there can be NO new rentals on the market, because you can’t buy a home and rent it out. If someone is renting out a property and then decides to sell it, that is one less rental on the market that can’t be replaced. Any house that is bought can’t be rented out ever, so there is no new rentals.
The Netherlands is just too rich that it is working against itself. We have created a society where every person wants their own house- 17 million people 10 million houses. And the Netherlands is a magnet for migrants- compared to most of the world the streets are paved with gold.
And no matter how much the prices go up people can and will pay. Unless there's a mayor economic recession things will not get better.
Wait, you’re making it sound like this is an obvious case of not enough supply — which could potentially be solved by building more homes! — but in fact, it’s the total opposite: the average Dutch household has 2.14 people, so that’s 8 million households vs. 10 million houses! (I assume this is overwhelmingly folks who want to live together: partners, kids, etc., not just folks who can’t afford to live alone.)
Sounds to me like there are 2 million extra houses, not 7 million missing ones.
So what, exactly, causes the problem? Presumably, those 2m extra houses just aren’t in the right places?
People pay because it is still the best choice for the non-financially-savvy to secure their net worth given the policies our government has made the past few years. Someone else already explained how renting costs way more, and people would argue the break-even point for renting vs buying is only about 1 to 2 years. That's without taking into account all the restrictions landlords are putting up.
Once you get past the hurdle, banks give you insane amounts of money to buy these insanely priced houses with. And due to the low rent, you're not that much worse off than 5 years ago. Since no one who buys a house today wants to end up losing out, many homeowners will vehemently oppose any measure which could make the prices sink, so more borrowed money, so even higher prices as long as there isn't a suitable alternative (cheaper/affordable and easy to attain rent).
Your first point is a misleading anecdote given there's actually data on this. The amount of empty homes in London is at a historical low [1]. Broadly, cities with the highest amount of empty homes tend to have the most affordable housing, because obviously that indicates there's more than enough housing to go round.
> The Square Mile has the highest percentage of empty homes in the entire country, fresh data states.
> Some 42.4 properties per 1,000 sit unused in the City of London, leaving it top of the charts and the only London authority to feature in the nationwide top 10.
> Data compiled by insurer Admiral also shows that as many as 29,242 London homes have been unoccupied for at least six months, to a collective value of roughly £15 billion.
That's because real vacancy (as in, untenanted) only makes up a small percentage of the empty houses. The rest are owned by wealthy foreigners who reside there a few weeks in the summer and leave it to the care of a caretaker (who does not live there of course) for the rest of the year. Some of the obscenely wealthy may even have a live in concierge who lives in his own rooms keeping the rest of the house ready for its owners all year round.
> walking back to hotel at night, only about 30% of houses had any lights on.
I wish a data scientist at utilities (water, electricity and gas) providers pick up this line and provide some statistics on this. I wish also that city-services companies (e.g. Electricity/water/parking service provider) can collaborate to provide better and justified policy making.
I did similar studies based on open data to provide insights on road/sidewalk optimization usage, and I still see value in collaboration with policy makers.
Pirates tried to investigate the situation from this angle only to be publicly shamed for being commies, spying on people. They only wanted district aggregate statistics.
Punitively heavy land taxes on non-primary dwellings solves this overnight. It also raises a lot of capital that can be used to provide services in the area.
Unfortunately the wealthy tend not to want to be taxed and they're not averse to fighting back. They've learned that they need to lobby even small local tax-raising authorities to obstruct these kinds of actions. In Wales, local authorities are allowed to raise a local tax premium of up to 100% on holiday homes [1], but few, if any, charge a premium of more than 50%, even in affected areas considered to be in crisis. There's also a loophole that a second home can be declared as a holiday rental property business, without any real intention of letting it out. Welsh authorities work hard to police this by asking to review evidence of lettings (I know this as I own a legit holiday rental property in an affected area) but the enforcers need extra funding to police the tax dodgers.
I don't dispute your underlying point that punitive taxes are a big part of the solution, but I take issue that it's an easy or overnight fix unfortunately because of the interests aligned against imposing them.
The fundamental problem isn't that investors vote against land value taxes. The problem is that the small homeowner doesn't want to pay them either so he will vote for the benefit of the investors.
Yes and no. Yes, your proposal can solve the problem for sure. No, you just can hardly implement it anytime soon.
I'm in Australia and Labor lost last election just because they were swearing to remove so called NG(Negative-Gearing, which allows the property investors to offset their income with losses from investment property) before the ballot day, despite NG itself is actually a bizarre idea: why would tax payers cover the asses of the property investors and what's more, in fair amount of NG claims, the so claimed losses were not actually rendered but rather losses in accounting term. If you opt to a different accounting method, they were actually making a profit.
So your proposal will for sure hurt those vested interests, and I would expect it be very hard to pass the parliament. It's great to see Dutch cities actually made that far, I'll keep my eyes wide open to see what's next for them.
You made negative gearing sound so bizarre, but it's really just business investment deductions, which applies to every type of investment, not just real estate.
If your business made a loss, you get to deduct that loss from your revenue, before getting taxed.
This is the exact same concept, but applied to investment properties. As for the "dodgy" accounting methods - it's not really dodgy, but merely depreciation of the property at play. Depreciation is real. After all, a house doesn't last forever, so why shouldn't depreciation be allowed for investment properties when it is allowed for all other business capital expenditure?
People like to argue that by taking away negative gearing for property (i.e., treat it differently), that it would increase affordability. It won't make a big difference.
> Round here in Cornwall the jobs are things like surf instructor, supermarket worker, barperson, etc. That's not gonna stretch to the local house prices.
That was the case. A colleague of mine, originally from St Just, moved to London for work as so many have to do. Another from near Cockermouth did the same. Both now work remotely full time from their 'home towns' on decent wages.
Covid has done wonders for local communities - good jobs are now available for people without having to move across the country.
https://www.rightmove.co.uk/properties/112353359 for example is under £300k. Assuming you got it for 300k (asking price is 285k) with a 15k deposit you're looking at £1,278.19 a month with nationwide on a 30 year rate, well within the range of a couple earning £35k each, which is a reasonable
Now sure if you didn't get the education to get a decent job. Hell even on 25k each, Nationwide can lend upto £275k for a first time buyer - just need that deposit.
For a small village of less than 5,000 people nowhere near any sort of city or population centre, this seems like a lot. £1,278/month is well outside the range for a lot of working class and even middle class families. The median gross salary in Cornwall was £27,223 in 2020.
I'm baffled by your comment to be honest; not very long ago I could buy a house in Bristol for the same or less.
> For a small village of less than 5,000 people nowhere near any sort of city or population centre, this seems like a lot.
Not really, people want to live there, and can now live there while working in a decent job, raise a family, send kids to school, etc.
Without remote work, villages like that are meaningless. Communication and social changes caused by covid have allowed people to actually live in remote villages.
> For a small village of less than 5,000 people nowhere near any sort of city or population centre, this seems like a lot.
Not really, people want to live there, and can now live there while working in a decent job, raise a family, send kids to school, etc.
Without remote work, villages like that are meaningless. Communication and social changes caused by covid have allowed people to actually live in remote villages.
House prices have shot up since the mid 90s as they become more affordable. A new 3 bed home in say east anglia is more affordable now (compared with median wages) than it was in 1980, despite being far far more expensive to buy. That's because
1) Most households have two incomes rather than one
2) Interest rates are much lower
House prices rise to the level people are able to pay for them. Remote work has allowed people to live in villages like St Just and continue in a decent job, which is great. Before it was mainly retirees and holiday owners, neither of which were good for the area.
Median post-tax household income in the UK is £30k. So, £25k each is roughly £20k post-tax, so you're looking at the top 30% of households.
Admittedly this includes households including people who are "retired" but I think that's reasonable as plenty of people have to keep working even though they're receiving a pension.
> Now sure if you didn't get the education to get a decent job. Hell even on 25k each, Nationwide can lend upto £275k for a first time buyer - just need that deposit.
This horrifies me. Even the slightest increase in interest rates will ruin a huge number of home owners.
On the other hand, home ownership in the UK isn’t normal either. It’s only since the 50s or perhaps 60s that the average person has been able to afford a home. And then again in the 80s with council houses sold off to tenants.
Usually mortgages are a fixed rate for the life of the loan (usually 30 years) -- at least here in the USA. Variable rate (eg "ARM") mortgages are also available but are less common and mostly used for short term flipping and the like, for the very reason you say -- nobody wants to risk a rising payment due to rising rates.
Is the situation very different in the UK? Do Britishers actually prefer variable rate mortgages for some bizarre reason?
Edit: I did my own research and was shocked to find that in the UK it sounds like variable is indeed more or at least as common as fixed and that even fixed tends to be fixed only for the first 5-10 years!This is the opposite of the US, where I know someone on a normal middle class circumstance who just secured a 3.25% 30 year fixed mortgage, and this is extremely common right now if you have good credit. Even the "scary and risky" variable mortgages in America are things like a 5/1 ARM which is fixed for the first 5 years, which sound like they'd be relatively low risk for the UK!
I am baffled. Is the great advantage for the American homeowner simply due to the wages of empire, ie dollar supremacy? Federal policy favoring homeowners? Or what? I did always wonder how banks could afford to provide such a good deal.
This is a vast difference really worth wondering about; I hope someone has some insight.
A lot of things in the UK are set up essentially with the notion that you shop around as much as you can to get the best deal, but it extends to credit cards, utility bills, internet, your mobile phone plan, etc. and not just one-off purchases.
You have little to no incentive to stick around as a long-term customer when there will be a fresh new deal enticing you to switch whenever your last contract expires. It's often more expensive not to switch as there's no benefit to being loyal to an energy or telecoms firm.
This arguably extends to mortgages too.
At the root of it all is that there's more competition between these elements and legislation has forced businesses to make it easy to switch providers at no cost. Anecdotally, I've been through three different ISPs in as many years in order to keep my internet costs down.
That doesn't directly address the question, it just highlights a mindset.
Fixes in the UK now are typically 2, 3, 5 or 10 years, certainly not life of mortgage. Idea is that prices increase and you repay the mortgage and you remortgage onto a better rate (so start with 90% 5 year fix, after 5 years you've paid down to 85% of the original value, but value has increased so you now remortgage onto 75% LTV which is a lower rate than you would have on 90% LTV as it's less risky.
Mortgage rates in the UK are far lower than 3.25% though -- 80% LTV on a 10 year fix with nationwide is 2.8%, 2 year fix is 1.54%.
Drop that to 60% LTV and 2 year is 1%, 5 year 1.1% and 10 year 2%.
It all falls down if rates were to shoot up, or house prices were to shoot down. The UK government traditionally protects house prices like the US government protects the S&P though. A house price crash is bad for polling.
Uk banks offer a wide range of mortgages. Interest rates used to be set by the government rather than the Bank of England and were a political tool until the late 90s. That added to uncertainty and pushed people to fixed mortgages. Then the era of low interest rates arrived and people were locked in to high fixed rate mortgages which had a fee to get out of.
Now there are Australian type mortgages, basically repay as quick as you can, that are variable rate plus X. Or fixed and floating, or pure fixed. It generally depends on your personal position.
Most of the ARMs were sold with very little downward adjustability. With rates at historic highs, the ones I was seeing when mortgage shopping in 2006ish consistently had wide open upward adjustment and one 0.25% step available of downward adjustment to their minimim rate from the initial rate.
The bank wasn't taking much risk on the adjustable rate.
I mean the risk the banks take today offering a fixed 30 year note at a very low rate, if there is significant inflation or rate increases anytime soon. It seems like a very good deal for the buyer right now and for the last decade.
Having lived through the 70s and 80s, the last 30 years have been relatively stable by comparison. But different. Zero interest rates, ERM, and QE, versus inflation, stagflation, currency devaluation, decimalisation and the winter of discontent. I can wait to see what black swans we get in the next 20 or 30 years. My point being really, the classic finance phrase, past performance is no guarantee of future performance.
The real problem is how much the bank earns off the interest it charges you throughout your life while it had to do what?... create new money from nothing into the money supply with special permissions given to it by the government. This is why housing is so expensive to begin with. This bullshit needs to stop.
Well, I personally think that the banks profit margins are way too high but let me explain why they deserve to charge a profit in the first place.
We can make promises to each other. Essentially write debt contracts to each other at no fee. The problem is that we trust each other but if we want a more complex economy than a barter system allows, then we need to make it possible for a third party to trust the debt contract. Through the introduction of banks as middlemen they use their resources to check how trustworthy the debt contract you offer to the bank is. In exchange you get money, which is a liquid claim on your debt contract and thousands or even millions of other debt contracts. Thus the bank is primarily in the business of managing risk and the management of risk demands a net interest margin. If the bank didn't make money off of loans then any bad loan would lose the bank money and it would go bankrupt over the long term. In other words, the surplus profit that the bank made off your loan is its reward for correctly managing risk.
>This is why housing is so expensive to begin with.
Or it could be that housing is in high demand and banks offer financing so people have more money but since location is a monopoly, supply never catches up with demand in popular areas. Speculators themselves simply predict that there is sufficient demand for you to be willing to bay $400k for a house. Speculators didn't create that profit margin, it is the monopoly of land that created it and they merely exploit it.
Banks don’t get to create money. Quantitive Easing isn’t something banks can call up on demand and it isn’t banks getting loads of free money. Instead they sell certain slightly risky assets to the government at a slightly higher price than they would be worth without QE. This small price difference is the free money but the bigger difference is that the banks have more liquid cash to use for e.g. making loans.
I think mortgages are pretty competitive, especially for reasonably well-paid people and there isn’t really that much profit made by the banks (your interest corresponds to inflation and the risk that you default on your loan with the house price having fallen.
Money today is worth more than money in 25 years and you have to pay the difference.
Literally every loan a bank gives out is mostly made up on the spot, everywhere in the world.
In some countries, banks are subject to reserve requirements — typically from fractions of a percent to some percents of their liabilities to depositors. Basically: banks need to cover the savings of people.
In the UK (and many other countries), this is not the case; banks are not required to have cash on hand in relation to their liabilities to depositors.
Instead, they are subject to capital requirements, which means they need to have sufficient equities (cash, securities, other financial instruments) with sufficient liquidity in relation to their risk-weighted assets (credit and loans). In effect: banks need to cover the investments of the investors.
Well, if we want to use correctish terminology then banks grant credit (the number on your bank account) when debtors offer a promise to pay (the debt contract).
I've wondered lately, since the government backstops both banks and mortgages, shouldn't it just cut out the middleman? It could either give cheaper mortgages or use the difference as tax revenue.
There's this weird brain worm from the 1980s in a lot of western democracies where everything government does has to be bid out to companies and driven by profit motive under the theory that it produces better outcomes. It doesn't seem to be working after decades of this experiment, but people keep trying.
I don't get how people can keep saying this. Is it that people are told banks lend out money from depositors in school?
Anyway, if you sign a contract that says you shall pay me every month for 30 years OR ELSE I get to sell your house (and whatever else you own, seize your income etc) then the document with your signature IS the value created and I can sell that document for what it is worth.
So the bank creates money not entirely out of thin air but against this contract.
This is a fantastic deal for them as there is almost no risk.
The seemingly few percent interest per year over 30 years quickly ads up to 2 or 3 times the initial sum.
I suppose this would be a reasonable amount roughly around the point where 3 out of 4 houses and the ground under them would just vanish in thin air with their owner stopping all payments after about 5 years on average.
The reality was that some people still had to pay rent for their flooded home.
So we are all suckers for putting up with the scheme, welcome to the club.
The system makes some sense because your fiat isn't completely worthless paper as many people think but there is something missing. It's that promises inherently have a tendency to lapse so we artificially introduce inflation. Well, the problem with inflation is that it requires you to borrow more money so you replace the lapsed promise with an empty promise that is bound to lapse as well. If we were truly serious about letting promises lapse then we would consider having negative interest rates rather than inflation.
Rather than have 0% interest and 2% inflation there would be -2% interest and 0% inflation. Less need for endless debt growth and government stimulus.
>>Charging 0% interest means the bank is losing money.
> I don't get how people can keep saying this. Is it that people are told banks lend out money from depositors in school?
They don't? Where is the money from? Due to complicated reasons (ie. bundling mortgages into mortgage backed securities and selling them), it might not be the case that the mortgage issued by Bank A is funded by Bank A's depositors, but it is the case that it's funded by depositors/investors somewhere.
From a technical perspective you need deposits but from a practical perspective deposits never leave the system except in the case of a bank run where everyone tries to withdraw their money. If we assume a cashless system then banks can never run out of deposits and deposits never limit loan creation. Saving doesn't increase the number of deposits, it just shifts them around. Borrowing money increases the number of deposits.
However, saving does have one important function. It creates a hole in the economy and that hole can then be used for investment spending (motivated by a borrower taking on a loan) without causing inflation.
>If we assume a cashless system then banks can never run out of deposits and deposits never limit loan creation
...except for reserve/capital requirements, right?
>However, saving does have one important function. It creates a hole in the economy and that hole can then be used for investment spending (motivated by a borrower taking on a loan) without causing inflation.
In other words, capital isn't free as the parent poster suggests.
Note, this targets anyone buying houses to rent out. It does not (like london considered) tax un-lived-in houses.
This is just a weird bandaid. Mostly trying to blame landlords for this housing crisis when mortgage tax credits, and scarcity due to weird eco regulation shenanigans are to blame.
The eco regulation shenanigans is about nitrogen emissions. They are limited by European regulations near protected areas.
The government ignored and worked around these regulations for a long time. Then environmental parties sued, and we were so far above the limits it was essentially ruled "no more emissions". Whilst building new houses causes a decent amount of emissions. This meant that country wide, getting building permits became almost impossible.
This contributed partially to our current housing shortage.
I moved here years ago and was having doubts if it's the right time to buy at these insane property prices. A coworker said "I know some people who've been holding out for fair housing prices since 1949, they are still waiting".
Anyone remember Fair Rent tribunals in the UK? Abolished by the Conservatives in the late 80s along with higher education grants. The 70s and early 80s were a golden age for more than just music.
Vacant properties in London are a red herring. Last time I checked official number they accounted for 1% of the housing stock, bearing in mind that a number of properties are always being refurbished at any given time. In general it does not make sense to keep a property empty unless perhaps it is an extreme luxury one.
South Kensington is one of the most expensive area of London and not representative at all. Whatever happens there does not affect the average person, and quite of few of the grand houses there are also actually offices.
In any case, it is not true that 30% of homes are empty there. Apparently the City of London (i.e. the square mile, not London as a whole) has the highest rate in the country and that is still only about 4% [1].
In Cornwall the issue is quite different: The area is very attractive for second homes and, at the same time, it is the second poorest region in all of Northern Europe. This means that local resident have a very low purchasing power and indeed cannot compete with people from London and the South East. I think that they are starting to implement restrictions in some areas in order to give priorities to buyers who will occupy the property as their main residence in order to keep second homes in check.
The median price for a property in London is £600K, the average is over £1M today.
That means that normal people cannot afford to buy anything in London even with HTB which is a terrible policy the people who can afford to use it are already in the top percentiles.
A £600K property as a first time buyer requires you to have about £100K to get on a property ladder.
10% deposit for a 90% LTV mortgage is £60K, stamp duty is £17,500 (£20K from end of Sep 21) that’s already ~£80,000 then you have mortgage fees, legal fees, furnishing costs (since new builds don’t even come with blinds)…
The average salary in London is £41K, that leaves you with take home pay of about £30K after tax (if you have no student loans).
So a house hold of two people living in London has about £60K per year if both earn the average pay, £25K or more of which would go to rent per year, another £4000 will go to various utility bills and council tax, another 5-5.5K would go for travel (assuming you live within zone 1-4), then you have food, clothing and other living expenses, so if you are somehow lucky and can save up £10K per year that’s 10 years to save up enough for a median property which is most likely a 54 sq/m flat.
Add kids to this mix and well you are royally fucked.
Why is it reasonable to assume that people earning an average wage should be able to afford a home in the most desirable city in the UK, and one of the most desirable cities in Europe if not the world?
I mean, nobody complains in the US if the average family can’t buy a home in Manhattan. That’s just unreasonable.
The idea is that two people on an average London wage should be able to afford to live in an average home in London. The truth is they can - if they can get the deposit together (which is trivial if you have parents you can live with for a couple of years, but if you've moved to London for work and your family lives 300 miles away your deposit savings go on rent). Perhaps they can't live in the most desirable parts of Chelsea, but there are affordable houses in the London area for a couple of 41k each.
Personally if I had to work in London, I'd look at buying a 2 bed house somewhere like Leighton Buzzard (30m Euston), Gravesend (22m St Pancras), Tonbridge (35m London Bridge), for about 250k.
> even with HTB which is a terrible policy the people who can afford to buy are already in the top percentiles
What a load of rubbish. HTB really helped us when buying by giving 5 years of interest free
We bought a 240k house with a 12k deposit and 48k htb. Moving costs etc meant we had to find about £17k, which we borrowed.
Assuming you do that now, HTB means paying £647 a month on the mortgage and £330 a month on repaying the deposit. Total of £977pcm.
After 5 years we sold for 240k with £48k htb and £160k mortgage, leaving us with 32k in equity. We could have remortgaged and repaid the htb at that point for a total outlay of £911pcm (with about £500 in fees)
With two earners on a middle 28k a year that's falls into well into the "affordable" bucket.
Even in London, a 600k house with htb will mean a £30k deposit (a problem) and a £330k mortgage. Two people on 41k each can borrow up to £368k with nationwide which gives an idea about affordability (you'll have to knock some off for things like service charges which are ubiquitious in new houses)
And 41k a year with a coalition loan means you have £30,310.51 per year after student loan, not before. If you still have a labour loan from pre-2012 you'll be paying an extra £600 a year.
All that's assuming a 600k loan. Reality is that help to buy homes aren't that expensive. This is a decent sized 2 bed flat for £375k.
Personally I think you'd be crazy to live in London when there are far more reasonable places to live just half an hour out of a one 1 station and far far less cost, but it London is affordable for people with two London incomes.
If you're single on minimum wage and wanting to live in central London? Well tough. Move somewhere else. Plenty of choice for houses in Crewe and Stoke, and plenty of minimum wage jobs.
HTB is a disastrous policy that did nothing but to increase the prices of properties.
People could borrow much more than they could because the government covered 40% in London and 20% outside of it.
Look at the new developments in London, the price is well just under the HTB limit for the handful of HTB flats, then there is the shared ownership racket too.
And commuting towns aren’t that cheaper either, and that is even before you account for the insane costs of rail passes.
HTB has definitely increased the prices of HTB eligible properties because they realised that buyers could afford a bit more w/ Gov assistance and so sellers are squeezing people for it.
Really, HTB should not have had a restriction on new builds. It's laughable because the restriction would make sense if the Gov was allowing anyone to actually build new properties.
I think you're FYIGM'ing. Idk where you're finding these decent 2 bed "houses" (I think you mean flats) in London for "250k". Hell even a 2 bed flat is mostly around the 350-400k mark in most of London, unless you want to raise your family in Croydon or something lol
It’s not that buyers could afford a bit more, buyers could afford essentially to pay double in London.
This isn’t because of the deposit but because HTB essentially allows you to buy a property for double the price in London.
Most people couldn’t afford a 500K property not because they can’t save up £50K but because they won’t have a salary north of £100K for the bank to loan them the rest as lenders cap the loan amount at 4-4.5 times your annual salary.
So now people that earn £50K can buy a property that only people that earn £100-120K could regardless of their deposits.
> It let me buy a property which I wouldn't be able to without HTB
Possibly you're taking the wrong counterfactual here?
"If I hadn't HTB but everyone else did" vs
"If no-one had HTB".
It's possible you're quite right about the first, but it tells us little about the second. Possibly in the presence of HTB, prices just rise again until they reach their equilibrium of just-barely-affordable.
House price doesn't matter, it's the deposit. HTB may have pushed up the house price by say 30%, but it meant the deposit was lower (12k rather than 18k) and the repayments were lower for the first 5 years.
House price does matter. End of the day with the bump-ed up H2B house prices...sure you can afford it w/ lower deposit thanks to gov assistance...but it's not free money. You still have to pay it back, so the seller is making an extra 30% of our backs bc they bumped the prices thanks to this scheme that was meant to "help" people.
People don’t pay them back no one can pay back 40% after 5 years assuming they bought in London.
If they do pay it back they do it by remortgaging so the builders win, the banks win, the tax payer pays for any HTB loans that aren’t repaid and the tax payer gets shafted with higher housing costs.
The deposit doesn’t matter, what matters is the total loan amount.
For a £500K flat you need a £50K deposit but you also need a household income of £100K or more to be able to borrow £450K as banks cap the maximum amount they’ll loans at 4-4.5 of your annual income.
So HTB didn’t only increase the prices it also pushed people to take on loans that they normally would not be able to afford.
For 250K you’ll find shitty property that would require a 2-3 hours of daily commute that will cost around £5000 annually per person working in London…
The problem with HTB is that it sustains inflation. Essentially it subsidises continued property prices' growth, which, in my view, is rather nonsensical economically.
As for saving for a deposit, I think an issue is also that many people seem not to have been educated about the benefits of saving at all. Bluntly, many young people I see find the money for short term consumption and don't save anything.
When I was young my outgoings were mainly the cheapest rent I could find. And maybe a slice of avocado toast once a week /s
This is because rents rise to the amount someone is willing to pay, which is basically what they earn, because they have to live somewhere near work. If they get free board then they can swiftly build up savings and buy a house and continue the cycle of wealth. If they have to pay, they're screwed.
Only issue with those is the c2c and great western thameslink etc for a season ticket (to get into London for work) you're paying (for that first property in Grays): £3,872.00 per year (includes tube travel) since domestic rail prices here are just ridiculous (lowest subsidies per passenger mile in all of Europe)
Also, presuming you don't work at Fenchurch Street, the commute would be anywhere from an hour (to Fenchurch street) to an hour fifteen minutes (nearbyish tube stations).
That is a complex problem, though. The main issue is land investment that effectively prevents or greatly limits potential new construction. With new construction thwarted even modest growth over time causes extreme prices per unit.
Preventing properties from being treated as bidding chips or bonds issued this could greatly improve the situation, but without addressing land use and land banking then the lack of new construction will continue to unbalance property markets.
Similar situation for York -- tourist hotspot, a large chunk of the local jobs in tourism/customer service, retail, food service etc.
Article in the local press in the last year (which I obviously can't find now) found that something like 95% of the properties on sale were unaffordable on the median wage of a local resident.
And then you get articles like this one: https://yorkmix.com/york-is-the-norths-property-hotspot-as-i...
Funny thing is, this article happens to be a total submarine -- I recognise the development they're describing, it's been there for years and has not sold well (totally overpriced) -- this article and others like it are just an attempt to drum up further demand.
Really frustrating that when we have so many people needing housing, homes are built entirely with the objective of selling them to people who already have homes elsewhere!
First houses should have priority over second houses please.
Let’s fix a housing crisis by having houses be used.
I doubt this is the magical unique problem everyone claims it is, but “oh no think of people’s investment” when people are sleeping outside is valuing property over people.
Housing vacancy is essentially a red herring when it comes to the housing crisis. Vacancy rates are still low overall, and reducing vacant housing would barely make a dent in the issue. The real issue is that there isn't enough supply for a given level of demand (i.e. how many people there are who do or would like to live there). Cities have added way more people than they've added housing units over the past several decades.
So would you say the same applies for property which is being underutilized? Throw out the rich people living in 5 bedroom houses? Throw out the grandmas living in the house they once had a family and children in? Mandate minimum number of persons per square foot?
It's not uncommon for cities to pas laws that aim at the reduction of unoccupied spaces amid housing crisis. Actually, most European capitals do this either by raising taxes on empty housing or by partially legalizing squatting.
Londongrad is an exception to what is otherwise a rule.
Houses that are vacant for a long period attract higher council tax in London and the whole of England.
Of course you may argue that the difference is small in relation to multi-million pounds properties, but that is a more general issue with the council tax's range.
Wages have been stagnant for decades while the cost of living has increased... and now housing has become a privilege.
Yes, there are "rich foreigners" and some corporations are strategically acquiring the places and spaces where high rent can be extracted. But what has driven housing cost in the market of individual homes is simply that some citizens can afford to borrow at low rates, and other citizens are seizing the opportunity to realise gains that they could not attain through a lifetime of work, wage increases, and other investing.
It is grim to work for years and have nothing else to show for it.
Young families, workers, the elderly, and the poor will be unable to afford even tenancy in the big cities. (To turn dark for just a moment, we only really seem to have a plan for the elderly.) The future control of crucial urban voting-blocks in Western democracies will be in the hands of landlords.
The governments are to blame. If conventional mortgages were capped to 1 per person. And a minimum of 80% ltv was required. Then houses would be cheaper.
Instead the government is letting people put low money down, low interest rates, and buy up many houses at once. That of course inflated housing costs.
Yup, things like buy 2 let should've been banned in London & areas around London a long time ago. Hell, ban b2l in all of the UK until everyone that wants their first home has one.
1) Visiting London and spending time in South Kensington - walking back to hotel at night, only about 30% of houses had any lights on. Suggestion is the others are effectively uninhabited, and a search on RightMove shows properties sell for £20-£30m for a 4/5 bed. This isn't normal Londoners, it's outside investment.
2) Cornwall, where I live - an insane house price rise over lockdown as city dwellers aim for the beautiful bits of the country. Literally no way now you could afford your first home round here on minimum wage, and some towns have a high (>50) % holiday or second homes.
It's an untenable situation. I think my generation (I'm nearly 50) are probably the last to be able to afford their own home on anything other than a massive wage.
Round here in Cornwall the jobs are things like surf instructor, supermarket worker, barperson, etc. That's not gonna stretch to the local house prices.