- Joined
- 13 Apr 2010
- Posts
- 18,477
- Location
- Sunny Sussex
When pensions are leaving people eating beans and freezing to death because they can't survive on their pension, a house they can cash in upon retirement is a bonafide investment.
House Price Rises Capped at 5%
- Thread starter No1newts
- Start date
When pensions are leaving people eating beans and freezing to death because they can't survive on their pension, a house they can cash in upon retirement is a bonafide investment.
Soldato
- Joined
- 5 Aug 2006
- Posts
- 11,431
- Location
- Derbyshire
That is fair enough. I just see the whole house price issue as nothing more than a supply and demand issue.
Build lots more houses, possibly a few more than we really need, and the prices will stop going up, or may even fall.
I felt I had to make the jump to house ownership before 2013 ends, as all these 'help to buy' schemes mean more people can afford a house and the prices will rise again
.
But mortgage availability is a large part of that demand.
If you reduce mortgage availability then you reduce demand.
But will prices really fall?
I am so cynical these days I look at the housing market almost like the oil market. They use a fabricated (or sometimes real) situation to push prices up and when the situation stabilises do prices ever drop? No they stay ludicrously high until the next time they can haunt them up some more.
Prices follow the market going up but I can't be the only one to notice the market tends to never mirror a trend that would mean lowering prices. Downward trends just lead to stability as opposed to a drop as they should.
Find me a place around here - where I can still have a stomachable commute to work - that has house prices that aren't stupidly expensive.
If people are willing and able to pay then that is why the prices go up and stay up.
Because the proposal is attempting to fix the problem from the wrong end. The demand is still there its just for many it would become unattainable.
In my opinion the answer to this involves chasing it back to basic principles. The fact is we have a supply shortage which as would be expected manifests as a high demand which in turn inflates prices. But we also have a plethora of existing dilapidated housing stock that sits vacant and blighting towns, cities and villages across all of Great Britain.
We need to look at why this is the case. You can start by examining why VAT is zero rated for new build and reduced to 5% for some conversion rate and yet is 20% for extensions and refurbishment work. To control a spiraling housing market you need to increase supply, that is the only long term solution to stabilising it and VAT should be zero across the board.
It’s not as simple though as reducing VAT on refurb, we as a country are signed up to the Kyoto Protocol whereby we have agreed to reduce carbon emission by 2020 (we are into the second stage 2013 – 2020). The knock on effect on the building industry has seen big changes in both housing design, material procurement, insulation levels and end user cost. The building regulations has a little clause in Part L which is the “opportunity to improve” which states that if you undertake a certain amount of work (remove more than 25% of external render, for example) you should replace it to current regs standard. With so much post war housing this would equate to a staggering amount of cost. I am not advocating relaxing this in any way ( I personally think it should be more onerous) but many owners of derelict and dilapidated houses find themselves in a situation where by the time they have added VAT and additional works to current regs into the budget it simply becomes un-viable.
You control growth by giving purchases more options, as soon as the market has more property options available then values fall in line with that.
Last edited:
That is fair enough. I just see the whole house price issue as nothing more than a supply and demand issue.
Build lots more houses, possibly a few more than we really need, and the prices will stop going up, or may even fall.
I felt I had to make the jump to house ownership before 2013 ends, as all these 'help to buy' schemes mean more people can afford a house and the prices will rise again
I did the same and what you've said actually backs up the below.
It seems like people would prefer to go back to the days when just about anyone could get a 110% mortgage and end up competing with people who're prepared to borrow more than they can afford to pay back.
Soldato
- Joined
- 5 Aug 2006
- Posts
- 11,431
- Location
- Derbyshire
I cannot afford to live in Cambridge. So I don't.
I would love to live in a city like that, but the fact is I don't earn anywhere near enough, so I cut my cloth accordingly.
The housing bubble of 2001 - 2007, created by ultra loose monetary policy (self cert liar loans etc) never popped in this country, not in nominal terms anyway. It just sort of flatlined for a bit thanks to the government meddling with ultra low interest rates and forebarence schemes like SMI. Therefore I find it amusing they are talking about 'another bubble' when we are in fact still in the same one.
You might find it odd then that I disagree with house prices capped at 5%.
However there is logic in my thinking. If the government is determined to pump up housing in order to try and win the next election and the delayed house price crash is invitable anyway, then lets have it, full on. This way it will overheat sooner and collapse sooner rather than later. The way they are dragging it out is really starting to annoy me.
-This is the scream if you want to go faster type of thinking
You might find it odd then that I disagree with house prices capped at 5%.
However there is logic in my thinking. If the government is determined to pump up housing in order to try and win the next election and the delayed house price crash is invitable anyway, then lets have it, full on. This way it will overheat sooner and collapse sooner rather than later. The way they are dragging it out is really starting to annoy me.
-This is the scream if you want to go faster type of thinking
The problem you have with increasing supply is that you need to invest money to create more houses, but in doing so you start driving down the price of the very product you intend to sell afterwards.
I'm not saying that it can't (or shouldn't) be done as well.
But the point is that you seem to be against a proposal that simply encourages 'steady growth'. Whereas I see nothing wrong with doing something which aims to prevent another 'boom bust' cycle.
If you also believe that house prices are currently too high, because there is insufficient supply - then that's a different matter. This proposal isn't about making housing more affordable, it's about making the existing market more stable.
Ah ok, so what you're actually advocating is that people shouldn't work where they can't afford to live within a commutable distance then. Eg anywhere near a popular city?
Or should the people who have been living and working in an area that has seen house prices explode then be forced to move to jobs elsewhere so that they can buy a house?
Last edited:
I'm certainly not against a proposal that encourages steady growth, I think that's absolutely vital. I just don't agree that the one proposed is correct or will have the desired effect. It would be like a shop narrowing its doors to limit customers, yes it stops people getting in to shop but they are still outside with demand. What you need is a bigger shop.
We currently don't need to build new houses, there are 350,000 vacant and uninhabitable ones dotted across the country.
Last edited:
Soldato
- Joined
- 5 Aug 2006
- Posts
- 11,431
- Location
- Derbyshire
Well you've been warned, buy now pre-explosion
.On a serious note, you live in a lovely city that people (including me) would aspire to live in. It is therefore very expensive to buy in as a result of that.
Either accept that the prices are mental, or accept that you cannot afford to buy in that area.
What I would be horrible though is if your second statement regarding being forced to move due to a price explosion, but even now when the housing market is doing badly Cambridge is, and always will be, an expensive place to live in relation to the UK as a whole.
Soldato
- Joined
- 29 Dec 2004
- Posts
- 17,114
- Location
- Shepley
No, prices don't drop because the market is overly reinforced. If the bubble was allowed to burst then they would drop.
People are willing to pay the prices because they have no choice. I don't think many buyers would claim to get VFM though.
It's not a problem for me persay, because I own a house in CambridgeWell you've been warned, buy now pre-explosion
On a serious note, you live in a lovely city that people (including me) would aspire to live in. It is therefore very expensive to buy in as a result of that.
Either accept that the prices are mental, or accept that you cannot afford to buy in that area.
What I would be horrible though is if your second statement regarding being forced to move due to a price explosion, but even now when the housing market is doing badly Cambridge is, and always will be, an expensive place to live in relation to the UK as a whole.
.I see it as a wider problem though because a) we can't really afford to size up at present (should we need too - but I realise this is a luxury) but more importantly b) I know people who can't get a start on the ladder.
Soldato
- Joined
- 5 Aug 2006
- Posts
- 11,431
- Location
- Derbyshire
It's not a problem for me persay, because I own a house in Cambridge
I see it as a wider problem though because a) we can't really afford to size up at present (should we need too - but I realise this is a luxury) but more importantly b) I know people who can't get a start on the ladder.
I was very lucky to be able to live with my parents to get a deposit together. I don't like how I needed a 10% deposit + fees for a house. Whilst on the whole the midlands area is cheap, getting £13000 together is not going to happen unless I was back with the parents.
If I rented my house out it would be exactly the same as the 90% loan 25 year mortgage payment, which is no issue.
I have no idea how anybody young could ever afford their own house in a major city now.
This is the sort of thing £160,000 gets you near here. This is the pricey areas too:
http://www.rightmove.co.uk/property-for-sale/property-40446400.html?premiumA=true
I would expect somewhere in London for £160,000 to be a bedsit in a poor area.
I realise what I am saying about youngsters refusing to give up their lifestyle is a sweeping statement, but I have found it to be true so often I am afraid it has stuck with me
.We currently have a system that requires a ratio of loan to salary and a minimum deposit I.e. LTV. If you meet those then you can afford the loan. We would all like to pay less. The houses are still selling and that is the market. There will always be some that can't reach the ladder but owning a home is not a right, it is a privelege and for those that work hard for it.
While I understand that from the current situation lets drop back a few years
in 1996 my parent bought a 4 bed detached for 80k that in now around 280k that is an average of 8% increase per year or about 5% per year increase over inflation that is unsustainable growth for any country in any industry sector.
Now if 20 years ago a maximum house price inflation percentage had been introduced their house would be around the 180k mark that would still put their house out of the reach of most but remember this is a 4 bed detached house in a good area on the south coast an average 3 bed semi would probably be floating around the 100k mark, with that in mind the banking crash bought about due to the bad loans that were being given out would have not been anywhere near as bad due to the fact the amount of unsustainable loans would have been much smaller, less of a crash means less of an interest rate drop to prop the country up and more return on the cash investments in your savings accounts.
So if they bring in an across the board inflation index to include house prices the house price to wage % will overtime fix itself and return to a state where the country isnt propped up on debt but is in fact built on savings, instead what the government has attempted to do so far is fix a debt problem by borrowing more something that if isnt addressed will just result in yet another big crash in a few years time
I agree but keeping the market artificially high is the wrong way to go about it, it used to be that mortgages where 3.5 times salary or 3 times combined if a dual income mortgage. Currently its around 7 times salary. Now if there was a cap on inflation of housing then the lts rate could drop meaning that owning a house would still be for the hard working but also that the ltv rate and therefore number of dead mortgages would drop it would allow movement in the economy rather than running the country on a purse string and it snapping the minute it goes a little pear shaped. If there is another hit to the economy at the moment there is nothing not 1 single thing that can be done about it the government is borrowed to the hilt, we cant drop the interest rates anymore basically bank of uk would go bust, now if the house price rates are controlled lts and ltv rates were more around the 3-4 times wages mark and interest rates held around the 6-8 % mark then in the event of another crisis there are things that can be done, those privileged enough to be able to afford a house would still do the cost of rent for those renting would maybe even drop a little as land lords wouldnt be forced to keep them high due to out of whack borrowing and the country in general would be more stable
Last edited: