The joy of being a landlord

[Bar]

Housing and affordability are massive multi-dimensional problems that wont be fixed any time soon. Our society is consumerist driven with an insatiable need to buy new things - social media and general attitudes have driven a very self centred approach to life.

If house prices go through a correction and align back better to income / disposable income you have a number of issues (just some off the top of my head):

• Those who have recently got onto the housing market are likely to go into negative equity which prevents them moving for a period of time - would also stop them spending money
• Those who had a lower LTV will end up with a higher LTV which could attract higher rates and reduce equity that could have been drawndown - which would also stop them spending
• Those with a very low LTV or no mortgage will be ok however they could end up buying some of the "new" cheaper houses as investments and reduce the availability further
• Those with substantial savings could end up buying multiple houses as they know house prices will climb again
• All of those pale into comparison to the hysteria that would be caused by economists / rating agencies such as Moodys etc declaring its the end of financial stability as we know it and we would suffer a significant economic crash.

Net result is that people spend less and economies all work on the movement of money. Stop the movement and you are in real trouble.

To get half a chance you would need:

• a government who are willing to put people ahead of the next election
• Building firms who are more interested in social responsibilty over profit
• a percentage of the population who would be willing to see their equity slashed massively
• a percentage willing to go straight into negative equity after struggling to get on the housing ladder

 

[Mr Badger]

Housing and affordability are massive multi-dimensional problems that wont be fixed any time soon. Our society is consumerist driven with an insatiable need to buy new things - social media and general attitudes have driven a very self centred approach to life.

If house prices go through a correction and align back better to income / disposable income you have a number of issues (just some off the top of my head):

• Those who have recently got onto the housing market are likely to go into negative equity which prevents them moving for a period of time - would also stop them spending money
• Those who had a lower LTV will end up with a higher LTV which could attract higher rates and reduce equity that could have been drawndown - which would also stop them spending
• Those with a very low LTV or no mortgage will be ok however they could end up buying some of the "new" cheaper houses as investments and reduce the availability further
• Those with substantial savings could end up buying multiple houses as they know house prices will climb again
• All of those pale into comparison to the hysteria that would be caused by economists / rating agencies such as Moodys etc declaring its the end of financial stability as we know it and we would suffer a significant economic crash.

Net result is that people spend less and economies all work on the movement of money. Stop the movement and you are in real trouble.

To get half a chance you would need:

• a government who are willing to put people ahead of the next election
• Building firms who are more interested in social responsibilty over profit
• a percentage of the population who would be willing to see their equity slashed massively
• a percentage willing to go straight into negative equity after struggling to get on the housing ladder

Aside from the supply and demand aspect, house prices would be expected to reflect affordability, which is mostly dictated by mortgage interest rates. The ling period of exceptionally low interest rates led to more affordable borrowing and house prices certainly increased. Assuming other factors remain equal rising interest rates should logically result in falling house prices, so no reason to think that a price correction it is the end of life as we know it.

 

[Bar]

Aside from the supply and demand aspect, house prices would be expected to reflect affordability, which is mostly dictated by mortgage interest rates. The ling period of exceptionally low interest rates led to more affordable borrowing and house prices certainly increased. Assuming other factors remain equal rising interest rates should logically result in falling house prices, so no reason to think that a price correction it is the end of life as we know it.

While I would tend to agree - the problem we have had is successive governments have artificially kept prices high with numerous schemes intended to let people buy at higher prices instead of letting prices fall to a more "normal" level.

 

[Mr Badger]

While I would tend to agree - the problem we have had is successive governments have artificially kept prices high with numerous schemes intended to let people buy at higher prices instead of letting prices fall to a more "normal" level.

Absolutely. There has been far too much focus on measures to essentially help people to borrow more and keep the housing market inflated.

 

[radderfire]

While I would tend to agree - the problem we have had is successive governments have artificially kept prices high with numerous schemes intended to let people buy at higher prices instead of letting prices fall to a more "normal" level.

Yes, these schemes are entirely self serving for the bankers and government. "Help to Buy" is a complete misnomer.

 

[dowie]

No one is arguing against the need for more houses. Perhaps you should think about why the private sector has not been building them in sufficient quantities to impact on the market?

Because we've got a really restrictive planning system! In addition, it's not helping much in London when there are demands for a silly portion of "affordable" homes to be included.

Agreed that right to buy etc. should not have happened, but you seem amazingly lacking in empathy for people on low wages who may well be working in key roles (I could give real life examples). Taking more of them out of private renting would cool the market and transfer the cost to the state from in work benefits that currently go into the pockets of landlords. I've not seen any credible analysis that concludes the UK has sufficient social/affordable housing.

I'm not lacking empathy for them I think there should be more homes available then rents wouldn't need to be so high.

Also, we may be at cross purposes regarding affordable housing. You seem to be picturing it as a part of a mixed private development, whereas I'm thinking more along the lines of the government/local authorities getting some blocks of apartments built. If they sorted it out then private developers wouldn't need to be given targets for affordable housing (which they usually seem to weasel out of in my neck of the woods).

Well, you're conflating different things, see here: https://www.pls-solicitors.co.uk/affordable-housing-and-social-housing that's social housing, the big freebie I mentioned previously, good to have some but as pointed out we've got rather a lot already. Sure we can build some more but it should be for people in serious need. It's not the lack of that specifically that's the issue here nor some specific lack of some below-market rent "affordable" housing but rather it's the lack of housing in general.

 

[dlockers]

Yes, these schemes are entirely self serving for the bankers and government. "Help to Buy" is a complete misnomer.

Are the bankers in the room now?

 

[Quartz]

The problem is that there are insufficient properties close to where people want to work. There are plenty of properties here in Aberdeen but there are no new jobs that aren't state-funded and property prices are continuing to fall. The recent announcements by the SNP and (Scottish) Labour haven't helped: I've just been told that thanks to them there's going to be no new investment (by unspecified but probably oil & engineering companies) for at least 3 years. That means no new jobs and probably redundancies. Union Street is pretty deserted. If only politicians - both national and local - could get a clue and create opportunities for businesses to move or set up here. Instead they're blocking rates decreases, faffing around with blocking cars from central Aberdeen with bus gates and ULEZ zones, and generally being useless.

You can buy a one-bed flat in central Aberdeen for £37500. Another flat in Torry (just the other side of the river Dee) is on offer for offers over £19k. These are properties that people on low wages could afford - if there were jobs. And there are many more under £50k. But the politicians are busy screwing over Aberdeen. Aberdeen needs something to take over from oil. But no one wants to set up here. And a major local property developer has gone bust.

And (rant contd. p97).

 

[Rroff]

You can buy a one-bed flat in central Aberdeen for £37500.

Ooof that would likely be close to 200K around here for anything decent, though there are some at 95K upwards, but a reasonable area and reasonable condition would be well over 100K.

Closest equivalent £120K but that is a bit away from where the jobs are, OK if you are mobile though.

 

[Mr Badger]

Because we've got a really restrictive planning system! In addition, it's not helping much in London when there are demands for a silly portion of "affordable" homes to be included.



I'm not lacking empathy for them I think there should be more homes available then rents wouldn't need to be so high.



Well, you're conflating different things, see here: https://www.pls-solicitors.co.uk/affordable-housing-and-social-housing that's social housing, the big freebie I mentioned previously, good to have some but as pointed out we've got rather a lot already. Sure we can build some more but it should be for people in serious need. It's not the lack of that specifically that's the issue here nor some specific lack of some below-market rent "affordable" housing but rather it's the lack of housing in general.

Although there may be issues with the planning process, don't you think this is also a rather convenient excuse for the building companies to indulge in land banking and limiting supply to keep prices high? Are house building rates currently increasing or decreasing as house prices are depressed by higher interest rates?

Also, developers would probably have a lot less problems with getting planning permission if they built mixed developments including decent sized houses and gardens. As opposed to yet another depressing estate squeezing in as many identical mini houses as possible.

 

[dowie]

Although there may be issues with the planning process, don't you think this is also a rather convenient excuse for the building companies to indulge in land banking and limiting supply to keep prices high? Are house building rates currently increasing or decreasing as house prices are depressed by higher interest rates?

There may be? It's literally the biggest obstacle for new development, it's not convenient it's a major problem, we have a major shortage of homes in the UK:

Conversely, see Japan in the above chart, Tokyo has abundant affordable housing because they build lots of it!

Opinion | The Big City Where Housing Is Still Affordable

Tokyo has succeeded in maintaining an abundance of affordable housing because it has no downtown, many railroads and laws that make it easy to build.

www.nytimes.com

Two full-time workers earning Tokyo’s minimum wage can comfortably afford the average rent for a two-bedroom apartment in six of the city’s 23 wards. By contrast, two people working minimum-wage jobs cannot afford the average rent for a two-bedroom apartment in any of the 23 counties in the New York metropolitan area.

Maintaining an abundance of affordable housing has its downsides. Green space is scarce in Tokyo, living spaces are small by Western standards, and relentless redevelopment disrupts communities.
But the benefits are profound. Those who want to live in Tokyo generally can afford to do so. There is little homelessness here. The city remains economically diverse, preserving broad access to urban amenities and opportunities. And because rent consumes a smaller share of income, people have more money for other things — or they can get by on smaller salaries — which helps to preserve the city’s vibrant fabric of small restaurants, businesses and craft workshops.

We don't need to sell off London parks or anything but we can permit developments that are taller, permit additional floors in some areas and just in general be more permissive re: proposed developments... or we can keep things unaffordable for everyone, throw in some token measures like "affordable housing" for the lucky few or maybe rent control for the lucky few at the expense of the rest of the market.

But just consider the above quote - two full time workers earning minimum wage can comfortably afford the average rent for a two-bedroom apartment - people don't need to fanny around with centrally administered social housing (save for those really in need) if we sort out the supply issue and therefore keep things affordable.

Also, developers would probably have a lot less problems with getting planning permission if they built mixed developments including decent sized houses and gardens. As opposed to yet another depressing estate squeezing in as many identical mini houses as possible.

It's the system itself that needs overhaul, it's not some developers keep on submitting the wrong plans and don't want to make any money issue.

This stuff strangles the rest of the economy too, cheaper rent for everyone = more disposable income, more savings for retirement, young couples in a better positon to start a family, quicker to save for a deposit while renting for a house/flat that's also going to be cheaper to buy and so on.

 

[sx_turbo]

I think if the councils had their own building firms they could create quality affordable homes, the sale of these could then offset the cost of new social housing and potentially add profit and money into the system.

It would stop house builders being greedy and improve social housing stocks, they could also prioritise brown field sites instead of eating more and more of the countryside.

But maybe this is far too sensible and ideal.

 

[sx_turbo]

There may be? It's literally the biggest obstacle for new development, it's not convenient it's a major problem, we have a major shortage of homes in the UK:

It's the system itself that needs overhaul, it's not some developers keep on submitting the wrong plans and don't want to make any money issue.

I don't think planning laws are strict enough in some cases.

For instance a 4 bed house with 1 parking space? In today's works that's ludicrous, they should be forced to have a parking space per bedroom.

Some of the sites that get through planning sometimes have huge question marks as to how.

 

[Hotwired]

I don't think planning laws are strict enough in some cases.

For instance a 4 bed house with 1 parking space? In today's works that's ludicrous, they should be forced to have a parking space per bedroom.

Some of the sites that get through planning sometimes have huge question marks as to how.

This sounds like it scales very poorly.

 

[sx_turbo]

This sounds like it scales very poorly.

Maybe, but when you see new builds where there isn't enough parking for the houses and everyone is parked up in the pavement in both sides, with everyone seemingly leaving their common sense behind, it's not a hugely terrible idea.

 

[Hotwired]

Maybe, but when you see new builds where there isn't enough parking for the houses and everyone is parked up in the pavement in both sides, with everyone seemingly leaving their common sense behind, it's not a hugely terrible idea.

It's bad design of parking control.

If a house has [1] parking spot that is the total amount of parking that house is entitled to. If the household feels parking control is so lax that the street and pavement is fair game they will exploit it and expand their vehicles if the opportunity comes up.

On the other hand if the road is double yellow and tow trucks arrive in 30 mins that road is going to be as barren as a race track because the rules are clear and enforcement is brutal.

There's blame to be shared and also costs being dodged.

 

[Mr Badger]

There may be? It's literally the biggest obstacle for new development, it's not convenient it's a major problem, we have a major shortage of homes in the UK:

Conversely, see Japan in the above chart, Tokyo has abundant affordable housing because they build lots of it!

Opinion | The Big City Where Housing Is Still Affordable

Tokyo has succeeded in maintaining an abundance of affordable housing because it has no downtown, many railroads and laws that make it easy to build.

www.nytimes.com

We don't need to sell off London parks or anything but we can permit developments that are taller, permit additional floors in some areas and just in general be more permissive re: proposed developments... or we can keep things unaffordable for everyone, throw in some token measures like "affordable housing" for the lucky few or maybe rent control for the lucky few at the expense of the rest of the market.

But just consider the above quote - two full time workers earning minimum wage can comfortably afford the average rent for a two-bedroom apartment - people don't need to fanny around with centrally administered social housing (save for those really in need) if we sort out the supply issue and therefore keep things affordable.



It's the system itself that needs overhaul, it's not some developers keep on submitting the wrong plans and don't want to make any money issue.

This stuff strangles the rest of the economy too, cheaper rent for everyone = more disposable income, more savings for retirement, young couples in a better positon to start a family, quicker to save for a deposit while renting for a house/flat that's also going to be cheaper to buy and so on.

Again, no one here appears to be saying that enough houses are being built in the UK. But you do seem to have completely swallowed the line that it's all the fault of restrictive planning regulations blocking construction, and nothing to do with the companies that are buying the land and building the houses looking to do the capitalist thing and maximise their returns.

I think if the councils had their own building firms they could create quality affordable homes, the sale of these could then offset the cost of new social housing and potentially add profit and money into the system.

It would stop house builders being greedy and improve social housing stocks, they could also prioritise brown field sites instead of eating more and more of the countryside.

But maybe this is far too sensible and ideal.

Well something certainly needs to change.

 

[dowie]

Again, no one here appears to be saying that enough houses are being built in the UK. But you do seem to have completely swallowed the line that it's all the fault of restrictive planning regulations blocking construction, and nothing to do with the companies that are buying the land and building the houses looking to do the capitalist thing and maximise their returns.

It is the fault of restrictive planning regulations, there's people who allege that when developers own land they've not yet built on then there must be some conspiracy at play because they're secretly speculating and looking to flip the land or something, that's the line you seem to have swallowed.

Reality Check: Are property developers hoarding land?

The prime minister wants more homes built in England and will make land banking harder to do.

www.bbc.co.uk

The Ministry of Housing, Communities and Local Government says that as of July 2016, just over half the 684,000 homes with planning permission had been completed.
Analysis from the Local Government Association, which represents local councils, found last year there were 423,544 unimplemented planning permissions.
But a Home Builders Federation spokesman said these permissions are measured "at the point when the first condition is discharged but some permissions have 100-plus conditions attached that take months or years to discharge before builders are actually allowed to start building".
He added: "So a lot of the 'permissions' are stuck making their way through the planning system via understaffed local authority planning departments."

But the other issue is there should be a much more efficient system for granting permission and much more land permitted to be developed on - even if you think there is some conspiracy the solution is still the same, overhaul planning and permit more development - no point hoarding anything when the supply is going to increase significantly.

 

[Mr Badger]

It is the fault of restrictive planning regulations, there's people who allege that when developers own land they've not yet built on then there must be some conspiracy at play because they're secretly speculating and looking to flip the land or something, that's the line you seem to have swallowed.

Reality Check: Are property developers hoarding land?

The prime minister wants more homes built in England and will make land banking harder to do.

www.bbc.co.uk

But the other issue is there should be a much more efficient system for granting permission and much more land permitted to be developed on - even if you think there is some conspiracy the solution is still the same, overhaul planning and permit more development - no point hoarding anything when the supply is going to increase significantly.

There is no point in misrepresenting my position. I think I have acknowledged there are several factors at play, including the process of getting planning permission. But that is certainly not the only reason companies are not building more houses. Since when is it a conspiracy theory to observe that private business is acting more in the manner that will maximise shareholder returns, rather than for the public good?

 

[slinxy]

Absolutely. There has been far too much focus on measures to essentially help people to borrow more and keep the housing market inflated.

TLDR:
- House prices are tied to people’s income
- Blame estate agents for stupid house prices
- Renting has its advantages, I would prefer to rent
- Buying a house should be an aspiration not a given right
- Blame the “right to buy” and people that play the system for the lack of social housing.

I saw a report the other week that shows that the average house price, on average rouse with the average medium salary. Some year it was slightly higher, some years it was slightly less but over a period, IIRC since the “correction” in 2008.. it’s simply rouse as much as people can “afford”, as house prices is tired to how much people can borrow.

Unless mortgage lenders change their policy on the amount that can be borrowed, maybe younger well educated would be house owners should be allowed to borrow more? As they have a greater chance of greater than average pay raises or career paths, then this is unlikely to change.

The idea of “affordable” housing is a myth… all houses that sell are affordable.. I may not be able to afford it but no one runs and stays in a business producing a product and it simply not selling.

The issue occurs when people overestimate or simply lie on their application forms to borrow more money than it is sensible or a twist of fate places then in a situation when they can’t manage like losing their well paid job and not able to get a similar paying position or trusting that they are a two income family but one person leaves or losses their job.

From my own limited experience in dealing with estate agents, some (not all) give a false impressions on how much a house is worth, they (some, not all) value a property on all the possible future positives and not the value of the property today as it stands to give a higher price than it’s actually worth.


Me: “the valuation of the house has come back as 10k less than I offered, I want to drop the offer by that amount..”
Estate agents: “we value the property much higher than that, are you not able to pay the difference?”
Me: “sorry, my bank has sent an independent inspector to the property, who I assume knows the area and they have come back with that value… I’m not prepared to make up the difference and over pay for the property”.
Estate agents: “oh.. but you already paid for the inspection and it’s only 10k difference…”
Me: “ermmm the cost of the inspection is a hell lot less than 10k plus interest rates.. unless there’s a cash buyer, any lender will likely send the same person to value the property and come back with the same value and even if there’s a cash buyer, I suspect that they would want to pay the value of the property if not less than to over pay for it?l


I have made more than fair offers on properties in the past only for them to smear at the offer, one place was on the market for 250k and no one was interested.. as it didn’t sell for that price. The price was dropped to offers above 200k and I made what I believe was a fair offer of 220k for the estate agents to turn it down before even speaking to the seller.

Estate agents: “no… simply 220 is not enough..”
Me: “Errmm.. what’s the house on the market for?”
EA: “offers above 200”
Me: “is 220 not above 200? What does the seller think?”
EA: “errmm… we know they won’t accept it as they turned down the same offer a few weeks ago.. and has accepted better offers!”
Me: “oh the house is no longer on the market then? As an offer has been accepted?”
EA: “no.. that buyer pulled out as they couldn’t secure the amount offered”
Me: “ok… my offer is on the table till the end of the week.. it’s up to you if you want to tell seller or not… thanks for your time.”


The asking price of the house dropped to 180k and I think it eventually sold for 175k. Lol

Some estate again, not all… really overplay their role in the whole house buying game to try and push up the prices and maximise their percentage.

Apparently in Manchester, it’s common for them to see and a store buyers bank details and amounts…

EA: “we need a copy of your bank accounts to see if you can afford it..”
Me: “sorry, I send over my mortgage in principle again..”
EA: “we have that, but we still need copies of your accounts”
Me: “are you leading me the money for the mortgage?”
EA: “no….”
Me: “then why do you need to see my accounts details? You have my mortgage in principle.. you can see that my mortgage lender has agreed to lend me well over the amount that I’m offering, therefore I can afford it.. would it help if my accountant confirms this with a letter?”
EA: “no…it’s our company practice to vet all offers before passing it on to the seller and we can only do this when we have seen your account details..”
Me: “ok… I can come down in person to show you my account details but it’s my practice not to send copies of my personal details to anyone that I don’t know.. it’s not exactly that you work for a global or even national company is it.. so I can either show you in person or you can send me your company’s insurance guarantee details against data lost, then I will send you my bank details.”
EA: “ermmm we don’t have one”
Me: “so exactly how are you planning to store my personal details safely?”
…


So in my point of view, estate agents are to blame for inflation house prices by giving sellers false hopes in their house values and trying to get as much as possible from buyers, rather than just trying to get the going rate.

But some people are just dealt bad hands… born in a low income family, poor education limiting their job and income prospects, not able or willing to “put in work” to increase their fortunes and for them house ownership is an impossible dream. Is it landlords fault that they can afford multiple houses? No they just playing the hand that they have..

I was luckily enough to have family members help me get on the property ladder, but it would be a dream to live in a property that is well maintained and that only cost the going rate.. I rented for most of my adult life and only purchased a house as I was pretty much nagged into it, I reached the age when it was now or never and thought I was settled enough to buy a house. Buying a house should be an aspiration, not just in terms of finances but mindset and life in general.. no point in having a house if you go out every night, like I used to.. you might as well just wake up in your parents house with a hangover.

There are advantages of renting, one millionaire; the author of I teach you how to be rich, swear bind to it…
Seen a job you like in another part of the country/world… move
Don’t like the neighbours.. move
Have less money due to less income or investment opportunities.. move
Need a bigger place.. move
Hate the garden.. move

All this is possible as a house owner, but unless your mega rich, it’s just so much easier renting… if I was mega rich I’ll be renting… just 5 star hotel rooms in different parts of the world rather than buying a place, but even now; if given the choice between renting and buying, I would opt to rent.. for me it’s far less stressful, but then again I paid the letting agents enough to keep it stress free.

Renting would be super stress free if it was controlled by a government agency, like the local council where it’s easier to govern and monitor for standards but the “right to buy” has removed a vast majority of the social houses of the past. It was common for a standard income earner to be living in a council house only a few decades ago.. growing up in a council estate in the 80s all my neighbours had standard job; bus driver, car sales men, builder and they all lived in a council house, now they are expected to own their houses or privately rent.. social housing has a bad reputation.

What limited good social housing is even more limited by some people who play the system, near me there’s a father who lives with his adult son, his daughter lives in a house across the road, his other son lives in an apartment down the road.. none of them work apart from one who I think does casual labour by the times he keep.. yet we are paying for them to live in three different houses, while my friend’s husband’s family.. all three of them in that house work part time jobs just to afford to keep the roof over their heads.

There was a rumour that we was getting more houses in the village.. personally I want them to be private houses to bring more money into the village, but people was demanding them to be social housing. One man.. jumped on the local councillor and demanded three of the houses, one each for his kids… no reason given why they should have them, it just seems like it was his god given right.. I may be wrong and they could be all working and simply can’t afford to rent, thou my nephews couldn’t afford to rent by themselves so they rented together. But the impression that I got was that they didn’t and they just wanted the luxury of having a place of their own and use more of the limited social housing budget to fund that luxury.