Why are property prices rocketing?!

[totallyfedup77]

I’ve just been reading the very depressing article below and don’t understand - we’ve just had Brexit and are still in the midst of a global pandemic. You’d expect prices to be falling if anything but according to this article, in some places they’re up by as much as 48% in a year! Why?!?!

www.dailymail.co.uk/property/article-9621715/Most-expensive-seaside-property-revealed-Salcombe-topping-list.html

I don't want to lecture anyone, but referring back to my post earlier this evening, there are a lot of boomers who have worked and saved for retirement, during a period when pensioners were the poorest element of society; conventional wisdom then suggested you/we/everyone needed to save to supplement their state pension, unless you worked in the public sector with an index-linked pension underwritten by government. That has changed, and it will change again when anyone who has had a defined contribution pension looks at what they are going to have to live on for the years they live in retirement. If you had an interest in your financial future 30 years ago, and didn't trust government to see you okay, then you looked around for safer places to put your savings that you personally could control. About 20 years ago, we bought an industrial shed. The returns have been non-existent and we've had no rent for a year, but we still have the property.

It is now very important to reduce the size of some high streets and even out of town retail zones. John Lewis want to repurpose some if their stores but planning policy needs to respond to this. Providing green space around such buildings will be a challenge too. Not to mention homes with gardens. There does need to be a rethink about utilising space and accepting not everyone will get what they want. It’s very difficult to ensure homes for all without substantial state intervention.

But, if you just got by on your earnings and never had anything to spare for saving, my post above is sounding tin-eared. I hoped to explain rather than to criticise.

Tealights, I think it has to be a burden shared. Social housing is of immense value, but it cannot be absolutely "free" or it will be a free-for-all rampage.

[quote XingMing]@BlueMongoose, interest rates are so low that savers and anyone with cash/pension savings have to look beyond the banks and building societies for a place to make their money work for the long term. Lots of people are like my DH, who has several family members who were defrauded of their retirement savings in the 1980s by their naievete in believing promises of decent investment returns. Those people, and the generation behind them, have decided that there is not much to go wrong with buying a two-bed house suitable for BTL. And while I know anyone under 35 wanting to buying a two-bed starter home will complain that it's preventing them from getting a foothold on the property ladder, because it is, the BTL owners are only storing capital safely and will sell when they need the cash. Having lived through the 80s and early 90s, I never thought I would ever write the words that "we need some inflation back in the mix". But we do need enough inflation to pay savers a return on savings, and that will hit the people who have stretched themselves to manage a low interest mortgage. And the inevitable crash in property values is going to hit as hard as it hit in the 1990s. But it will be nastier because of zero hours contracts and PT work.[/quote]
Yours is an explanation, but it is not a justification. In fact, it's not inflation we need, it is growth- something which will, sadly, be lower in the future than it could have been, and I'm not talking about covid there. Inflation without growth can happen, and is a horrible thing for an economy. Growth means people's ISAs, pensions, etc. as well as savings go up. Inflation doesn't help pensions or savings, because prices go up as much as income- they can go up more than income goes up. I still think it is immoral for BTL to doom others to eternal renting, where they are paying for someone else's mortgage plus a profit and ending up with nothing at the end- being left on a far smaller pension but still paying rent after buying a property for one, or possibly more than one, landlord. If what you want is high interest rates, that is not inflation. They are two separate things, not necessarily connected to each other. High interest rates make it difficult for businesses to borrow to expand and keep up to date with technology, and that tends to restrict growth and jobs.

I did not set out to justify anything BlueMongoose. Inflation is going to happen because of 12 years of having the money printer running at full throttle.

Social housing has exactly the same financial model as privately landlords!!! Where do you think housing associations get money from? The magic money tree?! For everyone’s information: they borrow the money. They charge rent and they pay the money back. It might be over a longer period but the money to build is borrowed! Private landlords are needed to take up the slack. They are currently essential. In fact they have always existed. Nothing new at all. Just hatred of them. Perhaps people would prefer to be homeless? Lack of understanding of housing finance is a real issue here.

Housing associations cannot always afford to build. Cannot always get finance in place. Cannot always buy land and develop in a banner that suits their business and economic model. There have never been enough social homes in 130 years of building them!

Banner... manner that suits their business

Private landlords are needed to take up the slack. They are currently essential. In fact they have always existed. Nothing new at all. Just hatred of them. Perhaps people would prefer to be homeless?
What a load of rubbish.
If private landlords withdraw from the market, they will sell the property. The number of homes in the market (either for sale or rent) will remain the same, landlords won't sit sulking over empty properties, refusing to sell or rent out.
I'm a private landlord myself btw.

My great-grandfather owned land and built on it. He built streets of houses which were usually rented. Some were bought from him, but my granmother and great aunt inherited them after he died. Encumbered with fixed rents and unlimited tenancy rights, they were a millstone around the necks of two elderly and not wealthy widows. The maintenance never stopped, rents were a few shillings a week, and under the 1960s tenancy rules which allowed tenants to pass on the tenancy from one generation to the next, the landlord could not evict even the worst tenants. Most of the time my grandma celebrated selling a house, even for £300 in the early 1970s. It was in her view one less to worry about.

Private landlords are a necessary evil. Nowadays, it often happens that someone has to rent out their own property while life is changing. I did so, when I moved in with DH. And in the early 1990s, when property prices tanked and interest rates were about 14%, I subsidised my tenant by £200 per MONTH, which was the shortfall between the rent I received (£580) and the mortgage I paid (£775). Don't feel sorry for me, but reflect on how fast the politics and economics can change before making commitments.

The 2007-08 crash was triggered by excess mortgage lending. NINJA loans. That went well.

In case anyone needs a reminder, and it was a mainly US phenomenon, NINJA loans were given to people with No Income, No Jobs or Assets.

Social housing has exactly the same financial model as privately landlords!!

Just that one little - well actually massive - difference. Social housing lets to vulnerable adults - those too ill or disabled to work, and low income families - often full time working in need of benefit top ups. Increasingly, private landlords refuse housing to these people.

We have a serious homelessness crisis. Which costs the taxpayer dear.

Huge sums of taxpayer money go to private landlords who charge 3, 4, 5 times market rent to house homeless children and their families in their substandard properties.

Huge sums of taxpayer money go to private landlords who charge 3, 4, 5 times market rent to house homeless children and their families in their substandard properties.

They don't charge 3, 4, 5 times market rent, that's a nonsense statement. The price charged is what the market will stand and is therefore the market rent. The problem is that property prices are too high (both rent and buy) because the market is broken. Essential services, such as shelter, shouldn't be left so completely to market forces were short supply maximises profit.

I agree with your post - except that,when it comes to temporary accommodation, it's true what I've said.

It's been widely reported - and people who work in the sector have posted about it too.

Temporary accommodation is very very expensive. It's often private landlords - and they frequently charge local authorities several times the usual market rent, to house homeless vulnerable adults and families with young children. The money spent on it comes from the taxpayer.

@ThisIsStartingToBoreMe

Oh yes. And also because high house values and low interest rates are the only things keeping the tories in power. If the market collapses or interest rates rocket it's game over for them.

[[https://www.theguardian.com/business/2021/jun/01/bank-of-england-monitors-uk-housing-boom-as-it-weighs-inflation-risk-dave-ramsden-covid Bank of England monitors UK housing boom as it weighs inflation risk]]:

"Ramsden, the deputy governor responsible for markets and banking, said: “There is a risk that demand gets ahead of supply and that will lead to a more generalised pick-up in inflationary pressure. That’s something we are absolutely going to guard against. We are looking carefully at the housing market and a raft of real-term indicators.”

Ramsden said the Bank would not be complacent about inflation. “If it is not temporary we know what to do about that. We can push bank rate up from its historically low level [0.1%] and we know what that will do to demand.”

As other posters have said, increased interest rates have the power to change the game. It is worrying for those who have stretched themselves, but maybe ok for those on fixed-rate mortgages.

They’ve sold their offices, so there won’t be any backtracking. It means a number of my colleagues are buying houses by the coast or in the countryside as commuting is no longer an issue.

Fine as long as your colleagues are content to stay with the same company for the rest of their lives. If they want any sort of career progression, they may find moving to another company difficult if they’ve sold up and are now living in rural Wales.

"If they want any sort of career progression, they may find moving to another company difficult if they’ve sold up and are now living in rural Wales."

Not if they find another wfh position. Which, many companies are now open to, in order to get good talent.

@Whatafuss

"If they want any sort of career progression, they may find moving to another company difficult if they’ve sold up and are now living in rural Wales."

Not if they find another wfh position. Which, many companies are now open to, in order to get good talent.

As long as they're not in roles that require regular contact (phone included) with customers and clients.

Because standards have fallen. Service is shit. It takes ages to get hold of the right person (who often never gets back to you), and I'm fed up of having to give my personal information including financial to someone whilst I can hear family noises in the background.

Widespread full-time WFH is a necessary temporary measure during a pandemic but for many customers, clients - and therefore ultimately, businesses - it doesn't work long term.

@Kendodd
You have a massive “if” in your comment to me. Landlords will not all withdraw. There will to be a glut because they would be stupid to sell at the same time and certainly would not sell with negative equity. Private landlords have always existed and will continue to do so. The housing associations cannot build enough homes and never have done. You can dream on about landlords all selling and reducing prices.

"
Widespread full-time WFH is a necessary temporary measure during a pandemic but for many customers, clients - and therefore ultimately, businesses - it doesn't work long term"

Sure, for client facing roles. But for a vast number of jobs, they can be wfh. In my sector everyone's moved to wfh for the long run. It's one of these things that there's no current general overview as all of us see our own vicinity. For me and DH and nearly all my friends there's definite long term change already agreed by their employees. Maybe not for you. Stats will emerge in the long run. Currently we r all speculating based on our partial realities.

@XingMing

It’ a frightening that you have framed this as you subsiding your tenant. There is clearly a benefit to having an asset rather than renting or you would have sold. Your tenant made your empty property a financial gain for you in adddition to it’s increasing value (over the long term). To see it any other way is disingenuous.

Factory workers who make things cannot work from home.Or anyone who does manual work. Or who drives a train or a bus. Vast numbers of office workers can but certainly not other workers who make things. Them and us it seems to me. Have all the perks vs those with no WFH perks at all and still paying their own expenses to get to work.

@PresentingPercy

You can dream on about landlords all selling and reducing prices.

Then they will continue to rent out the properties. What they won't do (unless extremely stupid) is sit sulking over empty properties and refusing to either rent them out or sell.

There wont be empty properties. There is a housing crisis, remember. I never said they would sit on them but neither will landlords flood the market unless they are very very stupid!

Guys, I want the market to maintain its position but it is clear to me from looking at rightmove, etc that the prices in London are definitely coming down. There is a 4 bed house, freehold, on at £150,000 in the Croydon suburbs. Needs work (no bathroom) but other than that is manageable.