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Bbc Spots House Price Problem 15 Years On...

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Article: Is The Property Ladder Disappearing?

Mariella Frostrup pushes the boundaries of investigative journalism to uncover a hidden crisis no-one knew anything about...

Many Britons have been brought up with "getting on the property ladder" as a major life goal. But is the ladder disappearing, asks Mariella Frostrup.

Transport yourself back to the year 1980. You're 25 years old and having a drink with a friend. You mention to him that you're keen to get a foot on the property ladder.

He looks puzzled. "That's an interesting way of putting it," he says. "I've never heard that phrase before." He wouldn't have heard it. The first time "property ladder" appeared in the Times newspaper was the next year, 1981.

Spool forward to the present day. If you're an ordinary 25-year-old in the UK and you had the same conversation with a group of friends, the chances are they'd look at you as if you'd lost touch with reality, or wonder how you'd come into untold riches.

For millions of people under the age of 40 the property ladder has become a snake instead - unsettling and threatening, the very antithesis of the stability and security that a home ought to bring.

We've been through what might turn out to be a strange and exceptional phase in the history of the UK, and that simple phrase, "the property ladder", captures so much about it.

A rung on a ladder isn't an end in itself, it's a means to somewhere else - to a stake in society, to greater wealth, to a bigger, better place in a few years' time. Financial security, a sense of belonging, and aspiration, have all been wrapped up in bricks and mortar. The dream of home ownership has profoundly changed. But what does that mean for us as a society, and what we can reasonably expect politics to do in response?

I was lucky. I come from a generation that rolled a six and, for the most part, landed on a ladder on the property board. I bought my first flat in London when I was 21, and it cost about four times the very ordinary salary I was earning.

In the past few weeks, I've been back to my old place. As I walked around it, I was struck again by the emotional power of a home. There were memories and ghosts in every room.

The flat is unchanged in lots of ways, but transformed in one - today, the young person that I was wouldn't have a chance of buying it. At about £400,000, it costs maybe 15 times the salary I'd be earning in an equivalent job today. That's not just a London problem, something similar would be true in large parts of the country.

The turnaround in the past decade has been dramatic. Ten years ago 59% of 25 to 34 year-olds owned their own home in England - now it's 36%. What are they doing instead? They're renting from private landlords - 21% were doing that 10 years ago, now it's 48%.

Sometimes, when the world changes this fast, it's not easy to see why, but that's not true of housing. It's simple - we're not building enough new homes, and we haven't done so for years.

And usefully, although we may be short of new homes, we're certainly not short of statistics to describe the problem. It's hard to think of a national failure that's quite as well documented as this one, and here's the scale of it in a nutshell - the UK needs about 245,000 new homes a year to keep pace with demand, and for the past six years the country has built about half that number. We haven't built fewer in peacetime since the 1920s.

The problems straddle both homes that are built to be bought, and social housing - housing associations and local councils. Councils have essentially stopped building new homes. Last year in England they built just over 1,000. Meanwhile, on waiting lists for council houses, 1.4 million people were sitting with their fingers crossed.

Overall, the number of affordable homes being built is running at about a third of the 75,000 a year the UK needs.

For people who are renting, the failure to do the big thing - to build enough homes - has led to small policy steps which could add to the growing issue of insecurity.

Governments in recent decades have been keen to get rid of barriers that might deter private landlords, so they've reduced the protection offered to tenants (you're more likely to rent out your place if it's not so difficult to get rid of whoever's living there if you change your mind).

The result may well be that more homes are available for rent, but how secure do you feel living in one? And for those who'd like to see us move towards a German model where the majority of people are in stable, long-term rented homes, the dream seems as elusive as ever.

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Still rolling out the same "not building enough" argument though I see. Compare with MSW's take on it:

http://moneyweek.com/give-the-young-a-break-let-house-prices-fall/

Nothing about building - just "end the support".

Spot on.

"Not building enough"...hmm. The people who are renting might be buying the very same houses/flats they're living in if prices weren't so stupid.

They might not be quite so many to a housing unit, though I'm not even sure about that. Thirty years ago it was common enough for an individual / couple to buy a two-bedder and take in a lodger. So the same number of people who would be renting a two-bedder today. Eventually the lodger would buy somewhere, say when he/she too got coupled up.

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i wont have a word said against the bbc or for that matter mariella, they are both wonderful iconic great british institutions with absolutely no bias or vested interests at all.

Why id even pay to watch their wonderful tv programs, double if mariella could be in every one of them.

Now, im just going to go back to photoshop to see if i cant get mariella's head onto these spiffing nudes i found on xhamster.

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No politician will admit to seeing the elephant in the room they all see it, they know the problem is the price but are to scared of alienating a section of their electorate

There may be shortages in certain locations but this would have little effect on the whole market if the market was a free market

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Still rolling out the same "not building enough" argument though I see. Compare with MSW's take on it:

http://moneyweek.com/give-the-young-a-break-let-house-prices-fall/

Nothing about building - just "end the support".

Spot on.

+1 more nonsense from the BBC! but I suppose it is better than them not mentioning the problem at all!

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http://

www.ice.org.uk/ice_web_portal/media/events/housing-and-sustainability.pdf

Housing and sustainability: demolition or refurbishment?

Apparently published in December 2010 which was after the 2010 general election.

Under section 3 termed THE DEMOLITION DEBATE they were (in about 2005) proposing to demolish about 80,000 houses a year upto 2050 - apparently to reduce carbon dioxide emissions etc. A total of about 3 million houses to be demolished upto 2050.

Statistics aren't at all readily available in the UK on almost anything and especially upto date ones but it's quite possible (without upto date figures to clarify otherwise) that while they've been building a bit more than 100,000 new homes a year they've been demolishing about 80,000 existing homes a year at the same time. So only about 30,000/40,000 extra homes would have been provided.

Any estimate for the amount of future new home building should take the numbers to be demolished into account.

If Mariella Frostrup considers that 245,000 new homes a year have to be provided it would be helpful if she'd clarified if that's the net number after demolishings - to take into account demolitions of 80,000 existing homes a year would actually require 325,000 new homes a year to be built..

Edited by billybong

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Sometimes, when the world changes this fast, it's not easy to see why, but that's not true of housing. It's simple - we're not building enough new homes, and we haven't done so for years.

Well it would have to be simple for the drooling BBC indoctrinated idiots to understand. Nothing to do with the multiple factors of cheap credit, unregulated banking lending to anything with a pulse, ridiculous lending multiples, massive unchecked immigration and the BTL scourge all allowed to fester under the BBC luvies pet political parties watch. We can't mention those though can we because that wouldn't be on message for the Bolshevik Bias Company agenda.

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Funny that Mariella comes up with the "it's simple, we need more houses" argument and that that kind of argument sits very well with the BBC. How very convenient.

Even more so when you factor in that there are supposedly around 1m empty properties in the UK.

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heard a local build plan on the radio this morning, they said '44% of the new builds will be affordable' i had to laugh, which implies 56% would be unaffordable, trouble is, i reckon for the area 0% will be affordable - to locals at least,

ps mariella frostrup - i thought she'd retired or maybe even died years ago. Didnt she have throat cancer or some such, maybe im living in the future and getting confused.

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No politician will admit to seeing the elephant in the room they all see it, they know the problem is the price but are to scared of alienating a section of their electorate

There may be shortages in certain locations but this would have little effect on the whole market if the market was a free market

You don't even have to look very hard to see the elephant. Here are the average asking prices and average asking prices that are SSTC in 8 of the postcode areas I watch on RM:

SN14:Total Properties: 281SSTC Properties: 115 (40.9253%)Average Current Price: £397,577.32Average SSTC Current Price: £280,088.17BA11:Total Properties: 400SSTC Properties: 184 (46%)Average Current Price: £304,517.22Average SSTC Current Price: £232,945.03BS1:Total Properties: 191SSTC Properties: 107 (56.0209%)Average Current Price: £255,193.53Average SSTC Current Price: £233,188.50GL6:Total Properties: 321SSTC Properties: 97 (30.2181%)Average Current Price: £458,679.06Average SSTC Current Price: £389,317.89BA3:Total Properties: 357SSTC Properties: 127 (35.5742%)Average Current Price: £320,455.31Average SSTC Current Price: £239,987.36BA2:Total Properties: 713SSTC Properties: 305 (42.777%)Average Current Price: £435,929.67Average SSTC Current Price: £314,577.99SW16:Total Properties: 1098SSTC Properties: 228 (20.765%)Average Current Price: £497,545.14Average SSTC Current Price: £407,257.63BA1:Total Properties: 477SSTC Properties: 150 (31.4465%)Average Current Price: £468,972.19Average SSTC Current Price: £328,503.93

If there were not enough properties for sale, then yes of course that would push prices higher, many buyers chasing fewer properties increases competition among the buyers.

But it would be within the constraints of affordability. Your averagely wealthy buyer would be buying an averagely priced property. So your average SSTC price is going to be higher than if there was not a shortage, but it would be in line with the average overall asking price - everything would sell, at an elevated price, within the upper bounds of what buyers can pay.

But not everything is selling. That which is selling is not even only averagely priced, it's way below average asking price. And this is just looking at SSTC prices - not actual paid prices (which are even lower).

Under what circumstances could that possibly be due to supply/demand fundamentals? It cannot be. The only reasonable explanation is that asking prices are too high.

We've had discussions about the huge gap between asking prices and sold prices before, and how can there still be upwards pressure on prices when the majority of sales are below average asking price.

My take on it is this: too few people can afford to buy at anything other than the very bottom of the market, and so instead of competition being spread evenly throughout the price spectrum, it is concentrated on the bottom end, and this puts upwards pressure on lower prices.

Increasing prices at the lowest end of the market are extrapolated as if they were happening across the whole market, and feed through into reported prices rises for mid to high priced properties rather than just low priced properties.

This then causes asking prices to rise, further pricing out the buyers who already can't pay the prices before they were raised, putting more pressure on the lowest end of the market and driving asking prices even further out of sync with paid prices.

Building more affordable houses will obviously bring this under control eventually, but unless wages rise big time, or credit availability expands, there has to be a price correction either way, and those who massively overpaid for their house during the credit boom years will be forced to accept offers that are in line with real fundamentals.

The difference will be that if we've over expanded our housing stock in the mistaken belief that this is the cause, there will be a supply glut at the same time, meaning the correction will be all the harder and deeper. I'm not complaining about that if it happens, but the same people who seem to think building more houses is the solution to the current affordability crisis, will be, when they realise they've only made it worse for themselves.

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There is no frustrated demand to buy at current prices that is not met by supply - there are many many houses available to buy in my area - I just won't buy any of them because the price is ridiculous and I won't pay it, not because there aren't plenty of people willing to sell.

Housing Benefit is the biggest prop left in the market - it sets the floor level for rent on crap ex-council houses, that sets a price for them based on BTL yield, and everything else is built on top. In my home town its 550-600 a month to rent a 3 bed 70's ex-council terrace on a sink estate, but a similar sized semi on a nice private estate on lets for only around 100 more is very telling. In a sane market there would be a 50% price differential.

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If house prices are high because there's not enough houses, why did prices fall 15% in 2008? Was there too many houses and not enough people in 2008?

Exactly. Same with mass immigration, we still had boatloads coming in 2008-2009, prices still falling.

I wonder how she thinks that person came up with the money fir her flat for 400k or 15 times her quite normal wage?

O

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A disappearing property "ladder" is a big problem if you "bought" at bubble prices and need to sell at bubble prices to stay above water with your debt, especially in a deflationary environment.

Going to be a bitter pill to accept your next move on the ladder can only be down.

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The house "price problem" is multiple problems:

Low interest rates causing savers/investor to chase property yields lower / house prices higher.

Planning restrictions preventing first time buyers/builders from building their own cheap property on cheap green field sites.

I think that extensively covers the problems making UK houses unaffordable. Both factors are in complete control of the government.

House prices are high because the government and their backers (Bankers & Boomers) want high house prices. The high prices are a result of capitalism and human nature and it wont change until the system fails.

You could talk about restricting landlords, introducing taxes but ultimately your just masking the symptoms of the above two factors: Supply of cheap money caused by low interest rates and planning restrictions preventing those prices out from saying fu@k it and building their own home.

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The difference will be that if we've over expanded our housing stock in the mistaken belief that this is the cause, there will be a supply glut at the same time, meaning the correction will be all the harder and deeper. I'm not complaining about that if it happens, but the same people who seem to think building more houses is the solution to the current affordability crisis, will be, when they realise they've only made it worse for themselves.

But... TPTB are absolutely aware of it, and thats why they are allowing the undersupply to continue regardless of the miserable social consequences.

One thing I am amazed the Millipede hasn't siezed on - Labour were addressing the lack of housebuilding (too slowly) to set up development commissions with high home building targets and the powers to over rule local NIMBYS - one of the first acts of the Tory coalition was for Pickles to charge in and shut that down, giving himself the power to arbitrate... just have a look at all the development the fat trougher has kyboshed recently....

http://covop.org/planning-decisions/

Edited by disenfranchised

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Whilst I'd liked to have seen more about the problems caused by low IRs, HTB, BTL, easy credit, as well as lack of house building in the right places. You have to apply a bit of emotional intelligence here, and some awareness of the psychology of loss aversion when trying to get across message of the house price problem in this country.

Saying building more houses is something every age group now supports (http://blog.shelter.org.uk/2015/01/the-strange-death-of-nimby-england/), most people either see no loss (or don't care). They won't react badly to a TV program or government initiative saying build more houses as they see no immediate loss to themselves and will be more receptive to the message. Plenty of home owners probably believe that increasing the housing stock will not do anything to reduce the value of their home - loss avoided. The FTB sees no potential loss either only the gain of more new houses being available.

Cutting credit availability, the very people who would benefit from the HPC caused by this will actually be averse to this because they will see it as a loss. The loss of the 95% or x5 mortgage will psychologically have a bigger impact than the gain of significantly cheaper housing. Also home owners are likely to twig that this might mean their home will go down in value. Resulting in a negative reaction to the message, just imagine if the latest government initiative was 80% and x3 lending cap - there would be uproar. Look at all the mewling and puking about the MMR from people looking to remortgage.

Increasing IRs, loads of people with a mortgage or hoping to get one (or with any sort of non-fixed rate debt) will immediately see the potential loss here so is a non starter. Just imagine if Mariella said IRs should go up, people would be frothing at the mouths and would pay no attention to the message. Look at how long Carney was softening people up over a potential rate rise.

Restricting BTL, I suspect there are FTBs and current home owners who, in the long term, want a BTL (as house prices only ever go up innit). However, the tide is turning here and anti-BTL sentiment is growing and this will become the focus of attention. The media will make programmes about the evils of BTL and governments will feel able to act against it.

A logical argument will cut no mustard with someone who is having an emotional response (and the lack of empathy might leave you looking a bit autistic to be honest). Oh and every war is won battle by battle, once people accept there is a house price problem and that more housing is needed the first battle is won. The second battle is making BTL taxes/restrictions acceptable to the wider public. It won't be so easy to convince people about credit controls etc.

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All true, it is absolutely about loss aversion, and can you blame them for complaining if the govt took steps to devalue their house?

They don't yet know that their house is already devalued. They incurred the loss when (if) they paid bubble prices, but they won't allow themselves to see it. All the govt would be doing is forcing them to face it.

Sure, there's a chance they might sell at overinflated prices, but there is too much supply and too little demand in that market on the whole, and it doesn't appear to be changing.

It's a sad state of affairs.

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Whilst I'd liked to have seen more about the problems caused by low IRs, HTB, BTL, easy credit, as well as lack of house building in the right places. You have to apply a bit of emotional intelligence here, and some awareness of the psychology of loss aversion when trying to get across message of the house price problem in this country.

Saying building more houses is something every age group now supports (http://blog.shelter.org.uk/2015/01/the-strange-death-of-nimby-england/), most people either see no loss (or don't care). They won't react badly to a TV program or government initiative saying build more houses as they see no immediate loss to themselves and will be more receptive to the message. Plenty of home owners probably believe that increasing the housing stock will not do anything to reduce the value of their home - loss avoided. The FTB sees no potential loss either only the gain of more new houses being available.

Cutting credit availability, the very people who would benefit from the HPC caused by this will actually be averse to this because they will see it as a loss. The loss of the 95% or x5 mortgage will psychologically have a bigger impact than the gain of significantly cheaper housing. Also home owners are likely to twig that this might mean their home will go down in value. Resulting in a negative reaction to the message, just imagine if the latest government initiative was 80% and x3 lending cap - there would be uproar. Look at all the mewling and puking about the MMR from people looking to remortgage.

Increasing IRs, loads of people with a mortgage or hoping to get one (or with any sort of non-fixed rate debt) will immediately see the potential loss here so is a non starter. Just imagine if Mariella said IRs should go up, people would be frothing at the mouths and would pay no attention to the message. Look at how long Carney was softening people up over a potential rate rise.

Restricting BTL, I suspect there are FTBs and current home owners who, in the long term, want a BTL (as house prices only ever go up innit). However, the tide is turning here and anti-BTL sentiment is growing and this will become the focus of attention. The media will make programmes about the evils of BTL and governments will feel able to act against it.

A logical argument will cut no mustard with someone who is having an emotional response (and the lack of empathy might leave you looking a bit autistic to be honest). Oh and every war is won battle by battle, once people accept there is a house price problem and that more housing is needed the first battle is won. The second battle is making BTL taxes/restrictions acceptable to the wider public. It won't be so easy to convince people about credit controls etc.

Fortunately (or unfortunately, depending on where your VI lies) this will ultimately fail due to reasons UK government and voting homeowners can`t control. Greece, China, Asian markets, US fed decisions are all things that will have an impact on mortgage lending here. My bet is some sort of China centric crisis leading to credit crunch 2, and bang, down we go again. I am really hoping that Greece will default on polling day or something, just to fire things up a bit :lol:

Edited by dances with sheeple

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"Not building enough"...hmm. The people who are renting might be buying the very same houses/flats they're living in if prices weren't so stupid.

there are other angles to this than simply "build more houses"

what about food and energy security for the country??..will we or can we tolerate the extra demand in rough times?..ie pandemic siezing up world shipping...or perhaps the mad mullahs deciding they are going to blow up the whole middle east and destroy oil supply?

I would say "no" on this count, so the governments JOB is to plan accordingly for such eventualities.We do not have the luxury of thousands of miles of sprawling wheat prairie like the yanks or canadians(or russia for that matter if they used theirs properly)

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