Blackcurrant

Surely there's no harm in people making good use of things that they find - things that the everyday folks leave behind.

The part of the Sustrans Thames Valley London Oxford cycle path between London and Windsor is stunning at this time of year - all houseboats, willow trees, cow parsley and idyllic waterside houses. Not very convenient for SE22, but unbeatable on an early summer day. I would start at top of Kew, on river path, and get train back from Windsor.

I would grow one cherry tomato, one beef tomato and one standard size like Alicante in the same bag. It's much more fun to have the variety and all do well here. Stick to vine type tomatoes, not bush type. You'll need to tie them to canes and pinch out leafy side shoots. Water regularly but not excessively or they'll split.

This is going to carry on for at least another year as there's no prospect of the base rate rising while "inflation" is so low. And since the government's official measure of inflation happens to exclude house prices, inflation is going to remain low however much house prices rise.

When the government stops using unnatural mechanisms to prop up the market, prices will at least stall. http://www.mjmortgages.org.uk/images/p012_1_00.jpg

Yes it's deliberate policy. The main reason for supporting house prices is that it recapitalises the banks and thereby encourages them to lend more widely, which supports business and helps the economy grow. The problem is that house prices have taken off again and wages aren't keeping up, so we're heading back into the same kind of unstable mess that wrecked Gordon Brown's reputation and career.

LondonMix Wrote: ------------------------------------------------------- > 4. If you accept the Shelter re-weighted analysis > for 2011 is correct and the 2011 ONS data for the > same period is wrong, what in your view was behind > the recovery in rents? Real wages were falling > dramatically and the country was in recession... It's not just about wages. Rents are driven by supply and demand, just like any other marketable item. After the financial crisis there was a glut of unsold properties that fed through into rentals, pushing up supply and pushing down prices - at a time when unemployment and redundancies were more frequent. After the crisis faded, the market corrected. This graph from the now defunct findaproperty rental index (which ran until 2012 and which you can browse on waybackmachine if you're interested) shows the clear relationship between supply and price: http://i62.tinypic.com/au84yr.jpg > 5. The significant increase in the ability for > would-be renters to become first time buyers (as I > mentioned several pages ago) is predicted to > result in a temporary slow down in rental growth > as people moving from the rental sector to owner > occupation reduces demand for rental properties. > This kicked in most strongly the latter half of > 2013. This phenomena in and of itself drives up > housing prices, while like for like reducing rents > until a new equilibrium is reached. Therefore, one > would expect to see going forward, a like for like > slow down in rental growth and an acceleration of > the increase in house prices until a new > equilibrium is reached. House prices in London were rising very strongly before 2013. The volume of sales is actually still quite low and the number of people moving from renting into buying is small. Most people simply can't afford to buy, so demand for rented property hasn't fallen as much as you imply. What's missing from your analysis is the significance of the low base rate. Because mortgage rates are so low, almost nobody is being repossessed or pressured into making a quick sale due to tight finances. Consequently, there are very few forced sellers on the market and the supply of properties for sale is very small. By my count there are 168 properties for sale in SE22 at the moment, but in 2008 there were over 400. Obviously the housing stock hasn't halved, but the effective supply has more than halved, and house prices have consequently shot up. These numbers can change overnight if lending rates change significantly. This has happened several times before - it's a fickle market. Don't make the mistake of thinking the current high house prices are supported solely by a structural shortage housing as they aren't.

As you might remember, rents fell about 20% in 2008-9. The substantial rise in 2011 reported by Shelter is largely a rebound from the trough, so picking out that single year leads to faulty conclusions. The LSL data doesn't pre-date the financial crisis so their figures also reflect the rebound but not the longer trend. If you want to pick out a single year, why not the last one, which also shows real term falls in rents: http://www.ons.gov.uk/ons/rel/hpi/index-of-private-housing-rental-prices/january-to-march-2014-results/iphrp-stb-jantomar14.html

LondonMix Wrote: ------------------------------------------------------- > For Blackcurrent: > > My previous post provided a circa 10 year analysis > of nominal and real wages. The data on private > rentals is slightly more complicated so for full > disclosure, I will details the issues below: > > There are two main sources for statistics on the > private rental market in the UK. > LSL ? most often used and quoted > ONS- official government statistics on private > rent started a few years ago but they publish look > back data > The LSL stats are still the most widely reported > as the ONS statistics are experimental statistics > that are still undergoing refinement and > adjustment regarding treatment, weighting, etc. > > http://www.ons.gov.uk/ons/guide-method/method-qual > ity/general-methodology/guide-to-experimental-stat > istics/index.html > > The Shelter report I linked to earlier used the > ONS data with certain weighting adjustments to > provide a like for like analysis between data sets > that were signed off by an academic researcher as > the most appropriate methodology. It produces very > different results to the unadjusted ONS data set. > > The experimental (unadjusted) ONS data shows circa > 12% rental growth in London from 2005 to 2013 > (that is as far back as it goes). The LSL index > shows significantly higher private rental growth > (I don?t have the time to reconstruct the like for > like data set but the LSL data set for 2010 to > 2013 showed London rental growth of circa 24% > whereas the ONS experimental data has rental > growth of just 5% over the same period to give you > an idea of the magnitude of the discrepancy > between the two data sets. > > Based on the LSL data rental growth has > outstripped wage growth over a significant period > of time. The Policy exchange report calculates > rental inflation as 80% in the 10 years to 2011 > using LSL data for example. This is significantly > above wage nominal wage growth over the same > period in one of my previous government links. > > You of course can decide to If I remember rightly, the LSL rental index has only been running for 4 or 5 years, so I'm not suprised you can't provide a longer record. There was another rental index that covered earlier years but it was scrapped (can't remember the name off hand). ONS is the best long-term record available at the moment. I'm not suprised you're disputing the ONS figures though as they contradict your argument...

clockworkorange Wrote: ------------------------------------------------------- > The discussion re provision of addiitonal supply > is very interesting. The point on the green belt > release (for me) even more so as this would > require a cultural shift in the minds of the > population and MPs. Sadly, I doubt this will > happen in the medium - long term as those "in > power" would never rock the boat and lose their > votes over the release of Green Belt. That is not > to mention the level of opposition such an idea > would face from groups like CPRE and Natural > England. > > Let's assume for a moment that the substantial > release of GB is allowed and housebuilders have > the green light to develop. Why would they do > that? Housebuilders have no interest in flooding > the market with new homes. They do this gradually, > building out in phases. this is for both practal > and financial reasons. Crudely speaking (as I'm > not an economist) sudden release of 1,000s homes > would drive down prices - good for buyers but not > for housebuilders. Taking account of the resi land > value they would have paid for the site in the > first place, there is no incentive for > housebuilders to do this. > > One solution (very simplistic) is that the Govt. > builds the houses and sells off - meeting it's own > affordable housing requirements. There's a lot of > talk of infrastructure projects being pafunded by > Govt. Why doesn't it do more on housing delivery? > There's a very synical answer to this. > > I'd be very interested to hear blacurrant and > Londonmix thoughts on these thoughts? Do you have > any practal solutions to the issues you've both > raised? Developers do hoard land, but there must be a profit in building or they wouldn't bother at all. I think there's probably more profit in buying up brownfield sites in central London and flogging the high rise executive apartments to China than building on green belt though. You're right about opposition to development of green belt land. People have a financial incentive to be NIMBYs and stop any development that would impact their own house prices. Those in power don't have much incentive to bring down London property prices - they nearly all own real estate in prime central London.

LondonMix Wrote: ------------------------------------------------------- > I think we are talking at cross purposes but > regarding your point about me not providing > evidence the rental growth has outstripped wage > growth please read the following report from > Shelter (page 4 has the relevant results). I can > add some additional links after work that cover a > longer period. um, that refers only to a single year, and for some reason you've chosen the year 2011. It's the long-term picture that matters. ONS data says private rents have risen by 11% in London over since 2005 (link: http://www.ons.gov.uk/ons/dcp171766_311546.pdf). The RPI index is up 26% over the same period, so London rents have fallen in real terms. I don't have figs for London wages but I'm happy to bet they haven't fallen (in real terms) as much as rents. > Essentially, the cost of renting in London has > increased at a faster rate than people's ability > to pay for those increases via wage growth. The > only explanation for that is supply and demand > These supply and demand issues are aggravated by > government policy on the supply side. The facts don't support those statements. > Now, to your other point. House price growth has > outstripped rental growth which indicates that > there is a speculative bubble (recent estimates > are circa 20%). This is a point I myself have > repeatedly made. The nuance is that the bubble > itself is driven by a belief the underlying supply > and demand dynamics will lead to continued > increased rental values over time. With this I agree 100%. But I'm not calling the top or predicting a crash. It's still possible we end up with rampant inflation and wages rise to the point where prices are supportable. Not much sign of that yet, though the press has recently said wages are at last rising in real terms again.

In real terms rents have fallen in London over the last 8 years, not risen. It's stretching credibility to call that growth. Your argument hinges on rent inflation exceeding wage inflation over a significant period, but you haven't demonstrated that. The housing shortage appears to be driving up prices in real terms but not rents, and the divergence between the two rates of inflation is substantial. There's no better evidence that prices have risen above long-term sustainable value.

Rents in London are up 1.4% over the last year, which is well below both RPI and wage inflation. www.ons.gov.uk/ons/rel/hpi/index-of-private-housing-rental-prices/january-to-march-2014-results/index.html I agree there is a shortage, but the figures don't support the narrative of ever tightening supply. Rents are not correlated solely with demand (which is a function of wages, purchasing power and number of tenants) - they also reflect supply. Tight supply will drive up rents faster than the general level of inflation. But that hasn't happened - rents are stagnant in real terms even over the last decade. The shortage argument has been overstated, and prices are being driven into bubble territory by speculation, not fundamentals. Mortgage affordability based on the low base rate is the key factor missing from your analysis.

LondonMix Wrote: ------------------------------------------------------- > BlackCurrent, what I am saying is that London > house prices are increasing for two different > reasons. > > 1. House building is not keeping up with household > formation. Allowing more land to be developed for > residential purposes in the greenbelt would > mitigate against this among other policy changes. > This state of affairs would normally lead to price > increases of some kind. > > 2. In addition to the above, there is a > speculative bubble forming leading to price > increases above and beyond what one would expect > solely based on point 1 above. The underlying > supply and demand issues have led people to price > in future growth expectations in their current > pricing > > If you buy now, even if your current pricing might > be above where one would imagine the market would > naturally settle based on rental costs, if the > underlying supply and demand issues are not > addressed, in time your expectations about growth > will materialize. > > My only point is that there is an underlying > problem that needs to be addressed to bring house > prices in London under control. > > And as an aside, asset prices don't necessarily > grow by inflation. That's not in anyway a given. My point is that speculation on the effects of the shortage (what you're calling the underlying supply and demand issue) is irrational given actual data. Rents in London are rising by less than RPI: http://www.zoopla.co.uk/property-news/renting/london-private-rental-increases-significantly-below-inflation-801690173/ This is the opposite of what you'd expect if household formation were outstripping building. You're right that projections show an increase in the number households, but these predictions are not watertight - they are based more on the questionable assumption that household size is on a long term downward trend than on population projections, though it's true that population is rising. So far, the projections on household size have proved wrong. The number of households isn't growing fast enough to lift rents in real terms, and those speculating on property values are therefore basing their investment entirely on questionable assumptions about a future trend that isn't yet in evidence. This is fundamentally why yields are down: the growing supply shortage isn't growing anywhere near as much as investors are betting. So a correction is on the way.

LondonMix Wrote: ------------------------------------------------------- > I am not a residential property investor but you > don't need to read an estate agent's report to > believe rents will grow in future. When house > building doesn't keep pace with new household > formation in London (which its not and hasn't done > for decades) then rental growth is what has > happened and what would be expexted in future. I agree that rents will grow in the future, but so far they haven't been growing anywhere near as fast as capital values. The divergence isn't justified by fundamentals, it's speculative. And if you believe that markets are efficient, the future projected growth in household formation is already priced in, so further price rises above the rate of rent inflation can only happen if market expectations are continually revised upwards. > Prices can always fall and could fall in London > for a number of reasons. The long term trend > though without reform on a number of fronts though > is continued growth. That isn't saying much as the long-term trend in any price is upwards as long as positive inflation exists. I think you're saying the long-term trend is up in real terms, i.e. above the rate of inflation? I'm not sure I agree as prices and rental yields have become misaligned.

LondonMix Wrote: ------------------------------------------------------- > Black currant if you read my post, I agree with > you that a speculative bubble exists. > > However, that is only part of the story. > Speculating that rents will grow due to a housing > market that isn't keeping pace with household > growth isn't irrational from landlords. > > Interest rates are not as influential as you think > on first time buyers. First time buyers in London > are still only borrowing on avg 3.7x their income > which is an increase but not such an increase to > suggest that with higher interest rates they would > not buy. The low interest rate is probably having > more of an impact on investors. Interest rates > were low for years without any real increase in > first time buyers. I didn't mean to come across as disagreeing, I was basically agreeing with you. 3.7 x income sounds high to me. First-time buyers were shut out by deposit requirements, but lending has become more relaxed, partly due to help to buy. 95% mortgages are common again. A lot of current first time buyers are taking a big risk, buying sub-prime, poor properties in increasingly poor locations. Speculating on future rents would be rational if the projections didn't mostly come from estate agents like Savills with an interest in talking up the market. Lots of things can happen to change supply. Developers are currently falling over themselves to cash in, so clearly any relaxation in planning could dramatically alter price predictions as new-build blocks spring up everywhere. I think a rise in base rates will prick the bubble first though. We've been here before. This kind of mania has happened twice since I moved to London and led to a crash both times. Each time, people were convinced prices couldn't fall. That conviction is part of the reason prices become disconnected from reality.

LondonMix Wrote: ------------------------------------------------------- > The general consensus is that there is an > artificial land shortage created by govt policy > that keep prices high. On top of this, in London, > there is a speculative bubble. People are pricing > in future growth expectations. Without a > fundamental change in land policy, rents will > justify current purchase prices over time, which > is what most investors are betting on. > > The entire system needs major reform. The "general consensus" is probably the most dangerous element in all of this as it's really just a reflection of sentiment and not a result of rational analysis. The best indication of the severity of the shortage is average rental yield. Rents in London are currently very high because of the property shortage - tenants are forking out around 40% of take-home pay on rent. But rental yields are very low, which tells you that capital values have run away, driven up by factors other than the shortage. If rents and values moved in parallel above the rate of inflation, there would be no evidence of a bubble and everything could be explained by the shortage. But that's not the case - they are on wildly divergent trajectories. Foreign buyers are one factor, but the low bank rate is the big one, as that's what's supporting the resurgent first-time buyer market. It makes sense to first time buyers to pay these high prices when mortgages look like good value compared to rent. Put up the base rate and everything changes, as we've seen before. Saying that, I think it will be a couple of years before rates begin to revert to mean, and in the meantime prices are going to carry on rising 20% a year or so. I've no doubt the Bank of England is privately very alarmed about it.

Penguin68 Wrote: ------------------------------------------------------- > If mortgage rates rise above rental yields, highly > leveraged investors are in a tight spot > > Interest payments are an allowable cost when > calculating your tax position as a letter of > property(s). I do not know whether these can also > be offset against other (non-rental) income, but > if so someone who does not just rely on a > leveraged property portfolio could still look to > capital increases to justify being in the market - > as the interest charges offset tax liabilities. > With current huge increases in capital values at > least in London and the SE a buy-to-let purchaser > whose portfolio is of any age will certainly have > seen a huge capital increase in values, and can > probably 'ride' some amount of fall/ re-balancing > if it occurs. Only those last on the > merry-go-round (buying at the top of the market) > may be significantly hurt. This was all true in 2007 but landlords still got stung the following year. Those who'd invested in new build apartments offering "executive lifestyles" in inner city locations like Manchester and Belfast suffered capital losses of 40-60%. East London was comparable. But people have short memories..

StraferJack Wrote: ------------------------------------------------------- > ". These figs make no sense to investors " > > what about the asset price once the mortgage is > payed off? No problem if the bank rate stays at 0.5% for 20 years or so. If mortgage rates rise above rental yields, highly leveraged investors are in a tight spot. Those exiting the market will push up supply. A rise in supply then puts downward pressure on prices - not good for asset prices. It's inevitable that the imbalance between prices and rental yields will correct. There are two ways it can happen: prices fall, or wage inflation takes off and tenants bid up rents. Or a mixture of the two. The greater the disparity between yields and prices, the more likely the correction will happen suddenly through price falls. A rise in the bank rate is one possible trigger. Note that all this can happen even with a housing shortage.

Quick check of median price & rent for houses and flats in SE22 show average gross rental yield is 3%. Net yield obviously well below this (and well below hassle-free dividend yield on stockmarket). These figs make no sense to investors unless the bank rate stays near zero permanently. As rents are tied much more strongly to supply and demand fundamentals than prices, this says bubble more than housing shortage. I don't have rental yields for 2007 just before the last crash but am happy to bet they were higher.

Loz Wrote: ------------------------------------------------------- > Blackcurrant Wrote: > -------------------------------------------------- > ----- > > Up 55% in 3 months, which is an annualised rate > of > > inflation of 365%. Very hard to believe there > isn't a London bubble. > > I think you'll find it's not anywhere near > representative of the entire London market. Up 40% a year is nearer the mark, but that still suggests unsustainable hysteria on the part of buyers. What are rental yields down to now? 2%?

Loz Wrote: ------------------------------------------------------- > Just looking at sold prices and found this > particular piece of madness... > > 36 St Francis Road, London, Greater London SE22 > 8DE > ?650,000 Terraced, Freehold 17 Jan 2014 > ?420,000 Terraced, Freehold 09 Oct 2013 > > ?230k profit in three months! Up 55% in 3 months, which is an annualised rate of inflation of 365%. Very hard to believe there isn't a London bubble.

Jeremy Wrote: ------------------------------------------------------- > The wealth tax idea is equally hair-brained as the > CGT on all sales. Morally wrong to tax somebody > for something they've worked hard most of their > life for. And whatever ppl say, WOULD force owners > out of their homes. The people droving up prices > are the buyers, not those who have lived there for > ages. You can't tax people out of jealousy. I don't see any moral problem in taxing unearned windfalls that have happened as a result of government policy. It would be preferable to use policy to drive house prices back down rather than recovering the misallocated wealth through tax, but the current lot are too terrified of triggering another banking crisis to go down that route.

Loz Wrote: ------------------------------------------------------- > Blackcurrant Wrote: > -------------------------------------------------- > ----- > > > Your initial point was that assets have no value > and are worthless. I think you've realised that > > was nonsensical as you've repositioned and are > now saying assets do have value but that value is > hard > > to specify exactly until point of sale. > > When I say assets have 'no value' I mean that they > cannot be correctly given a value, not that that > are worthless. What is a painting by, say, Monet > worth? We can guess, but we do not know and we > could be out by a long, long way. How do you tax > that? Shares with a paper 'worth' of ?10k today > might have been 'worth' ?20k yesterday. The only > time you can know the correct and accurate value > is when it is sold. Anything else is a just a > guess, nothing more. And it may be a very bad > guess. > > > Fine. But it can be estimated easily and > accurately enough to make taxation practical. Even > on eBay I can > > establish market value of any common item by > selecting completed sales and looking at > > comparables. Houses are valued the same way. > It's even easier to value shares or other > financial > > assets including cash (which is also an asset). > > You have a strange idea of the word 'practicable'. > You want to tax people based on a guess? And a > guess of every single major item of every person's > wealth? A guess that might be out by a long way > (cough, *Foxtons^) or, even if reasonably > accurate, might be very wrong within a very short > time of it being made (e.g. shares)? > > I sold my car last year as I was going away. The > Parker's guide told me it was 'worth' ?7500. I > ended up selling it for ?6000. Parker's > 'valuation' of my car was, therefore, wrong. It > wasn't the value at all, was it? It was wrong by > 25%. I only knew the value of my car by selling > it. > > > In any case your point that property, being a > worthless asset, can't be taxed is pretty > > obviously untrue as various countries already do > collect wealth taxes based on property, including > > the UK, which uses residential property values > to calculate council tax. You can justifiably > quibble > > about how efficient or fair the valuation > process is, but that's very different from arguing > that > > the value is nil, which I think you've got > muddled about. > > Look back at my post - I never said it 'can't be > taxed'. It is, however, a stupid idea and can't be > done with any accuracy. > > Council tax is a great example of the monumental > issues of trying to tax assets anywhere near > accurately. It works on valuations made 23 years > ago and even then only to put properties into > rough bands. And 23 years later, people are still > putting in appeals on the valuations made. Every > time it suggested that a revaluation is made it is > quickly thrown into the 'Too Hard' basket by > politicians, and for good reason. Can you imagine > trying to do it every year? > > And yet you want to extend this hard-to-do > guesstimate to wealth in general, with tax to be > paid on every asset's guessed value at a specific > time, re-guessed by the taxman at least every > year? That's your idea of a practicable solution? > And we've not even got to the issues and problems > around taxing illiquid assets. > > Taxing wealth is just a bad idea and usually > impossible to do accurately. It can sometimes be > done in very, very small ways (and usually done > badly, like council tax), but it is just not > practical on a larger scale. Nevertheless, various countries do already tax property, including the US and UK. The most likely route towards increasing wealth tax will be via rebanding council tax, which is already on the cards.

lounge lizard Wrote: ------------------------------------------------------- It is a free market and should be, for > better and for worse, some people took a risk that > for one I was 'nt willing to take, and have gained > quite spectacularly from it. It isn't really a free market though as the government controls demand via the bank rate and supply via planning laws. House prices are a matter of government policy and people are right to demand that policy is changed to bring prices back down. As for gaining spectacularly from the risk - it's nothing to congratulate as it's essentially a lottery win that owes nothing to talent, judgement or hard work. The London economy shouldn't revolve around random windfalls from property. People should earn their fortune by using their brains and being innovative and productive, which is what makes an economy vibrant and healthy. What we currently have is an economy that rewards couch potatoes with huge windfalls for doing nothing. All the more galling that those who've won the windfalls are often the ones to complain about benefit scroungers and excessive tax.