London's world status and house price boom is now hurting the middle class | Net Of The Woods

2013-08-10 23:57:00

samthesheriff
Joined: 2013-07-26 17:19:44
Posts: 43

I... imagine it's time for me to get used to the fact that I'll never have a property.

Oh well - I kind of like renting. chiefly the part where I call the landlord whenever something breaks and he fixes it from his own pocket. I really love that bit.

When the bubble bursts land will be cheap. Remains to be seen how far it inflates before it bursts though: if it's too far it will bring the banks down, again, and the govt almost certainly will not this time be able to bail them out, so we'll be a kind of worse Greece. So you might not like to live in London then.

I genuinely don't imagine it will burst. With inflation and interest rates apt to be low in the long term, purchases only if truth be told need to think of the expense of servicing the mortgage rather than the headline cost of the house. The expense of servicing mortgages is quite low and expected to remain so for a long time.

Because the property bubble that took the banks down 5 years ago could in no way happen again.

a though provoking comment if short and, taking it into consideration seriously, reminds me that 'world cities' such as london and NYC did not see a failure in prices as did the wider market in 2008's worldwide real estate crash.

My suspicion is that the reason they didn't is because the banks generally got bailed out, so people dependant on them for wealth stayed wealthy and carried on buying big houses. However we are now running away from fixing the underlying problems (breaking them up) and it's not clear to me whether, next time, there is enough money to bail them out again. In any case I think the 'property prices will inflate for ever' view is extremely naive: that's what the banks bet on before 2008 and it was silly then.

Yes. Also overseas have seen a plunge as GBP fell in 2008 by 25%.

I totally concur with rising forever being dumb. Even just as a thought drill it's obvious. Question: what happens if prices expand in real terms forever? Answer: not possible.

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2013-08-11 00:36:00

samthesheriff
Joined: 2013-07-26 17:19:44
Posts: 43

That's why I moved out of London.

On a moderate salary of £50k, I'd be able to pay for a 3-bed in a non-slum area ..... never.

How many people are now leaving London who will be essential for a straight taxpayer base? Especially with finance jobs deflating. Quite a lot I'd say. Those who hold good skills can go out of London and even out of the UK.

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2013-08-11 03:49:00

simon5
Joined: 2013-08-02 16:37:09
Posts: 11

I... imagine it's time for me to get used to the fact that I'll never have a property.

Oh well - I kind of like renting. chiefly the part where I call the landlord whenever something breaks and he fixes it from his own pocket. I really love that bit.

I acknowledged a year or so ago my initial property will be in the US.

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2013-08-11 08:42:00

chipsedge
Joined: 2013-07-30 13:50:57
Posts: 17

I... imagine it's time for me to get used to the fact that I'll never have a property.

Oh well - I kind of like renting. chiefly the part where I call the landlord whenever something breaks and he fixes it from his own pocket. I really love that bit.

When the bubble bursts land will be cheap. Remains to be seen how far it inflates before it bursts though: if it's too far it will bring the banks down, again, and the govt almost certainly will not this time be able to bail them out, so we'll be a kind of worse Greece. So you might not like to live in London then.

You're forgetting overseas buyers though unfortunately...they'll keep London propped up except we go into some sort of worldwide depression, which is looking increasingly unlikely.

This gets bandied about a lot, but does anybody have any real numbers. On the face it makes an amount of sense, but I have doubts that this endless overseas wealth amounts to much.

It's a very British belief that land is the main means to wealth, and British property is the best at it. Aren't we merely projecting the same beliefs onto others. at these Russian millionaires, if I had that cash I'd start a Buy-to-Let empire in Bromley! The incentive that those that are buying in London, want to do so, is because of London's importance in global trade and finance. Any impending recession/problems with the financial sector may be a basis for foreign ownership to reduce, not be a substitution for home-grown buyers.
British, and markedly London, property really isn't performing that well as an investment when compared next to other things. The US stock-market reached an all-time high this week, but an ordinary London property yields less than 4%.
it's the capital gain stupid! - well yes, but unlimited capital gains in the face of less buyers is not sustainable. And the higher market prices levitate above sustainable prices (which can be very roughly approximated by comparing with the more liquid rental market), the elevated probability of a painful correction.

In summary: buyers is just grasping at straws to try and find a reassuring narrative that house prices are sustainable, it doesn't stand to reason.

The best hope for sustainable prices is good old inflation, that's the only thing that can the housing market - the numbers will be steady (or even rise), but the relative value of housing will steadily find a sustainable home.

Not that inflation doesn't initiate other problems, of course.

If you read my comments I said that profit isn't a motive. One motive is protection of capital (this applies to third world countries similar to Greece, African countries etc), another is to live some of the time in the cultural capital of the planet (probably Russians come beneath this), and lastly as why not.

Profit doesn't picture in the decision most of these people make to buy property here.

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2013-08-11 10:11:00

bobcatty
Joined: 2013-07-29 16:22:31
Posts: 39

That's why I moved out of London.

On a moderate salary of £50k, I'd be able to pay for a 3-bed in a non-slum area ..... never.

You could live somewhere like Leicester or the Stevenage area and commute to the city fairly well. I have a friend who bought a 2 bed with garden and garage for less than £180k and commutes to Moorgate to work. Depends what you want.

The commute would be torture though, Leicester to St. Pancras is about 1 hour 15 minutes and then put in 15-20 minutes to get to Moorgate.

Then factor in the train costs, from what I can tell a monthly period pass is £794.90 (£183~ a week) PLUS a zone 1 travelcard (or PAYG)

Obviously it's a personal evaluation and if it makes him happy then so be it, but from my perspective I think the whole tribulation would be too pricey in time and money to even be worth it.

Depends. He takes a nonstop train to Moorgate and has a 5 min walk to work from there. Rail card is £300/mth (I think), with a loan from the company for an annual ticket. His commute is a lot more pleasurable than mine and loads of others who take the tube from one side of London to the other, with changes, and then get home to a shitty house-share somewhere.

Yeah I can visualize the commute is less nerve-racking (when the national rail network is working...), but I just don't think I could stomach the £300 a month cost.

Mind you I presently pay roughly £170ish a month for the tube so I expect it's not a huge leap. Still, 25 minutes on the tube is better than over an hour!

I remember my manager eagerly leaving work earlier than usual at 5pm saying I'll get home by 7 tonight! People doing these commutes are mad, truly crazy

I commute 3 hours in total a day, I could get it down to 2 hours and 45 minutes but I like having a seat. I just do it since my rent is ridiculously cheap.

When I worked in Chelmsford one of my colleagues was commuting from somewhere in the center Suffolk, which didn't make any sense, so I know what you mean.

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2013-08-11 13:36:00

crocodilesmasons
Joined: 2013-07-28 19:27:38
Posts: 27

I... imagine it's time for me to get used to the fact that I'll never have a property.

Oh well - I kind of like renting. chiefly the part where I call the landlord whenever something breaks and he fixes it from his own pocket. I really love that bit.

When the bubble bursts land will be cheap. Remains to be seen how far it inflates before it bursts though: if it's too far it will bring the banks down, again, and the govt almost certainly will not this time be able to bail them out, so we'll be a kind of worse Greece. So you might not like to live in London then.

I genuinely don't imagine it will burst. With inflation and interest rates apt to be low in the long term, purchases only if truth be told need to think of the expense of servicing the mortgage rather than the headline cost of the house. The expense of servicing mortgages is quite low and expected to remain so for a long time.

Because the property bubble that took the banks down 5 years ago could in no way happen again.

a though provoking comment if short and, taking it into consideration seriously, reminds me that 'world cities' such as london and NYC did not see a failure in prices as did the wider market in 2008's worldwide real estate crash.

My suspicion is that the reason they didn't is because the banks generally got bailed out, so people dependant on them for wealth stayed wealthy and carried on buying big houses. However we are now running away from fixing the underlying problems (breaking them up) and it's not clear to me whether, next time, there is enough money to bail them out again. In any case I think the 'property prices will inflate for ever' view is extremely naive: that's what the banks bet on before 2008 and it was silly then.

i actually concur with this and it was on my mind while writing that reply but i forgot to convey it. it may not all be due to that but i think it may have been a important factor.

on your point about banks NOT being bailed out due to insufficient funds i would like to point out that the US Fed has an in effect limitless ability to print money so the snag would not be affordability as much as the political will to do so. and to add to my last point the Fed is technically an apolitical association but in reality will likely consider politics (maybe not along political party lines but in some way) when acting.

Any country with its own currency can issue as much of it as it likes, to bail out banks or for any additional purpose. Doing that typically has rather undesirable results.

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2013-08-11 17:46:00

desertIslandDooda
Joined: 2013-07-30 01:17:16
Posts: 10

I... imagine it's time for me to get used to the fact that I'll never have a property.

Oh well - I kind of like renting. chiefly the part where I call the landlord whenever something breaks and he fixes it from his own pocket. I really love that bit.

When the bubble bursts land will be cheap. Remains to be seen how far it inflates before it bursts though: if it's too far it will bring the banks down, again, and the govt almost certainly will not this time be able to bail them out, so we'll be a kind of worse Greece. So you might not like to live in London then.

You're forgetting overseas buyers though unfortunately...they'll keep London propped up except we go into some sort of worldwide depression, which is looking increasingly unlikely.

So how does this work? If overseas buyers push London house prices up, how will they make a profit on their investment once even the upper-middle class won't be able to have the funds for purchasing property in London? Will they make a profit by buying and selling amongst each other as constantly increasing the prices? Is this genuinely going to be sustainable?

If you are a Russian entrepreneur you can buy a house in London for say £30m. That is now an asset in a nation with one of the safest legal and political systems in the world in a currency that is relatively sound.

If/when you need to leave Russia in a dash you have a large asset that can be cashed in. The same applies to Greeks and countless other nations.

And you pay almost no tax for this protection, and you asset has a high probability of rising in value.

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2020-10-29 23:25:47

Mauwey
Joined: 2019-08-24 17:38:16
Posts: 3

Now imagine that you also buy a house in the winter, in which the windows are broken. That's happiness. Whatever. I was very depressed, as I had paid a large sum for the house. I thought that replacing the glass would be expensive, but I found a great window Glass Replacement Arbor Trace on the Internet. If it weren't for the experts, I'd be freezing.

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