Home  5  Books  5  GBEzine  5  News  5  HelpDesk  5  Register  5  GreenBuilding.co.uk
Not signed in (Sign In)

Categories



Green Building Bible, Fourth Edition
Green Building Bible, fourth edition (both books)
These two books are the perfect starting place to help you get to grips with one of the most vitally important aspects of our society - our homes and living environment.

PLEASE NOTE: A download link for Volume 1 will be sent to you by email and Volume 2 will be sent to you by post as a book.
Buy individually or both books together. Delivery is free!


powered by Surfing Waves




Vanilla 1.0.3 is a product of Lussumo. More Information: Documentation, Community Support.

Welcome to new Forum Visitors
 Join the forum now and benefit from discussions with thousands of other green building fans and discounts on Green Building Press publications: Apply now.




Politics: House price crash caused by new builds

Bottom of Page

1 to 30 of 53

  1. <
  2. 1
  3. 2
  4. >
    • CommentAuthorTriassic
    • CommentTimeAug 28th 2012
     
    Policymakers are believed to be preparing plans for a major publicly-funded housebuilding programme to kick-start growth at the same time as addressing the perceived housing shortage. Vince Cable, the Business Secretary, has indicated plans are afoot, and an increasing number of economists have endorsed the idea.

    According to Fathom Consulting, however, the plan "could have exactly the opposite effect from the one desired" – causing prices to fall by as much as 30pc, forcing banks to take large losses, and triggering a new credit crunch.

    http://www.telegraph.co.uk/finance/economics/9500516/State-backed-housebuilding-drive-would-cause-price-crash-warns-Fathom.html#

    So what'a happening to house and building land prices in your areas? Around here prices are down but only by a bit, maybe 10%.
  2.  
    I believe a housing crash is inevitable, irrespective of who does what.

    As long as the numbers of prospective first time buyers earning the minimum wage increases there is no other eventuality.

    The only other possibilty is wage hyperinflation - yeah right.
    • CommentAuthorTriassic
    • CommentTimeAug 28th 2012
     
    I tend to agree, a few friends in the building trade are only just making a living and one, a plumber was been made redundant wtice 2 far this year and each time the company he worked for started up under a different name and with lower rates of pay, the latest only just above minimum wage. He's now got a job back in his original trade, a benchhand joiner, but the pay is still low!
  4.  
    And there was me thinking I was the only doom and gloom merchant around here.... But i've been saying this for about 10 years and so far it hasn't happened
    • CommentAuthorbella
    • CommentTimeAug 28th 2012
     
    The wage structure now looks something like 1910 - a huge and growing gap between top 1% and bottom 25%. The rest, strung out between, mostly rather worse off than 20 years ago and the young unable to afford to buy houses or even pay the rent. And no need to ask where all the money went. Chicago economics (the blessed Margaret) and the odd war coming home to roost cheered on by Blair (he knew) and Brown (was he just a bit dim?) now being brought to maturity by, well you know who!! Selling off the family silver Macmillan called it. Did anyone listen?
  6.  
    Here would be the same drop, around 10% but no more.
    • CommentAuthorneelpeel
    • CommentTimeAug 28th 2012
     
    I think 'crash' is the wrong word. I suspect that prices will continue to trickle downwards over a good few years.

    Don't think prices have changed much around here. The oil & gas filled Aberdeenshire bubble continues to float. If any tradesmen are out of work and don't mind relocating then this is the place to be!
  8.  
    Good point about the 'crash' You may well be right and it will be a slow process
    •  
      CommentAuthorjoe90
    • CommentTimeAug 29th 2012
     
    Perhaps the word crash is wrong, I think prices will start to be more "realistic".
    •  
      CommentAuthorSteamyTea
    • CommentTimeAug 29th 2012 edited
     
    I think it is the wrong way of looking at it. But then I would as I am odd.
    What I think is that you have to look at the two sectors that affect house prices, the buying population and the type of houses they buy.
    So say you are 50 (wife, 2 kids at home), household income of £60,000 pa, have a 4 bed detached in a mediocre area that is worth £250,000. You are very average for the area.
    There are 400 similar properties in your area all worth about the same (because estate agents only value on the last sale, hence not much selling and house prices are not very elastic).
    Three scenarios coming:

    Scenario 1, 100, 1 and 2 bed starter homes are built with a selling price of £90,000 (total capital value of £9m)
    Scenario 2, 36, mediocre 4 bed detached houses are built at £250,000 (total capital value of £9m)
    Scenario 3, 5, Luxury homes are built at £1.8m (total capital value of £9m)

    Scenarios 1 and 3 are not in you sector, though may be in your kids that are hanging around upstairs or your Boss at work.
    So that leaves Scenario 2 that may affect you, your local market stock has increased by 9% (capital value £100m to £109m) but the household incomes are about the same at £60,000 (there will always be variation), so the money in your sector economy will increase from £24m/pa to £26.16m/pa. So that matches the increase. So not a problem at a 9% increase in housing stock (about what is claimed nationally is needed)

    Another way to look at it is to work out how much free equity is in the housing stock, say in your sector the housing was bought ten years ago for half the price but on a 60% loan that is near enough 1/3rd paid off and the 36 new households take out the same deal but at today's prices.
    Old housing stock free equity is £80m
    New housing stock free equity £3.6M
    That is 4.5% capital value increase in your sector, or about half of the increase in the local sector economy, so not going to affect you in my opinion (this assumes that there is no fraud going on and everyone that buys can afford to).
    • CommentAuthorbillt
    • CommentTimeAug 29th 2012
     
    From the Nationwide (the least unreliable supplier of house price statistics) from Q2 2007 to Q2 2012:

    Uk average -9.3%
    London +3.4%
    Outer met area -1.7%
    Outer SE -6.9%
    East Anglia -8.2%
    South West -7.3%
    East Midlands -10.4%
    West Midlands -10.7%
    North West -14.9%
    Yorks & Humberside -13.4%
    North -14.6%
    Wales -14.9%
    Scotland -8.4%
    and the crash
    NI -51%

    For more granularity http://www.landregistry.gov.uk/__data/assets/pdf_file/0019/18352/june-hpi-report.pdf has figures for the last year.

    Of course these figures tend to be self selecting in an upward direction as lenders only deal with the middle of the market where most transactions are discretionary. If people see prices falling they stay put, the number of transactions fall and the crash is masked. That happened after the 1989 slump.

    Any government money is likely to be put into social housing so there won't be any direct effect on the private owner occupier sector.

    There's a fair amount of building activity round here. 2 small developments in Much Wenlock have just finished and a 3,500 house development in Telford is being restarted after being mothballed in 2007-8.

    A non representative sample of one. My parents put their house on the market in 2007 for £295,000. It didn't sell. Put it on the market in September last year for £250,000; hopefully it has sold for £210,000. That's a theoretical 30% drop.
  12.  
    I would agree that is a 30% drop but firstly was the £295,000 figure in 2007 realistic and secondly if you are buying in the same market then you should save 30% on your purchase price.
  13.  
    i think its a lot more simple than that. looked at historicaly,. (100
    years) house prices in western countries have always followed an average of 3.5 times average earnings. speculative bubbles created by easy access to credit(debt) means that th
    ere are cycles of boom and bust around this average.
    •  
      CommentAuthorjoe90
    • CommentTimeAug 29th 2012
     
    What Gusty said!!!,

    Someone said to me recently that i would make at least 40% on my house if I sold it now, but i replied that in that case the market had risen by 40% over the same period so I would be no better off:cry:
    • CommentAuthorbillt
    • CommentTimeAug 29th 2012
     
    Posted By: gustyturbineI would agree that is a 30% drop but firstly was the £295,000 figure in 2007 realistic and secondly if you are buying in the same market then you should save 30% on your purchase price.


    The similar bungalow next door sold for £350,000 at about that time, so the price wasn't unreasonable, but that's why I said a theoretical drop.

    In this case my parents have left the housing market, so purchase price is not relevant.

    You're right bot. Prices in the middle of the market are determined by how much people can borrow, which is determined by pay (actual or imaginary!) and lending ratios. That also explains a lot of the regional variation. London prices have increased; lots of well paid jobs - further from London fewer and lower paid jobs and prices have dropped.
    • CommentAuthorJonti
    • CommentTimeAug 29th 2012
     
    Posted By: bot de paillei think its a lot more simple than that. looked at historicaly,. (100
    years) house prices in western countries have always followed an average of 3.5 times average earnings. speculative bubbles created by easy access to credit(debt) means that th
    ere are cycles of boom and bust around this average.


    Would that not mean the average price should be around the £90K ish mark? If so, it would be welcomed by many first time buyers but few present house owners

    Jonti
  17.  
    You might well be able to get a house for 90K - if it was not for the planning permission lottery which generates an absurd value on a few m2 of land just by virtue of PP.
    Of course if people viewed houses as somewhere to live rather than an ongoing method of tax free profit, this may also help.
    • CommentAuthorbeelbeebub
    • CommentTimeAug 29th 2012 edited
     
    Actually, on the subject of tax free profit, why is capital gains tax not levied on your primary residence? If there was a 40% levy on (above inflation) profits it would put a bit of a break on the speculation.
    • CommentAuthorJonti
    • CommentTimeAug 29th 2012
     
    Wasn't the real reason for the hike in prices the fact that the banks went from lending 2.5 times the principle earners annual wages to 4.5 times the combined? If they went back to the old formular then house prices would become more realistic.

    Jonti
  20.  
    Yes 3.5 times combined salaries. Big jump in house prices.
    It effectively meant that you had to have 2 people working full time to afford a house.
  21.  
    <blockquote><cite>Posted By: Jonti</cite>Wasn't the real reason for the hike in prices the fact that the banks went from lending 2.5 times the principle earners annual wages to 4.5 times the combined? If they went back to the old formular then house prices would become more realistic.

    Jonti</blockquote>

    Thats what I said
    "speculative bubbles created by easy access to credit(debt)"
    •  
      CommentAuthordjh
    • CommentTimeAug 30th 2012
     
    Posted By: beelbeebubActually, on the subject of tax free profit, why is capital gains tax not levied on your primary residence? If there was a 40% levy on (above inflation) profits it would put a bit of a break on the speculation.

    (1) it would lose a lot of votes for whichever party introduced it.
    (2) it would reduce labour mobility even more than at present, and that's already a problem.
    (3) it would benefit the rich, since companies would be likely to pay the tax when recruiting highly paid executives.
    •  
      CommentAuthorSteamyTea
    • CommentTimeAug 30th 2012 edited
     
    There could just be a surcharge on borrowed money.
    So say the banks are willing to lend a multiple of income, say 4 times, and they do that at say 2.5% above base rate, every month when the Land Registry and the HMRC look at the figures for median wage and median house prices (could be mode or mean, that is for clever people to work out), every time the house prices rise above 4 times income they invoke a tax on mortgage repayments as a a price signal sends a very fast message about taxing wealth. Not sure what it shoudl be, but would have to hurt, so say 3%, that would take the current lending rate to about 6%, or about what people are paying now after the 'special deals' have ended (I would put a stop to them as they are a complete nonsense). This would encourage people to think hard about asking prices, would be based on sales values, would raise income, would not affect people that own outright or rent. Think of it as a greed tax.
    • CommentAuthorbeelbeebub
    • CommentTimeAug 30th 2012
     
    @djh:
    1) agreed it would robably be be a vote loser,
    2) not sure why it would reduce labour mobility, all the tax does.is close a loophole where using your home as a speculative investment is tax free.
    3) not sure it would benifit the rich disproportionately, after all the poor who are renting will be unaffected by this. The next rung up who love in cheap starter homes are unlikely to have a huge profit so I'll fall under the allowance calc. The middle will get hit a bit. The rich will get hit more as allowance is fixed but a 5% increace on a £1m house will be way over the allowance, whereas the 5% of a 250k house would not be. In addition the rich would tend to have other assets subject to cg, investments, art etc all of which would be inder the same allowance. There isn't anything you fan do to stop third parties paying tax on behalf of someone else. if your skills are valued so much that someone wants to pay you lots of money then good on you!
  25.  
    I remain to be convinced that the availability of credit pushes up the price of houses, IMO it is the availability of houses that pushes up the price. If money isn't available people don't buy, if money is available people will buy at the price dictated by the market - which if plagued by the wrong product or the shortage of the right product then the right product in the right place will command a high price - enter house price inflation. If you could get PP on low grade agricultural land as a matter of course for example think what this would do to the price of the 1ha. plot with PP. The notion that an official, by virtue of deciding that a particular piece of land can have PP which will immediately add three 0s to the end of the price must be a nonsense.
    IMO the current planing procedures in the UK are broken and not fit for purpose.
  26.  
    But was (for example) the relatively unfettered inter-war 'Ribbon development' which, among other things, gave rise to the Town and Country Planning Act, not indicative of a Planning 'process' (or non-process) which was ''broken and not fit for purpose''?
    •  
      CommentAuthordjh
    • CommentTimeAug 30th 2012
     
    Posted By: beelbeebub2) not sure why it would reduce labour mobility, all the tax does.is c

    Suppose you own a house (even with a mortgage) and have lived in it for a while and prices have gone up (remember the Bank has a target of 2% inflation even if there isn't a house price bubble). Now suppose that you want to move to a new job and everything else stays the same (i.e. salary, price of houses in the new area is thesame etc). In addition to the normal costs of moving you now have to find cash from somewhere to pay the proposed tax. It can't come from the proceeds of your sale, because you need those to buy a new house. So effectively you're being taxed to change jobs - that's not good for labour mobility and low labour mobility is bad for the economy. The structure of the UK housing market is already bad from this point of view and the proposed tax would make it significantly worse.

    Posted By: Peter_in_HungaryI remain to be convinced that the availability of credit pushes up the price of houses

    There's a lot published on the subject, so all I can suggest is reading some of it. Google found this, for example:

    http://www.nottingham.ac.uk/cfcm/publications.aspx
  28.  
    Posted by nick Parsons
    But was (for example) the relatively unfettered inter-war 'Ribbon development' which, among other things, gave rise to the Town and Country Planning Act, not indicative of a Planning 'process' (or non-process) which was ''broken and not fit for purpose''?


    Just because the previous process was bad does not mean that the follow on process automatically must be good. All you can do is hope that the new does what is required and IMO it does not!
  29.  
    Posted By: djh
    Posted By: Peter_in_HungaryI remain to be convinced that the availability of credit pushes up the price of houses

    There's a lot published on the subject, so all I can suggest is reading some of it. Google found this, for example:

    http://www.nottingham.ac.uk/cfcm/publications.aspx


    In a situation of supply constraint (caused IMO by the planning process) then yes freely available credit will push up the prices, but this is a symptom of the constraint if the constraint was removed then there would be no driver for the available credit to push up prices.
    Of course if the constraint was removed this would then create other problems as many would have purchased in times of constraint and consequently paid prices according to that constraint. How this could be managed (other than just by saying 'tough') I have no idea.
  30.  
    I dont agree Peter, if that was the case the situation would be different in France where planning regs are much more "socialist" than in the UK. In 2010, 300,000 houses were built, I think the most ever built in 1 year was 500,000. It is relativley easy to buy land and build your own house. and yet prices have gone up considerabley (though now falling again due to the credit crunch)

1 to 30 of 53

  1. <
  2. 1
  3. 2
  4. >
   
The Ecobuilding Buzz
Site Map    |   Home    |   View Cart    |   Pressroom   |   Business   |   Links   
Logout    

© Green Building Press