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 don't believe rents should be more expensive than a mortgage for the same property in the same area.

Then you are very naive.

The rent needs also to cover cost of deposits, repairs, buildings insurance and all sorts of other things.

We rent in the south east, dh is self employed. so moving north would be completely starting again with nothing.
Both our families are bloody shit so we don’t have that support.
But we have no equity to start again and dh would have no business.
It’s not always as cut and dried as just moving - that’s before I’ve uprooted the kids from all they know.

It’s more risky to move for one job if they are few and far between outside London. If it ends there may not be a replacement in the same area.

The issue is much more complex than just supply and demand, and as said the oversupply of cheap credit is a big factor feeding into the property bubble
People invest in property because it gives a good return, it would be better for society as a whole if people invested in the areas of the economy which added value, we need to restructure the incentives so that people want to invest in areas that can help everyone technology education medicine etc.
Investing in property is destructive for society as a whole, it pushes up prices so that people can't afford to have families or to leave home and start their own lives properly

@malylis

Maybe some of that such as reasonable repairs and insurance should not be included when considering fair rent. If you own a house you should be able to afford its upkeep yourself. That way, the only people that would be able to profit from property would have to have significant finances to do so to begin with. This would be a big start in ensuring that private properties are decent and humane. Some LL simply cannot afford to do the repairs to make somewhere warm and clean because they have stretched so much to Buy to Let on top of that the fact that some genuinely do not care about other people with less than themselves.

The rent needs also to cover cost of deposits, repairs, buildings insurance and all sorts of other things

That doesn't explain why there is such a gulf though & rents do generally cover this as they will be higher than the mortgage the landlord is paying.

"If you own a house you should be able to afford its upkeep yourself"

No the rent is part of paying for upkeep. Some LL are bad, the majority are good and pay for repairs etc.

Buildings insurance has to be included as having it (and contents) is pre requisite of lettings contracts and mortgages for BTL properties.

Investing in property is destructive for society as a whole, it pushes up prices so that people can't afford to have families or to leave home and start their own lives properly

Exactly it's not good for society. I think I read that 1 in 6 over 60 yrs olds own 2 properties & only 1 in 10 at 30 owns one. Yet we have a shrinking tax paying population, and now the younger generations need to pay more for uni, start saving for a pension and there won't be a state one & likely the NHS won't exist in its current form.

You already see the impact in the people who live in London. In my profession (typically masters degree, post degree qualifications etc), even in London you would be doing well to earn more than 40-50k by the time you hit your thirties. You'd need to be in a senior role, or equity partner, to be earning over 100k.

But London is still regarded as being the top place to be for my industry, even if it's not quite to the same extent as in finance. So what happens is that you get a crop of graduates who are happy to work there and do all the things you want to do in London in your 20s. Then when they want to start families they leave. The upper levels of management are still there because they're in their 50s and managed to buy when it wasn't silly. I'm not sure where the next group of management will come from though. There are also a lot more foreign workers than out in the sticks - I get the impression that for a lot of them it is a chance to live in an exciting world city, but I'm not sure that they stay for a particularly long time.

Landlords will charge what the market value of their rent is, that is what causes the gulf.

Its incredibly frustrating to be stuck paying high rent in an area you like but ultimately can't afford to buy in (believe me this happens to most Londoners looking to buy), but we all have to make decisions.

I know plenty who have stayed renting into their 40s and 50s and have long term rentals in beautiful areas.

I know others who moved out and bought but the areas have improved around them.

@malylis is obvs a landlord

I don't think there is anything intrinsically bad about people buying property to rent. In other countries the proportion of private homeowners is often far lower. The problem is the regulatory system that allows for uncontrolled rent increases, dodgy landlords not maintaining the properties, squashing a ridiculous number of people into houses etc.

Yes I agree, renting has its place but it needs tougher regulations

Nope Malylis is a realist, too many people get their knickers in a twist about London prices.

Two of you buying a first time property on London average salaries should be able to do it fine. If you cut your cloth accordingly! If you want to live in a garden flat in Crouch End however its not gonna happen.

I do find it wrong though that people have become very rich by being able to hoover up property because lending was much more lax in the past & younger people are paying the price for that now.

Of course there's nothing wrong with renting, but people need homes which are stable secure and affordable, without this basic fundamental thing we cannot get on in life, we cannot do our best
A home is a fundamental human need just like education and health care are fundamental needs that we consider essential to a modern productive life

So is Bristol it's ridiculous

Ten years ago a room in a shared house above a pub in Willesden Green was £480 a month. Market value indeed.

If you cut your cloth accordingly

Yep no more coffees & avocados 🙄

My home is now worth around 800k having paid 400k. I couldn't afford it now no matter how I cut my cloth.

Nope nothing about coffees, about location.

Everyone I know who bought in London at any time had to make this compromise.

People who rented in Maida Vale in the 80s had to buy in Cricklewood (and no one wanted to live their then), loads of people who rented in Highgate and Archway in the 90s had to buy further out.

People who rented in Crouch End in the 2000s bought flats in Palmers Green or ex council properties in Finsbury Park.

Then you must somehow take your cloth to the land of unicorns and turn it into spun gold

Plus the difference now is that people who have to make choices & buy where they don't want to be aren't going to see anything like the historic price gains that older people have experienced.

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

Nope, a cheese sandwich is available from any supermarket in London for £1.

In fact, eating out or takeaway food in London is often really cheap, due to the large amount of competition.