House Market in crisis? (fit in, rental, mortgage)
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I read in the papers today that the average house price is around 8 times that of the average wage. This apparently is higher than it was in 2007 before the financial crash.
Once again this is what comes with liberalisation of the financial markets. When I got my first mortgage I was allowed to borrow 2-3 times my annual salary. In other words I was allowed what I could afford not what the lender wanted to saddle me with. The financial institutions championed primarily by Tory dogma have now created an irretrievable situation IMO.
We have a section of the community who cannot and never will be able to purchase a house, because their incomes will never reach the required level. On the other hand we have people paying sky high mortgages which will be unaffordable in the event of increased interest rates. If prices should fall those people would be plunged into negative equity. Deregulated lending has destroyed the essential balance between what we earn and what we spend, and I see no way of restoring that balance, other than a financial bomb going off.
We are sleepwalking towards just that.
1. The sell off of social housing that began in the Thatcher era. This lowered the quality of the bottom rung of the housing ladder, while pushing up prices. The sold properties have never been replaced. The % of social housing is now much lower than it once was. Therefore overall prices rise across the market.
2. People being allowed to borrow insane income multiples. Most who do this are speculating that the house they're buying will keep going up in value, so they'll be fine. This has led to people buying houses to make money, not simply as somewhere to live. Therefore prices go up.
3. The rise of buy to let. The lack of social housing pushes millions into the clutches of buy to let landlords who's only interest is profit. Rental prices go up, pushing up prices everywhere.
4. Mass immigration. Millions added to the population means much greater competition for limited housing stocks. Again, up go the prices.
In the 1970's, one average income was enough to pay a mortgage for a typical family in all but the most expensive parts of Britain. Nowadays, even 2 such incomes in the household won't be enough to get a foot on the ladder anywhere other than the cheaper parts of the country.
The solution isn't simple, but there must be a return to social housing as the norm. That means huge government investment. But we can't afford that because we've spent all the money bailing out the banks. All that private debt has now been rebranded as public debt, and Gideon Osborne tells you it's your fault for over spending.
the main reasons are: too many people and not enough houses to go around. and, the price of houses these days, when I bought my first and only house back in 1970 it cost £3,800 and the mortgage was £10 per month, these days the average house down here is around £250, 000 and you need a 30% deposit and trying to get a mortgage on anything but a brand new house is difficult if not impossible.
The problem I have at the moment is that I have been practically forced to live in a rougher area because the area I want to live costs an extra £100K. I have paid into a mortgage for 20 years now and I am still not living where I want to live.
I don't want to say where I am but let's just say that Channel 5 could easily do a programme about it here! It's affecting my quality of life because it is so run down and I don't really fit in with any of my neighbours at all.
The only option I have is to get one of those Help To Buy Equity Loans. But then it will mean paying a mortgage until I'm nearly a pensioner plus there's the Equity Loan part. It will feel like a double mortgage almost!
I have no choice though, as it's either living here or paying for a nice house in a nice area for a stupidly high price.
I don't pretend to have any first hand knowledge of the UK housing market, but from talking to people who live there, it seems as though prices reached the silly level long ago. So if there's not a crisis now, there will be. Just wait.
The housing market torpedos the rest of the economy.
With housing being such a large % of most peoples outgoings more then ever before theres quite simoly less to spend on other goods and services.
Nevertheless, every other car I see these days seems to be a BMW, Mercedes or Audi. I don't see a shortage of affluence when I shop either. I imagine people are borrowing more than they can afford as usual.
The government are making things worse with their ludicrous help to buy scheme, which once again encourages people to borrow more - and for properties up to £600,000 !!!
What about all the 'hard working families' struggling to pay for houses half that value?' Are they quite happy to be subsidising that?
The answer is quite simple - social housing, but that's way below tory radar. They are obsessed with the vision of a home owning society when in reality there will always be many (also 'hard working families' incidentally, who will never be able to own or perhaps don't wish to own their own home)
Margaret Thatcher with her deregulation philosophy laid the ground for the mess we are in today. Selling council houses to a select few being her biggest disgrace. I hope history remembers her for the right reasons.
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