High price of London rentals?

[Saffron]

So will the bubble in London ever really burst and give some renters a chance to get a reasonable foot in the door of home ownership, or is this the start of a longterm trend for increasing renters compared to home owners in London?

[DJKillaQueen]

No the bubble won't burst, because the current government don't want poorer, low income families living in London, and because they are hoping equity in property will solve the looming pensions crisis. We are certainly heading for a dominent rental market in London (and many areas of the South East).

I just hope when there are no people here to do bar work, hotel work, drive busses, clean the streets, nurses, junior doctors, shopkeepers and a whole swathe or other low paid people doing essential jobs that they won't whine too much.

[right-clicking]

A new initiative cooked up by Boris, seems to offer a glimmer of hope for those struggling to afford the extortionate rents/purchase. https://www.sharetobuy.com/london

[Burbage]

right-clicking Wrote:

-------------------------------------------------------

> A new initiative cooked up by Boris, seems to

> offer a glimmer of hope for those struggling to

> afford the extortionate rents/purchase.

> https://www.sharetobuy.com/london

Not so much new as salvaged from the remnants of pear-shaped housing association schemes. This appears to be simply an aggregating website (and marketing wheeze), endorsed by the mayor or, in other words, subsidised by taxes, for schemes that aren't shifting very quickly.

Shared-ownership schemes were supposedly very popular in the days of Blairite largesse and easy credit, but housing associations swiftly shifted to the more traditional rental market once the headaches became apparent. The reasons they didn't work are various but on the whole lenders didn't much like them. The properties were often overvalued, repossessions weren't going to be straightforward and, because they couldn't be sold to just anybody, they could be very slow to shift. As a result, shared-owners often ended up stuck with a less-than-amusing triple-whammy of rising rents, negative equity and little chance of remortgaging.

And that's without the more practical problems. Such as having to pay the full set of service charges as well as the rent, and that those rents, though only around 80% of the market average, still shot up at the rate of the average. More insidiously, once you'd got a shared-ownership property you weren't a first-time buyer any more, and thus wouldn't be eligible for another. So if you ever had to move house, you'd be stuffed.

This appears to have been deliberate. The people who invented the scam are the very people who imagine that everyone has a job for life with bonuses, promotions and pay-rises, and thus naturally assumed every part-owner would regularly buy extra shares in their home until they'd bought the whole lot. Unsurprisingly, the vast majority didn't. Possibly out of pure stubbornness, but more likely on account of a global economic crisis, pay cuts, mass redundancies and rocketing rents.

It's not all bad news, and flogging the horse a bit more might not be entirely insane. But, unless they've changed the way they work significantly for the better, you'd need to be a very twisted optimist to see so much as a glimmer. To my mind, it's a very bad thing indeed - removing property from the general market isn't likely to make anything more affordable for anyone. There again, if I was about to start a family and the only alternative was renting, I'd be very interested indeed. But that's not an argument for shared ownership (not as it exists, anyhow), that's an argument for more secure tenancies.

[polla2256]

The only way around this issue is depopulation. There are too many people in too small an area.

[Saffron]

True (perhaps), BUT depopulation would effectively worsen the pensions crisis. AND, how would one attain (and more importantly maintain) depopulation?

The UK population is aging, we're not growing a larger younger population in quantity enough to overtake the accumulation of the aged population. IE, the population of young people is falling in relative terms (as I understand it). We could tighten immigration to restrict population growth, but unfortunately most immigrants are young workers. Their skills influx and taxes, not to mention their willingness to live in undesirable rental conditions, makes them an asset rather than a burden, by many accounts.

We could attempt to depopulate London by re-settling individuals elsewhere in the UK. This would take mass cooperation between the government and private companies, in addition to a way in which to determine which people to keep in London.

Mass contraception is out, as it's already noted that we need (at least some) young people. Short of mass plague (which isn't a maintenance scenario anyway), I'm not coming up with much else on depopulation, although we're probably overdue for a plague anyway.

[El Pibe]

A rock the diameter of three london buses coming along at once would probably do the job nicely, but the cost of rentals would be the least of our worries if it hit dulwich.

Given the amount of writing about it, surely the zombie apocalypse is well overdue?

[DJKillaQueen]

I also think that successive governments see the equity in spiralling house prices as the short term solution to the looming pensions (top heavy population) crisis, that's if there's anyone left able to afford to buy a home that is. Longer term, there will be increasing demand on state pensions as decreasing numbers of workers have employer paid or private pensions. It's not going to end well sadly.

[LondonMix]

I don't really agree with this. London has more than 30% social housing. There is more demand for housing than there are houses to live in which is what is pushing up prices. This is turning London into a city for only the very rich and those poor enough to qualify to get social housing (and fortunate enough to secure it). It is middle income workers in general that are being pushed out of London as a demographic. While middle income workers and low income workers alike want to live in London in greater numbers than is possible, social housing guarantees that a sizeable portion of London's population will be low-income workers even if there are some who can't get it because of the waiting lists.

DJKillaQueen Wrote:

-------------------------------------------------------

> No the bubble won't burst, because the current

> government don't want poorer, low income families

> living in London, and because they are hoping

> equity in property will solve the looming pensions

> crisis. We are certainly heading for a dominent

> rental market in London (and many areas of the

> South East).

>

[Saffron]

LM, so you don't agree that it's lower income families that will be affected, or you don't agree that the bubble won't burst (or we're not headed for a dominant rental market)?

I agree that it's middle income workers who are likely to be squeezed. Although "low income" makes sense, if DJKQ meant low income renter, ie not those receiving social housing?

So if middle income workers are being squeezed out, will there come a time when they're in short enough supply to make their jobs worth more?

[Saffron]

El Pibe Wrote:

-------------------------------------------------------

> A rock the diameter of three london buses coming

> along at once would probably do the job nicely,

> but the cost of rentals would be the least of our

> worries if it hit dulwich.

>

> Given the amount of writing about it, surely the

> zombie apocalypse is well overdue?

We're agreed then, zombies it is. Shall I start the petition?

[Mick Mac]

The recent coverage of high rentals was enlightening to me - many young people interviewed complaining that they pay half their net pay per month in rental... on, wait for it.... a one bed flat, most likely in an upmarket area of SW London.

Well sorry but when I was young/single I rented an affordable room in a house share. If you want the luxury of a one bed flat, demand you own space etc, then I'm not sure your entitled to a lot of sympathy if that means you have to cut back elsewhere.

I understand that for couples and families its different.

[LondonMix]

Saffron, everyone who is not very wealthy will be affected by the shortage of housing. My only point was that a large portion of London?s population will remain low income because of the high proportion of social housing in the capital. That certainly doesn?t mean every low-income person who wants to move or live in London will be able to, but low income workers will always be part of London?s cultural milieu.

Middle income workers will have to make a choice- sacrifice increasing amounts of quality of life to live in London or move to the home counties. Depending on what London has to offer, some will stay and others will go. A lot of professionals work in London and live in the surrounding countryside already. For a long time, this wasn?t even to do solely with the cost of living. Families in much higher proportions used to leave London as a matter of course. Now- perhaps because London state schools are the best in the country?- more families want to stay in London than before. This is partly why the general nationwide shortage in school places that is a result of the recent baby-boom is even worse in London?not only are people having more kids but instead of moving to Kent they are staying put in London. If I had to guess what would happen it would probably be like New York and San Francisco:

1. Young people and singletons will live in shared apartments and much smaller apartments for longer than before?the shortage of affordable house in both San Fran and NY has led to the approval for the creation of new micro units. http://www.apartmenttherapy.com/sfs-micro-apartments-220-square-feet-1500-what-the-hell-180708

2. More middle income households will permanently live in apartments as residential accommodation becomes denser and denser in London in line with most big cities. In New York even the very wealthy live and raise their kids in apartments. People just take it as part of urban living. Hopefully, nicer, more spacious and family oriented apartments will be developed accordingly with better sound insulation etc. However, the need to live in a house rather than a flat seems to be really engrained in the UK.

3. More middle income workers will move to the home counties. House prices there will increase but there is also more scope to develop housing I think.

The upshot will be that London will largely be comprised of those relatively well off and those who got onto the housing ladder years ago and those poor enough to qualify for social housing. What this means for jobs growth in London is hard to say. The infrastructure for commuting from the home counties to London is really good and again if NY is anything to go by, won?t necessarily put people off. Professional service firms and the like, as long as they can still recruit, will probably stay in London as there are certain synergies firms get from being near other firms in the same industry and near their clients etc.

Overall, my guess is the demographic composition of London will change, housing and commuting habits will change but London isn?t going to collapse due to the shortage of housing. With that said, I do think the government?s new buy scheme is creating a mini housing bubble again!