LondonMix Posted April 29, 2014 Share Posted April 29, 2014 In real terms, wages have declined and now stand at circa their 2003 levels in London as well as the country as a whole.http://www.ons.gov.uk/ons/dcp171766_299377.pdfI 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.https://england.shelter.org.uk/__data/assets/pdf_file/0008/425708/London_Rent_Watch.pdfEssentially, 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.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. Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-742737 Share on other sites More sharing options...
MissKing Posted April 29, 2014 Share Posted April 29, 2014 Just spotted an ED two bed on rightmove has had its price slashed by ?50k! Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-742747 Share on other sites More sharing options...
LondonMix Posted April 29, 2014 Share Posted April 29, 2014 Asking prices are definitely dropping. In the past few weeks, several houses have dropped in price. At least 8 houses that I can think of have been relisted at lower levels-- I am helping a friend look who is buying at the moment. Even the reduced prices though for 4 beds are still over 1 million. Asking 1.2m for a house that a few months ago would have asked for 1million was probably just the agents over shooting... Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-742754 Share on other sites More sharing options...
clockworkorange Posted April 29, 2014 Share Posted April 29, 2014 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? Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-742764 Share on other sites More sharing options...
LondonMix Posted April 29, 2014 Share Posted April 29, 2014 I think you are 100% spot on. House builders have operational land-banks. If the value of land were to decrease as a result of a dramatic increase in the land available with residential planning, it could potentially bankrupt the house building system as they use significant amounts of debt to finance their land-banks. The corresponding drop in house values would lead to a banking crisis. Therefore radical reform of the plan-led system is virtually impossible.To illustrate how significant a premium residential planning adds to green belt land in the South East?In Oxford, a hectare of land with agricultural use is worth 20,000. With residential planning permission the same hectare is worth 4 million. At best, I imagine reform will be very gradual. First releasing enough just to keep pace with household formation to moderate future increases. Ideally enough land would be released to keep nominal values below positive wage growth so that slowly housing becomes more affordable. However, when the government is tasked with estimating market needs and planning accordingly mistakes occur?household formation projections have been far off recently due to local councils not accounting for spare bedroom capacity for instance. In the earlier link I posted the Policy Exchange report discusses this in much more detail and while I don?t agree with all of their conclusions it?s a very good discussion of the complexities involved. Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-742795 Share on other sites More sharing options...
Cyclemonkey Posted April 29, 2014 Share Posted April 29, 2014 I'm seeing a few reductions recently or places hanging around.I'm hearing of sharp practice in other parts of London by agents such as requring the buyer to agree to pay the vendors agents fees - has that sort of nonsense crept in here at all yet? Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-742805 Share on other sites More sharing options...
clockworkorange Posted April 29, 2014 Share Posted April 29, 2014 Can you re post the report please? The GLA is seeking to release more land but this appears a slow process and not sufficinetly to keep up with the GLA's forecast demand. So what's stopping them...At recent events including with the Mayor, industry leaders asked the process of land release to be sped up, the Mayor could not respond. Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-742806 Share on other sites More sharing options...
LondonMix Posted April 29, 2014 Share Posted April 29, 2014 Sure, here is the link to the report by the Policy Exchang again:http://www.policyexchange.org.uk/images/publications/why%20arent%20we%20building%20enough%20attractive%20homes.pdf Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-742824 Share on other sites More sharing options...
LondonMix Posted April 29, 2014 Share Posted April 29, 2014 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-quality/general-methodology/guide-to-experimental-statistics/index.htmlThe 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 Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-742866 Share on other sites More sharing options...
Blackcurrant Posted April 29, 2014 Share Posted April 29, 2014 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. Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-742877 Share on other sites More sharing options...
Blackcurrant Posted April 29, 2014 Share Posted April 29, 2014 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. Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-742879 Share on other sites More sharing options...
Blackcurrant Posted April 29, 2014 Share Posted April 29, 2014 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 toIf 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... Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-742880 Share on other sites More sharing options...
LondonMix Posted April 29, 2014 Share Posted April 29, 2014 The ONS has only been publishing private rental data since 2011 which is less time than the LSL and by their own admission the data they provide is still experimental. Here is some guidance on experiemental data from the ONS themselves:http://www.ons.gov.uk/ons/rel/hpi/index-of-private-housing-rental-prices/index.htmlhttp://www.ons.gov.uk/ons/guide-method/method-quality/general-methodology/guide-to-experimental-statistics/index.htmlQuote:When do experimental statistics become non-experimental? This will be a matter of statistical judgement, but typically will take into account factors such as: ?When it is judged that statistical methods have settled down?When coverage reaches a good level ?When user feedback indicates that these statistics are useful and credible ?When the defined development phase has ended ?When it is judged that the statistics meet the rigorous quality standards of National Statistics.If you want to insist this experimental dataare the better source data when Shelter themselves had to re-weight the data set to make it consistent over a short period of time then that's your judgement call. However, Shelter following academic guidance came up with figures closer to the LSL's for 2011 than to the ONS's data set. Make of that what you will.I think at this point we simply have to agree to disagree. You believe rents have grown more slowly or in line with real wages in London based on experimental data from the ONS. I conclude based on decreasing affordability (private rents as a percentage of total income has been increasing) as well as LSL statistics that rents have grown significantly more than real wages. Even anecdotal experience over the last 10 years suggests that rents have increased by much more than the ONS's 12% since 2005. I'm note sure there are many London renters whose personal experience would tally with that... Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-742902 Share on other sites More sharing options...
LondonMix Posted April 29, 2014 Share Posted April 29, 2014 Also, the LSL has data that goes back further but I don't have the time to find it. However, I found found the research sited in research papers so I now the historical data does exist though the publication started after the initial data set. Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-742906 Share on other sites More sharing options...
Blackcurrant Posted April 29, 2014 Share Posted April 29, 2014 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 Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-742937 Share on other sites More sharing options...
LondonMix Posted April 29, 2014 Share Posted April 29, 2014 1. The ONS data for the period you linked to above is still experimental (yes, even the most recently published data) 2. I provided an extended period of rental inflation figures in my previous posts and told you the source. I have not just provided one year.3. The 2013 rental inflation figure is in the region of 4% as of December 2013 according to the LSL3. The 2011 growth spurt you mention is not picked up in the ONS data but only in the adjusted Shelter figures and the LSL figures to be clear4. 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...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 reachedTo be frank, I feel like we are going in circles. We trust different data and are therefore reaching different conclusions. You are arguing that it is easier for the average person in London to afford to pay market rents today than it was almost 10 years ago I disagree based on the LSL data, the fact that the ONS data is experimental and personal experience. Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-742965 Share on other sites More sharing options...
LadyDeliah Posted April 30, 2014 Share Posted April 30, 2014 I'm a Green voter, but I'm impressed with Miliband's proposals to make renting more secure now that so many people can't afford to buy:http://www.newstatesman.com/politics/2014/04/milibands-pledge-cap-rent-rises-smart-politics Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-743249 Share on other sites More sharing options...
LondonMix Posted May 1, 2014 Share Posted May 1, 2014 I think longer term tenancies are definitely needed. Commercial lease contracts as standard are much longer than even the proposed secured tenancy term. I suppose the question is, would people want to be tied into longer term contracts? Sometimes you just need to rent for a short period of time (between moving homes). What if you need to move for your job? Would you have to find a new tenant for the property for your landlord to release you? Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-743324 Share on other sites More sharing options...
Loz Posted May 1, 2014 Share Posted May 1, 2014 So would these rent increase controls (as he's said there will no control on starting rents) extend past the initial three year contract? If so, then you'll probably find yourself out on the street every three years as that would be the only way for the LL to bring the rent back to market rates.Also, I'm assuming that the tenant would also be held to the three years, something that many may not be comfortable with. Giving the tenant a get out clause but not the LL would probably be open to judicial review as it would be unfair to one party. Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-743393 Share on other sites More sharing options...
LadyDeliah Posted May 1, 2014 Share Posted May 1, 2014 If the landlord can give 2 months notice, then it would have to be the same for the tenant. Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-743615 Share on other sites More sharing options...
PokerTime Posted May 1, 2014 Share Posted May 1, 2014 I agree LD. What we should have is a flexible system where those who want longer securer tenancies can find them. A system also where the rate of annual rent increase is capped - so a tenant knows what to expect. Social rents have been capped to annual percentages for decades. And there is scope within those caps to modify the level if it seems reasonable to do so. Why can't the same system be applied to private landlords? 80% of private properties for rent are not subject to mortgages anyway, so should an increase in interest rates happen, the landlord won't be affected. There could be different perameters for properties that are mortgaged. All of that would also help those trying to save for deposits while renting. At present, everything is in the favour of the Landlord. Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-743626 Share on other sites More sharing options...
clockworkorange Posted May 2, 2014 Share Posted May 2, 2014 The is an increasingly supply of very high qaulity residneital development coming forwards in London known as PRS (Private Rented Sector). If it works it is likely to be rolled out accross the major cities in the uk, then other locations. Effectively the idea is secure tenancy, market rent, no 6 monthly increae! you have to sign up for minimum 2 years contract I think. The concept is that the tenant gets a very high quality home, all maintainance, consierge service etc included in the rent. the idea is that people stay in the properties to make a community. the buildings have communal rooftop gardens or libraries or games rooms or whatever. Often they have gyms and pools too. The buildings are owned by financial institutions (pension funds etc - there's a lot from Germany and the US cicling at present). They make a garunteed return year on year which is attractive due to its stability and safety. It is in the landlord's interest to keep everybody happy to ensure continued return and 100% occupancy. These are currently being built close to transport hubs in London, notably at Swiss Cottage and I think in East Croydon. It's reaosnably new concept (in its current form) and I think offers a very attractive propsect (particularly to young Londoners) who perhaps cannot afford to buy, don't want to take th erisk with th normal landlord sharks and want to be in prime locations. the GLA is keen to promote this concept and has been for the past few years. Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-743757 Share on other sites More sharing options...
Guest Posted May 2, 2014 Share Posted May 2, 2014 Well I hope it takes off as my brother's daughter has just had to move from her rented accommodation after livng there for two years because her landlord wanted an increase of ?200 a month. greedy or what? Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-743787 Share on other sites More sharing options...
Loz Posted May 2, 2014 Share Posted May 2, 2014 Depends. If she can find somewhere similar for the old rent she's made the right move. If it costs her ?300 a month more to find somewhere similar then she may have been better off staying put. Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-743789 Share on other sites More sharing options...
Guest Posted May 2, 2014 Share Posted May 2, 2014 Luckily she's found somewhere for the old rent but its not quite as nice. Link to comment https://www.eastdulwichforum.co.uk/topic/37470-trying-to-buy-a-house-in-this-area-is-near-impossible/page/55/#findComment-743794 Share on other sites More sharing options...
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