House Price Rises Capped at 5%

there seems to be an attitude in this country that people have a right to own their own home through means of a mortgage.

i'm curious as to where this has come from. people under certain circumstances will be given social housing, people with their own rental agreements may also be subsidised but to actually get a mortgage is not a right at all, it's something you will only achieve by having the funds to do so. you don't have a right to own your own home, it has to be worked for.

i agree, the prices are inflated and the banks are very cautious but it is highly unlikely you will ever make a bigger investment in your life and this obviously comes with certain conditions, being able to afford to get on the ladder in the first place being one of them.
 
LOAM said:
So when you come to sell, are you going to ask it be placed on the market at vastly below the market value for your property or are you going to hold out for every last penny ?
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The next rung on the 'ladder' is way out of my league. I'm stuck here for life. :-)

But that's a separate issue. The issue is that BTL is subsidised by the taxpayer. That fundamentally unbalanced the market and has led us to where we are today.

Put MIRAS back to help level the playing field, or stop those buying homes from getting tax relief on their expenses, including mortgage interest.
 
Andrew_McP said:
The next rung on the 'ladder' is way out of my league. I'm stuck here for life. :-)

But that's a separate issue. The issue is that BTL is subsidised by the taxpayer. That fundamentally unbalanced the market and has led us to where we are today.

Put MIRAS back to help level the playing field, or stop those buying homes from getting tax relief on their expenses, including mortgage interest.
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I'm not entirely convinced that removing mortgage interest from tax relief would help, landlords would simply pass that over to the tenant and "your" rent would go up even more.

MIRAS was touted as a means to re-kick start the stagnant housing market several years ago would likely lead to further increases in property value in the long run as it frees up even more disposable income which inevitably would end up back in the housing market.
 
Fulax said:
They wouldn't be 'expected' to make mortgages harder to get. The BoE would restrict them. That is, a public body would regulate the activities of private institutions and individuals. That is, they would meddle with the free market.
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Only if you consider regulation of the banks to be 'meddling in the free market'.

The credit crunch has already shown not just that banks cannot regulate themselves responsibly, but also that the country cannot allow them to fail. If you have a situation where an institution is not allowed to fail (because the implications are too severe for the entire country), then that institution is already out-with the bounds of the 'free market'.
 
LOAM said:
How is this a benefit to anyone ? It would just stagnate the housing market for everyone other than the minority that don't need a mortgage.
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No, it just means that banks lend to people who borrow most responsibly and who are lowest risk.

It isn't about stopping lending completely, it's about trying to lend in a way which creates 'stable' growth and hopefully prevents the boom bust cycles that we've seen in the past.
 
Only a madman would try to stem housing market growth by restricting supply in a system that is already supply starved. There are infinitely better methods to limit spiraling values than preventing people from getting funding in the hope that current vendors start reducing asking prices. It simply wont happen, the housing market would just stagnate and as we all know its the first to go and last to come back, with a world of pain between.
 
unless they are going to build more cheap affordable houses for people i think it's a good idea

lets get back to the basics of what housing is for a lot of people, somewhere to live, not for profiteering
 
Cruiser said:
unless they are going to build more cheap affordable houses for people i think it's a good idea

lets get back to the basics of what housing is for a lot of people, somewhere to live, not for profiteering
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But who are going to provide / produce these house's without profiteering?. Why aren't you out there now building houses in your zero profit company, come on lead by example!
 
If you buy a house in the peak and then it crashes to 1995 levels (which is unlikely because there is just such high demand for house prices, but not impossible). It would make sense to continue paying off the mortgage and just hope that house prices rise again be it 10-30 years time. If you sell for less, not only would you lose your deposit and anything you have paid in to the house since you bought it, but you might find yourself in position where you owe the bank money and have no house. That is why some people just walked away from houses in the states when they had the crash in 2008, just declared bankruptcy.

If you have an interest only mortgage or normal mortgage and say its going at £800 per month. The interest rates rise and your house value drops, you could be paying in £1200 per month for example, when if you rented the same house on the market you could be getting it for less. This is what happened in the states and why people just walked away losing their deposit.

The banks like the high prices as they can get everyone in debt, what they don't want is a crash because they could be left out of pocket as people walk away the benefit is they still have the house (asset).

But the uk and us housing markets are very different in many ways so i can't see it being affected as bad. If we could increase supply and decrease the population (which is unlikely) then we could see a house drop back to 1995 levels which imo is about right for houses relative to salary and everything else in the economy. With immigration very high and a very high expectation of a standard of living, even for the poorest in society over the last 30-40 years has put more strain on the limited housing stock that is available.

Not to mention all the problems the governments creates by running council house schemes and having the key worker status. These further distort the supply and demand of the market. Also the restrictions on deveopment and development always comes with strings attached like 20% have to be X and 30% have to low cost. In free market developers would make the best properties they can and make the most money, this would naturally allocate resources adequately. As more high quality houses go on to the market, the what was high becomes the new normal and what was normal because the new low. Instead they purposefully build low end housing and as a result there is no middle market in the housing market. You either have out of reach expensive properties or low end shoeboxes that if not eaten up by council they are not worth the money.
 
Cruiser said:
unless they are going to build more cheap affordable houses for people i think it's a good idea

lets get back to the basics of what housing is for a lot of people, somewhere to live, not for profiteering
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One sure fire way to do this is to block house purchases from outside the UK, it may be a terrible idea and or impossible to police however I'd say 60% of London 'premium' properties are being bought up abroad with the sole intention of renting them out, pushing up demand and prices so that your average UK resident can't afford to buy in these areas and are destined for the wealthy.
 
Oh god, now you two have done it. Can open, worms everywhere!


This thread is now about immigration (I suppose it had to happen eventually) :p
 
maccapacca said:
What on earth has what I said got to do with immigration?
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It lead on from groens post which (in part) cited it as a reason for an inflated housing market. It was relevant with you mentioning preventing foreign investment. Either way it was meant lightheartedly and not as a slight.
 
Haircut said:
I don't think anyone's saying they would force you to sell your house for less.
Carney has talked about forcing banks to increase their reserve ratios so they can't lend as much money for mortgages.
As that's the main factor for house prices rises it would naturally dampen the market without 'forcing' anyone to sell for less.

House prices in this country, especially London, are frankly crazy and I don't think it's healthy to see them go up much more from where we are at the moment.
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As someone who is selling their house currently, I can state that the Estate Agents either have no clue, or are manipulating the market/s.

We were quoted from 6 different estate agents whom the price varied £25k between them.

We ended up listing at the lowest price (thinking it realistic). We received interest from only rental portfolio collectors.

We shifted the price up to the highest price, much to the disagreement of our Estate Agent who said we were committing property suicide, and it was under offer within 3 days from a first time buyer couple.


I've checked out the first time mortgage offers, and find that my own personal limits on mortgages wouldn't even allow me to take a mortgage out on my own house (about £100k short). I don't know what sort of job, or deposit FTBs need, or their jobs (must be a requirement to be a CEO), but the markets are expensive.


Saying that however, there are some absolute dumps for sale for obscene amounts of cash, in poor areas of the country. If new sellers see these, and set them as the precedent, then house prices will continue to increase. The solution is for the crap houses which are overpriced to be correctly put in line with their area, facilities, and particulars, and not just a brainfart of a greedy amount.

For example, I currently live in the most expensive area of my county (with doctors and other professionals), yet the poorest area of the next county (about 2 miles down the road - full of council estates and trouble) is at least £75k more expensive than ours. For some reason, a county has more determining factor control on the price than the specifications, location, footprint and grounds.
 
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Well for perspective on the foreign ownership of housing point. Arabs in the middle east do not allow non arabs to own land or own a business. Foreigners can purchase flats (but on a long term lease like 99 years) they can own a business but they have to have an arab business partner. I am not saying we should go to that extreme. But limiting foreigner from purchasing land especially when they have no plans on living in it themselves would not be such a bad idea.
 
krooton said:
I'd say 10%, 5% doesn't offer much over other investments.
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At what point did buying a house become an investment?

Houses are places for people to live in the same way cars are for people to get to work

Personally I think its a good thing, house prices should be brought into the cost of living either through rpi / cpi having somewhere to live is by far more important than the inflation on usb thumb drives and cat litter
 
LOAM said:
Only a madman would try to stem housing market growth by restricting supply in a system that is already supply starved.
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The proposal would aim to reduce demand, not supply.

LOAM said:
There are infinitely better methods to limit spiraling values than preventing people from getting funding in the hope that current vendors start reducing asking prices.
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This isn't about reducing asking prices, it's about stopping the situation where people would offer 5, 10, 15, even 20% above asking price, because borrowing is cheap and easy for anyone to get. Cheap and easy borrowing causes a spike in demand, which combined with the fear of buy now, or you'll never get on because prices are spiralling and you've got a classic 'boom' situation all over again.

LOAM said:
It simply wont happen, the housing market would just stagnate and as we all know its the first to go and last to come back, with a world of pain between.
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Why do you think controlled growth = stagnation?

It just results in a situation where responsible people can more easily plan their route onto the housing market, rather than having to compete with people who're able to borrow 110% mortgages on unrealistically low wages, simply because the banks are prepared to gamble on prices continuing to rise sharply - based mainly on the fact that they control demand, by maintaining cheap and easy credit.

I can't see how anyone thinks that allowing banks to go back to a 'self-perpetuating spiral of high demand and rapid increases' is in any way a good thing.

If you think there's a better way to move away from 'boom - bust', then feel free the share.
 
stuie said:
At what point did buying a house become an investment?

Houses are places for people to live in the same way cars are for people to get to work
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Most cars are rapidly depreciating assets, but that doesn't mean that their aren't vintage or modded cars that sell for more than their original price.

That said, now that I understand that the proposal isn't to do with individual house prices, my comment moot, 5% as an overall average for the country seems fair enough.
 
You cannot cap house prices - I bought mine under the going rate, so does that mean it is worth less? Houses are worth as much as someone else is willing to pay. No more, no less.

There is no reason why people cannot buy a house in the UK. Yes some areas are stupidly expensive, but you can move to somewhere that is not. I bought a detached 3 bed in Stoke recently for an extremely good price yet the road is a nice quiet cul-de-sac.

House prices are stupidly high, much more so than 10 years ago (ignoring inflation) but the main issue is that young adults refuse to sacrifice their lifestyle. I know no end of <30 year old adults who say they cannot afford a house deposit, but have an Iphone 5 and a brand new car on loan, along with a snazzy holiday every year, designer clothes and a party lifestyle.
 
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OpenToSuggestions said:
You cannot cap house prices - I bought mine under the going rate, so does that mean it is worth less? Houses are worth as much as someone else is willing to pay. No more, no less.
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It's not about capping prices. You cannot consider any individual house and apply the '5%' figure.

It is just about trying to get the banks to act in a way which means that the level of lending results in steady growth, such that the average house price continues to grow by no more than 5% per year.
 
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