Prices Will Never Go Down In London. Will They?

[padington]

That might be true. But London is a big place. And this city's centre does not the city maketh. Dude! Central London might be full of foreigners, tourists and merchant bankers, but outside the centre I believe economic gravity will prevail.

I live on the border of zone 2 and 3. I've been a renter and a potential buyer since before the financial crisis and I've yet to see any foreign interest in the areas I have been interested in. In fact, quite the opposite. As a renter I have always been outbid by families on housing benefit, and as a potential buyer I have always been outbid by BTL merchants, or BOMADers, who are BTLers by another name. Prices might have gone up but the volume has reduced to a trickle.

There's been no foreign interest in these parts, purely speculators whose wealth-creation model relies on unlimited government subsidy directly and indirectly through the welfare system rather than the London is different myth. Well, the welfare tap has been turned off. Look at the stats! Choose an area of London outside the centre and do a rightmove search of rentals priced above the benefit cap. Ask yourself who will rent some of these places now at those prices? There is a glut building up and these places are unlettable anywhere near those prices. Those BTL barons, leveraged to the hilt, wont be able to take the reduction in cashflow. And they wont be able to offload either at peak prices because their natural buyers, other BTLers wont now be able to make the numbers work either.

Anyway, we'll find out for sure over the next few months. One thing is for sure, loathe them or love them, the Tories housing benefit cuts are severe and will hit London the hardest. It is happening right now and it is biting. I find it impossible to believe that cutting billions of cash from the London economy that was flowing directly into the hands of landlords can have anything but a downward effect on rents and house prices. Time will tell!

You might be right, lets touch base on this one in four months time. For me property is a slow game, you have time to smell the wind and jump ship if things are looking that bad. I personally think that in stormy weather though you are best off owning bricks and mortar in a safe desirable area. Every year you are guaranteed to save 5k plus in rent and what with the population boom happening in London, betting against property is a pretty dangerous bet in my mind. I don't see interest rates going much higher for a very long time . It's possible there might be a few years when the price goes down but timing that gap is not easy and there are hundreds of thousands of people who effectively went short on London property by continuing renting and hoping for a crash and are kicking themselves.

As Mark Twain said, buy land - No ones making it anymore.

[padington]

Also great cities have an enduring legacy long long after the empire has died, look how long Alexandira held the allure of the world long after the Egyption empire had fallen. London will enjoy this premium for another hundred years I reckon, no sweat.

[orcocan]

lastlaugh you must be living in London, Ontario cause the situation you describe is nothing like what i see

it's fair enough that all your saudis etc are looking at mayfair and knightsbridge not at hackney, at the same time 'normal people' are being displaced by these wealthy individuals and have to move further out considering areas they would have not considered before, whether it's the 'dodgy' bits in London itself or all the commuter belt

i live in a pretty dodgy part of east london, yet new build flats incredibly sell as if they were giving them away for free (and we're talking about hundreds and hundreds of new flats within a couple of miles of where i live). My rent has gone up by a good 20% and it will go up again looking at how prices have moved in the area. And that's all because of demand. All flats in my building are occupied as far as i can see and 1 beds go for 1300 (it was just above 1000 a few years ago), and we're talking about a very unglamorous part of east london. We must be living in different cities.

[Venger]

You might be right, lets touch base on this one in four months time. For me property is a slow game, you have time to smell the wind and jump ship if things are looking that bad. I personally think that in stormy weather though you are best off owning bricks and mortar in a safe desirable area. Every year you are guaranteed to save 5k plus in rent and what with the population boom happening in London, betting against property is a pretty dangerous bet in my mind. I don't see interest rates going much higher for a very long time . It's possible there might be a few years when the price goes down but timing that gap is not easy and there are hundreds of thousands of people who effectively went short on London property by continuing renting and hoping for a crash and are kicking themselves.

As Mark Twain said, buy land - No ones making it anymore.

Could you post up any more property stupidisms? A game, ships, bricks n mortar, not making any more land, growing population. Might be price goes down? Try a full blown crash imminent.

Even if rates remain low, which could be taken out of BoE's hands, or their policy might change if they decide to get rid of zombie businesses and prevent further malinvestment taking place from low-rates..... what about the risks of a UK downgrade?

[padington]

Could you post up any more property stupidisms? A game, ships, bricks n mortar, not making any more land, growing population. Might be price goes down? Try a full blown crash imminent.

Even if rates remain low, which could be taken out of BoE's hands, or their policy might change if they decide to get rid of zombie businesses and prevent further malinvestment taking place from low-rates..... what about the risks of a UK downgrade?

Care to put a specific time frame when this full blown crash is going to hit the London property market ?

[padington]

Could you post up any more property stupidisms? A game, ships, bricks n mortar, not making any more land, growing population. Might be price goes down? Try a full blown crash imminent.

.... what about the risks of a UK downgrade?

What about it ? it happened to the USA and they are looking strong going forward regarding property now, stronger than before the downgrade actually. London is booming people wise, no one knows how fast but it's fast. There also is a baby boom, talk of not enough mid wives. Where are all these people going to live ? I tell you where, in house's - in London. They won't live all spaced out with one person in a one bed flat paid for by the government, they'll share like ozzies used to do with 20 In a house. Either way, more people will move to London and more and more houses will become sort after, pretty simple stuff. Also as the economy crashes in Europe, London will become even more sought after - its a mega city that's sucking people in like crazy.

Full blown crash ? Would love one to get a second place but can't see it.

[SHERWICK]

What about it ? it happened to the USA and they are looking strong going forward regarding property now, stronger than before the downgrade actually. London is booming people wise, no one knows how fast but it's fast. There also is a baby boom, talk of not enough mid wives. Where are all these people going to live ? I tell you where, in house's - in London. They won't live all spaced out with one person in a one bed flat paid for by the government, they'll share like ozzies used to do with 20 In a house. Either way, more people will move to London and more and more houses will become sort after, pretty simple stuff. Also as the economy crashes in Europe, London will become even more sought after - its a mega city that's sucking people in like crazy.

Full blown crash ? Would love one to get a second place but can't see it.

Poor ozzies living 20 to a house.

[padington]

Poor ozzies living 20 to a house.

Well things have changed now, that's what Brits do to survive in Sydney these days to try and bring some hard currency back home.

[samtheman]

London will become even more sought after - its a mega city that's sucking people in like crazy.

Based on London maintaining its status as a major financial centre mostly and the place where a lot of foreign companies base their EMEA headquarters. People have short memories. This reputation took just a few years in the 80s to be established. To think that, n the next few years, especially in the current economic and political context, that couldn't suddenly change, would be particularly naive.

[samtheman]

i live in a pretty dodgy part of east london, yet new build flats incredibly sell as if they were giving them away for free (and we're talking about hundreds and hundreds of new flats within a couple of miles of where i live). My rent has gone up by a good 20% and it will go up again looking at how prices have moved in the area. And that's all because of demand. All flats in my building are occupied as far as i can see and 1 beds go for 1300 (it was just above 1000 a few years ago), and we're talking about a very unglamorous part of east london. We must be living in different cities.

You don't specify which part of East London but half of newbuilds in the Docklands that I've seen are sold to South East Asian investors.

[orcocan]

so suddenly foreign investors buy half of the properties in east london...

i was actually talking about bow, shadwell, stepney green, limehouse

[samtheman]

so suddenly foreign investors buy half of the properties in east london...

i was actually talking about bow, shadwell, stepney green, limehouse

Shadwell and Limehouse would definitely apply here, as part of the Docklands. Have a look at some of the new builds in those two specific areas. I had done a while back when considering buying and was told every time that the flats had already been presented to South East Asian investors by the developers. Once, I was told that I was "lucky" because the development hadn't yet been presented to investors.

I thought it was quite a well-known fact? Not the best source but it goes straight to the point:

http://www.standard.co.uk/news/the-great-haul-of-china-far-east-investors-rush-to-buy-london-homes-6411088.html

I've heard that the South-East Asians are attracted to the presence of the water and the modern apartments that are probably similar to back home in Singapore/Hong Kong and the Russians have a tendency to be attracted to anything modern (back home, to live in Soviet-era buildings is a sign of poverty0

[lastlaugh]

lastlaugh you must be living in London, Ontario cause the situation you describe is nothing like what i see

it's fair enough that all your saudis etc are looking at mayfair and knightsbridge not at hackney, at the same time 'normal people' are being displaced by these wealthy individuals and have to move further out considering areas they would have not considered before, whether it's the 'dodgy' bits in London itself or all the commuter belt

i live in a pretty dodgy part of east london, yet new build flats incredibly sell as if they were giving them away for free (and we're talking about hundreds and hundreds of new flats within a couple of miles of where i live). My rent has gone up by a good 20% and it will go up again looking at how prices have moved in the area. And that's all because of demand. All flats in my building are occupied as far as i can see and 1 beds go for 1300 (it was just above 1000 a few years ago), and we're talking about a very unglamorous part of east london. We must be living in different cities.

That made me laugh because I did actually stay in London Ontario for a while.

But we are actually living in the same London. £1300 for a one bed flat, you say? Who can afford that? You'd need a salary of over 50K to live like that. Rules out most young professionals starting out. Even a couple wouldn't have much money left. A couple of teachers? No chance! Save for a deposit? Forget it!

So who is paying those rents? Well I don't know exactly what part of unglamorous East London you live in, but I'd be curious to know what the housing benefit rates are where you live. You can look them up here Local Housing Allowance Rates My guess is in your area a one-bedroom will be about £1050 and a two-bed about £1300.

[orcocan]

i live in shadwell, in my building one beds go for 1300 pcm, and the building is pretty full i can assure you

[MRMX9]

it's fair enough that all your saudis etc are looking at mayfair and knightsbridge not at hackney, at the same time 'normal people' are being displaced by these wealthy individuals and have to move further out considering areas they would have not considered before, whether it's the 'dodgy' bits in London itself or all the commuter belt

i live in a pretty dodgy part of east london, yet new build flats incredibly sell as if they were giving them away for free (and we're talking about hundreds and hundreds of new flats within a couple of miles of where i live). My rent has gone up by a good 20% and it will go up again looking at how prices have moved in the area. And that's all because of demand. All flats in my building are occupied as far as i can see and 1 beds go for 1300 (it was just above 1000 a few years ago), and we're talking about a very unglamorous part of east london. We must be living in different cities.

You could always move further out - lots of places on the central line and the train services to Liverpool St where you could rent a house for £1,200 a month (or less). I certainly wouldn't pay £1300 a month for a one bed in a dodgy part of east London - life's too short (and life insurance aint that cheap). All these areas - unlike Hackney - probably offer quicker commutes anyway!

[lastlaugh]

i live in shadwell, in my building one beds go for 1300 pcm, and the building is pretty full i can assure you

I wasn't disputing your figures and I'm sorry if I gave that impression. In fact I see exactly the same numbers in most areas of the capital.

I was simply demonstrating that the numbers are what they are, not because of some special mythical quality about London, but simply because that is the level at which housing benefit is paid. If housing benefit will cough up £1300 for a pokey flat in London, then unsurprisingly that will be the rent for pokey flats across the capital.

[orcocan]

well you wouldn't, i happily would and do, we're all different

i'd rather pay 1200 to be walking distance from work and tower bridge than miles away in suburbia to have 3 bedrooms i'd never use and an hour commute on a crowded train

[orcocan]

that was in response to MRMX9

[padington]

well you wouldn't, i happily would and do, we're all different

i'd rather pay 1200 to be walking distance from work and tower bridge than miles away in suburbia to have 3 bedrooms i'd never use and an hour commute on a crowded train

Yeah I think the cost of commuting is only ever going to get worse, travel is clever way to tax people, probably better than VAT sales as its even easier to enforce. My bet is that properties that are close enough to central London to commute by bicycle will become more and more a clever purchase. Also as immigration gets worse and boy it's going to, those commutes are going to be more like torture.

[samtheman]

Yeah I think the cost of commuting is only ever going to get worse, travel is clever way to tax people, probably better than VAT sales as its even easier to enforce. My bet is that properties that are close enough to central London to commute by bicycle will become more and more a clever purchase. Also as immigration gets worse and boy it's going to, those commutes are going to be more like torture.

So you buy into the "The UK is full" argument?

You only have to have lived and worked in a few other developed countries (although from a transport point of view, I'm not sure the UK deserves to be placed in that category) to realise that the main problem is infrastructure. Thank God HS2 and Crossrail are on their way, not because they're going to make travel in England ultra fast, but simply to allow travel to get a bit closer to the standards set by true developed countries.

Having lived and worked for years in Montreal, Boston, New York, Lyon and Berlin, I often find it amusing how some Londoners think that it's normal for the underground and trains to be so unreliable. It's not that the service is that bad but it's people's expectations that are so ridiculously low. You'd only have to send the population of London to a different capital for a year for their tone to rapidly change once they came back. Sure, it's the oldest subway system in the world but that can only provide part of the excuse. Awarding contracts to subcontractors who will only bid if it allows them to keep a line closed 20 times a year (when technically, they could do it in 5 but that would require far more overtime pay, actually getting some of the workers to be productive which all costs too much money to accept the contract while logistically 20 allows you more leeway).

If the transport system in London was less archaic, commuting would be an entirely different experience. However, investing in infrastructure doesn't get you many votes these days. Selling the benefits of a "small State" gets you far more votes within the English middle-class. These same people who don't want to be disturbed (i.e. no HS2, no third runway at Heathrow, no infrastructure project that might disturb me or knock off a few percent off the value of my dear beloved house) yet will then complain when the economy is not working. It's what you could call a false saving.

[padington]

So you buy into the "The UK is full" argument?

You only have to have lived and worked in a few other developed countries (although from a transport point of view, I'm not sure the UK deserves to be placed in that category) to realise that the main problem is infrastructure. Thank God HS2 and Crossrail are on their way, not because they're going to make travel in England ultra fast, but simply to allow travel to get a bit closer to the standards set by true developed countries.

Having lived and worked for years in Montreal, Boston, New York, Lyon and Berlin, I often find it amusing how some Londoners think that it's normal for the underground and trains to be so unreliable. It's not that the service is that bad but it's people's expectations that are so ridiculously low. You'd only have to send the population of London to a different capital for a year for their tone to rapidly change once they came back. Sure, it's the oldest subway system in the world but that can only provide part of the excuse. Awarding contracts to subcontractors who will only bid if it allows them to keep a line closed 20 times a year (when technically, they could do it in 5 but that would require far more overtime pay, actually getting some of the workers to be productive which all costs too much money to accept the contract while logistically 20 allows you more leeway).

If the transport system in London was less archaic, commuting would be an entirely different experience. However, investing in infrastructure doesn't get you many votes these days. Selling the benefits of a "small State" gets you far more votes within the English middle-class. These same people who don't want to be disturbed (i.e. no HS2, no third runway at Heathrow, no infrastructure project that might disturb me or knock off a few percent off the value of my dear beloved house) yet will then complain when the economy is not working. It's what you could call a false saving.

I love immigration in London for selfish reasons. It's pushing the price of London real estate up like clockwork. . Also It's powering a vibrant London economy which is good for me too. From an ecological perspective though the human population explosion is an unsustainable disaster.

[MRMX9]

well you wouldn't, i happily would and do, we're all different

i'd rather pay 1200 to be walking distance from work and tower bridge than miles away in suburbia to have 3 bedrooms i'd never use and an hour commute on a crowded train

Sorry - I thought we were talking about 'East London'. Apparently you are referring to places within walking distance of Tower Bridge?!

Places like Leytonstone are in east London - one bed flats close to the station there can be got for £900 a month and you are door to door at Liverpool Street within 15 minutes (so someone living there would probably by at their desk in the office long before you walked it!). Maybe its not Wapping - but it is definitely 'east London'.

God the snobbiness of some posters who talk about east London and seem to think you reach the channel coast at Shadwell? You do not need to pay £1200 a month for a one bed in east London at all.

Edited February 4, 2013 by MRMX9

[samtheman]

Sorry - I thought we were talking about 'East London'. Apparently you are referring to places within walking distance of Tower Bridge?!

Places like Leytonstone are in east London - one bed flats close to the station there can be got for £900 a month and you are door to door at Liverpool Street within 15 minutes (so someone living there would probably by at their desk in the office long before you walked it!). Maybe its not Wapping - but it is definitely 'east London'.

God the snobbiness of some posters who talk about east London and seem to think you reach the channel coast at Shadwell? You do not need to pay £1200 a month for a one bed in east London at all.

Tower Hamlets is considered fully part of East London by most of its inhabitants. Proximity to Tower Bridge doesn't make it central.

Shadwell could also vye to be, with Mile End, the poorest part of Tower Hamlets, which also happens to be the part of the UK with the highest rate of child poverty so not sure what is snobby about suggesting that Shadwell is East London. It very much is and is significantly poorer than most of the areas you think of as East London

[orcocan]

exactly... i really don't know what you're on about, honestly

[Si1]

What about it ? it happened to the USA and they are looking strong going forward regarding property now, stronger than before the downgrade actually. London is booming people wise, no one knows how fast but it's fast. There also is a baby boom, talk of not enough mid wives. Where are all these people going to live ? I tell you where, in house's - in London. They won't live all spaced out with one person in a one bed flat paid for by the government, they'll share like ozzies used to do with 20 In a house. Either way, more people will move to London and more and more houses will become sort after, pretty simple stuff. Also as the economy crashes in Europe, London will become even more sought after - its a mega city that's sucking people in like crazy.

Full blown crash ? Would love one to get a second place but can't see it.

it really is spaz bull day in this thread - yeah a euro zone crash will be good for london house prices

doh