So will the UK house prices ever come down ?

[D.P.]

Only way house prices will come down

a) ukip get in and leave the eu and put a stop on mass immigration, putting a hold on increases in demand.
b) have another economic recession which will lead to immigrants to go back to their home country, reducing demand on housing.
c) massive increase in supply of housing (unlikely due to the state not allowing it)
d) new laws that prevent foreign ownership on housing like in arab states, reducing demand and increasing supply.
e) have another economic recession which leads to interest rates to go up and push a lot of people in to unaffordable mortgages, increasing supply as they sell and reducing prices as supply outstrips demand.

immigration has little if anything to do with house prices across the country.
if anything immigration has a negative affect on house pricing by providing cheap labour resources for new builds.

But you are right, if UKIP got in to power (and pigs fly over a frozen hell) then house prices will collapse following a high recession. Of course with the economy shattered affordability will be far worse.


As for foreign owners - they may locally drive up prices in some parts of London, but it is not a nationwide issue at all. Plus the UK greatly benefits from the foreign investment and taxation of property.

 

[D.P.]

In parts of Europe, like Holland and Norway the government take their taxes after paying interest on the mortgage payments though. Substantially reducing the costs for mortgages.

The flip-side of this is that housing is even MORE expensive. I have looked at moving to both countries in the past with work, and both are scarily priced. As well as other taxation issues, here in the UK, we actually have it ok.

This is the same in the US, interest payments on mortgages are tax deductible. that still makes US housing very affordable outside NY/SF/LA

 

[Freddie1980]

Long, long, long but good article here:

http://www.lrb.co.uk/v36/n01/james-meek/where-will-we-live



Apparently house building has slumped to a pre-war low right now

[edit: The articles argues that NIMBY's aren't the main problem, as new laws since 2011 can force local councils to approve new housing. I've even seen that happen where I live. Council said no, went to appeal, govt said yes.

The arcticle argues that builders don't want to build the numbers of new houses we need - because it's in their interest to keep supply below demand, and for prices to be ever pushed upwards. Sure they want to build, but if they built in the kinds of numbers we need, their profits would go down.

Hence why it was a bad idea to stop the councils building houses themselves.]

I can't quite see the scale on that graph but I would imagine a lot of the mass building you see at the start was due to the fact that the Germany has bombed a lot of people out of their houses in the War and these people needed to be re-homed. As people were re-homed the actual demand for new houses fell away.

 

[balky12]

So? I know people who're approaching 40 on that kind of salary who've had the job for less than 5 years because they've spent most of their life working minimum wage and decided to go back into full time education in their 30s. Everyone's circumstances are different and they're all eligible for Help to Buy. Not sure what that's got to do with you or anyone else.

Quite frankly, even if you have been in a £40k job for a long time at age 40 and decide it's time to buy a house (maybe that job involved a lot of moving around) and settle down, you'd be an idiot to not make use of such schemes.

You make some good points. I was wrong to throw an age in there. You just hear about people taking up these offeres who don't really need the help.


Still I think it's ludicrous to be able to put 5% deposit down on up to a £600k house, and the neither get a 95% mortgage or a 75% mortgage with a 20% interest free loan (for 5 years). Especially with al lthe current buzz around interest rates.

 

[Nitefly]

Personally, I would never bite the hand that feeds me.

 

[FoxEye]

I can't quite see the scale on that graph but I would imagine a lot of the mass building you see at the start was due to the fact that the Germany has bombed a lot of people out of their houses in the War and these people needed to be re-homed. As people were re-homed the actual demand for new houses fell away.

Yes, and the article suggests that during the 70s, basically there was enough housing for almost everyone. But the council continued to build houses, and the population continued to rise.

After Right To Buy, the council was prohibited from building new houses. Our (ever growing) housing needs were then to be entirely met by the private market - which had *never* provided 100% of the needed housing at any point on that graph.

And it continues to not build enough houses, but instead only builds the most profitable houses (as you'd expect from a private enterprise).

 

[D.P.]

I can't quite see the scale on that graph but I would imagine a lot of the mass building you see at the start was due to the fact that the Germany has bombed a lot of people out of their houses in the War and these people needed to be re-homed. As people were re-homed the actual demand for new houses fell away.

The left hand side is 1945 .... so yes, a very misleading graph.

A more interesting graph is house prices vs interest rate:
http://econbrowser.com/wp-content/uploads/2007/08/green_paper2.gif

 

[balky12]

Personally, I would never bite the hand that feeds me.

I think it's touch and go to giving people a false sense of security / wealth.

People no doubt have got these 95% mortgages and stretched there budget, probably live day by day as most people in the UK do with no real savings (who would save in todays climate?). An increase in interest rates will murder them.

 

[Tunney]

I am guessing most Brits wont return home, a large % of Europeans living in the UK are low skilled workers, the type not likely to get a Visa. Those with the skills are very likely to get a Visa,

Most Brits in the EU are workers with a high skill set likely to get a visa, or retired people who don't take up jobs but put a lot of money into the local community so again likely to be getting a Visa, I mean can you really see Spain kicking out the British? they would be bankrupt in weeks.

I don't think that kicking out a bunch of builders, electricians and plumbers is going to solve our housing crisis.

 

[MichaelAwkward]

And it continues to not build enough houses, but instead only builds the most profitable houses (as you'd expect from a private enterprise).

Houses weren't seen as a commodity before 1950. Houses were either self built, government built, or landowner built (often altruistically). Private companies, riding on the back of American consumerism, changed all that.

 

[AtticusFinch]

House prices are unlikely to come down at any point in the next 5-15 years. They will continue to climb for a while and then stabilise at some point. Property only really goes in one direction taken over time.

 

[Jono8]

I think it's touch and go to giving people a false sense of security / wealth.

People no doubt have got these 95% mortgages and stretched there budget, probably live day by day as most people in the UK do with no real savings (who would save in todays climate?). An increase in interest rates will murder them.

You have to remember though that the 75% LTV ratio means you can get a pretty good rate on a 5 year fix. Couple that with the fact that 20% is interest free for 5 years and then after that, the "loan fee" on the 20% is still only about 1.8% a year (then only rises with inflation) and it means your mortgage repayments end up being very affordable, meaning you will hopefully be able to save.

With help to buy you will only be able to borrow a maximum of 4.5x salary and they are very strict with any other loans, student loans, deductions etc you have meaning that the 4.5x salary limit can easily go down. They also have an affordability calculator that you have to pass (its an excel document that you can download from their site to see how much you can afford and they use that to determine whether you are eligible).

That is the new build scheme though. I agree that the 95% mortgage guarantee scheme is dodgy as you have to get 95% mortgage meaning the interest rate you get is already pretty damn high and that is on the whole 95% of the loan.

 

[D.P.]

I=this is a good page of relevant data:
http://www.economicshelp.org/blog/5709/housing/housing-market-stats-and-graphs/

Section 2. Affordability of Housing has the most relevance as house prices in themselves are meaningless without taking into account inflation, average salaries, mortgage rates, and general affordability.


One of the biggest issues in the UK is lack of controls over renting and the absurd notion that you have to buy a house. In most other countries like German etc renting is the perfectly normal way of life. There is simply no need to own a house. If Brits started embracing a renting culture and regulation were brought in to manage rental pirce inflation and contracts lengths then the house prices would fall dramatically.

 

[Jono8]

I=this is a good page of relevant data:
http://www.economicshelp.org/blog/5709/housing/housing-market-stats-and-graphs/

Section 2. Affordability of Housing has the most relevance as house prices in themselves are meaningless without taking into account inflation, average salaries, mortgage rates, and general affordability.


One of the biggest issues in the UK is lack of controls over renting and the absurd notion that you have to buy a house. In most other countries like German etc renting is the perfectly normal way of life. There is simply no need to own a house. If Brits started embracing a renting culture and regulation were brought in to manage rental pirce inflation and contracts lengths then the house prices would fall dramatically.

But it is too late. You cant just introduce radical new rules that would leave most of the population in negative equity and have everyone default on their mortgages.

 

[platypus]

Only way house prices will come down

a) ukip get in and leave the eu and put a stop on mass immigration, putting a hold on increases in demand.
b) have another economic recession which will lead to immigrants to go back to their home country, reducing demand on housing.
c) massive increase in supply of housing (unlikely due to the state not allowing it)
d) new laws that prevent foreign ownership on housing like in arab states, reducing demand and increasing supply.
e) have another economic recession which leads to interest rates to go up and push a lot of people in to unaffordable mortgages, increasing supply as they sell and reducing prices as supply outstrips demand.

Ah of course, it's those damned immigrants that are to blame.

Nothing to do with the property speculators and buy to letters at all, or the government and businesses propping it up because they have too. Nope.

 

[platypus]

The govt also needs to allow us to build own homes.

Before anyone says this is ridiculous, let me just say it's pretty common on the continent.



Last year only one in 10 new homes in Britain was self-built.

http://www.theguardian.com/money/2011/nov/25/self-build-go-dutch
(top result on Google)

It's not really down to the Government, there are all ready enough provisions for self build. The problem is mostly due to banks not wanting to lend mortgages to self builds.

 

[balky12]

One of the biggest issues in the UK is lack of controls over renting and the absurd notion that you have to buy a house. In most other countries like German etc renting is the perfectly normal way of life. There is simply no need to own a house. If Brits started embracing a renting culture and regulation were brought in to manage rental pirce inflation and contracts lengths then the house prices would fall dramatically.

True however, as I stated earlier, what Government is going to sort out the housing crisis?

It means devaluing millions of peoples homes and ruining peoples retirement plans... Whoever has that on their manifesto isn't going to win votes.

 

[FoxEye]

One of the biggest issues in the UK is lack of controls over renting and the absurd notion that you have to buy a house. In most other countries like German etc renting is the perfectly normal way of life. There is simply no need to own a house. If Brits started embracing a renting culture and regulation were brought in to manage rental pirce inflation and contracts lengths then the house prices would fall dramatically.

The lack of regulation over renting makes it absolutely not absurd to want to buy your own place.

If we had a regulated rental market like the continent then the pressure to buy would be much, much lessened.

Currently tenants are subject to what amounts to abuse from agents and landlords alike. Not saying there aren't good ones, but there's plenty of bad ones operating with impunity.

 

[platypus]

I=this is a good page of relevant data:
http://www.economicshelp.org/blog/5709/housing/housing-market-stats-and-graphs/

Section 2. Affordability of Housing has the most relevance as house prices in themselves are meaningless without taking into account inflation, average salaries, mortgage rates, and general affordability.


One of the biggest issues in the UK is lack of controls over renting and the absurd notion that you have to buy a house. In most other countries like German etc renting is the perfectly normal way of life. There is simply no need to own a house. If Brits started embracing a renting culture and regulation were brought in to manage rental pirce inflation and contracts lengths then the house prices would fall dramatically.

But it is too late. You cant just introduce radical new rules that would leave most of the population in negative equity and have everyone default on their mortgages.

The lack of regulation over renting makes it absolutely not absurd to want to buy your own place.

If we had a regulated rental market like the continent then the pressure to buy would be much, much lessened.

Currently tenants are subject to what amounts to abuse from agents and landlords alike. Not saying there aren't good ones, but there's plenty of bad ones operating with impunity.

Even without radical new rules but phased, gradual change, how do you stabilise the market when so much is invested in it? If you eventually allow house prices to fall by introducing better rental legislation, you pull the rug out from under most - if not all - pension funds and they're in a bad enough state as it is.

 

[Nitefly]

I think it's touch and go to giving people a false sense of security / wealth.

People no doubt have got these 95% mortgages and stretched there budget, probably live day by day as most people in the UK do with no real savings (who would save in todays climate?). An increase in interest rates will murder them.

Thanks for the reply but that's not what I was referring to (I was however being intentionally vague).