5 ms·

And by worst they really mean best. Lower housing cost means better life for more people.

by DenisM 10y ago

CountSessine 10y ago
Agreed - I can understand why there would be concern over lower equities or bond prices - but how are lower real estate prices really a bad thing? Young families are killing themselves trying to earn enough to subsidize the retirement of older homeowners through high real estate prices, mostly because our cites are so badly managed and zoned. Or well managed and cunningly zoned, if you're a Hollywood villain and what you're interested in is destroying a whole generation with debt.
- vidarh 10y ago
  It's bad for investors, which can affect the speed of new builds. Otherwise it's only bad for home ownes if they drop too fast, or if you want to treat your home as an investment and plan on trading down in the future, which is incredibly risky to depend on.
- simonh 10y ago
  > but how are lower real estate prices really a bad thing? It depends why they are lower. If they are lower because more houses are being built that could be a good thing because relieving the chronic shortage in affordable housing will help more people get on the property ladder, increase the available labour pool for businesses, if they live closer to work it will ease transport congestion, etc, etc. Good all round. However if house prices are falling because wages are getting depressed so people can't afford higher prices, the jobs market is slowing, inward investment is petering out, etc then it's not so much that lower house prices themselves are bad, but it's a really bad sign for the economy. Apart from anything else, falling house prices due to economic factors is going to reduce investment in new housing, which we really do need in the medium to long term.
  - dx034 10y ago
    It seems that the recent price development is due to higher taxes on second homes (and expensive purchases) which deter capital investors. This could be a good thing as it means that a higher share of houses will be owned by people living only in London, instead of second homes. And even though it only directly effects the most expensive property, it ultimately lowers prices for a lot of houses due to the inelastic nature of housing demand.
- rwmj 10y ago
  High house prices are mainly good when you die. You no longer need a house and your descendents get to convert the house equity into cash (paid for by the younger generation). The rest of the time high house prices just mean larger debt, more risk if prices fall and higher transaction costs.
  - mathgeek 10y ago
    This assumes that you never sell your house to fund your retirement. High house prices also imply higher real estate taxes, which pressures the older generation to sell.
    - rwmj 10y ago
      The UK real estate tax ("council tax") is ridiculously small even at the highest levels. Even if I was in a multi-million pound property, the maximum I'd ever pay would be £3.5K annually, and for most houses it's less than half that.
      - mathgeek 10y ago
        Things are different depending on locale. Here in the US, retirees living on a fixed income where their house is most of their net worth have it very different from the wealthy in the UK.
- notahacker 10y ago
  London is something of a special case, where (i) property is so expensive it simply isn't accessible to people on average salaries to buy and (ii) property investors are interested in the market for the capital gains rather than the rental income, and so owners aren't necessarily as aggressive at pushing for market rents as they could be. A poor outlook for property prices could potentially result in quite a few tenants finding their landlords squeezing them much harder in future. More generally, whilst lower property prices are generally a good thing for the economy, a property price crash and the resulting economic instability is unequivocally a bad thing.
- deleted 10y ago
  [deleted]
deleted 10y ago
[deleted]
tehwalrus 10y ago
Sadly, the geospatial data in the article don't support this. Inner London, the £1m+ mansions, are what are faultering after brexit. Outer London prices are up 2.7% on last December. Edit: yeah, OK, you can't buy a mansion in zone 1 for £1m. I'm going on my own internal standard, i.e. if it's over £1m it better have turrets.
- valdiorn 10y ago
  A mansion for 1 million in London? that's rich. 1 Million will buy you a 3 bedroom flat in Zone 1.
  - dagw 10y ago
    I think it's a reference to the so called "mansion tax" which would end up including a lot of mid-sized London flats.
    - tehwalrus 10y ago
      Not deliberately, no. See my other comments on this tree.
- lostboys67 10y ago
  Lol 1 mill will buy you an ex council flat in central london not exactly a Mansion
- fpp 10y ago
  To better understand changing house prices in London you first might want to look at longer term development of prices - one UK estate agents chart at http://www.winkworth.co.uk/articles/30-years-of-house-prices http://www.winkworth.co.uk/articles/30-years-of-house-prices and a newer but shorter term overview at http://www.telegraph.co.uk/property/house-prices/the-state-of-the-uk-housing-market-in-five-charts/ http://www.telegraph.co.uk/property/house-prices/the-state-o... Don't forget all these charts provide averages across all central London areas - some more real-life examples: A terraced house in Earls Court cost you about £150-£200k early 1990 - now £1.5M+ - similar in Fulham etc. A double fronted house in Worlds End (now considered to be part of Chelsea) was about £350-£500k at the same time - now about £4-6M. Many people working in central London until about 20years ago bought themselves property from bonuses - these properties (first time buyers) were mostly used for self-occupancy - now there are very little bonus payments for younger people working in the City and a large proportion of people working in offices in London commute between 2-4h each day (when the 9-5 becomes 5-9). Now (since at least 6 years) most property is cash-bought - i.e. no mortgage was taken out. You are looking mostly at "investment buyers" and with these, prices are far more sensitive to changes like the Brexit. Look around in central London and you will realise how much residential property is actually empty - for some of these "investment buyers" it is cheaper (tax) not to rent and the government is not doing anything about this since many years. Most property development - to my knowledge - is now "to-rent" vs. "to-buy" - what we are seeing is a reversal of policies supporting people (latest Thatcher) to become property owners back to pre-WW2 when only the rich could afford not to rent. On current central London price level you will have to have best at least £500k cash for a down-payment and then earn at least £200k p.a. to be able to pay your mortgage for a family size property.
tonyedgecombe 10y ago
In general but I'm not sure this movement is that significant, we really need to go on a huge house building spree to solve our housing problems and it doesn't look like this is going to happen, largely because of political ideology.
- dazc 10y ago
  You could build one or two million houses and solve a lot of problems but you'd also p*ss off a lot of homeowners in the process. It's a no win situation for any political party.
  - guard-of-terra 10y ago
    But then again, your economy will get a large boost. Construction is awesome source of growth. No construction means stagnation. If you don't piss off homeowners today, tomorrow situation will become even more dire. Pricess will be bigger, price growth expectations would be even more insane, regular people will be more disgruntled. So it should really be "piss early, piss often". Or face downward spiral. It's pretty obvious how this should resolve: suppose there's two nearby towns (inside metro area) - one is building up but another one doesn't. Property prices will lower in both of them but onle one will be getting economic benefits, leading to second one following the suit. It only becomes problematic when cartel forms, blocking the development of entire area. Such cartels should be fought with.

And by worst they really mean best. Lower housing cost means better life for more people.

by DenisM 10y ago

And by worst they really mean best. Lower housing cost means better life for more people.

Agreed - I can understand why there would be concern over lower equities or bond prices - but how are lower real estate prices really a bad thing? Young families are killing themselves trying to earn enough to subsidize the retirement of older homeowners through high real estate prices, mostly because our cites are so badly managed and zoned. Or well managed and cunningly zoned, if you're a Hollywood villain and what you're interested in is destroying a whole generation with debt.

vidarh 10y ago
It's bad for investors, which can affect the speed of new builds. Otherwise it's only bad for home ownes if they drop too fast, or if you want to treat your home as an investment and plan on trading down in the future, which is incredibly risky to depend on.
simonh 10y ago
> but how are lower real estate prices really a bad thing? It depends why they are lower. If they are lower because more houses are being built that could be a good thing because relieving the chronic shortage in affordable housing will help more people get on the property ladder, increase the available labour pool for businesses, if they live closer to work it will ease transport congestion, etc, etc. Good all round. However if house prices are falling because wages are getting depressed so people can't afford higher prices, the jobs market is slowing, inward investment is petering out, etc then it's not so much that lower house prices themselves are bad, but it's a really bad sign for the economy. Apart from anything else, falling house prices due to economic factors is going to reduce investment in new housing, which we really do need in the medium to long term.
- dx034 10y ago
  It seems that the recent price development is due to higher taxes on second homes (and expensive purchases) which deter capital investors. This could be a good thing as it means that a higher share of houses will be owned by people living only in London, instead of second homes. And even though it only directly effects the most expensive property, it ultimately lowers prices for a lot of houses due to the inelastic nature of housing demand.
rwmj 10y ago
High house prices are mainly good when you die. You no longer need a house and your descendents get to convert the house equity into cash (paid for by the younger generation). The rest of the time high house prices just mean larger debt, more risk if prices fall and higher transaction costs.
- mathgeek 10y ago
  This assumes that you never sell your house to fund your retirement. High house prices also imply higher real estate taxes, which pressures the older generation to sell.
  - rwmj 10y ago
    The UK real estate tax ("council tax") is ridiculously small even at the highest levels. Even if I was in a multi-million pound property, the maximum I'd ever pay would be £3.5K annually, and for most houses it's less than half that.
    - mathgeek 10y ago
      Things are different depending on locale. Here in the US, retirees living on a fixed income where their house is most of their net worth have it very different from the wealthy in the UK.
notahacker 10y ago
London is something of a special case, where (i) property is so expensive it simply isn't accessible to people on average salaries to buy and (ii) property investors are interested in the market for the capital gains rather than the rental income, and so owners aren't necessarily as aggressive at pushing for market rents as they could be. A poor outlook for property prices could potentially result in quite a few tenants finding their landlords squeezing them much harder in future. More generally, whilst lower property prices are generally a good thing for the economy, a property price crash and the resulting economic instability is unequivocally a bad thing.
deleted 10y ago
[deleted]

deleted 10y ago

[deleted]

tehwalrus 10y ago

Sadly, the geospatial data in the article don't support this. Inner London, the £1m+ mansions, are what are faultering after brexit. Outer London prices are up 2.7% on last December. Edit: yeah, OK, you can't buy a mansion in zone 1 for £1m. I'm going on my own internal standard, i.e. if it's over £1m it better have turrets.

valdiorn 10y ago
A mansion for 1 million in London? that's rich. 1 Million will buy you a 3 bedroom flat in Zone 1.
- dagw 10y ago
  I think it's a reference to the so called "mansion tax" which would end up including a lot of mid-sized London flats.
  - tehwalrus 10y ago
    Not deliberately, no. See my other comments on this tree.
lostboys67 10y ago
Lol 1 mill will buy you an ex council flat in central london not exactly a Mansion
fpp 10y ago
To better understand changing house prices in London you first might want to look at longer term development of prices - one UK estate agents chart at http://www.winkworth.co.uk/articles/30-years-of-house-prices http://www.winkworth.co.uk/articles/30-years-of-house-prices and a newer but shorter term overview at http://www.telegraph.co.uk/property/house-prices/the-state-of-the-uk-housing-market-in-five-charts/ http://www.telegraph.co.uk/property/house-prices/the-state-o... Don't forget all these charts provide averages across all central London areas - some more real-life examples: A terraced house in Earls Court cost you about £150-£200k early 1990 - now £1.5M+ - similar in Fulham etc. A double fronted house in Worlds End (now considered to be part of Chelsea) was about £350-£500k at the same time - now about £4-6M. Many people working in central London until about 20years ago bought themselves property from bonuses - these properties (first time buyers) were mostly used for self-occupancy - now there are very little bonus payments for younger people working in the City and a large proportion of people working in offices in London commute between 2-4h each day (when the 9-5 becomes 5-9). Now (since at least 6 years) most property is cash-bought - i.e. no mortgage was taken out. You are looking mostly at "investment buyers" and with these, prices are far more sensitive to changes like the Brexit. Look around in central London and you will realise how much residential property is actually empty - for some of these "investment buyers" it is cheaper (tax) not to rent and the government is not doing anything about this since many years. Most property development - to my knowledge - is now "to-rent" vs. "to-buy" - what we are seeing is a reversal of policies supporting people (latest Thatcher) to become property owners back to pre-WW2 when only the rich could afford not to rent. On current central London price level you will have to have best at least £500k cash for a down-payment and then earn at least £200k p.a. to be able to pay your mortgage for a family size property.

tonyedgecombe 10y ago

In general but I'm not sure this movement is that significant, we really need to go on a huge house building spree to solve our housing problems and it doesn't look like this is going to happen, largely because of political ideology.

dazc 10y ago
You could build one or two million houses and solve a lot of problems but you'd also p*ss off a lot of homeowners in the process. It's a no win situation for any political party.
- guard-of-terra 10y ago
  But then again, your economy will get a large boost. Construction is awesome source of growth. No construction means stagnation. If you don't piss off homeowners today, tomorrow situation will become even more dire. Pricess will be bigger, price growth expectations would be even more insane, regular people will be more disgruntled. So it should really be "piss early, piss often". Or face downward spiral. It's pretty obvious how this should resolve: suppose there's two nearby towns (inside metro area) - one is building up but another one doesn't. Property prices will lower in both of them but onle one will be getting economic benefits, leading to second one following the suit. It only becomes problematic when cartel forms, blocking the development of entire area. Such cartels should be fought with.