Trying to buy a house in this area is near impossible

[LondonMix]

Worlwiser is correct. There are absolutely not enough homes in London to house ever person who would like to live here. There are also not enough homes being built to keep apace with projected population growth in London.

That's not to say that buy-to-let isn't part of the picture but the fundamental issue is a shortage of homes to buy. This is a complex issue. Young families are remaining in the city longer than they used to and older people are living longer which both reduces the turnover of homes available for purchase to new buyers.

The concentration of a scarce resource in the hands of the most wealthy will always happen without regulation. Regarding housing we as a society have to decide how we want to address this: either reduce the attractiveness of owning homes as investments in London or increase the attractiveness of renting so that its not an issue.

However, in both scenarios there will be unintended consequences if you don't think it through. Finance for residential developments can still be expensive / difficult to obtain. Chinese buyers who invest in London real estate allow certain schemes to get off the ground that otherwise would never be built. Without them, the total number of homes in London would be less. Most of these investors also rent out these properties. The increase in homes available for rent in London, reduces the rate of rental growth which is good for tenants. Also, as the prospect for rental growth diminishes, the attractiveness of owning buy to let properties decreases, tipping the balance back in favour of owner occupiers.

Given the supply of homes is the fundamental issue in London, my policy suggestion would be to give massive tax breaks to those willing to buy new build homes as investments as this increases supply. However, I would severely tax those who buy existing housing stock for investment purposes going forward.

[worldwiser]

It does also coincide with historically low levels of inventory.. whether demand is actually up on historic levels I know not. But I do know that good rental properties are insanely sought after too with people regularly offering above the advertised amount. This being the case, you're left with one inescapable fact. This just in: people from just about everywhere really want to come live in London. Who knew?

[StraferJack]

But it isn't just that is it?

Demand can't and hasn't suddenly risen that much

A herd mentality has triggered and people are behaving in irrational ways

[Loz]

I think this sudden demand in ED has very little to do with BTL anyway. It's not a good time to enter the market. As someone pointed out above, a 500k property (i.e. 2 bed) would need a monthly rental of ?2500 to get a decent yield to make it a worthwhile investment. Ain't gonna happen. You'd be lucky to 1500/1600 at the moment.

Something is driving the prices in ED, but I doubt it is BTL.

[Otta]

StraferJack Wrote:

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

> Why the SUDDEN rise in demand. There isn't this

> amazing increase in influx to account for numbers

> such as these.

Help to buy scheme (which I've used) surely a major factor.

People like me and mine thinking "well this is our one chance of buying in London unless we wait for our parents to die (assuming their assets don't get swallowede up in care bills in their latter years)" and taking the plunge even though we're frightened of what might happen when we renew the mortgage.

It's not ideal by any stretch but people will gamble.

And that's just one aspect of this huge problem. The thing about the E&C development already being sold off in part to foreign investors is also a scary story if true.

[PokerTime]

sorry posted the same thing twice!

[PokerTime]

Worldwiser. Firstly, there are countless properties that lie empty at any one time, and in some of the wealthiest areas, homes lay empty for months and years. There is a shortage of affordable properties for people to buy yes, but that's not what I was talking about. I was talking about the shortage of properties to buy vs the numerous properties owned by any one person for rental. Buy-to-Let HAS inflated the market and is one of many reasons why there are less properties available for first time buyers and those wanting to upgrade/size. The issue is that a few people are profitting from property portfolios they were allowed to acquire with NO capital investment and are charging high rents to cover the mortgage on those rental properties. That is why many people in decent paid jobs can't get deposits together. It also shifts wealth from the many to the few and an older demographic of the few. The baby boomer generation really have had the best of everything, and continue to do so - with provisions, pensions and benefits for the over 65s being left untouched whilst everyone else pays for it.

Here are some facts for you. There are around 25 million homes in the UK of which 70% are owner occupied. Only one in ten is privately rented. However in London, home ownership is only 58%. A quarter of homes are not properly maintained or constructed. House prices have tripled since 1996. In 1985 the average house cost 3.4x the average wage. Now it is 6.1x and in London it as almost 9x. It is thought that four out of ten people buying a first home now need parental help. Yes the demographics of how people live is changing but this has little to do with the housing inflation of the past 30 years.

SJ is right. people are paying stupid money through sheer panic! It's the same kind of speculative frenzy that leads to stock market crashes. Homes have actually been demolished in the North of the country over the last three decades because there is no-one to live in them. The pressure is greatest in the South East, but we have a coalition that seem determined to price the lowest waged and poorest out of the South East altogether.

Here's a perfect example of the kind of thing that has gone on. 1.9 million council homes have been sold under right to buy since the 80's. There are around 1.8 million people on council waiting lists around the country currently. 40% of those homes sold are now in the hands of private landlords charging commercial rent levels. One of those landlords is Charles Gow, the former housing minister of Thatchers Government. He owns owns at least 40 former council flats on one South London estate with his wife!

There has been a concerted effort to reduce affordable housing for the the poorest and lowest waged on one hand, and other concerted efforts to accelerate demand to buy on the other hand, by offering mortgage products that keep the property investors coming. Building hoards of new properties won't come fast enough to fix that, and it has to be said that the kinds of properties that are being built are hardly addressing affordability - which after all is the real issue isn't it.

[PokerTime]

Most of the people being forced out of London LondonM are those who are from London. The traditional cockney working classes. As my post above shows, home ownership in London isn't what everyone thinks it is. 42% of people are renting. They have no choice but to. And of those private rented properties, only 19% are mortgaged. So that's a lot of property in the hands of wealthy people. It would be absolutely possible to rent cap those properties without impacting on the landlords investment.

As for construction, there are already incentives and government sweeteners on offer for house building. But construction companies don't want to build affordable housing. They are in business to make money, and as much of it as possible. This is the problem with all public/private partenership arrangements.

London has always had huge demand for housing. It's a capital city. The post war building programmes, both the 1930s and the 1950's (and 60's) were meaningful responses to decent housing shortages. And they were responses that built according to need. So affordable homes were built near to docks and factories to house workers. There is no such thought out response now - just pursuit of profit.

[Loz]

PokerTime Wrote:

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

> The issue is that a few people are profitting from property portfolios they were

> allowed to acquire with NO capital investment and are charging high rents to cover the mortgage on

> those rental properties.

That's not quite right - the market decides the maximum rent, not the landlord.

[PokerTime]

That's not strictly true either. A landlord can set the rent wherever they want to. They choose to set it as high as they can get away with. The only exception to this are those Landlords repaying mortgages (only 19% of rental properties are subject to this) who have to charge enough to cover that mortgage plus other management expenses. The vast majority of private sector Landlords could charge less.

Historically, landlords have typically been profiteers, often caring little for the plight of those they rent to. That is why housing programmes, rent controls and things like the Housing Act were needed in the first place. And even with the Housing and Tenant and Landlord Acts, enforcement is poor, with tenants often not knowing their rights. Of course, there are good landlords and bad tenants too, but let's not kid ourselves that landlords are at the mercy of the market. They are business people, who work the market to their own profit.

Of course, there is another solution that no-one seems to dare suggest. That is for local authorities to mass build to replace all the council homes lost to the free market. Council homes are subject to rent controls and in the 70s provide homes for one in three. There is only one reason why the majority of social house building (where it happens) is given over to Housing Associations. That is because HA tenants have less rights than LA tenants. The government doesn't want tenants to have security, any more than it wants tenants to have affordable rents.

[LondonMix]

You are missing Loz's point. Landlord's can't dictate rents. They can only charge what the market is willing to pay. Many landlords can't always cover their costs and some are forced to sell.

[fizzmoll]

> House prices have tripled since 1996. In 1985 the average house cost 3.4x the average wage. Now it is 6.1x and in London it as almost 9x.

Nine times? That in itself is a rather alarming figure. What's that data based on? Curious to learn more about that 9x in particular. Thanks!

[Mick Mac]

Contradictory as it may sound what is driving the prices in ED is that is cheaper than any popular area south west of here.

I was in Wandsworth last night and a look in an agents window showed an relatively ordinary looking 1930s style (6 bed) terrace at 3.8m.

[MissKing]

I agree - 'cheaper' prices are what attracted me to the area in the first place, and then I fell for east dulwich anyway! The prices have shot up crazily in the last year, but the area has come up and the prices are now falling into line with the claphams/balhams. I think the increases will slow down over the next couple of years.

[PokerTime]

Sorry LondonM. I did indeed misunderstand Lozs point.

If we accept that Landlords can only charge what the market is willing to pay, you then have to ask why millions of people need Housing Benefit (a million of them in full time work). I also can think of many people who see more than half their salaries swallowed up be rent who would like to pay less, but can't. So rent is being dictacted by whom exactly? Wealthier people who can afford those rents? I would suggest that what has happened goes more like this. House values rise, Landlords raise rents in line, people in rental accomodation become desperate to buy (rather than spend all the money on rent). which in turn fuels demand for property, forcing prices up and up. At the same time, affordable social housing diminishes by half through right to buy, pushing demand up within the private rented sector...and so on and so on............

My point is that it's a fine line between willing to pay and having no choice but to pay. Interestingly, when the coalition introduced new Housing Benefit caps, they predicted it would force Landlords who rent to Local Authorities and HB recipients to lower their rents. That hasn't happened in the South East. Instead, Landlords have removed themselves from LA housing lists altogether, choosing instead to no longer rent to HB recipients.

Have a look at this graph too (from Shelter). Look at the shutdown in council home building, started by Thatcher. If you add to that, that a third of ex-local authority homes are now in the ownership of private landlords (so of the 3 million council homes that existed before right-to-buy, one million are now in the hands of private landlords), it's not hard to see the impact of that on private rental demand.

Fizzmoll, that data is based on comparing average salary to average house price. It's a simple equation. The figures are in the public domain through various credible data collection sources. The Office of National Statistics reports detailed data on salaries every three months. House prices are monitored by various bodies inculding the Land Registry, who also report on average prices regularly. The average home in London costs approx ?300,000 and rising. The average salary in London is ?27,800.

Here's a well researched article from the Guardian.

http://www.theguardian.com/money/2014/apr/02/london-house-prices-rise-bubble-nationwide

[LondonMix]

People thought the cap would reduce rents because they underestimated the demand for private rents. There has been a lot of speculation that housing benefit increases rents in and of itself as it allows tops up real incomes. However, there are so many people who want to live in London that the market could be sustained just on private renting. However, that would not for most people be a good socio economic mix for the city. If ownership and renting only went to those with the highest income.

However, it important to realise that even if every home in London was owned by the council and offered at low rents there would still be a waiting list for housing. More people want to live in London than homes. In light of this a decision must be made about how much of the housing stock will be for affordable housing to ensure key workers and a reasonable mix of socioeconomic mix remains in the city.

Right now the government appears to be targeting 20 percent affordable and 80 percent market. Whatever the number though, until more homes are built many private renters / buyers will leave London and the waiting list for the affordable stock will be long.

Mick is also right. Growth here is far faster than most areas of London. East London is also growing very fast but on average London is not growing as fast as ED. This is mostly ED prices catching up with other areas for a number of reasons including changing amenities and improving school performance.

[PokerTime]

I agree with all of that LM.

Social Housing already accounts for 17% of all stock in the UK. I'd argue it needs to be closer to 30% of all stock in order to ease the growing problems. That would be also closer to where it was before all these problems started. The demographics of our capitalist plutocrasy haven't suddenly shifted. The percentage of people at the bottom is the same as it always has been. All we've done is destroy any hope of upward social mobility they would have had in the past. All the data shows that.

London too isn't suddenly faced with new problems here. It has always attracted people to it, in great numbers, like all captial cities - and housing provision has always been a challenge. Again, the slump in social house building since the 80's in a major reason we are where we are. Driving the poorest out of London is not any answer.

[????]

Er, actually PT, with the problems it has no doubt created, right to buy was one of the biggest drivers of social mobility ever. Until the 80s the working classes were meant to know their place and that was not as home owners but away from the Middle classes - in their council houses.

Also, earlier in this thread, you talk about quality social housing built before the 80s...you are having a laugh aren't you? much of it, especially from the 60s and 70s was cheap shite, often dangerous (Ronan Point anyone?) and largely a failure much of which is now or has now been knocked down with no-one mourning it.

Most of it was designed by middle-class tossers from their georgian homes, naturally. Always know what's best for the plebs statists/lefty middle class types....

[StraferJack]

Parody of a parody of a parody

You are entering absurd territory now quids

Dodgy tower blocks exist everywhere from all providers

But average 3 bed semi from ex council stock? Solid as a rock. Especially compared with many wimpy homes

Do you have do drag every argument down go an insult to metropolitan lefty types in such predictable fashion?

Just stick to the argument dude

[StraferJack]

Still, a working class / middle class who can't afford jack shit is definitely progress from a working class that had homes provided for them isn't it.

[PokerTime]

No that's not true ????. Pre the 1980's, a single average income could buy a home as average house prices were 3x anverage salaries. Many working class people moved out of council property to do just that. People were not trapped in low rental accomodation in the way they are now. There was a better turnover of social homes also.

The social homes built between WW1 and II are still standing and will still be standing in another 100 years time. Yes there were design flaws with many of the high rise buildings of the 60's, not forseen at the time, but that's hardly the bulk of social housing. There are many houses and masionettes built during the 70s that also are still standing. Social housing has taken many forms since it was first conceived. The flawed properties of the 60s are only a part of that story.

[Zebedee Tring]

That variation of Godwin's Law, i.e. the EDF Law, applies yet again, namely "As an EDF online discussion grows longer, the probability of a argument involving class warfare approaches 1" .​

[KidKruger]

Nazis.

[Zebedee Tring]

Yes, KK, I was suggesting that the EDF Law is a variation of Godwin's Law which indeed relates to Nazis. If that's what you're getting at by saying "Nazis"

[StraferJack]

David McWilliams on similar situation in Ireland

http://t.co/88VudwqXD8

Not exact like for like, but enough familiar factors