Jump to content
House Price Crash Forum
Sign in to follow this  
Cinzano Bianco

Does The Housing Market Need Ftbs?

Recommended Posts

One of the arguments I like to use (and something I have been thinking about with regards to when to buy) with regards to the impossibility of a continuation of housing price rises, is that eventually they are out of reach of people like me. This, to my mind, means that without new blood the market eventually stagnates and prices level off or decrease to allow FTBs back into the market.

The question though is, is it plausible that house prices could continue to be out of reach* for FTBs, and only those cash rich enough/ with enough capital to secure a mortgage against are able to buy? Thus meaning that prices don't actually crash (any further), and we end up with a small percentage of elite each with a large percentage of the housing stock in a portfolio progressively over time?

Would it therefore be sensible to restrict the purchase of property that is not essential somehow to allow people to own there own property, since housing is pretty essential?

* By out of reach I mean average wage vs average house price is greater than a ratio of, say, 4:1

Share this post


Link to post
Share on other sites

People die.

If there are no first time buyers then house ownership becomes ever more concentrated into the hands of fewer and fewer companies.(not BTL pensions people, they die, kids sell house, government grabs it etc)

This is a bad thing.

Share this post


Link to post
Share on other sites
People die.

If there are no first time buyers then house ownership becomes ever more concentrated into the hands of fewer and fewer companies.(not BTL pensions people, they die, kids sell house, government grabs it etc)

This is a bad thing.

It's happening right now and what purports to be capitalism here in the UK is quickly shifting the balance at an alarming rate, undoing nearly 2 centuries of wealth distribution to the masses. "Yes m'lord"

As I always say: This is Britain. Same as it ever was.

But would you prefer the state to allocate you X square meters of space? I think not.

Share this post


Link to post
Share on other sites

You can't buck the market forever.

All that was keeping it going was debt fuelled consumption, now this has been shattered house prices will slowly start reflecting what people can afford. Which isn't a lot.

Share this post


Link to post
Share on other sites
Would it therefore be sensible to restrict the purchase of property that is not essential somehow to allow people to own there own property, since housing is pretty essential?

It would only be necessary to increase the council housing stock and put councils on an equal footing with private landlords and then no one would be keen on aquiring others means of life.

Share this post


Link to post
Share on other sites
It would only be necessary to increase the council housing stock and put councils on an equal footing with private landlords and then no one would be keen on aquiring others means of life.

So it won't happen.

Share this post


Link to post
Share on other sites
But would you prefer the state to allocate you X square meters of space? I think not.

Tax the crap out of second homeownership.

Convert all the mutiple occupancy places back into houses that you can raise a family in.

Regulate new builds so they exceed the space of council houses.

Share this post


Link to post
Share on other sites
One of the arguments I like to use (and something I have been thinking about with regards to when to buy) with regards to the impossibility of a continuation of housing price rises, is that eventually they are out of reach of people like me. This, to my mind, means that without new blood the market eventually stagnates and prices level off or decrease to allow FTBs back into the market.

The question though is, is it plausible that house prices could continue to be out of reach* for FTBs, and only those cash rich enough/ with enough capital to secure a mortgage against are able to buy? Thus meaning that prices don't actually crash (any further), and we end up with a small percentage of elite each with a large percentage of the housing stock in a portfolio progressively over time?

Would it therefore be sensible to restrict the purchase of property that is not essential somehow to allow people to own there own property, since housing is pretty essential?

* By out of reach I mean average wage vs average house price is greater than a ratio of, say, 4:1

Clearly, people think you don't need first time buyers. Rather like an economy that is 70% retail: you don't need an export market. You just need to make enough on exports that pay for the oil and gas you consume to keep everyone busy selling stuff to each other. Oh, hang on a minute...

But in all seriousness - the philosophy is the same. If all you have is internal transactions in the market, then no, first time buyers don't matter to a certain extent.

But as another poster has pointed out:

1. House owners die and need to be replaced.

2. The demographic is shifting and everyone will be downsizing. That means price pressure at the top of the market that will cause knock-on price pressure at the lower end of the market. This is a rather unique intra-market function.

The introverted nature of an overpriced market (those that have equity and have ridden the wave up can swap houses with little or no restriction) means is could be sustained if (1) and (2) didn't exist, but they do.

The problem is as well that market turnover is WAY lower than volume created by floods of first time buyers entering the market.

If there's weakness, prices can be set at the margin on very thin volume, mostly turnover with the odd first time buyer entering with an inadequate deposit or mortgage.

I don't think any housing market can self sustain for all these reasons.

It's going down - plain and simple.

Edited by AvidFan

Share this post


Link to post
Share on other sites
According to Peter Bolton-King, chief executive of the National Association of Estate Agents, a healthy property market requires between 25% and 33% first-time buyers. "Currently there is nothing like that level and, as second-time buyers need first-time buyers to sell to, the market can't recover until lending improves."

Share this post


Link to post
Share on other sites

Think of the current market as a helter-skelter ride.

Viewed from above, in each revolution, it looks like a perfect circle.

Viewed from the side, in each revolution, slow descent indicates a hemorrhaging of capital.

For those on the ride, what appears to be a journey round and round is actually a death spiral.

And guaranteed some joker at the top will be saying "I can see your house from here".

Share this post


Link to post
Share on other sites

I'm not sure FTBs are needed.

It depends entirely on the rate at which asset rich families can pass on that wealth the their children (assisted FTBs) and speculate on BTL properties. If they can fill the gap then prices wont come down.

Of course, as another poster commented - it leads to a "yes m'lord" society, which is arguably the UK norm. My fear is that the 20th Century meritocracy is an aberation. We will return to "normality" soon. And when you factor in declining national wealth, end of the north sea (local peak oil has already happened) and global resource scarcity it starts to look scary. After all, the only reason we are able to have a middle class is that oil does the work of the prols.

And just because this is a terrible thing doesn't mean it isn't happening today, here, right now. The government (and masses) support this happening. Even if they don't realise the end result of their wish for ever higher prices relative to earnings.

The only question that matters is - can these richer families invest at a rate that can replace FTBs?

Share this post


Link to post
Share on other sites

FTB's are not needed. Those willing to MEW as a deposit on another property can use it as a deposit on a new residence. Then all these people can have gdp based on selling houses to one another. The more productive parts of society can emigrate and watch as the UK gets even richer.

Share this post


Link to post
Share on other sites

That is pretty much what I have been trying to work out in my head.

Sybil pointed out that Peter Bolton-King thinks we need 25% to 33% FTBs. But what if those can be (maybe just in part) replaced by BTLs that have enough capital/ cash rich enough to be able to cover any expenditure with rent? There certainly appears to be people in the city that are generating enough cash to potentially make a dent in that 25% to 33%.

Share this post


Link to post
Share on other sites
One of the arguments I like to use (and something I have been thinking about with regards to when to buy) with regards to the impossibility of a continuation of housing price rises, is that eventually they are out of reach of people like me. This, to my mind, means that without new blood the market eventually stagnates and prices level off or decrease to allow FTBs back into the market.

The question though is, is it plausible that house prices could continue to be out of reach* for FTBs, and only those cash rich enough/ with enough capital to secure a mortgage against are able to buy? Thus meaning that prices don't actually crash (any further), and we end up with a small percentage of elite each with a large percentage of the housing stock in a portfolio progressively over time?

Would it therefore be sensible to restrict the purchase of property that is not essential somehow to allow people to own there own property, since housing is pretty essential?

* By out of reach I mean average wage vs average house price is greater than a ratio of, say, 4:1

Not in the long term

In the short term prices can be held up by low interest rates and people deferring moving or renting out their old houses

In the long term, death/marriage/divorce etc and normal interest rates will force house price down

Banks lending only 3x income now and houses costing 5x income just doesnt work once there is a normal flow of houses needing to be sold

BTL investors will stop investing once they see how low rental returns are and realise that capital appreciation of 10% pa is just a memory

All this takes time however

Share this post


Link to post
Share on other sites

Your post certainly reads as if it is sarcastic, but I just wanted to say that you can only MEW indefinately in the short term so long as house prices continue to "rise" ahead of inflation. Long term that's impossible and the process would be much slower, so you need money that has come from elsewhere initially to really create the "landed gentry" society I am referring to... IMO.

Share this post


Link to post
Share on other sites

I do agree with this in terms of the bog standard spiv speculator, but I guess I mean those who are cash rich enough to keep the market propped up out of reach of average people for a long enough time that we swing towards the landed gentry society - if you see what I mean.

Share this post


Link to post
Share on other sites
One of the arguments I like to use (and something I have been thinking about with regards to when to buy) with regards to the impossibility of a continuation of housing price rises, is that eventually they are out of reach of people like me. This, to my mind, means that without new blood the market eventually stagnates and prices level off or decrease to allow FTBs back into the market.

The question though is, is it plausible that house prices could continue to be out of reach* for FTBs, and only those cash rich enough/ with enough capital to secure a mortgage against are able to buy? Thus meaning that prices don't actually crash (any further), and we end up with a small percentage of elite each with a large percentage of the housing stock in a portfolio progressively over time?

Would it therefore be sensible to restrict the purchase of property that is not essential somehow to allow people to own there own property, since housing is pretty essential?

* By out of reach I mean average wage vs average house price is greater than a ratio of, say, 4:1

Relax! The "value" of UK housing used to be £3.5 Trillion, with about 60% of that value mortgaged. This has now dropped nominally by say 15% to £2.9 Trillion.

There simply is not enough cash around to support the buying and selling of houses without FTB's, especially in a severe recession.

It was the greatest Ponzi scheme of all time, but will take some years to unravel. The current "green shoots" in the housing market is NOT FTB's buying expensive houses (IMO) , but STL's buying houses, because they are frightened. But the VOLUME is right down - this is a very thin market.

This has already come to an end, simply because cash rich buyers are not a common species. The housing market cannot survive without FTB's, like any other Ponzi scheme.

In July, according to Rightmove, house prices declined by over 2%.

After the next election there will be massive redundancies in the public sector, whoever wins the election. Reposessions will increase. Watch the housing crash really move then!

Share this post


Link to post
Share on other sites
I do agree with this in terms of the bog standard spiv speculator, but I guess I mean those who are cash rich enough to keep the market propped up out of reach of average people for a long enough time that we swing towards the landed gentry society - if you see what I mean.

Why would the super rich wish to corner the property market in a small wet high tax island off the northern coast of Europe?

They will buy up smaller islands in the med and the caribbean for pleasure as usual instead, trust me ;)

For business, they have better yielding things to invest in I would have thought...

Share this post


Link to post
Share on other sites
Relax! The "value" of UK housing used to be £3.5 Trillion, with about 60% of that value mortgaged. This has now dropped nominally by say 15% to £2.9 Trillion.

There simply is not enough cash around to support the buying and selling of houses without FTB's, especially in a severe recession.

It was the greatest Ponzi scheme of all time, but will take some years to unravel. The current "green shoots" in the housing market is NOT FTB's buying expensive houses (IMO) , but STL's buying houses, because they are frightened. But the VOLUME is right down - this is a very thin market.

This has already come to an end, simply because cash rich buyers are not a common species. The housing market cannot survive without FTB's, like any other Ponzi scheme.

In July, according to Rightmove, house prices declined by over 2%.

After the next election there will be massive redundancies in the public sector, whoever wins the election. Reposessions will increase. Watch the housing crash really move then!

I tend to agree with you except I think, barring surprises, the process will be slower than we have previously seen and take most of the first half of the next decade to play out...

What could make it quick? A sudden sharp rise in interest rates, just like the early 90s....

Share this post


Link to post
Share on other sites
Why would the super rich wish to corner the property market in a small wet high tax island off the northern coast of Europe?

I don't know..why is the vast majority of the uk owned by the superrich?

I suspect it is to collect the economic rent

Share this post


Link to post
Share on other sites
One of the arguments I like to use (and something I have been thinking about with regards to when to buy) with regards to the impossibility of a continuation of housing price rises, is that eventually they are out of reach of people like me. This, to my mind, means that without new blood the market eventually stagnates and prices level off or decrease to allow FTBs back into the market.

The question though is, is it plausible that house prices could continue to be out of reach* for FTBs, and only those cash rich enough/ with enough capital to secure a mortgage against are able to buy? Thus meaning that prices don't actually crash (any further), and we end up with a small percentage of elite each with a large percentage of the housing stock in a portfolio progressively over time?

I think it is perfectly possible

Edit to add - i think prices will crash, but i think it is perfectly possible they remain unaffordable for ftbs

Edited by Stars

Share this post


Link to post
Share on other sites
BTL are the new FTB.

The typical flat (starter for FTB) in Bristol now is bought as investments, not buy FTBs according to Estate Agents. Hence why prices are not going to crash.

If I was to be a BTL investor I'd want to get a double digit gross return to get a 10% net return to reflect the:

- hassle

- risk

The gross yield on a BTL at current prices isnt 7% so the rest would have to come from capital growth or the ability to raise rents by 5% per annum (in reality the same thing)

CPI yoy is about 1.8% and RPI is negative right now.... so that aint happening...

Share this post


Link to post
Share on other sites
BTL are the new FTB.

The typical flat (starter for FTB) in Bristol now is bought as investments, not buy FTBs according to Estate Agents. Hence why prices are not going to crash.

I think I have spotted a flaw in your argument ;)

Given that the age demographics are purpotedly V shaped you might consider arguing that downsizers will become the new FTB?

Who are they going to sell their original, oversized property to?

Conclusion; the British housing market is a pyramid selling scam. Like all great pyramid selling scams, it will collapse evetually, due to lack of new entrants at the base of the pyramid.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   295 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.