House prices and housebuilding

[DB]

Moderator Note: Split from https://www.railforums.co.uk/threads/furloughing-in-the-uk-what-is-the-current-situation.206877/

If you make unskilled jobs more expensive to employers then there is a risk employers will mechanise/computerise, or simply change their business to reduce headcount.
Have you not noticed the self pay machines at McDonalds and Morrisons cafes, and ordering by app at Wetherspoons?

So perhaps a more logical way to approach it is to reduce living costs (and house prices is where this could most practically be done) - but we seem to have this alternative reality with housing where the Daily Mail, etc, screams about anything which might 'ruin' house prices and stop the relentless upward trajectory, meanwhile increasing costs in any other area are criticised.

 

[Ken H]

So perhaps a more logical way to approach it is to reduce living costs (and house prices is where this could most practically be done) - but we seem to have this alternative reality with housing where the Daily Mail, etc, screams about anything which might 'ruin' house prices and stop the relentless upward trajectory, meanwhile increasing costs in any other area are criticised.

Do we really want to concrete over England with more and more houses?

 

[Bletchleyite]

Do we really want to concrete over England with more and more houses?

A tiny amount of England is "concreted over". This is about the biggest myth going, particularly if you build higher density on brownfield sites.

 

[Ken H]

A tiny amount of England is "concreted over". This is about the biggest myth going, particularly if you build higher density on brownfield sites.

A huge amount of england is not buildable
Huge parts of northern England which is high moorland
river flood plains.
Land is in very short supply in SE England. Towns are merging as more infill occurs. And people want bigger and bigger houses, with parking for 2-3 cars.

 

[Bletchleyite]

A huge amount of england is not buildable
Huge parts of northern England which is high moorland
river flood plains.

The vast majority of England is arable or livestock farmland, not moorland or river flood plains.

Land is in very short supply in SE England

No, it's not. Just stick Google Earth on and have a look. Once you get past the M25 it's mostly farmland. The North West is considerably higher density than the London commuter area.

There's room for another 10 Milton Keyneses if you wanted. Or more. (Though ideally built around e.g. a tramway, not a car based transport system)

 

[DB]

A huge amount of england is not buildable
Huge parts of northern England which is high moorland
river flood plains.
Land is in very short supply in SE England. Towns are merging as more infill occurs. And people want bigger and bigger houses, with parking for 2-3 cars.

Buildings cover about 2% of England.

I agree about the pressure on the SE, and changes are needed to the spread of employment. A reduction in cars is also needed.

 

[najaB]

Buildings cover about 2% of England.

And about 6% in total is built on, iirc.

 

[thejuggler]

Everyone who lives in a house occupies what was once a green field.

 

[RT4038]

So perhaps a more logical way to approach it is to reduce living costs (and house prices is where this could most practically be done) - but we seem to have this alternative reality with housing where the Daily Mail, etc, screams about anything which might 'ruin' house prices and stop the relentless upward trajectory, meanwhile increasing costs in any other area are criticised.

I am not quite sure what the Daily Mail has to do with this, or the purpose of your comment?
Please tell of which group of home owners wants (or willingly will allow) the value of their properties reduced, no matter what newspaper they may read?

There is no easy way of reducing house prices without causing distress somewhere. Even your original suggestion of holding house prices where they are at the moment and them effectively reducing through inflation will take years and years to have any kind of practical effect, even if a means of doing this could be found (which I doubt). Speeding up the process by allowing high inflation will just cause distress to those living off savings and pensions, as they are destroyed in the process.

 

[DB]

And about 6% in total is built on, iirc.

Depends how you define 'built on' - the higher figure (usually given as around 6 to 8%) includes roads, etc - for just buildings, it's around 2%.

 

[najaB]

Depends how you define 'built on' - the higher figure (usually given as around 6 to 8%) includes roads, etc - for just buildings, it's around 2%.

That's exactly what I meant. Just to emphasise that the vast majority of land isn't built on.

 

[DB]

I am not quite sure what the Daily Mail has to do with this, or the purpose of your comment?
Please tell of which group of home owners wants (or willingly will allow) the value of their properties reduced, no matter what newspaper they may read?

There is no easy way of reducing house prices without causing distress somewhere. Even your original suggestion of holding house prices where they are at the moment and them effectively reducing through inflation will take years and years to have any kind of practical effect, even if a means of doing this could be found (which I doubt). Speeding up the process by allowing high inflation will just cause distress to those living off savings and pensions, as they are destroyed in the process.

Have you never seen a Daily Mail headline screaming about house prices? It's one of their favourite 'rainy day' topics! Rising house prices are always presented as being a good thing.

And yes, it will cause distress somewhere - how much depends on how quickly it happens. What do you see as the alternative? Because the reality is that the current situation isn't sustainable: we already have loads stuck in insecure renting, and a large group of "investors" who happened to be around at the right time to buy up property cheap, and now get a good income off it without doing much. Sooner or later the property bubble will burst, as they always have in the past, and the longer it's allowed to inflate the worse the outcome may potentially be. It was only averted in 2008-09 by the government deliberately propping it up.

 

[najaB]

Please tell of which group of home owners wants (or willingly will allow) the value of their properties reduced, no matter what newspaper they may read?

Nobody wants the value of their home to fall, but by the same token high house pricing is damaging to those who can't afford (to rent or buy) quality housing. Either way, the decision by successive governments to create a link between house prices and national prosperity means that someone is going to end up losing out.

 

[MotCO]

Irrespective of what percentage of England has been built on for housing, it still has the highest population density in Europe which must tell you something.

Housing is probably the best example of pricing based on demand, as opposed to the cost of production. The fact is that house prices will not come down until demand reduces, whether that is building more houses (or converting vacant shops and offices to homes), or a reduction in popuation.

 

[najaB]

Irrespective of what percentage of England has been built on for housing, it still has the highest population density in Europe which must tell you something.

Yes. It tells me that population density in Europe is quite low.

By the way, I wasn't aware that Belgium and The Netherlands weren't in Europe. Quite interesting.

 

[DB]

Irrespective of what percentage of England has been built on for housing, it still has the highest population density in Europe which must tell you something.

Housing is probably the best example of pricing based on demand, as opposed to the cost of production. The fact is that house prices will not come down until demand reduces, whether that is building more houses (or converting vacant shops and offices to homes), or a reduction in popuation.

The demand is distorted by using it as a get-rich-quick scheme though. Buy to let should be far more strictly controlled (in particular, no buy-to-let mortgates), and renters should have more rights - Assured Shorthold Tenancies are worthless.

THe demand is also regional - some areas have more houses than required, but governments in recent decades have done nothing much to stop the migration of much employment to the SE.

 

[MotCO]

Yes. It tells me that population density in Europe is quite low.

By the way, I wasn't aware that Belgium and The Netherlands weren't in Europe. Quite interesting.

Depends if you are comparing the UK or England. The Netherlands is 421 per km2, Belgium is 375 per km2, UK is 280 per km2, but England alone is 432 per km2. I was quoting England.

== Doublepost prevention - post automatically merged: 22 Aug 2020 ==

The demand is distorted by using it as a get-rich-quick scheme though. Buy to let should be far more strictly controlled (in particular, no buy-to-let mortgates), and renters should have more rights - Assured Shorthold Tenancies are worthless.

THe demand is also regional - some areas have more houses than required, but governments in recent decades have done nothing much to stop the migration of much employment to the SE.

I'm not sure about the get-rich-quick schemes. Some people will rent these properties, but there could be a problem if the properties were empty or unlet, but that is also true for any vacant property. It may well be that the vacant property is in the wrong place, and I agree that the Government should do more to help distribute employment around the country. Maybe the unintended growth in working from home will help address it. Maybe the Government should ensure its departments are spread around the country (like the DVLA in Swansea, Dept of Health in Leeds etc); interestingly, if Scotland win independence, then presumably National Savings, based in Glasgow, would have to come south.

 

[najaB]

Depends if you are comparing the UK or England. The Netherlands is 421 per km2, Belgium is 375 per km2, UK is 280 per km2, but England alone is 432 per km2. I was quoting England.

Well, if that's the game we're playing I raise you the population density of North Rhine-Westphalia: 525 per km2.

 

[thejuggler]

Monaco. 39,242 per sq km.

 

[Bletchleyite]

The demand is distorted by using it as a get-rich-quick scheme though. Buy to let should be far more strictly controlled (in particular, no buy-to-let mortgates)

Why not? The effect of that would be that housing would follow everything else into being run by corporates. I rather like the way private rentals at present are rather a cottage industry (ha!).

and renters should have more rights - Assured Shorthold Tenancies are worthless.

ASTs have their uses both for landlords and tenants, sometimes a short tenancy is what you need. But there should also be the option of a longer one with more rights, skewed towards the renter, so you'd for example have 2 months notice for the renter to leave, but 6 months notice for the landlord to have them leave or to increase rent. The tenancies used for social housing might be a good guide, but really I don't see why I shouldn't be able to rent my house out for 6 months or a year if I want, and similarly why I shouldn't be able to rent one myself in that way, e.g. to break a chain in selling and buying.

 

[DB]

Why not? The effect of that would be that housing would follow everything else into being run by corporates. I rather like the way private rentals at present are rather a cottage industry (ha!).

ASTs have their uses both for landlords and tenants, sometimes a short tenancy is what you need. But there should also be the option of a longer one with more rights, skewed towards the renter, so you'd for example have 2 months notice for the renter to leave, but 6 months notice for the landlord to have them leave or to increase rent. The tenancies used for social housing might be a good guide, but really I don't see why I shouldn't be able to rent my house out for 6 months or a year if I want, and similarly why I shouldn't be able to rent one myself in that way, e.g. to break a chain in selling and buying.

Why not? Because hosing shouldn't be seen as an 'investment' to profit from, especially when it's bought on a buy-to-let mortgate - it's pure rent seeking, and even Adam Smith (widely seen as the originator of the capitalist system) was against it. And actually in countries where the rental market is more corporate-owned (e.g. Germany) the standards are much higher - many 'amateur' landlords have neither the ability nor the interest to do it well.

ASTs are worthless - they give no security to tenants who can be booted out with two months' notice, no reason needed. And the point is that there is no other form of tenancy used for residential lettings, so while ASTs might have a place in specific circumstances there needs to be something more evenly weighted for longer tenancies.

 

[RT4038]

Why not? Because hosing shouldn't be seen as an 'investment' to profit from, especially when it's bought on a buy-to-let mortgate - it's pure rent seeking, and even Adam Smith (widely seen as the originator of the capitalist system) was against it. And actually in countries where the rental market is more corporate-owned (e.g. Germany) the standards are much higher - many 'amateur' landlords have neither the ability nor the interest to do it well.

ASTs are worthless - they give no security to tenants who can be booted out with two months' notice, no reason needed. And the point is that there is no other form of tenancy used for residential lettings, so while ASTs might have a place in specific circumstances there needs to be something more evenly weighted for longer tenancies.

Whether housing should be seen as an investment or not is academic, because currently the system is that it is an investment. It is strange how it is always 'someone else' who must be scalped in order to change the system, in this case now 'Buy to Let' landlords. (In a previous post it was everyone should have the value of their property reduced). Withdrawing the right of Landlords to terminate tenancies would be another 'scalp', as this would reduce the value of their investment.

Nobody wants to lose the value of their investment, whether it be property or pension fund or savings. Any change to 'the system' needs to recognise that.

 

[DB]

Whether housing should be seen as an investment or not is academic, because currently the system is that it is an investment. It is strange how it is always 'someone else' who must be scalped in order to change the system, in this case now 'Buy to Let' landlords. (In a previous post it was everyone should have the value of their property reduced). Withdrawing the right of Landlords to terminate tenancies would be another 'scalp', as this would reduce the value of their investment.

Nobody wants to lose the value of their investment, whether it be property or pension fund or savings. Any change to 'the system' needs to recognise that.

Back to my previous question, which you ignored - what do you see as the alternative solution? Because endless above-inflation price rises are not sustainable long term, nor are values way above average earnings. and the bigger the bubble gets, the bigger the impact when it eventually bursts.

Have to say I find your view that the value of a landlord's investment is more important than the tenant's right to secure tenure rather distasteful...

 

[Meerkat]

BTL investors don’t get any of my tears. If they lose then they just have to take the hit just as other investments have taken hits from changes in world circumstances or government policy changes.
My concerns would be more about those who have entered the bottom of the ladder maxed out on borrowing and could face negative liquidity and getting royally shafted when their current mortgage deals expire even before you get to those needing to move.
Would it make a big difference to tax property gains at point of sale at higher rate?

 

[RT4038]

Back to my previous question, which you ignored - what do you see as the alternative solution? Because endless above-inflation price rises are not sustainable long term, nor are values way above average earnings. and the bigger the bubble gets, the bigger the impact when it eventually bursts.

Have to say I find your view that the value of a landlord's investment is more important than the tenant's right to secure tenure rather distasteful...

I don't have a solution! Once the genie is out of the bottle, it is very difficult to put it back in. However I find 'scalping' sections of the population, because they are in a better off position than some others, to be quite distasteful too....

I don't believe that a tenant's right to secure tenure is compatible with private rental of domestic housing. So therefore, if we have a system of private rentals, then tenants cannot have this right. When tenants did have this right (prior to the changes in the 80s), there was little meaningful private rental market. It was all municipal, with an equal number of (different) issues.
What you are suggesting is a major reversal of the society created in the Margaret Thatcher era and has been, more or less, affirmed in every election since. Good luck with that.

 

[DB]

I don't have a solution! Once the genie is out of the bottle, it is very difficult to put it back in. However I find 'scalping' sections of the population, because they are in a better off position than some others, to be quite distasteful too....

I don't believe that a tenant's right to secure tenure is compatible with private rental of domestic housing. So therefore, if we have a system of private rentals, then tenants cannot have this right. When tenants did have this right (prior to the changes in the 80s), there was little meaningful private rental market. It was all municipal, with an equal number of (different) issues.
What you are suggesting is a major reversal of the society created in the Margaret Thatcher era and has been, more or less, affirmed in every election since. Good luck with that.

So you think the bubble will never burst, and these rises will just carry on indefinitely? Because if they even level off, which will also cause rents to level off, a lot of BTL landlords will be in trouble as interest-only mortgages seem to have been quite popular.

Given that no major party has proposed a major change to the system (arguably apart from possibly Corbyn, who was unpopular with many for other reasons) I'm not sure how you can claim that people have voted for it.

And as regards secure tenure, most other European countries manage to do this, including with private lettings.

 

[RT4038]

BTL investors don’t get any of my tears. If they lose then they just have to take the hit just as other investments have taken hits from changes in world circumstances or government policy changes.
My concerns would be more about those who have entered the bottom of the ladder maxed out on borrowing and could face negative liquidity and getting royally shafted when their current mortgage deals expire even before you get to those needing to move.
Would it make a big difference to tax property gains at point of sale at higher rate?

BTL investors are , for the most part, ordinary people. I hope that you would take the same view if a change in government policy destroyed the value of your pension pot or savings investment?

 

[DB]

BTL investors are , for the most part, ordinary people. I hope that you would take the same view if a change in government policy destroyed the value of your pension pot or savings investment?

With most investments, there is an acceptance that values can go up or down, for a wide variety of reasons. Anyone thinking that housing is permanently immune from going down is probably going to find out the hard way sooner or later.

 

[RT4038]

So you think the bubble will never burst, and these rises will just carry on indefinitely? Because if they even level off, which will also cause rents to level off, a lot of BTL landlords will be in trouble as interest-only mortgages seem to have been quite popular.

Given that no major party has proposed a major change to the system (arguably apart from possibly Corbyn, who was unpopular with many for other reasons) I'm not sure how you can claim that people have voted for it.

It is not that I think the bubble might not burst, I can see no way of 'voluntarily' altering the current system without 'scalping' some part of the population, and I just can't see that happening.

I may have been a little ambiguous - the society change that created the current private rental sector has been affirmed, more or less, by every election since. (i.e. not to make any major changes).

== Doublepost prevention - post automatically merged: 22 Aug 2020 ==

With most investments, there is an acceptance that values can go up or down, for a wide variety of reasons. Anyone thinking that housing is permanently immune from going down is probably going to find out the hard way sooner or later.

I agree, but not if the value substantially reduces due to a (hostile) change in government policy.

 

[DB]

It is not that I think the bubble might not burst, I can see no way of 'voluntarily' altering the current system without 'scalping' some part of the population, and I just can't see that happening.

I may have been a little ambiguous - the society change that created the current private rental sector has been affirmed, more or less, by every election since. (i.e. not to make any major changes).

When have major changes to the rental sector been offered in a manifesto? because if nobody has offered it then nobody can vote for it!