To think London house prices are unjustifiably high

[Alanis126]

I was recently visiting London, where I once lived. It was a big big struggle financially and I wasn't sorry to leave. House prices have been stratospheric for 20 plus years and while there have been some small declines in recent years, I saw a central and fairly nice but ordinary sized flat which cost £1m. There are of course many properties costing way more. There are a couple of things in particular that I don't get. Forgetting the £1m central flats, even a very ordinary property in a quiet zone 5/6 area without much in the way of social amenities was £400k plus. While some people have family money, I think it is fair to say most people start their working lives with no or negative net worth. For many the early/mid twenties will be the lowest point if their income and when they most would like to or benefit from having access to social amenities. When even rent in a grotty house share is £800 plus bills, I don't see how it becomes feasible to live while you are trying to build a career. I know there are other cities but what if you have a job in an industry only existing in London? If houses are £2m or £3m then does it matter anymore what the price is? Could they be worth £5m, £10m,£150m? And while I accept people may still choose a London lifestyle, if someone has London equity and doesn't enjoy their job, is it only fear of being priced out for good that stops them relocating and having a total change of lifestyle?

I can’t work out whether people who are saying they don’t know how people doing essential jobs for low pay can (now or future) afford to live in London are being deliberately obtuse to make a point, or really don’t know.
I live in a fairly poor, slowly-gentrifying zone 3 London neighbourhood. It’s where I grew up. I managed to buy last year (age 31), through shared ownership, household income of £50k, by borrowing £20k deposit off my grandma (essentially this is an advance on my mum’s inheritance, in full). Between rent/mortgage/childcare/bills I am hugely stretched, and without doubt we are the richest household in DC’s class at school. He has plenty of friends living in HMOs, families of four sharing a bedroom between them and a bathroom with completely unrelated households. These are parents who are working multiple jobs in the gig economy, mostly, and often also sending money to family back home. People decide it is the best place for them to be and they make it work, one way or another.

Yes HB helps subsidise people in good professions who previously would never have needed that support to keep a roof over their heads. I used to get a bit of HB as a civil servant on £30k (eligibility reflected my childcare costs, as this is knocked off your income for calculating HB eligibility - without significant childcare costs I prob wouldn’t have received HB on that salary), so I’m sure this is true for plenty of teachers and nurses etc. Living now in a shared ownership block (again, to reiterate, this is a less desirable corner of London and priced accordingly), I also see people in these professions doing the same.

Still wading through the thread but I found this interesting, @Toomuchtrouble4me:

We have 2 properties in Manchester and 1 on the south coast - the rents on these pay for us to live in our lovely part of NW London.

You’re part of the problem. The more people like you buy up multiple properties in cheaper parts of the country to pay for one overpriced one in London, the fewer houses there will be for more families to buy in those places elsewhere. Prices go up in those once cheaper areas because of supply and demand and what has been achieved at the end of it? Normal families are now unable to buy In the cheaper areas, and got 3 other households to pay off the multiple mortgages for YOU while they could have been paying it off themselves if they’d owned the property rather than renting it from investors like you.

You’re no different from the super rich buying up properties in London and putting the prices up there. Only difference is that they may leave their multiple properties empty OR they may rent them out to other mobile rich people for a few years who will have the disposable income to prop up the local economy. The people paying your mortgages for you for years have nothing to show for at the end of it and have probably minimal disposable income at the end of every month to use in the local economy, as rental prices are usually more than what their monthly mortgage cost would have been.

It’s not ethical. Before anyone says it, i am not jealous as my mortgage is paid off and I have enough money from an inheritance to buy another property outright as rental income. I refuse to do it. It isn’t right. It would only make the affordability of housing worse here, and that would make me a massive hypocrite because we bought our property at the start of the 2000s before prices went silly everywhere. We couldn’t actually afford to buy our property now if we had been starting out now. We would have been stuck renting, from landlords like you sitting back in their overpriced house elsewhere, probably!

I have to be in London for work, my 1 bed flat (no garden, parking or balcony) is £1100 plus bills. I have been earning just under £2000 but now I’m on £2400. Funnily enough I can’t save anything on that! I could easily pay a mortgage around here but not a hope for the deposit. Despite having more than enough my parents are unwilling to offer any form of loan of deposit money (totally their choice of course and I would never ask) but it leaves me pissing money down the drain just to live.

Yes there's free activities, but you get fed up of sharing them with millions of other people

One thing I agreed with David Cameron about was the sharp elbowed middle class. I remember discussing this with a MC friend of a friend who was very offended by this comment of his and she went on to explain that she might be richer than say, me, but she is still on a budget living in London and all that which I completely understand. She isn't super rich by any means. But the reason she goes for free stuff according to her is because it means that they can do an activity AND eat somewhere nice instead of having to bring a packed lunch or eat somewhere cheap. I did explain to her that we have to both go to the free thing and bring our own lunch and that is the big difference.

David Cameron was a hypocrite though that is what should have offended her

@Barbie222 Nothings particularly busy round here, we went to a free performance yesterday. It wasn’t at all full, we could easily pick our own seats and it was really good. The theatre was a little blow up dome.

A lot of people with ordinary jobs bought their houses a long time ago and are still living in them. I live in Zone 4 (Awesomestow) and my house cost £66,000 in the 90s. I couldn't afford it now (£450,000?). I work in the NHS.

I don't know what will happen.in the future. There needs to be a big correction, but with money coming in from overseas I can't see it.

@beguilingeyes

Bet it will be zone 3 round there before long. Friend just got a shared ownership place next to St James Street stn. Surprisingly roomy with character too.

I don't think people understand the meaning of "unjustifiably". If the prices were unjustifiably high, no one would pay them. The fact that people do pay them shows that it's not unjustified.

Just because something is expensive doesn't mean it's unjustified. If I opened a restaurant, I doubt I could sell a cheese sandwich for £30. But I might sell a lobster for that price.

@lifecraft

In London, a cheese sandwich is sold for £30 in a greasy spoon because the posh restaurant next door sells Lobster. But all you get is a plain cheese sandwich and its fucking Red Leicester (or your most hated cheese) to boot

Surely at some point interest rates do need to go up?

Don’t the economists say if chickens had gone up as much as houses they would be £50 each.

To answer the questions earlier on about why anyone on a normal salary would want to stay... I'm a keyworker in a normal salary. I used to live alone in rented and then a few years ago bought a flat with my DH and having DC. I've always felt that there are sacrifices and gains to us living in London versus living in other parts of the country. I accept a massive sacrifice of living here is living in a flat / smaller home (although our flat is actually huge in terms of floor space), we've no garden. This is the main decision to be made I think- if having a "house" matters to you then unless you're wealthy, central London is not an option. The flip side of living in a flat is that is we can access one of the most beautiful huge green spaces in the country and all the resources central London has to offer. We walk a lot and have a tube station 2 minutes away so getting around is great. Life is convenient and there are so many options for things to do, see, eat etc. We don't drive or have cars which is easier, cheaper and better for the planet. If we want to have a weekend away we can easily get a streetcar club car which is parked on our street. One aspect of suburban living I don't like (I have friends in market town type areas in the SE) is the fact that they use their cars all the time to go everywhere, sometimes multiple times a day.

Another consideration for me is that my DC can grow up in a multicultural area and be exposed to a lot of diverse experiences, people, foods etc etc, and see other non-white faces in all manner of jobs. As a result I think they grow up more engaged and mature than their counterparts in more suburban type areas (anecdotal comparison with friends' children living in places like Wiltshire, Surrey, rural Kent). My older teenage nephews (also grown up in London) for example got the tube to school from secondary and they are now very confident and streetwise in the useful sense, compared to friends' kids who are less confident and seem more sheltered, and are incredibly nervous about travelling in London. Just my opinion.

Also, another personal view, but as someone who works on the frontline with vulnerable people and does not vote Tory I would not want to live in a Tory safe seat. Others will disagree with that- perfectly entitled to do so- but for me it wouldn't be good. I have a friend who voted Labour and lives in a very safe Tory seat and says she feels frustrated by many of the opinions and conversations that come up in her social circles. I'm not saying I only socialise right Labour voters! I do have Tory voting friends! But I would feel living in a middle class largely white and overwhelmingly Tory bubble would be uncomfortable for me. This seems to apply to many of the commutable places surrounding London.

It's horses for courses and won't appeal to everyone and nor should it. Each to their own and all that. But I'm just providing an insight for those who couldn't understand why someone like a keyworker / teacher / nurse would choose to live in London.

We have looked at the types of houses we could afford in places like Kent, Surrey etc- massive and lovely. But I don't think the house alone would make up for the other things I value- for me. I'm just not excited about living in a suburban town.

There needs to be a big correction,

The difficulty is, a big correction means that all current owners, including those with 5% equity, will see the value of their house fall. Long-ago buyers, and owners of more than one property etc, may be able to afford it (and wouldn't necessarily be displeased if it meant their own adult dc could afford to buy). But last week's first time buyers less so if it puts them into negative equity. A huge increase in house prices is one example (there may be others!) of something that is very difficult to 'put right' quickly once it's happened.

There was a report this week, can't remember who by, that the sharp increase in house prices is not the result of supply shortage, but of low interest rates. It suggested that an increase in interest rates could lead to sharp price falls.

In SE London there’s many on normal salaries, they just bought their house ages ago.

I’m a high earner, work in London couldn’t afford to live there. My friend just spent £6m on a five bed house!

I'm just not excited about living in a suburban town.

Same here! Born & raised Londoner & even zone 4 outwards doesn't really appeal. I can't imagine not having a high street 5 mins away. We would look to move to another city.

The big correction should have been the 2008 crash. But the government didn’t let it happen - understandable as it’s going to be horrific.
But in that time houses in my area have nowdoubled (wages haven’t) so the issue is even bigger and will be even more painful

Yes the gov has meddled too much

YANBU it's fucking outrageous, we're totally stuck. This city is a home to people not a speculative market for families halfway across the world to invest their fucking savings. Governments of all stripes have been totally lax with regulation - foreign buyers and non-residents should be massively taxed plus shitty help to buy should be binned. Proper rent controls need to be put in place. Other mainstream European countries and cities do this so it's not exactly rocket science or wild policymaking. Our area won't have any regular workers in the future now that house prices have risen so dramatically. The city will be a lot shittier to live in without basic and essential services. It is a giant Ponzi scheme but people are so invested I can't see prices dropping (though I think they will stagnate for many years post-Brexit).

My husband and I have a joint annual income of around £80,000 and live in a gorgeous 6 bed, three story victorian end of terraced on a private road up in the North East. I work PT, he works FT. We have two large parks at each end of our street, and can walk into the city centre where there are lots of amenities. We bought the house for £275,000 last year and live comfortably; this was after selling our home in a more expensive area for £400,000. In London, we'd be skint and simply could not afford the lifestyle we have here. I can't understand why more don't move up North. The coastline and countryside is easily accessible, and there are great schools too. I don't think our NHS services are as busy either. House prices in London are astronomical - I'm assuming families like mine must have a really limited lifestyle if they have no choice but to live there.

Our income is about 90k so not loads but we have low childcare costs (i'm pt, tto) & have a relatively low mortgage vs equity. If I was 5 yrs older & did everything the same Id be in my 1.2m plus home having paid no where near that. If I got on the ladder at 17 I'd be a multi millionaire. I remember seeing houses in Wim village on sale for close to 1m in the 90s & thinking wow. The same houses are 7m now.

. I can't understand why more don't move up North.

Because some people's wages and/or the type of work they do is tied to this area?

Houses might be a lot cheaper but their wages would be lower as well, if they can find any work at all and it's a big gamble. Not to mention leaving behind their support network,family ,friends, help in case of emergency etc.

tbf people I know who have moved North (Manchester, Edinburgh) have either obtained a similar salary (surgeon, accountant) or work remotely. I would defo consider it & DH could very likely work remotely but my fil is very ill, so we have to wait.

One of the big problems that London has is that the areas you can afford to rent in you can't afford to buy in (or are extortionate).

It is possible for a couple on an average London salary to buy, you just have to move somewhere not trendy (as Walthamstow was in the 90s and early 2000s). What people really want to do though is to buy in their current area at prices from 20 years ago.