Why have people tolerated the housing catastrophe of the last 30 years

[nomemono]

I know it has been good for those geared up or alt the top of the ladder in the mid 90s, and to a declining degree, most years since then, but really, how has this been allowed to happen. Just as one illustration, houses in the frankly crime ridden North London estate I grew up now cost 4 times their real, inflation adjusted, 1997 price. £420,000 to live in one of the worst areas of London, in an old, poorly insulated house. Oxford, affordable when I was a student, now almost worse than London. Cambridge, Brighton, anywhere well linked and with good transport links or local jobs, the same. People casually posting on this website about having £900k to spend on a house. Single people shafted, ditto those without inheritances. How has it come to this?

Yes, and with overseas students, care workers and general immigration dropping there will be much less demand for property.

Because there hasn't been a party that has had plans to do something about it. its not just a UK issue - its happening in plenty of other countries too.

This is true, but a decade earlier, around 1980, my parents were only allowed to borrow 2.5 my dad's salary plus half my mum's. They expectation being she would have children and step back. Which she did to an extent. This sounds sexist but had the effect of reducing the money supply available to buy property and kept prices lower. Although we shouldn't forget the high interest rates they paid on the 80s.

It's an interesting question. Probably because at least during the 90s and early 2000s more people were long on property than short.

The idea that property was nailed on to make you money really took off in the early 00s. The middle class amateur landlords were getting heavily into BTL which was free from regulation and also relatively free from taxation. And right to buy meant a lot of property was transferring cheaply.

Popular TV programs also jumped onto the bandwagon with the media weighing in on how it was possible to make a tax free fortune slapping on a couple of coats of paint and re-doing the floor.

Of course it went off the rails a little around 2007/2008, but not enough to hurt the majority, who just sat out a minor correction and waited for the Tories to come up with a few mad schemes like HTB and funding for lending to re-inflate the market.

Then durings the 2010s continued historically low interest rates buoyed prices and the nations love affair continued, right up until around 2020, when things began to change.

Increasingly regulation with the BTL sector due to more of the electorate shifting to renting has really knocked the stuffing out of the sector and it has become more and more difficult to turn a profit. Many amateur landlords sit on properties though in the hope that house price inflation will return, all the time losing money to problem tenants. They would rather be bled slowly dry than sell something for less than they believe its worth. Tax regulation was also tightened up on.

Interest rates started heading up around 2022 and these again really knocked the stuffing out of affordability for buyers. Sellers however have remained pretty stubborn, the result being that volumes have collapsed but prices have held relatively steady. I think this reluctance/need to sell is a sign of the relative wealth tied up in older cohorts who own most of the property and are of the mentality that "house prices can only go up".

Even now if you look on here one of the top uses for money/inheritance etc seems to be for someone to help get their kids on the housing ladder, and not asking the question of why they should actually need to in the first place.

It feels like a Mexican standoff between buyers and sellers at the moment, each group waiting to see whether something turns up to make the other blink.

I can't really see much upside to the housing market at the moment. I don't see rates going that far down again. I don't see any massive wealth creation that is going to happen in the economy that will filter through to increase prices. Maybe AI is a possibility.

It's anybody's guess really though, The sentiment in my opinion has been denying the reality for years, but time and time again the market has defied my expectations and held up. The government has either juiced it or something has turned up to re-inflate it. So what do I know.

I think a final point would be is that the UK housing market is in no way homogeneous and how well you have done hanging onto property varies considerably depending on where you are and the type of property you have. A flat in the midlands may not have increased in price since 2005, and thus is worth well below what it would be expected to in real terms, whereas a family house on a good plot in the SE may have tripled in value over the same timescale. The property market though only ever seems to be discussed in terms of these massive gains though. And not the losses due to inflation from static prices.

Interesting points, yes the discussion has certainly been framed a certain way for many years, much harder to do with all the economic podcasts etc. out there now though?

Small debt with High rate is better than Massive Debt with potential for big rate increases any day.

Would you like some figures? Let’s compare 1970 and now.

In 1970, average gross weekly wages for men and over 21 were £28 and £14, respectively. Even if a household had two earners, which was rarer, the average weekly wage was £42 for a gross annual wage of £2184 or £182/month. Before taxes.

The average house cost about £11,500 and required a 5% deposit. Even with a big deposit you would have around a £10,000 mortgage. A15% interest rate means annual payments of £1500 or monthly payments of £125. That mortgage payment is 68.6% of the gross household pay.

Now for a modern example: Numerous online banking guides state that usually you can only get a mortgage for 5x household salary, let’s make it 6 to make it fair.

In the example of a £300K mortgage, then, gross salary is at least £50K, monthly salary is at least £4167. At 5%, payments are approximately £15,000 per year or £1,250 per month. Mortgage payments are just under 30% of gross household pay. Less than half the 1970 example.

Interest rates weren’t 15% in 1970, though. And you’d have needed more than a 5% deposit.

Try reading the post properly.

Try doing maths properly

The maths is fine. It was the date you were quibbling about.

Because ppl know they can punch down instead of up and take it out on someone else. See any thread about social housing tenants

The maths isn’t fine if you’re using the wrong interest rate. Your post talks about 1970 but the interest rate wasn’t 15% then. So the comparison you’re making is inaccurate.

This If the banks had refused to lend so many multiples of income then house prices wouldn't have risen so fast

Why is this happening?

https://uk.news.yahoo.com/home-mortgage-approvals-drop-lowest-100820649.html

I don't think the vast majority of people are interested in watching or listening to economic podcasts.

If they are without house they want a place to live and if they have spare money to invest they want to do it in a way that makes them as high as return as possible.

Maybe to answer the question in a nutshell, the reason enough people are not outraged by the property boom was because enough people benefited it, particularly the vocal middle class.

Once more and more people became renters through the investors hogging property, the government was forced to act in bringing in legislation to improve the rights of renters, and of course more and more people are beginning to see that the property market is dysfunctional and doesn't act in the countries best interest. It's fundamentally a numbers game for electoral support and where the tipping point lies.

For me the government(s) should never have let the housing market become a place for such speculation. The government(s) job should be to provide cheap, affordable housing to everyone.

If they can't do basics like this then what is the government actually for ?

Very good points.

Because they've contributed to it themselves by buying second homes, or changing a bungalow into a house, or adding a massive extension which turned a hitherto affordable home into an expensive one.

Don"t think extensions add much value TBH, many just contributed by borrowing too much, no doubt they will be regretting that now.

During Covid, my house was "worth" £900k. It's not now. Probably £650k if I want to sell it. But I shall be equally hard nosed when we buy the next house, and rationality will return.

Exactly this.

House prices going up so much have definitely made people feel wealthy. Feeling wealthier makes people more happy to spend.

Exactly, only those accepting reality will be able to sell.

If you think housing should be a commodity, this is where you end up.

It's not like there haven't been several chances to change course since 1979.

Only cure is much higher interest rates, absolutely great news for savers as well.

For a long time now, property was seen as a good return. There's a reason in this country we have long used the phrase "Safe as houses"! What happens when a commodity is seen as a good return, more people invest in it and the value goes up. Property in the UK is a limited resource and so it isn't like vacuum cleaners, where you can make more fairly easily, in certain parts of the UK, it is really difficult, expensive and time consuming to make more property. So the resource becomes even scarcer and therefore prices get even higher. Investment returns improve and therefore property is seen as even more desirable by investors.

Governments have consistently taxed property income at lower rates than the tax they have levied on returns from industry. It is also easier to get a loan to buy a property that it is a loan to start a business. The value of property in this country has gone up by an insane amount in the last 30 years all the while productivity has gone down. It is like all the value of our country has been sucked into the property market. If you were a pension fund holder obliged to ensure that you invested in the sectors offering the best returns - where would you invest?!

If we don't address the lack of structural investment into R&D, production, agriculture and all the other areas of the UK economy that are currently starved of investment, then property will continue to be seen as the the safest place for money to go!