LondonMix

That is so condescending... Moral integrity isn't the preserve of the white educated middle-class. There are scam artists of every race and socio-economic background. Rich scam artists just perform different scams-- like ponzi schemes... eberg Wrote: ------------------------------------------------------- > I'm glad that I don't feel that I have to survive > by lying, but like a few others Sue I benefit from > an event of pure luck. > I'm a white, middle class man born into an > educated white middle class family. Things are > stacked in my favour. I'm very lucky indeed.

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

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.

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...

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.pdf 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. https://england.shelter.org.uk/__data/assets/pdf_file/0008/425708/London_Rent_Watch.pdf 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. 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.

I?m not sure why you keep mentioning inflation as an indication that there isn?t growing demand relative to supply. I?ll put it this way. When average prices of consumer goods are rising faster than your wage, do you generally feel you have more or less money to spend on housing? The fact that the cost of other items in the economy are going up, does not mean that housing costs should go up but quite the opposite. For the last 5 years, real wages have been falling as inflation has outstripped wage growth. In these circumstances, all things being equal, one would expect rents to fall as a greater proportion of take home wages is used for essential items with inelastic demand (food / heating/ transport) that are increasing in cost. This is effectively what happened during the recession in most of the UK?inflation of essential items was higher than wage growth and rents declined. However, in London rents grew and continue to grow despite continued declining real wages. The cause of this is increased demand relative to supply. Edited to clarify that housing is also an essential item. However food and fuel prices are set on the global market and What happens in the UK doesn't materially impact on their cost. For rents this is not the case.

Yeah, I think they'll be pretty tiny!

Haus of Wood and many others offered to take the space and were all turned down.

EDMummy is right. The Old Police station on Crystal Palace Road has been granted permission to redevelop the site into housing. http://planningonline.southwark.gov.uk/AcolNetCGI.exe?ACTION=UNWRAP&RIPNAME=Root.PgeResultDetail&TheSystemkey=9551354

I am not really sure what you are saying. If you are asserting that those speculating on London housing may not make as much money as they think they will then that of course is possible as is losing money. Personally, I wouldn't buy London houses as an investment but that doesn't really matter. However, if you are saying there is no underlying supply problem that is simply not true. The fact that household formation has outstripped house building is a statistical fact borne out by census data. If that will continue to be the case in years to come is a judgement call but so far for various reasons house building has not kept pace with any future yearly targets but there are a number of variables that could impact this going forward. My opinion is that the situation in future won't be different to the recent past without policy change. Regarding rents: Rents in London are growing and grew even during the recession. Some pressure has eased as some renters are becoming first time buyers. Your point about inflation however is misguided. Rents are correlated to wages and purchasing power not inflation. So all thing being equal (ie no change in demand or supply) rents would increase in line with nominal wage increases. Rents in London increased despite flat nominal wages and given a decline in real purchasing power of non-housing goods, one would have expected rents to fall. This in and of itself is evidence of supply pressures in the market. Regarding yields: rental yields are a basic calculation of rent of valuation. Yields are flat when values are increasing at the same rate as rents. It doesn't mean anything else in and of itself. Yields in London are 4.8percent http://www.ft.com/intl/cms/s/0/e2f40ca8-a476-11e3-9cb0-00144feab7de.html#axzz2zoS42ynZ In prime Central London they are much lower but that market is small compared to London as a whole. For an investor, buying at an initial yield of 4.8 percent that grows by circa 3 percent per annum (if they feel that will happen) isn't a bad return relative to alternative investments. Anyhow, I don't know if investors or owner occupiers are more responsible for the speculative component of the price increases. However, the longer it goes on the more dangerous it will be which is why the central bank is taking some action though it's very weak.

Also, Pokertime 1. Movement or non movement of rental yields isn't a proxy for changes in rent. Yields are calculated over the current valuation. So if you bought last year and rents increased, the yield in your original investment would be up. However, if house prices increased more than rents the reported yield would be down. http://www.theguardian.com/money/2014/feb/26/london-buy-to-let-rent-double-uk However, an increase in first time buyers is having an impact on demand for rentals as renters are shifting to buying. As prices get pushed by buyers one would expect the balance to return. The new rules are regarding affordability analysis have been used fir a while now but making them mandatory is good policy. The issue around affordability Is an interesting one. Price growth in outer London has massively outstripped prime Central London. Without action growth will continue to ripple out towards the commuter belt.

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.

I agree lower deposit mortgages have brought first time buyers back to the market. While the lending ratio may sound high its not wildly above historical norms. This only means that if interst rates increased back to recent highs (last 10 years) you wouldn't immediately anticipate a huge defaults to occur. 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. 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.

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.

Loz, not in London. London has very little brownfield even but a natural release valve for London prices is the Home Counties commuter belt. If homes were cheaper there which they would be with more land released for residential planning, London prices would be lower.

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.

Agree with Steve- houses that are trying to push prices beyond the recent heights they reached at the beginning of this year don't seem to be having much success. Several houses have had to drop their asking recently- Hebert rd, Landcroft rd, Chesterfield and Frogley all of which were way above recent asking prices. Buyers seem to have reached their limit for additional large increases for the moment. Still, compared to the end on 2012' prices up are up 30 percent

Poker, the government poses restrictions on developing greenfield land which is a large part of the land access issue highlighted in the research. Again, this is policy driven not a market issue. MikeB as Otta says, you can only benefit as a homeowner from falling prices if it doesn't push you into negative equity. For most homeowners who want to eventually buy a bigger house would prefer flat prices. Building equity for you move is best accomplished through mortgage payments. Also, only those planning to leave London benefit from increasing prices or those planning to downsize. I would personally prefer to see prices that would allow my children to live in London without waiting for me and my husband to die...

Also, the fact there is a shortage of homes isn't really debatable. Anyone who has spent anytime researching this is 100 percent clear on the stats. Dave Carnell, govt is a huge element in a complicated system but why not read Shelter's report and draw you own conclusions if you are interested.

PokerTime Wrote: ------------------------------------------------------- > I did offer an answer to motorbirds Q LM. And made > the point that most development in London over the > last 30 years has been the wrong kind of > development. Not really, you said they developed the wrong type of housing. Given there is an under supply of all housing types it's hard to see how that is at the root of the issue. From the brief reading I've done to learn more about the issue has more to do with land availability, public policy, brown field development requirements, supporting infrastructure development etc. It's rather complex. http://england.shelter.org.uk/__data/assets/pdf_file/0004/120919/pdp_building-more-and-better-homes.pdf http://www.policyexchange.org.uk/images/publications/why%20arent%20we%20building%20enough%20attractive%20homes.pdf For instance, Shelter (the housing and homelessness charity) research paper accuses the SouthEast Regional Assembly of under planning by 20 percent for new homes in the area needed by 2020 in the South East Plan. Part of the issue faced by regional and local govt is a reluctance to develop new homes for a variety of political issues. For anyone genuinely interested in learning more about what the issues are I recommend reading these two source documents I've found which provide a very detailed exploration of the supply side issues. Without dealing with and understanding the supply side, a lot of the solutions being bandied about in here seem premature. Fundamentally, the UK is not developing enough houses to keep apace with the net formation of new households. If this isn't appropriately addressed none of the demand side policies being proposed will have the desired outcome. Rent caps will simply lead to long wait lists / a black market for private rental accommodation. Taxing housing more as a stand alone policy might drive down the headline price of housing but won't make it fundamentally more affordable. For instance, if you increased stamp duty across the board, house prices would fall as people only have do much they can spend regardless of how much goes to the gov't vs the seller. However, would a drop in in the headline price induced by an increase in tax effectively make houses more affordable from the buyers' perspective? Not really. An increase in council tax will do the same as the new buyers will swap any reduction in price / lower mortgage for higher monthly tax bills. CGT won't result in any reduction in price for first time buyers but movers will have less equity to move which may again reduce headline prices but won't actually make it easier or more affordable to move. If your idea is that the gov't should use these tax windfalls to create more housing, again, you should try to understand the supply side issues as the first step before drawing the conclusion that this is the best way to tackle the problem. I'm not saying it isn't but there is a lot if cart before the horse discussion going on here and while so e very openly admit they aren't well informed others have made some pretty self-assured statements about what needs to be done...

Oh God, mention of Nazi's already?! Motorbird's question hasn't been answered yet and anyone trying to advocate for policy changes should better understand supply issues. This thread has highlighted the demand issues quite well: population increases driven by increases life expectancy, more families choosing to stay in London, internal and foreign immigration due to jobs growth in London vs elsewhere, the Help to Buy policy, the attractiveness of London property as an investment both to foreign buyers and internal buy-to-let investors for a multitude of reasons. So we get where demand is coming from. Why isn't the market responding by building more homes as one would expect, affordable or otherwise? I really don't know but understanding why the market is failing to deliver more homes given the demand must be explored in more detail. How that new housing is allocated between social housing for key workers and lower wage earners, the private sector etc can only be discussed properly if we understand the issue fully. I don't have a clear picture of the supply side issues at all yet. If the final picture is that the market can't provide what the people deem to be a public good, then government should step in to acheive what the majority believe is fair economic allocation of housing (right now London is circa 19 percent social housing)- should that level be maintained, be higher or lower? On what grounds are people asserting so: how many key workers need to live in London and how may low income earners does London need economically and to prevent London from becoming a rich Ghetto? Trying to suggest policy changes without having clear what you want to ultimately acheive is difficult... Also, the assumption that people are leveraging themselves to the hilt is simply not true. The average first time buyer in London borrows circa 3.7x their income. The average mover borrows significantly less than this. I've liked to these stats eleswhere in the thread.

PokerTime Wrote: ------------------------------------------------------- > I'd say 70-80k is probably more realistic Zebedee, > and that's joint income. I don't know of anyone in > ED on a joint income of 150k. People buying houses in the last 12 months okoume be buying with a joint income of circa 150k. And yes I know some who do earn that much. Of course that isn't average adjust people have lived here longer than that and many live if flats rather than houses.

Agree with James and Jeremy

I think FH will grow faster this year until the premium comes down to something sensible. This is what's happening in ED vs prime Central London. Prime central London grew less than the London average with areas like ED etc well above avg.

I am one if those people. I think ED should have a premium to other areas. However, personally I don't think it's that much nicer than Forest hill. The comparison would be Clapham being 50 percent more extensive than Balham. Historically, the premium between ED and surrounds was 20 percent.