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Weekend reading: Yes, we do have a house price problem

Weekend reading

Good reads from around the Web.

One of the big frustrations of the ‘priced-out’ generation – which is fast becoming anyone under 35 in the South East, or at least those without access to Feudal leg-ups from their parents – is that older generations really don’t get how tough it is to buy a house under your own steam now.

“It was equally hard in my day,” some 60-something property millionaire next door will say.

“We ate baked beans for three months and used toxic waste drums for furniture. To get a mortgage I had to marry one of my girlfriends just to look respectable to the bank manager, and she still had to take care of him behind the golf clubhouse to seal the deal. Interest rates were 8%, and I had to sell my LPs.”

Even I’ve underestimated the younger generation’s despair, and I’m not a complacent home owner.

Rather, as a conscientious objector to high house prices in London and hence a deliberate renter, I’m on their side, too.

So I really shouldn’t have opined to some much younger friends over email that their unwanted office relocation out of Central London to Zone 2 at least put them within shooting distance of cheaper property they might eventually buy.

One bombarded me – as is the way of the under-30s now – with animated movie clips of the clinically insane cackling and of cars being deliberately driven off cliffs.

The other emailed: “Twenty three minutes on and I’m still laughing at the idea of ever buying ANYWHERE myself.”

I did the maths. He earns about £35,000 a year. He’s doing okay, by ordinary late-20s standards.

He’s screwed.

The dirty dozen

On this point, The Guardian has come out with some new statistics that show how stretched the market has become:

A homebuyer earning the median salary for their region in 1995 would have had to spend between 3.2 times and 4.4 times their salary on a house, depending on where they lived.

In 2012-13, the last year for which complete data is available, the median house price had risen to between 6.1 times and 12.2 times median regional incomes.

Prices have only pushed higher since 2012-2013.

And as those of us foolish enough to live in London keep reminding everyone else, it really is a madhouse down here:

In 1995, the median income in London was £19,000 and the median house price was £83,000, meaning that people were spending 4.4 times their income on buying a property.

But by 2012-13, the median income in London had increased to £24,600 and the median house price in the capital had increased to £300,000, meaning people were forced to spend 12.2 times their income on a house.

Now, this data does overly exaggerate the escalation in house prices to incomes over the past 20 years.

That’s because prices in 1995 were still in the dumpster due to the last big house price crash.

(Yes, we used to have those, even in London.)

I know that well, because that’s when I first took an interest in London property. The sticker shock of seeing prices well above those lows just 4 or 5 years later definitely discouraged me from buying, even when it was still a sensible thing to do.

Nevertheless that doesn’t change the thrust of the argument.

I’d imagine the median pre-1995 would still only have been around 5 times back to the mid-1980s, and probably lower before that.

But regardless of how much it’s grown, a price to income ratio over of 12 times in London is far in excess of what’s prevailed throughout history.

You’ve got to fight for your right to party walls

So younger people aren’t just moaning like every generation before them when they say that property is almost hallucinogenically expensive.

It is.

The wonder of it is they’re not rioting on the streets every day, like some previous generations would have.

Certainly the baby boomers of the 1960s would have been making their voices felt.

But then, they could afford to take a six months leave of absence to drop out and rabble rouse.

At least as far as the men were concerned, they lived in a world of full employment, free higher education if you could get in, good blue collar salaries if you couldn’t, and social mobility was peaking.

And though the fun wore off in the 1970s, by the 1980s they could begin amassing the property wealth they have today – aided enormously by the right-to-buy and buy-to-let booms that the current Government is only just applying the brakes to.

People obviously weren’t evil in doing this (despite what some bitter Internet warriors say).

They were just trying to improve their lot.

If Monevator had been around in the mid-1990s I am certain many of them would have been reading it – and for that matter I’m sure we’d have been making the case for getting into property for those double-digit yields.

But that was then, and this is now.

We know the consequences of all that, and something has to change.

A European problem, too

For me, it could eventually be the country I live in.

The gulf between what you can buy in the UK and in the great livable cities of Europe is staggering.

True, it helps enormously that I don’t rely on those famed London office-based salaries for my income – and that I’ve saved a fair wodge along the way.

So really all I’ll be doing if I was to move to Spain or Portugal or Italy is arbitraging how far my savings will go.

The indigenous youth of those countries actually think property is a pipedream, too, according to a report in the FT this week [search result]:

The affordability gap has widened so much that 72 per cent of Europeans questioned in the ING survey believe that society would benefit if house prices fell.

This is felt most sharply by renters, with 93 per cent of Spanish, 75 per cent of British and 74 per cent of French tenants citing expensive housing as a block on their path to home ownership.

Of course, in most of those countries a sickening proportion of the young haven’t got jobs at all.

That’s not the cure for high house prices that anyone wants.

You can’t swipe your first flat

Bottom line: If you know a young person, be kind to them.

Yes, they have iPhones, Tinder, and they live in a more tolerant, flexible society.

But the majority of those without wealthy parents foresee no chance of ever owning a place of their own.

And rightly or wrongly, in the UK we all want one of those.

Note: Constructive comments are always welcome, but I will be deleting abusive ones or anything that sounds like it was written by a die-hard in a newspaper comment section. If you’re going to be snarky, be elegantly snarky!

From the blogs

Making good use of the things that we find…

Passive investing

Active investing

Other articles

Product of the week: TSB has bank accounts that – used together – The Telegraph reports could see savers earning up to £238 a year (with a cashback bonus) on relatively modest balances. There are, of course, catches.

Mainstream media money

Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber of that site.1

Passive investing

  • Swedroe: Beware the death cross! (Or not..) – ETF.com
  • Felix Salmon: Ban daily stock market reports – Fusion

Active investing

  • DeGiro will offer free trading in 2016 with ‘DeZiro’ – ThisIsMoney
  • Don’t even think about trading places in markets – Bloomberg View
  • Value investing – you’d be crazy not to [Search result]FT
  • Defensible reasons to go active – Morningstar
  • The decline of the trading desk memoir – The New Yorker
  • 3 ways UK shares are cheap [Though author seemingly doesn’t understand what a P/E ratio is, he’s citing solid third-party research]Telegraph

Other stuff worth reading

  • Longevity gains could mean State pension at 70 by 2050 – ThisIsMoney
  • Is this global slowdown different? [Interesting graphs]Bloomberg
  • The financial case for studying at a university in Europe – Guardian
  • How Bitcoin may yet transform finance – The New Yorker
  • Room to rent in London is a garden shed… in a room – Metro

Book of the week: The podcast interview with Danish finance professor Lasse Pedersen I linked to above prompted me to look up his book Efficiently Inefficient. It seems an interesting read for active investors. Perhaps in some comic book clash Pedersen would be Lex Luthor to fellow Dane and Investing Demystified author Lars Kroijer’s Superman?

Like these links? Subscribe to get them every week!

  1. Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. []

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{ 80 comments… add one }
  • 51 The Investor September 7, 2015, 5:00 pm

    I will be brief as I feel I’ve had my say, yet I remain inclined to comment because there’s a surreal quality to a certain strand of the discussion here.

    The reason we are having this debate, the reason newspapers write “house prices blah blah”, and the reason I titled my post as I did — because I’m all too aware of the tendency to house price revisionism — is because houses are much more expensive than they were, particularly in London.

    As the data I provided shows, median prices have gone from 4.4x to 12+x median earnings. That is an absolutely enormous move.

    If we want to say that 4.4x was a cyclical low I have some sympathy for that. So let’s say 5-6x to 12+x, in London. Still a huge move.

    This red herring argument about first-time buyers not being relevant to this data is surreal. This is a blog post, not a 300-word Phd dissertation; I naturally assumed we could also see that a move of this magnitude for median prices would indicate similar movement across the spectrum for all but the outliers on the distribution curve for a mass good like housing.

    If people want to provide data series that shows that first-time buyer earnings to FTB housing has not increased similarly (not an anecdote about their cousin Vinny who found a flat going cheap last Tuesday etc) particularly in the South East, which is where the problem is most acute, then please be my guest. Having followed developments closely for a decade, I am overwhelmingly confident you will find quite the opposite is true.

    Comparing the growth of house prices to other assets is an interesting contribution. However I’m not sure it gets us too far. Firstly, because houses *are* different, as I’ll get to in a moment. Secondly, because assets are pretty disparate.

    To give an example, from memory median US house price growth over the past 100 years or so in real terms is only a little over 0%. Real terms growth in the US equity market is closer to 10% than 0%. Clearly we have different factors at work in the UK; I’d say our housing market is more different to the US than our equity market. This is pointing me into continuing to believe it is the UK housing market that’s the issue.

    Leaving that aside, I’ll concede that what house price to earnings ratio inflation might also be signalling is a low earnings growth rate compared to asset price growth rate (see Thomas Picketty et al). We do know that is an issue, rightly or wrongly, so there is probably a bit of that in the data.

    Finally, housing is different to other assets. It is a truism that we all need to live somewhere. Moreover we all have nesting instincts, and the ownership of your own home and aspirational feelings about it have so long been a part of our culture that it is just stubborn to try and deny them, or to suddenly expect young people not to feel aggrieved about the current status quo.

    Nobody (well at least not me) is saying that everyone should be entitled to live wherever they want at a price they can afford. Clearly pie in the sky.

    What I am saying is at the least we should recognize how wildly what’s attainable by a young person has changed (assuming as ever no parental assistance — crucial for me, though I know moot amongst much of the middle class who is happy to argue “Why cares about high house prices, the kids will inherit” and social mobility be damned).

    This thread has shown that even this is still — bizarrely to me — up for debate.

    I used to have a lot of debates like this, online and offline. I don’t anymore, as they go around in circles. But when I did I was always grateful for the genuine and honest 50-60-something who would say something along the lines of “Yes, when I bought my first two-bedroom flat in a nice bit of London I had to save for a year before and didn’t go on a holiday for a year or two afterwards. It cost me three times my then-low starter salary. Now my son would need to find 20x his salary” [I’m making these figures up but they are about right. “I admit it is far more difficult.”

    Finally, on the “nobody needs to own, they can rent” argument.

    To me this has echoes of the “prostitution should be legal argument”, in that you will hear people arguing for that but then expressing horror and outrage if you ask if you can offer £100 for a quick one with their 20-year daughter (I’m being glib, but you take the point. The thought appalls them). Perhaps that’s a natural human reaction and it’s not the end of the argument (I don’t think X Factor should be illegal but I’d be horrified if a child of mine turned up on it) but it does have echoes for me here.

    I can’t recall anybody over 50 *ever* arguing “it’s perfectly fine renting all your life, nobody has a right to own” etc etc who didn’t own themselves. In numerous cases, further discussion revealed they either had or planned to help their children own at some point to.

    So it was perfectly alright to rent, as long as they and their kids didn’t have to rent.

    Wonder why?

    Finally FINALLY I agree one can sit this out, enjoy the low rent to house price multiple, and save the difference while hoping for a crash. I’ve been doing just that for a little over 10 years now.

    So far it’s been a bad financial decision that’s turned into a terrible decision. I would say the bad-to-terrible part represents the most frothy and ridiculous recent years of London house price inflation though. So perhaps we’ll eventually see a correction and I can go back to it being a bad decision. I can buy, but I refuse to. I hold no candle for ever undoing the ‘bad decision’ part — ancient history.

    But really, my personal circumstances aren’t the point, nor why I posted the data. Clearly there’s something huge going on here. Even if we decide that the world has indeed changed — that owning your own home is off the table for 30-something middle-class average earners, despite their parents being able to buy family homes in a nice part of town at the same age — then we’re going to have to decide how best to structure society accordingly, not least to keep the incentives in place to make people bother getting up in the morning.

    Ideas might range from building more lower-cost low-footprint high-quality mass apartment type housing others have already mentioned to changing the tax system so that non-home owners can get the same sort of capital gains tax relief enjoyed by those fortunate enough to have jumped over the chasm.

  • 52 Brendan September 7, 2015, 5:03 pm

    @Investor

    “It is a truism that we all need to live someone.”

    A weird mashup of ‘love someone’ and ‘live somewhere’, or a typo? 😉

  • 53 The Investor September 7, 2015, 5:12 pm

    Oops! Typo! (Wish I was that poetic.)

  • 54 Nyul September 7, 2015, 5:13 pm

    Annoyingly I can’t find the chart I saw only in recent weeks that showed the percentage of each generation who had bought their own home by a certain age. It showed very, very clearly that a far higher percentage of those in their 60s now owed their own home in their 20s than the generations that came later. The chart showed shockingly clearly just how few young people can buy now, and it’s not because they’re buying too much Starbucks. So sorry I can’t find the chart, I did try! Maybe someone else saw it and can post a link.

    I used to be one who argued “yes, house prices have gone up, but rates are low and it’s always a struggle isn’t it?” but the data has changed my mind. It is stratospherically more difficult now than it ever was, especially in the south east, and huge numbers of young people will never own their own home who would have done if they were born a few decades ago.

  • 55 gadgetmind September 7, 2015, 5:17 pm

    I’m not sure median income is a great metric by which to judge house affordability. Those with low/no skills find it hard to demand more money as such skills (or lack thereof) aren’t exactly rare, so the low paid will skew both average and median.

    Even in the grim North, we pay graduate engineers around £30k from day one as we have to be competitive. This is enough for them to rent, live fairly well, and to start saving for a deposit. After a few years, they will be able to buy a terraced house in a tatty area on their own, or something far nicer if they have a partner who’s also working.

    I’m sure the situation is different in That London, but I guess that’s what fancy London salaries are for.

  • 56 Peter September 7, 2015, 6:40 pm

    > Finally, on the “nobody needs to own, they can rent” argument.

    To anyone making this argument I ask: when was the last time you rented? Let me spell out to you what it’s like renting from the most reputable agent in a market town:

    1. We have a 33 page contract to keep to, specifying down to the number of picture hooks you can put up per room, and who can visit (we can’t have children over, even for tea).
    2. I want to see walls painted something other than magnolia before I die.
    3. The house is not cavity wall insulated; despite it being free the landlord has no incentive to do so. Ditto for other energy saving changes.
    4. Problems reported are sometimes dealt with, usually not without being chased. And chased. And chased. We are still waiting on some, 18 months after moving in.
    5. There is a 10 inch step up to the shed where the mower lives; my partner can’t even get it out to mow the lawn, let alone back afterwards.
    6. The shed leaks.

    And this is better than most rental properties. Small wonder people want to buy.

    If something could align landlord and tenant’s interests, that would be a big improvement. Personally I can’t wait to get my own house and make it energy efficient, put in a decent hob costing more than £70, and make it feel like a home.

  • 57 b murray September 7, 2015, 7:35 pm

    All of this depends where you live and if buying a house is a priority it is still possible for young people to do that if they settle away from the south.

    In 2007 we bought 2 flats to support our 2 children through uni. We paid £160000 for a new 2 bedroom flat in edinburgh less that 1 mile from the science faculty of edinburgh uni, half a mile from the new edinburgh royal infirmary and 2 miles from another uni and 8 years later they will now sell for £130000. Our children are both at uni now so not long to go till we have to realise the capital, not looking great for people who bought 8 years ago,not so bad for people looking now.

  • 58 Jed September 7, 2015, 8:19 pm

    Speaking from experience it has never been easy buying your first house. We bought our first house in 1992 and that was at the top of the market. It took all of my wifes salary to pay the mortgages every month and that was an interest only mortgage. Then a year later a similar house was for sale around the corner for 25% less than what we paid. Then everything about house prices was downward even books were written about how house prices would never recover (dont ask me the name of the author or the book). I sold the house seven years later for 5% less than I paid for it. The present discussion in the media and on this weekends blog is about high and rising house prices very similar to the discussion in the media up until 1992.

  • 59 BeatTheSeasons September 7, 2015, 8:51 pm

    Fantastic discussion all, food for thought to be forced to consider this issue from so many different angles and perspectives. The argument that this is all somehow linked to the growing disparity between the capital rich and the income poor is a fascinating and compelling one.

    It does seem, though, that anyone blaming low interest rates and irresponsible lending for high prices has to explain why houses are still cheaper than they were in 2007 in many parts of the country, despite mortgages being available everywhere. Clearly something different is afoot in London and its environs.

    But what strikes me in particular is that, even among a wealth of data and in the midst of the situation, it’s still impossible to reach a consensus on what’s actually happening and the causes of where we find ourselves today. So how we can possibly predict the future or come up with solutions I have no idea!

  • 60 UK investor geek September 7, 2015, 9:32 pm

    I had the privilege of joining @Mathmo on the Sunday greenbelt experience and he is underselling it. And his data on asset prices since 1985 are fabulous – I hadn’t realised that FTSE-100 began then at 1000.

    Globally, property prices vary by area. At their peak, they are ‘trophy assets’ (Mayfair, Kensington, St Tropez etc). At the trough, they follow replacement cost – which has got lower over the decades as manufacturing innovation has outpaced quality expectations. On average, in averagely-desirable-or-better neighbourhoods, they follow earnings over the long term.

    The fact that the UK property market has closely approximated the highest returning asset classes, and not replacement cost, is testament to tight supply. But I don’t buy @Neverland’s argument that ‘only 3% of the country is built upon’, and in e.g. Melbourne/Sydney Australia where planning standards are far looser than in the UK, this hasn’t stopped the mainstream housing market rising practically in line with London. To me it is a simple question of supply/demand; we need a few million more homes, in London/South East to have the most impact, and whether planning law changes or not to accommodate this is almost moot.

  • 61 Baby Boomer in Croydon September 7, 2015, 10:56 pm

    After reading many if not all of the comments we may reach the stage where property is mortgaged on such a long timescale to reduce the costs that the mortgage and property has to be passed down through successive family generations.

    I think this is the case in Switzerland where property is very very expensive and the mortgage is passed down the generations who end up effectively renting the property.

    Just like our interest only people also discussed, why do these properties need to be repossessed, we just need a new provider of capital at economic interest payments.

  • 62 Neverland September 8, 2015, 11:10 am

    @ investor

    The central part of the problem is that many of those who already own houses in the uk are happy with the status quo

    They can subsidise their offspring (or grand offspring) to give them a deposit to buy and give them a huge monetary advantage over the children of the less wealthy

    Witness for example the raising of inheritance tax to £1m is an obscence number for anyone paying 40% tax

    The answer is the weakening of current private property rights around land and inheritance to increase equality and opportunity…

    … Or we can just have a Downton Abbey society

  • 63 gadgetmind September 8, 2015, 11:56 am

    I’m certainly not happy with the status quo as I don’t see it as being healthy or sustainable, however, I don’t see knee-jerk taxation of privately owned and occupied property as being the answer.

    BTW, I don’t think anyone has discussed the taxation changes towards BTL interest payments on this thread yet. A lot of BTL investors are saying they’ll sell up, which might be hot air, but let’s wait and see. This would obviously put more housing onto the market, but would also reduce available rental stock, so doesn’t really change the demand and supply issues.

  • 64 Neverland September 8, 2015, 12:44 pm

    @gadgetmind

    I see the changes in taxation of BTL being the first in what will probably be a long line of changes removing the tax advantaged status of residential property in the UK

    In days gone by the local rates were quite effective at capturing a reasonable chunk of the unearned increase in the annual value of a house, like local property taxes are in the USA

    (in the USA you actually see people selling their houses are moving somewhere else because of the local property taxes, conversely the most expensive houses in the UK have the lowest council taxes)

    When huge chunks of the population are excluded from owning houses, leaving only the richer sections of society owning them you can expect governments to use houses as a piggy bank

    I say good, PAYE earners on £40,000+ pay waaaay too much of the burden for tax in this country

  • 65 Mathmo September 8, 2015, 2:31 pm

    TI – you highlight the change from 4.4x to 12x earnings as a sign that housing is very expensive. You are even circumspect about the choice of timing to trim a bit off that to take account of the difficulty of timing the market exactly peak to trough — and even so that asset it is at least twice as expensive in expenditure terms.

    It surely isn’t a surprise to this community that expressing capital in in expenditure terms has got more expensive. We all look at SWR rates as part of our FIRE thinking and we have an idea of what capital we will need to cover our expenditure in perpetuity. It won’t have missed anyone’s attention that we’re living in a low yield world and the plethora of articles here about whether the fabled 4% SWR is too low. Do we need 5%? Do we need 6%? Please not 7%. So it should be no huge surprise then that the amount of capital required to cover future rents has gone up. You can do this in one of two ways: by having an invested amount which you withdraw and spend on rent, own an asset that produces shelter at the rate at which you consume it.

    But housing is different. It’s not just another asset. Why? It’s a little early in the year for a group of people to be chanting “oh yes it is”, “oh no it isn’t” at one another so I’d like to understand a bit more about what makes it different.

    One really obvious thing is our common need for the thing it produces: shelter. It is a natural hedge against your future consumption of shelter to own the asset. But it’s equally valid to buy the shelter at market rate as you require it. I don’t, after all, own corn fields to supply my future needs for sustenance.

    But as UK Investor Geek so rightly points out — it’s more than shelter — it’s got a bit of the shiny stuff attached. We’re not just talking about staying warm out of the rain, we’re talking about staying warm out of the rain on Cheyne Walk. We’re talking about being stylishly accommodated in one of the trendiest cities on Earth, Hounslow.

    * * * *

    My question to the non-owners (and this debate does seem to split along ownership lines) is how far would you like the price to fall? Are you after it becoming a regulated good, centrally planned and provided, perhaps? Or would a quick 50% crash do, followed by surging growth? Do you perhaps think a long bear market in housing would be a good thing?

    And do you regularly look at other asset classes and think that they should be cheaper for your benefit, too?

  • 66 Neverland September 8, 2015, 4:45 pm

    @ Mathmo

    “Are you after [housing] becoming a regulated good, centrally planned and provided, perhaps?”

    It already is…

    “Do you perhaps think a long bear market in housing would be a good thing?”

    Yes

    “And do you regularly look at other asset classes and think that they should be cheaper for your benefit, too?”

    Yes and everything else I buy too

  • 67 gally September 8, 2015, 5:40 pm

    This discussion on house prices seems to imply that us Londoner’s have gained massive increases in equity on our houses. That may be so in recent time but not without its impact.

    When I moved to London in the late 70’s from a relatively cheap Coventry housing area, my Mortgage triples, I took a evening job to subsidise the Mortgage and when the family arrived I did it all again and even had to send my wife out to work. Achieving what I have now was not without its costs.

    On the other hand my brother and friends in the Midlands had far moire disposable income, a better lifestyle when I was struggling. Now I have achieved some benefits I would hate to be thought of as having had them just through rises in property prices.

    I feel sorry for the young today that have to do the same and more than I did back in the 70’s and 80’s but as I have previously said you can only borrow or rent what you can afford to pay from income. The fact that some of us are sitting on high value property is not our fault but a fault of the system and I fully expect to give it back later when we need to pay for care fees or property prices fall, but not before I can sell and spend/give away the surplus.

  • 68 Learner September 8, 2015, 10:16 pm

    I don’t resent landowners. After all, I’d like to be one some day. But I know it’s not going to be in London, where I make my living (let alone the absolutely bonkers Auckland, NZ where I’m from originally).

    @Mathmo I’d like to see prices back down at a more realistic multiple of earnings so there’s more chance of raising a deposit for us folks without contributing parents. If that means a 50% correction, so be it. Prices will eventually return to present levels, though it may be 20 years from now, and hopefully incomes will have risen along with it this time.

    The main appeal in owning a house – aside from being allowed to hang pictures on the wall – is to not be paying market rent in retirement.

    I’d like to see a less volatile housing market overall. To hell with the housing “ladder”.

  • 69 Bob September 9, 2015, 12:52 am

    @Peter

    I have to say after renting thirteen flats in Aberdeen, Norwich, Durham and Glasgow before buying, my experience of renting is nowhere near as awful as you depict. I’ve always had the best experience renting direct from a landlord more often than not via an advert in a shop window.

    I place ‘lettings agents’ in the same category as ‘recruitment consultants’. I.e. Parasitic middlemen that have miraculously managed to convince society that a need exists for their existence .

  • 70 The Investor September 9, 2015, 3:45 pm

    @Bob — I have had similarly positive experiences, I can’t remember the last time I had a truly bad landlord. The ‘cons’ for renting for me are more the implicit ones in all such arrangements (uncertainty, inability to make changes to homes in the UK, versus say Germany) and the opportunity cost in terms of the gains I’ve missed out on, and that will mean I’ll need to find more money in the future one way or another to put a roof over my head.

    @all — Thanks for the further thoughtful follow-ups, particularly from Mathmo, where we seem to agree property is expensive, just not on whether that’s unusual re: other assets or a problem. (Very well expressed comments re: low yield world). As I said earlier I feel I’d largely be repeating myself to comment further, but am enjoying reading the new contributions. 🙂

  • 71 The Investor September 9, 2015, 3:46 pm

    p.s. That’s not to say I haven’t had bad landlords, but I’d have to go back to the 1990s for them. Obviously I was poorer then too, so perhaps a bit of you get what you pay for. (And a sign that the poorer renters are perhaps inevitably more vulnerable to downsides of renting.)

  • 72 Survivor September 9, 2015, 4:50 pm

    If there is a big BTL sell off of properties as a response to the shuffling of tax benefits, another option to FTB catching a break seems to be rearing it’s head – big institutions/corporations buying en masse to get into the rental returns. This could be perhaps as an investment diversification strategy, as well as the steady regular predictable income being attractive for planning purposes….. think pension, hedge or other managed funds for example.

    Even if today’s yields don’t look so good, they are essentially betting that property [in prime areas at least] will always pay off in the long run. Given the fact that current policy means the population is expected to rise significantly in the near to medium term, whilst new building is ever stymied, it’s not illogical.

    If I was still young, I would seriously consider emigrating to any civilized place that’s still behind the inequality curve, to give myself a shot by turning the clock back just enough to get through before the door slams shut.

  • 73 The Rhino September 10, 2015, 10:41 am

    @survivor – would you be able to put names to any such civilized places? I am very curious as to where they might be.

  • 74 Krismarett September 10, 2015, 11:34 am

    @Peter It does sound like you don’t have the best deal there landlord wise. I rented for many years and most of that time was trouble-free. Now I am a landlord (an accidental landlord as I cant live in my home for the time being) and my property has been rented out for 6 years with only our second tenant in. The agency who look after it for us have full authority to rectify any issue immediately up to a certain cost and then any time something above that comes up its referred to me and permission is instantly given and followed up. I understand that my tenant by law has reasonable right to “quiet enjoyment” of the property – the only rules we have are no-smoking indoors and no pets. I find it staggering and possibly even unlawful that your landlord can dictate who can visit you. We have agreed to our tenant doing some minor décor changes, painting walls and replacing a carpet (we went 50/50 on costs as the old one was a bit thread bare). Why do we try and be accommodating (no pun intended) well a) because its the right thing to do and b) if the property is empty it costs me lots of money and the next tenant might not be very good. As it is if I have a tenant who looks after the property and pays rent on-time why don’t I want to work hard to keep them. They are after all my ‘customer’.

    That said I still see your point. I miss living in my own property and the implicit freedom to do with it as you will.

  • 75 david September 10, 2015, 12:57 pm

    I think there used to be strict limits on the size of the mortgage compared to household yearly income? Was it 2.5 times? Then a few decades ago that limit was scrapped, leading to unlimited upside for mortgage size? The chart at this link shows how the % of mortgages bigger than 3 times yearly income exploded in size starting in the mid-1980s:

    http://www.cityam.com/1403775108/bank-england-imposes-limits-high-loan-income-mortgages

  • 76 Topman September 10, 2015, 1:05 pm

    @Survivor “….. seriously consider emigrating …..”

    Strapping on my “body armour”, my personal view is that the lack of affordable housing is simply one of the many symptoms of the extent to which our country is overcrowded; something that has been plain to me for many a year and which is worsening.

    I welcome outmigration from the UK, for whatever reason, and its increase to a point where it eventually exceeds immigration to the UK is to my mind an inevitable eventuality, although I regret that it may not be in my lifetime.

  • 77 The Rhino September 10, 2015, 3:47 pm

    @Topman

    overcrowding can work in your favour as well though

    it allows far superior infrastructure compared to somewhere that is undercrowded

    trick is to use it all off-peak when it far exceeds the required capacity and it is awesome, think motorways, pools, parks etc. largely all to yourself (FIRE can be seen as an enabler to living off-peak in this way)

    also specific population density is wildly different to average population density, perform ‘crowd-arbitrage’ to get the upsides of infrastructure without the downsides of overcrowding through judicious use of your physical location, think slightly, but not completely off the beaten-track (never on the beaten-track)

    one example that springs to mind is the quality of road-biking to be had in the UK due to all the backlanes, b-roads etc. These don’t exist if you live somewhere like NZ because the population density can’t support the infrastructure required.

    So its not all bad, if you exploit it in the right way I think..

  • 78 Survivor September 11, 2015, 5:03 pm

    @ The Rhino & Topman,

    I have one Kiwi & one Aussie sister, they emigrated again because having already emigrated here as kids, they found it too crowded after becoming adult & looking for jobs/a decent quality of life.

    They have comparative salaries way higher than when we were all working here in London even ….. & that still doesn’t take into account the differences in lifestyle possible there, they will never come back.

    Interestingly though, in both Sydney & Auckland, the housing market is as distorted as London (not unsimilarly) due to mainly foreign [specifically Chinese] money buying up property for investment, thereby locking out young/poorer locals.

    It seems the Neoliberal revolution in the US calls the economic tune, the UK is first to copy unquestioningly, then all the other Anglo countries follow too, so to answer the question ‘Where is still good?’ is quite hard.

    I think it is still possible, but you have to be really creative. A buddy of mine is an accidental landlord & after a holiday in Spain post property crash, figured out he could rent a place for peanuts there & retire at 50 by letting out his place in the SE of England. (a standard 3-bed noddy house in an indistinguishable suburb, yielding ~ £12k a year gross) He now lives a much better life on that in the Med than his sucker tenant who ironically earns a multiple of that income sweating his life away on the UK corporate treadmill as a ‘professional’. Dreams can come true…..

  • 79 Ptp September 22, 2015, 8:48 pm

    If its acceptable for uk plc to take untaxed and often criminal foreign money, to inflate London housing, along with immigration, then surely its acceptable for Londoners to offshore their tax affairs. What’s the difference?

    This crisis has a serious impact on our rule of law.

  • 80 Financial Samurai September 27, 2015, 4:48 pm

    Won’t each young person simply just inherit all the wealth and property their parents accumulated?

    You people don’t need to do more than average anymore b/c their parents hooked them up!

    BTW, isn’t foreign money the one buying London property? Why compare to local salaries if locals are priced out?

    Sam

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