to wonder why house prices are so high if the economy is so bad?

[RattyRoland]

I have been looking at three bed family homes in the area I live. Nothing amazing, just semis with a reasonable lounge and three ok sized bedrooms and small garden. They are around £750k about five years ago they were about £500k, property websites confirm this increase. No way can I afford 750k!

So Aibu to wonder how the property prices have risen so much when all we hear is the economy is dire? I live in south west London/ Surrey.

I was looking through the estate agents reports on rightmove the other day. In an ex pit village near where I live in the north east, someone has been trying to flog a three bed mid terrace for £140k for the past three years. They only paid £35k for it in 2004 yet they've obviously decided they "deserve" a £100k profit.

If it wasn't so depressing it would be laughable.

Average prices across all London boroughs. Some surprises in there.

news.bbc.co.uk/1/shared/spl/hi/in_depth/uk_house_prices/counties/html/county39.stm

I'm amazed at this too. We bought our home 5 years ago just one month before the Northern Rock went under and a year before the banking collapse.

We paid £430k after selling our previous house for almost three times what we had had paid for it 8 years earlier We assumed we had bought our present house at the peak of the property boom.

Now we are seeing similar houses to ours in the area being marketed for £599k - it's ridiculous and I very much doubt they will sell at those prices.

There does seem to be a lot of young affluent families from London moving to our area as it's an easy commute into The City from here and there are excellent schools. I think that has pushed local house prices up.

You can't lump all of the south east in together. I'm in a 3bed semi, bought last July for £160k.

"someone has been trying to flog a three bed mid terrace for £140k for the past three years. "

The seller is being stupid rather than greedy holding out for an unrealistic price.

I think a big part of the problem is the disproportionate concentration of commerce and population in the SE which has created a hothouse bubble of good job prospects on the one hand but huge living costs and high house prices on the other. If any government is looking for ways to generate growth it would be to set about deliberately developing the other big cities of the UK, relocating big government departments out of London the way the BBC has relocated, putting serious tax incentives in place for companies to set up far away from the M25 and putting capital investment in supporting infrastructure such as airports, road and railways. Make Newcastle the job hot-spot and lure people in with the promise of trading in the poky 3-bed semi in the Home Counties for a luxurious five-bed detached in Tyneside... why not?

Weather - on average you are 10 degrees lower than London and have 25mm more rain than London.

Ergo, it's cold and wet up north

Fifty years ago a low paid worker could not only pay the rent on a reasonable house, but pay all the other household bills too, whilst his wife was a SAHM.
In a way Housing Benefit has facilitated the increase in house prices.
If it didn't exist then rentals would have to be lower.
So did the 'wonderful' Mrs Thatcher who created a free market by selling off council houses.
Banks benefit enormously by the high cost of houses, the interest payable from a £200k mortgage is a lot more than a £100k mortgage.
Redrow made £43m profit last year.
Capitalism at it's worst.
High house pri

Houses, like everything else, are worth only what people are prepared to pay. Not one penny more or less.

So they will go down when nobody is willing to buy at the prices they currently go for.

Which will mean that a lot of people will make a huge loss.

Which is why people are reluctant to let that happen. Many buyers are also sellers. Nobody wants to make a loss.

HollyBerryBush, the report you refer to was talking specifically about London and it didn't say prices would double, rather they would rise by 30% - so around the rate of inflation.

Also, it wasn't the Halifax, it was the CEBR, who you'll find were predicting similar in early 2007-before prices EVERYWHERE fell by around 20% - and yes that includes London and the South East.

Fact is, high prices are being sustained (at least in parts of the S.E.) by a number of artificial and ultimately unsustainable measures e.g. Funding for lending, historically low base rates, bank forebearance, several stamp duty holidays etc. and in case anyone hasn't noticed, we as a country are broke-we need to spend less. And as more and more potential voters rent, political will is going to turn in favour of withdrawing these props.

I bought my 4 bed semi in a Manchester suburb (15mins drive from centre) in April 07. The other half of the semi just sold for £5k more than we paid for it. It's nice to know that prices have held up here.

Prices in commuter belt from London are high because London wages are high. It would be good for everyone if there was a move to decentralise jobs and spread the wealth out more evenly across the country.

The problem has been lenders giving out mortgages that are more than people can afford.

People used to start small and move their way up the property ladder. When people started getting 100% mortgages they were able to jump the first couple of rungs of the ladder, but then they get stuck there. They can't afford to move up to a bigger house so demand increases for mid price homes.

People aren't being greedy by wanting to sell a house for £140k that they bought for £35k a few years ago. These people still need somewhere to live, and to get that they need significantly more than the £35k they invested.

Sellers aren't making a profit because they can't afford to upsize even if they house has quadrupled in value. The value of a house means nothing when you have to pay the same amount to move into a similar sized property.

In theory, I have made £50k profit on a house that I bought a few years ago, but it's not like I have spare money that I can now spend on holidays and shoes. That money doesn't actually exist, it's tied up in a supposed value of a house, and all the other houses have gone up in value by that much as well.

Because there will always be just enough people with very well paid jobs or money inherited from family to be just that bit better off than the rest of us.

Anyone selling a nice house, who is retired or can commute just sits in their house until such a buyer comes along.

Interest rates on savings are lousy, property is still seen as a safe investment.

The banks are being very risk obverse. They would much rather lend to some one who has just sold another house or inherited granny's bungalow than a first time buyer.

If the risk to the bank is nowhere near the cost of the house they don't care.

We're not in the UK but when we were looking to buy our first place, the bank we applied for the loan with said that they could lend us up to the equivalent of £600,000. We only wanted to borrow the equivalent of £75,000 because we already knew which place we wanted to buy. It was a 3 bedroom split level unit in an area that was not hugely popular then. It has become more popular since then due to a certain well-off immigrant community making it their base for restaurants, grocery stores etc. We had a deposit for about half of it. For a week, we kept getting calls from the bank agent about how we could get a much bigger place in a nicer area, buy a new car etc etc if we took out a bigger loan. Eventually, they reluctantly agreed to lend us what we originally asked for. This was in 2007 and pretty sure that banks were starting to try and rein in debt.

So I think one of the problems is that many people go to the bank and they think "Well hey, the bank says that they can lend us this much, and they know what they are doing, so we will take it!". That, of course, pushes prices way up beyond what most people could really afford if they were sensible with their finances.

Although the value of the unit has gone up quite a bit, if we wanted to sell up and buy elsewhere, the value of all the other houses has either gone up as well or, if not significantly higher than before, are still far too expensive for us to feel comfortable with.

People aren't being greedy by wanting to sell a house for £140k that they bought for £35k a few years ago. These people still need somewhere to live, and to get that they need significantly more than the £35k they invested.

That's a fair enough observation, but surely this just means they can not afford to move elsewhere? Trying desperately to attain the impossible is just driving up prices elsewhere. If everyone in their position sat tight and didn't sell just yet it would be easier for prices to come down to a much more sensible level. Then their £35k (plus a proportional profit, say £10k) WOULD buy them something else.

It is not the asking price what is important but the price at which it sells.

In many areas, sellers egged on by estate agents are totally unrealistic. Those houses are not going to sell.

The UK has just lost its triple A rating, borrowing costs are likely to increase. The economy is still a quagmire. I would hold fire for a while.

However, there will be areas where prices are high and may even go up, like areas in Central London (lots of foreign buyers, Russians, Greeks etc. with plenty of money) and areas in good (and affordable) commuting distance to Central London.

The UK is a very capital centred country, everything happens in London, that is where most well paid jobs are, etc., as a result house prices reflect this. Really, it is madness as it destroys the rest of the country, but you get the politicians you (collectively) vote for.

A lot of people are sitting tight and not moving, but I think it's that that's driving the prices up because it creates more demand for fewer properties at the bottom of the ladder, and at the same level.

There will always be some people that have to move, then when they can't sell without making a loss, they end up renting, meaning that there are even fewer properties available for those willing to buy.

It's craziness, and I can't see it getting better any time soon.

i would say with your area, you probably have a lot of people who either work in banking or industries that service the banking industry - that's prime area for commuters into the city.

5 years ago or so is when redundancies were happening in those industries, we make a lot of our money as a firm from banks, we did a round of redundancies in early 2009. that was the year DH didn't get a bonus and a lot of people didn't either even though under normal years, their same performance would get them a large bonus.

we moved in 2009 (Kent, good London commute), and I know our sellers made a loss but needed to move (divorce). Since then, prices have bounced back quite a bit.

It could be the people you are 'competing' with for the houses are people who are those who've weathered the redundancies in their industries, so aren't feeling the pinch now, whereas if you'd been looking in 2009/10, you might have found a relative bargain as that's when your area really was badly hit.

There's a lot of recruitment going on in the city again. There's a lot of confidence that those who've held on to their jobs are 'safe' from the economic storms. If you are looking at houses in the £750k range with an easy commute to London, you are looking at houses being sold by/to the sort of customers banks want; people who probably have large deposits, with secure highly paying jobs - in industries where they can easily move to another job should something go wrong with this one. It's everyone else who are screwed, I think we might see bigger gaps between types of houses/areas than we used to.

I agree with DontmindifIdo if you happen to live in an area attractive to bankers/City people, then prices are likely to go up rather than down in the (near) future. Large bonuses are coming back again as no reform has taken place whatsoever, all mistakes are probably going to be repeated, but that is not going to help you.

Can you move to another area or extend your current house?

here in argyll 750k would buy a small castle, a detached 4-6 bedroom victorian pile with 1-2 acres is about 4-500K (same in glasgow but will small garden would be 6-800K)

but prices have dropped in last few years here at least 10% in our perfectly ok village with good school ex-HA 3 bed semis are 85-90K we are 1 hour from glasgow, prices go up as nearer glasgow

it is demand in SE that keeps prices high but it can not last indefinitely as I reckon SE is over priced and at some stage bubble will burst

BTW - "we're all in this together" doesn't mean "we're all going to feel the effects of the downturn equally". there are a lot of people who have very secure and well paid jobs, and right now their mortgage rates are low, any services they buy are competing for less business so if you can afford a cleaner/gardener/building work, it's a lot cheaper than it was 5-6 years ago. There are deals on cars, clothes, holidays, restaurants near us have vouchers pretty much every other week. If you have the money to spend, your money goes a lot further, therefore saving more towards a house deposit is easier to do.

Round here, only one of my friends DHs does'nt work in the City. Everyone gets the train every day and we are in a strange little bubble. It sounds like you live in a similar area. The prices are effected because for a lot of these guys, throwing more money at housing in a good commute location is the difference between being home for bathtime or not seeing their DCs in the week. It's worth it to someone who's cash rich and only needs a 3 bed house to accept they are effectively overpaying for space compared to other areas in order to get that quality of life.

Move away from commuter belts and watch the house prices tumble to closer to the average.

Because the price of tangible items like property, gold, silver etc is always more solid. People are prepared to pay for something they have confidence in and things like this doi not drop confidence.

Things like pound value fluctuate as people have more varied opinions. Usually more negative. Most people are positive around actual items.

Bubble in commuter belts will not bust. Demand will not cease. It will get more strained as salaries do not compete, but there will also be an upswing and then all this will be forgotten and change again.

Just cyclical.

Excessive immigration, property speculation, unreasonably low interest rates: many reasons.