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Prices Might Be Going Up, But The New Homes Aren't

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The great British housing crash largely passed Andrew Pratt by. Managing director at Grainger Trust, the UK's largest listed residential landlord with £2.3bn of assets, Pratt has just completed a 212-unit housing development in the shadow of Arsenal's Emirates stadium in north London.

It was a triumph. Never mind that nervous banks are reluctant to lend money, the 92 homes available to buy sold out in just 10 weeks. The properties earmarked for private rent did not see a huge take-up, so Pratt put a further 30 on the market. All but two remain unsold.

With the number of housing transactions at historic lows, most housebuilders are forced to offer huge incentives - legal fees, moving costs and stamp duty all paid - to get stock off their hands and cash in the bank. But all Pratt did was drop the asking price by up to 20% from the market's peak 18 months ago.

A large number of first-time buyers came up with the asking price, assisted, as Pratt said, "by the bank of mum and dad". Buy-to-let investors also piled in to help.

Recent days have offered comfort to housebuilders and the government clinging to the hope that the engine of the British economy - a roaring housing market - may be spluttering back to life. On Friday, the Land Registry said house prices in England and Wales rose by 1.7% in July compared with June - the biggest monthly leap in value since July 2004.

The previous day, Nationwide said prices were up for the fourth consecutive month. And Savills, the upmarket estate agency, said overseas cash buyers in central London, helped by cheap sterling, were creating a mini-recovery in the capital's posh property market.

On Tuesday, Persimmon, the UK's biggest housebuilder, surprised the city when it became the first quoted firm to "write up" the value of its 64,000-unit land bank. A turnaround after a year in which major housebuilders slashed the value of their land assets, writing off billions in moves that provoked sector share-price falls in excess of 80%.

Last week, however, that all seemed years away as evidence grew that mortgage lenders were slowly opening the vaults again. Gross mortgage lending totalled an estimated £16bn in July, a 26% rise on the previous month, though 36% down on the previous year. The number of mortgage approvals, now 47,500, is 20,000 higher than the depths of the crash last November, though, again, still 50,000 shy of peak figures.

So is that it? Will normal service be resumed? "I would love to think we are past the housing crash but realistically I don't think the recovery will be strong," says Shelter's housing policy expert, Caroline Davey. "Unemployment is going up, repossessions are still high. At some point interest rates, which are currently acting as a protective measure, will go up. Those in mortgage arrears are rising and are already high. Look at social housing waiting lists. They are rising. In the private rented sector, people are experiencing real difficulties. Even in a macro-economic context, it's too optimistic to the call the end of the crash."

Fears of a second leg to the housing slump should not be underestimated, she says. There are 270,400 mortgage loans in arrears of three months or more, equivalent to 2.43% of all home loans and up 117,700 on the previous year, according to the Council of Mortgage Lenders. Repossessions are being kept to a minimum as the government presses banks to avoid them, as a quid pro quo for the £1.2tn taxpayer bailout. Nevertheless, they are still rising and further increases in unemployment could spark forced sales, dampening any recovery.

Housebuilders, meanwhile, are still labouring under billions of pounds' worth of debt. Hundreds of thousands of construction workers have been laid off and built units are at historic lows.

It all makes for painful reading for a Labour government whose electoral fortunes were buoyed by the feelgood factor, induced by seemingly never-ending rising house prices. Now, though, it has all come home to roost.

"Any government that allows an extended period of rampant house price inflation fails its people." This analysis of Labour housing policy over 12 years does not come from a Socialist Worker apparatchik, but from the chief executive of a FTSE 250 construction company, playing with his sea bass on a bed of spinach at a City restaurant.

When Labour came to power in 1997, the average price for a house in England and Wales was £63,313. By January 2008, when the market peaked, you would need to fork out £184,362 to purchase one - a near 200% rise.

So easy was credit during the boom that, according to a study by the Greater London Authority, in early 2007 two out of three new homes bought in London were sold to buy-to-let investors.

Senior housing officials are split on whether they should have tried to take the sting out of the buy-to-let market. One says: "If it had not been for [buy-to-let buyers], many homes would not have been built in the first place. Without them there would have been no pre-sales, and without pre-sales no developer would have gone ahead."

Housing minister John Healey says: "Some claim buy-to-let buyers crowded out first-time buyers. I think it's hard to isolate buy-to-let as a single factor driving up house-price inflation. I think in some areas they may have contributed. They still account for 3% of homes across the country. Their effect may have been greater in some areas."

As house prices reached seven times average earnings, 100% mortgages pumped up prices that, at their peak in 2003, grew by 24% annually.

Was that not the precise time for the Treasury to address lending limits? "The nature of [our] involvement was mediated by the regulator and the tripartite system," says Healey, who was at the Treasury just as prices were showing their headiest rises. "I guess we were not close to lending decisions being made at the time. This is territory well trodden."

For those lucky enough to be in at the start of the housing bubble, life was easy. But increasing numbers have been locked out of home ownership. In 12 years under Labour, the number of households on council waiting lists has risen 70% to 1.7 million.

Despite endless announcements of "step changes" in the rate of new housing supply, "growth zones", regional housing targets, "community plans", "urban summits" and Gordon Brown's determination to make increased housing a central plank of his administration, Labour has been unable to build homes in large enough quantities to take the heat out of inflation and mitigate growing social problems.

Only in 2007 did the number of new homes begin to approach the government's annual target of 240,000 units. Even then, it was 33,000 shy of it.

Labour helping to make family homes unaffordable for hard working families.

A very nice profit for those who bought before the price spike and cashed out.

Thank god these price increases are sustainable.

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In my area, it will be a long time before the few vacant building plots are completed.

A lot of these were bought at peak in 2007 at prices so high that further HPI was already priced in. A lot of these developers would make a loss even if they could sell at peak prices. With 20% off peak, they are well under water.

The best example is a plot last sold for £3m in 2007. It has river views and PP to build 6 semis. The developer is desperately trying to sell, and in the meantime this 'prime' land is now let out to the type of eastern European hand car wash that you would normally see in a Tesco car park!

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according to a study by the Greater London Authority, in early 2007 two out of three new homes bought in London were sold to buy-to-let investors.

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Look quite sustainable to me. I cant wait till I earn over 1,000,000 a year in 2052. :lol::lol::lol::lol:

Year	Average	Increase1997	£63,313.00	2008	£184,362.00		191.19%2019	£536,846.26		191.19%2030	£1,563,250.04		191.19%2041	£4,552,049.39		191.19%2052	£13,255,175.56		191.19%2063	£38,597,928.96		191.19%2074	£112,393,842.97		191.19%2085	£327,281,185.17		191.19%2096	£953,014,607.76		191.19%2107	£2,775,096,411.73	191.19%2118	£8,080,841,606.93	191.19%2129	£23,530,714,392.57	191.19%2140	£68,519,412,551.03	191.19%2151	£199,522,624,685.82	191.19%2162	£580,992,689,215.92	191.19%2173	£1,691,800,643,931.34	191.19%2184	£4,926,377,684,148.11	191.19%2195	£14,345,187,285,469.20	191.19%

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