House Market in crisis?

[Star10101]

Yes, I remember when Thatcher let people buy their own council house at a reduced price. Of course, at the time people were pleased to be buying their own house after years of paying into it. But with hindsight, it was such a wrong decision as we needed those council houses (or social housing as it's called now).

I was always taught not to buy things on credit (apart from having a mortgage). My first house was a two bedroom one for £36K (ah, those were the days) and I saved up a £3600 deposit to put down. I was thrilled to get on the property ladder and thought I would work my way up easily. Now houses can be up to 10 times what I paid for my first house!

I have friends who are still living with their parents because they have missed the boat so to speak, with getting on the property ladder. The only way people will be able to buy a house in years to come will be either taking out many of these loans for it or waiting for elderly relatives to die so they can inherit their house!

[Jaggy001]

House prices are where they are because people are paying them. We put our Glasgow flat on the market last May and got 6 offers all of which were over our asking price and the winning offer was 30% over asking.

If buyers stopped paying the prices then they would come down. That is not happening.

[geoff956]

Originally Posted by Jaggy001

House prices are where they are because people are paying them. We put our Glasgow flat on the market last May and got 6 offers all of which were over our asking price and the winning offer was 30% over asking.

If buyers stopped paying the prices then they would come down. That is not happening.

Yes but you are talking about the result rather than the cause. It was only when borrowing restrictions were lifted in favour of the financial institutions that people borrowed more and therefore could pay more.
People are never going to stop paying the prices unless they are stopped by restricting the amount they can borrow. This is a good thing not a bad thing because it introduces the element of stability.
Those who can't buy used to live in a council house (or private rented) and saved for a house if they wanted one or stayed in their council house until it was naturally vacated. It was then let to the next needy family on the list. This was the disastrous thing that Thatcher did - she deprived all the families who would have been entitled to that house in the future in favour of the fortunates who happened to occupy the house at the time. It's impossible to over state just how catastrophic this was for the housing market, because she set in motion a pattern which cannot be reversed.
We now have many young people who will never be able to buy because the easy availability of borrowing has caused the prices to soar out of any proportion. They can either stay with their parents or do the best they can in the private rental market ( which doesn't have a particularly rosy track record I might add).
And what are the government doing? Helping those who can afford to buy. I'm afraid they have no interest in those who can't.
Still, plenty of voters were quite happy to put the Tories back in power. Let's see how it looks after the five years !!!!

[Jaggy001]

There are two unrelated things here.

The first is the availability of social housing. That is absolutely within government's ability to manage. Blaming Thatcher is a cop-out. Major, Blair, Brown or Cameron could have reversed it if they wanted.

The second is the availability of borrowing. This is a more complex subject than you make it out to be essentially because of interest rate fluctuations. When I bought my first property I was paying 13% which rose to 15% a year later (thanks Thatcher). Right now, I have 3.125% fixed for 15 years. I can actually afford to pay the mortgage off but I am making more money with the capital invested than I would if I paid it off. Anyway, today I can borrow a lot more capital and still have the same repayments.

The best way to limit borrowing, always assuming this is desirable, is to limit it to a percentage - say 80% - of the assessed value of the property.

[geoff956]

Yes I agree they could have reversed it, but no subsequent Tory government would have, and the Blair era governments were nothing more than Tory-lite anyway so they followed the pack.
However, it was Thatcher who brought it in and to blame her is absolutely the right thing to do. A Prime Minister who introduces legislation of any kind is rightly judged accordingly. History demands that.
I don't claim to be a finance expert but I do know that the old system worked. It rewarded savers and young people could put money by through hard work so as to save a deposit for a house. It was within reach for many. We should have preserved that system.
How would they do it now? Impossible for thousands of people and no social housing to turn to.
We the house owners have been so busy over the past 30 years congratulating ourselves on the profits we've made through an inflated housing market we've forgotten that future generations need homes as well. A 'help to buy' is not the answer, it just feeds the flames.
Yes, limiting mortgages to 80% would slow things down but that would mean a deposit of around £60,000 on the average house price by my reckoning.
What's the answer? There isn't one at present because successive governments have blown it.

[Star10101]

Yes, I worry for my young daughter - what's it going to be like for her, when she gets older? Is there any way she will be able to afford to buy a house of her own?

We're in a situation now, where people in their 20's, 30's and even 40's are still living at their parent's house. And even if they wanted to rent their own house, it would cost almost £100 more per month than a mortgage would. Then there's social housing - in some areas people are waiting for up to 10 years on their list!

I don't know what is going to happen in the future but it can't go on like this can it?