to think high house prices are the problem?(230 Posts)
Just watched a news item about the benefit cap being introduced today in some areas. Not sure I totally agree with it but I understand that the reason for it is that the welfare bill is too high. What I don't understand is how reducing housing benefit payments will solve the problem in the long term.
As I see it, the reason housing benefit spending is high is because the rents charged are also high. Too high in fact for the (mostly working,but low paid) tenants to be able to afford to pay without assistance. The usual reason given for high rents is lack of available properties, but I can't see the evidence for this locally (south east) or in other towns I have visited.
Instead, I would suggest that, the reason for high rents and demand exceeding supply is actually due to the cost of buying a house being far too high. A large proportion of people who would like to buy a house (and in the past would have been able to afford to) have been priced out of the housing market. Therefore they have no choice but to rent those same houses from a landlord that could afford to buy it. This means the rent is at a rate that not only covers the mortgage the tenant couldn't afford plus extra for maintenance and I presume some amount of profit. So it would follow that the tenant quite likely will not be able to pay the whole rent their self and must apply for housing benefit.
Am I being unreasonable in thinking that if house prices were lower and affordable to most people on an average wage there would be a lower demand for rental properties. In turn this would mean lower rents for those who can't or don't want to buy and mean lower bills for housing benefit. Also if people didn't have to spend such a high proportion of their income on the basic necessity of a home to live in, there would be less need for top-up benefits (e.g. tax credits) and people would be able to spend more which would get the economy moving again.
So AIBU? <dons hard hat and flameproof suit>
it was only a matter of time before a landlord-hater appeared.
in my experience of renting out my property (disgusting, I know - sorry) - the rent went up and down by about 20% between tenants. If no-one will rent it at the price you ask, you drop the price until someone does. It's called supply and demand.
BTW many private landlords cannot take HB tenants - can't get insurance.
The government doesn't buy people assets, they pay for housing for the people that claim the benefit.
When other basic needs such as fuel and food go through the roof in price everyone complains loudly. Why then do people think it's so fantastic when the most important basic need of all, i.e. shelter sky rockets in price.
Would agree with Holly that house prices used to be much more affordable, particularly for the young.
I know I'm old but I bought my first house for £18,000 at a time when I earned £6,500 p.a. It was a 3 bed 1930s semi, and banks were happy to lend 3 x your salary.
We've since moved several times. However...my first house came up for sale again a couple of years ago for £180,000. That means for it to be a comparable price I should now be earning £60,000 pa.
Well, I'm not! I'm earning around half that! Despite being 20 odd years older and having moved on considerably with my career.
I do wonder if my DCs will ever be able to afford to buy, certainly.
House prices are far too high in most areas. I'd like to move but to get anything better with as good a garden and postion would be too expensive for us to bridge the gap. So we just have to stay put. I don't agree with all those government rent subsidies going to Lanlords. Why is the taxpayer lining the pockets of landlords.
Good question Vivienne. Why don't they just use that money to build more social housing. Far more sensible. I can only assume that they profit from it themselves
I dont accept HB even if I could so the government would not be paying.
Agree that btl is a huge blight on the housing market. That doesn't make me a landlord hater, so don't be so defensive.
I would like to see house prices drop. I am a homeowner but want my children to be able to afford their own home and as things stand now they won't be able to. We will probably end up selling this house to pay for our old-age care so no sizeable inheritance for them either. I worry for EVERYONE's children. A rental house similar to ours is nearly double what our mortgage is so there's no way that rentals are affordable. And people can't afford to buy either. Something has to give.
My friend, on the other hand, bought a flat at the peak of the climb and wants prices to stay high so she doesn't go into negative equity. But she can't sell as no-one thinks the place is worth that much, clearly. Or they cant afford the mortgage which is probably more likely. She also has trouble renting out as the rental is high for what it is, I guess. I'd say it was a poor investment and I feel sorry for her but ultimately I disagree with people trying to make huge amounts of money out of ordinary properties for the ordinary person in the street, when in doing so it prices ordinary people out of the buying market. It comes back to bite them on the bum, in the end.
it's ok the government is approving loads of planning apps to build loads of houses in a vain attempt to build it's way out of trouble - so when all these shiny new homes come on the market then surely prices will decline.
unfortunately more people will be trapped by negative equity.
Sorry I meant that my friend bought her flat as an investment to rent out. She owns her own house.
Good point about how to lower house prices. I hadn't thought about that as I only started thinking about it in general an hour or two ago.
How about we say from tomorrow every house is now worth half what it was today. Everyone's house would still have the same value in relation to others, but actually the gap between your current home and the next step up is actually more achievable relative to your wages. Homeowners won't lose anything because at the same time all mortgage debts are also cut by 50%.
As I see it there is no actual loss in terms of assets and debts so long as it is applied to all properties simultaneously as their value is only relative to each other. But at the same time the cost of a home relative to the average income has now fallen and as I said earlier this should translate to a lower welfare bill and more disposable income all round.
The banks are probably the only ones who wouldn't be happy that they have lost 50% of the value of debts owed to them, but as another poster said it was them who gained from house prices rising the most
and probably caused the problems we are now having so maybe its about time they suck it up take the hit. Halving the amount they get in bonuses should just about cover it . After all we are all in this together.
Well said Curly. Also what happens to people now who can't afford to buy because they're paying all their income on rent in 20 or 30 years time. What happens when they're no longer able to work? They will have to have HB. It is a mad situation when people can't afford to save to buy a house because their rent is so high and in many cases it is more than the land lord's mortgage. Why are they so hell bent on ignoring this crisis? What do they think will happen? Sadly, I believe that they just don't care. They just want to win the election in 2015 and to hell with what actually matters. Not that they've got any chance of doing that
Ultimately we will have to wait years, for the population of homeowners at the top of the ladder to age and need to sell to pay for their own care. Who will they sell to, when the families on the next rung of the ladder down already are paying the maximum amount they can afford on their current house? They won't be able to afford to move up so the houses on the next rung up will eventually come down in price. And so on down the ladder.
It's already happening in my road. Single Elderly people in family homes are having to reduce their house prices to enable the families that these houses were built for (3 bed semis) to afford to buy them.
Mortgage debts couldn't just be slashed by 50% If you borrowed £10000k from the bank you owe them £1000. Trying to mess with that would completely screw the value of our currency.
It's all very worrying of course but I imagine the government doesn't wish the housing market to deflate. Think of the millions taken by the government every year via Stamp Duty. DH and I just had to pay 4% Stamp Duty on our last house. If house prices go down the government will be taking less money in overall.
I'm with you Curly, a homeowner that would like prices to drop. Mainly for the sake of my children, but also because I might be able to buy a bigger house instead of the shoebox I currently have!
Claptrap, if your dreamy idea did happen, there would still be areas of high house prices simply because of location. People will always pay over the odds to live in the right area, or near the right school. So what happens when those areas where people actually want to live are full up?
I think a big part of the problem is that so many of us (myself included) have families where parents don't live together, so there are a lot of children that effectively take up two homes instead of just one.
YANBU op, i don't get it either :S
I recently read a report by Shelter: apparently if food prices had increased at the same rate as house prices have I the last 40 years the average family weekly food shop would be £450 - if that's anything to go by you are DNBU for coming to the conclusion that high house prices are the problem...thing is it seems from what I've read that we're pretty much stuck with it all...
The problem with halving everything is that those who have already paid (for example) 90% of their mortgage off will feel hard done by compared to those who have paid 10%
It used to be that food was a families biggest expense
Now it's normally housing with food second and council tax often close behind
Some parts of the country are very affordable. I do not understand why more people don't look for jobs, business opportunities etc in more affordable places. Where I live you can get a 3 bed with a garden and sea views for about £120k. Rents here are low (£450 per month for the same house) and there are jobs, if you are flexible. Also, loads of people are self-employed (tourism type jobs and businesses mostly, but not exclusively). I always wonder why we are not swamped but we have very few new "young" arrivals, mostly retired folk.
If you can be flexible (and I appreciate not everyone can) why not? I moved here from SE21 and now live in a 5 bed house worth not much more than my 1 bed flat was. With good broadband and some imagination, some people could save themselves a fortune in rent and mortgages.
but if house prices go down even more will be trapped and unable to move by negative equity - we bought in 2007 - we are stuck in a house that no longer meets our needs but can not sell (if we did we would still owe over £20k let alone solicitors fees and estate agents fees which we can't afford to pay anyway) - we would have to rent and no chance of building a deposit with 20k to pay off and we would be less likely to get a new mortgage anyway as we are 6 years older etc.
if we wanted to rent it out we could only do that by changing to a btl mortgage so would lose our v good interest rate and would have to pay £100 more in mortgage than we could let the house out for and we would have to rent elsewhere (unless we could miracle up a deposit to port our mortgage - we would still be paying the extra £100 per month for the mortgage on our property.
I think part of the problem is people like us - trapped in "1st" homes and unable to move on.
Have thought about that myself Rose, but the problem is that if you are not self employed you still have to be able to commute to your place of work.
I don't think it would be a good idea to lower house prices. If we lower the value of all of the housing stock and people are in negative equity and banks have no security it will not help the economy.
The problem is people will pay what they can afford, which with interest rates so low, is a lot.
My first house cost £40k the interest rate was 15%
My current house has a 100k mortgage on it at 1% over base rate which is £292, nearly £400 per month less than my first house.
I am a landlord and have invested a lot of money in two houses which are let, one to a single lady and one to a retired couple. I have just spent £2k on a new boiler for one. I have all safety certificates and insurances.
My properties are let at market value. I don't understand the attitude of some people towards landlords.
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