Social consequences of house price boom

[Upwind]

comment at the guardian.co.uk [click]

One of my pet subjects but I have not seen this in the mainstream media before:

"If food or energy prices were rising at 8% per year, let alone at 20% there would be outrage. There would certainly be alarm that such price rises were not sustainable and that increasing numbers of people were unable to afford a basic commodity.
Academics at the university of Aberdeen are currently running a project on this, and other, changes in society and believe that "when the implications of these developments are taken together, they hold the potential to produce profound and, as yet, largely unanticipated social consequences for this age cohort, as well as for UK society as a whole".
Astronomical prices mean that couples who cannot afford to buy, or move to larger properties, or lose half a joint income, are having children later in life when their fertility rates are lower. You do not have to own a home before you have children but many people desire at least some stability before they do so. "

What's your take on stake ownership capitalism DC?

There's no point in working in this country. I saw some property porn show the other day, the couple had bought in 1992 at £150,000 sold in 2006 for £650,000. That's half a million pounds in a bit under 15 years.

That's a lottery win. That's over £30,000k a year, every year. Why bother working? Why contributing anything, or doing anything, if housing is a one way bet, and you can just sit back and watch the money roll in?

"IQ and work ethic have nothing to do with being able to afford a house." Too right. I was born in 1980, and I went university, which means I'm shafted. Born ten years earlier, and I'd be sitting pretty. Last time I looked the definition of "intelligence" didn't "buying a house shortly before insane wage inflation and irresponsible lending practices send prices rocketing" Since when did that indicate any thing other than luck?

It doesn't matter how many houses you build, because the housing market no longer functions on rational market principles. People buy because "house prices always go up". People buy because Sarah Beeny says it's good. People buy because every main stream media outlet is relentlessly pushing the line that 'House prices always go up and if you don't get on the ladder you're stuck renting for life", ignoring the fact that the journalists writing that drivel probably have a heap of BTLs each. Actual hard market data barely gets a look-in, unless you're to trawl for it, and no-one does that kind of thing nowadays. Not when the nice lady on the telly tells you now is the time to buy.

well if we're talking in the third person all the time then I have to say that dominiconnor has obviously not known the joys of being a serial tennant. decent landlords do like long term tennants, but many (perhaps even most) landlords like to boot tennants out so they can jack the rent up by an unreasonable amount for the next one. they also despise tenants who have the gall to phone environmental health or another organisation. EH has the power to force lanlords to improve homes, but few tenants ask them to use thatr power when they can be evicted at 2 months notice.

I do agree that spanish housing policies are generally crap though. but that doesn't mean their rental laws aren't better than ours.

I do love the term "propery porn"

Stakeholder capitalism seems to be the only viable alternative to more classical capitalism.

It has succeeded where tried, a few firms work that way with apparent efficiency.
It was tried with some success, (perhaps too much) in Yugoslavia where it became a threat to state power, and was done away with in favour of more traditional socialism.

There is a 3rd form which is the worst form of government yet devised by man. This is where "stakeholders" are not the workers, or those who contribute to it's success, but is defined as parts of society, and of course by extension the government. Once government becomes too entwined in wealth creation then you are in a death spiral. It nearly did for Britain.

Property porn is entirely the approriate term. It's repetetive, plot-free, there are entire channels showing nothing but it, and it's obsessivly watched by people who're not in a position to do any of the things they're watching.

Lol Kevlar

Where to start?

Lack of foster carers here.

So extreme they're breaking the law because they're unable to remove children for lack of carers.

Because most people live in very overcrowded conditions already.

And two+ bedroom places are very nearly nonexistent.

We're not talking about a 'ladder' here or 'young people' who can't get on this mythical ladder when they're 18.

We're talking about children living in potentially life-threatening conditions for lack of suitable housing to move carers to.

How's that for a social ill?

'There's no point in working in this country. I saw some property porn show the other day, the couple had bought in 1992 at £150,000 sold in 2006 for £650,000. That's half a million pounds in a bit under 15 years.

That's a lottery win. '

Excellent post.

And NO ONE seems to ever report about hte effect these rising house prices have on rent.

For those of us who will never be able to buy here, fair enough. No biggie.

So you rent, right?

Wait a sec!

High house prices = high rents, too.

Then you have the added issue of many buy to let landlords.

Who sell up after the 6 month short-assured tenancy is up.

Leaving yet another person or family scrambling for housing.

Council and HA?

Oh, wait! They sold much of their stock under Right to Buy.

So you're fucked there, too.

I don't delude myself that my children will ever live in this country as adults .

Buy you can still make money. A friend of my daughter has bought his first place. He can't afford the mortgage and he's living at his parent's but he's renting it out and that just about covers his costs. I still think over time whenever you end the market even if you really really stretch yourselves like we did buying a tiny first place in 1983 you can own a home and then as time goes buy upgrade if you need somewhere bigger. That house we bought then is now worth about £220k and on the salary my husband and I would have had today at that career stage and given interest rates are nearly half what we were paying then it would be as affordable.

I don't think people should have to go to those extremes xenia just to buy a home!
The increase in house prices was manipulated in 2001 by lowering IR so that we would avoid a recession so there is every possibility that they can be manipulated in the other direction too.When the ex governor of the Bof E admitted this last week it didn't even make the front pages of the newspapers!

1. If a family with children lives in a council house/flat, what happens when the children grow up/leave? Does that person/couple stay in the same flat, or are they made to move to a smaller place as they no longer "need" the same amount of room?

Excellent question actually if renting were to be a viable option for many families. Where we want to move to there are dozens of council homes with 3 bedrooms with one elderly tenant. When granny looks like she is about to pop her clogs in comes the family buying the house "for her" and then once she is out of the way they sell on for massive profit. There was a policy of over-occupancy, where one person living in a 3 bed would be offered a flat or smaller home to allow families to move into a proper size home. This doesn't happen now. I know of one person, again in this town I want to live in, who bought their 4 bedroom council house for £31k. If she sold it tomorrow she could fetch over £200k, and remember the god-awful Scottish system of offers over. That used to mean about £5k over the asking price, it now means a good £20+k if you are very lucky, only incomers with good money behind them can afford to play around with buy a property like that. And to them that is what it is, property, not a home.

We were always quite happy renting, until twice the property was sold and we had to move. When it was about to happen a third time we managed to get an HA property. We don't mind renting but we are stuck thanks to there being no houses in the town we want to live in, private renting is the same as a mortgage on the place so not an option.

And considering, from what I have been reading last week, that the bottom has just fallen out of the US housing market the UK is sure to follow.

HA are like council houses, but more expensive and likely to up your rent every single year as ours has. We now pay £30 more than a similar council house per week (although we pay per month due to wages.)

Yes, TIBS, this is why I think right to buy should be abolished entirely. Or the property offered to the tenant only at market price - no discount.

And why I will never ever buy an ex-council property. They already bought it at a discount courtesy of hte taxpayer, there's no way I'll fund their profit.

"A friend of my daughter has bought his first place. He can't afford the mortgage and he's living at his parent's but he's renting it out and that just about covers his costs."

Thank you,you've just demonstrated how unsustainable the whole housing pyramid scheme has become.

You know in Sweden they have those IKEA houses, for couples only (too small for families although they look lovely!) Anyway, when the people buy them it is under contract that they have to sell it back to IKEA therefore maintaining the low cost.

Now why the councils couldn't have done that god only knows, it would have generated more money for them and stopped the greed from families buying 2 or 3 council properties.

(Neighbour has a friend who bought her father's council house "for him," her father-in-law's council house "for him," and their own council house. Made an absolute killing when they got to sell all three and that is 3 more houses out of the loop.)

?even if you really really stretch yourselves like we did buying a tiny first place in 1983 you can own a home and then as time goes buy upgrade if you need somewhere bigger.?

But the problem many people have, including us, is that we managed to get on the housing ladder before the prices took off. But now we?re stuck. There isn?t a hope in hell of my salary ever rising anything like enough to match the rise in the property market. In fact when I moved to my current job it meant moving to a more expensive area and stretching ourselves to the limit to get the tiniest two bedroom house imagineable. Now with a new baby we?re looking into the possibility of moving and have realised that 2 years on, with cr*ppy public sector pay awards, we can borrow hardly any more than we could before. Meaning that we can?t now and will not for the forseeable future be able to upgrade to a larger house. And there is no scope for extending this one so we?re well and truly scuppered. We can?t afford the rents round here either.

And jobs in my sector are few and far between so we can't just move - not that there are many cheaper areas we could move to. Oh - and I have a degree and a postgrad diploma btw, but I long ago came to the conclusion that IQ/earnings/owning a home are not in any way linked.

The other thing that annoys me is sanctimonious members of the older generation declaring that feckless young people could people could afford a house easily if they weren't spending all their money on trainers and Ipods. WTF!

Let's do the maths:

Average UK terraced house; (ideal for first time buyer!) £143,512 (Source: BBC)

New video Ipod £160 (Source: Amazon.co.uk)

Current HPI: 6.7% per year (Source IntheNews.co.uk, quoting Hometrack)

6.7% of £143,512 is £9615.30 per year.

Which is £183 a week. In other words, for an average terraced house (not a semi or detached) one new Ipod equals around five days of inflation.

For a semi, weekly inflation is more like £215. These are average figures as well; they'll be higher in the SE.

If you haven't saved that much in a week then you're further away from home ownership than ever. You may as well buy the Ipod; it's not like it's going to affect your chances of owning your own place.

Always dangerous to use the BBC in any subject where numbers are important. They pick simple, easy to digest ones, and stick to them.

The average price is not the issue at all, it's the distribution of prices around the average.

First time house buyers have always struggled to buy "average" price houses, and probably always will.
However average does tend to imply that some some homes are below this price. Some terraced houses are far more, implying an equivalent mass below the average.

Many people who buy their 2nd or later home typically have some equity, pushing the average up.
There are many houses considerably below the average, whose HPI is going to be a different number. At this stage in the cycle it's probably higher, but on average must be lower else of course cheap homes would cost more than expensive ones.
Straight away that tells us that not only is HPI different for different homes, it is much more variable for cheaper homes. (the technical term is mean reversion)

Also I fear you must also look at the different rates of growth of savings. You can invest your iPod in shares, which will grow faster than money in a bank (on average).

Also you are assuming very wrongly that real house prices only ever go up. That is simply and flatly wrong.
It's a principle of market microstructure that a large % of the wealth transfers (sort of like profits) in a market are between those who cannot choose when to buy/sell and those who can.
If you save, one day the market will go tits up and you will be in a position to get a bargain. Do this with luck and skill and the effective rate of return is very good.

Am I asking a silly question here - if people stopped paying the stupid prices for houses, wouldn't they get cheaper anyway? (I mean everyone now...stop buying..stop now!)

I rent with a Housing Association, a 2 bed terrace house with no garden and a drive way. Very simple little house, very small.
I can't afford to buy because I don't have the god knows how much I need for the deposit (probably around £10k, which I don't have laying around the place).

My parents lived in a Council house until about 10 yrs ago. They bought it for £21k. They sold it for £95k about 6 yrs ago and now live mortgage free. I think they deserve it too, my dad can now retire. He has worked an honest living for around 35 years, why shouldn't he?
I agree that buying Council homes is not ideal, but how else can some working class people survive, especially with such low pensions and probably no savings - or very little.
For a young couple buying their first home together, a mortgage is not 'owning' your home, it is a loan. The bank owns your home, not you. To me this is no different to renting, until of course the very last payment is made!

For every new build development of homes - 30% has to go to a housing association.

"If you save, one day the market will go tits up and you will be in a position to get a bargain. Do this with luck and skill and the effective rate of return is very good."

Which is what I've been doing since 2002, aside from blowing my money on fripperies like food, rent and course fees.

When the time comes, I'll temporarily suspend my humanity, check in my soul, and go looking round the repossession sales. Until then, I sit tight and save... it's not like I've got an alternative.

In any case, current levels of House Price Inflation are stupidly high. Poke at the numbers all you like, but I could have done a spreadsheet looking at the prices and inflation levels in the lowest two quartiles of sales for the past year, adjusted for season, interest rates, etc, etc and I reckon I would have still got the same answer. Pulling numbers off the BBC is just far faster.

Whatever; this thread got under my skin badly.

Hmm...lets go out and pay £227k for a pokey little terrace house with a back yard and no parking so that when I get home from work after a 13 hour day to pay my loan, I have no where to sodden park and have to circle the area to look for a spot....or should I rent h/a house with a driveway for £71 a week...tough choice.

TwoIfBySea...'And considering, from what I have been reading last week, that the bottom has just fallen out of the US housing market the UK is sure to follow.'

There's a simple reason why it won't - we are a small island with restrictions on building on Green Belt land. Demand far exceeds supply.

Re: Right to buy. I'm not sure if this applies in all areas, but where I live the discount is capped at £34,000, whereas a 3 bed terrace house is worth around £190,000. The sale of council properties has slowed to a trickle for the simple reason that most people living in them are either on Benefits (60% of council tenants receive a means tested benefit) or less than the average salary, which is £23,000. So even with the £34,000 discount, the tenant will not be able to raise a mortgage for the balance of £156,000 plus fees.

I worry current trends in the housing market are taking us back to a Dickensian situation, where life chances are strongly determined by inheritance.

Life for many become materially a lot more comfortable when the older generation moves on.

Nice!