London Renters Forced To Pay Much More Than They Can Afford

[jiltedjen]

In my field engineering I'm getting lots of head-hunted from the south-East wanting me. I tell each and everyone that although the wages are much better the cost of housing is insane, that I'm very sorry that the business is located there.

slowly the recruiters will hopefully feed this back, we at HPC can only do our own little bit to bring this bubble down. But I'm sure I'm one of many!

[Si1]

It is because London is bonkers

A friend of mine works at Nestlé in York. He was recently offered a promotion that meant moving to croydon. Even though it is a significant promotion with a big pay rise, he said no. To move into a comparable house he would go from mortgage free to using most of his savings and still needing a £500k mortgage. He could afford that, but just can't stomach it.

Can't blame him.

Fair observation, but it underlines my point. There is no concrete sustainable reason for this situation in London to this degree.

It does in fact remind me of the city centre apartment bubble that occurred on the regions up until 2007. That deflated without trace in the end it seems.

[pipllman]

Fair observation, but it underlines my point. There is no concrete sustainable reason for this situation in London to this degree.

It does in fact remind me of the city centre apartment bubble that occurred on the regions up until 2007. That deflated without trace in the end it seems.

There doesn't need to be a concrete sustainable reason other than buyers and sellers being willing and able to transact

Same as any other market: rarely driven by fundamentals

Prices can go higher, prices can go lower

When, by how much and for how long... no one knows

[davidg]

In my field engineering I'm getting lots of head-hunted from the south-East wanting me. I tell each and everyone that although the wages are much better the cost of housing is insane, that I'm very sorry that the business is located there.

slowly the recruiters will hopefully feed this back, we at HPC can only do our own little bit to bring this bubble down. But I'm sure I'm one of many!

I was saying that to firms and recruiters 30 years ago, it hasn't filtered down yet, I guess it never will. I left after a couple of years. **** 'em.

[porca misèria]

In my field engineering I'm getting lots of head-hunted from the south-East wanting me. I tell each and everyone that although the wages are much better the cost of housing is insane, that I'm very sorry that the business is located there.

slowly the recruiters will hopefully feed this back, we at HPC can only do our own little bit to bring this bubble down. But I'm sure I'm one of many!

It's working. Back in 2007 I wrote about it. Now - after many years working for non-UK companies - I just started working for a London company which is happy for me to live and work remotely.

[Ring Ring]

“Hello, [me] speaking”

“Hello, this is J. Random Recruiter. Is this a good time?”

“Yeah, fine. What can I do you for?”

“We’ve got a city financial company needs your skills, in particular [foo]”

“Indeed?”

“Would you be available to work in The City”?

“I work for clients around the world. The City is fine. Just so long as they don’t expect my bum physically in their seat on a regular basis. Happy to travel to London occasionally – say, up to once a month.”

“They’ll pay £150K for this. And that’s a permie salary”

“Great. And that’ll be based on working primarily from home?”

“No, clients won’t generally do that. But you don’t have to live in London, you can commute in from the country”.

“It’s a minimum of five hours from here to Paddington, one way. About monthly is OK; anything much more frequent isn’t. That’s why I work from home, for clients around the world”.

“You find clients who are happy with that?”

“Most of my income comes from America, which means it’s losing its value. I’d welcome work coming from London.”

“And you wouldn’t consider moving”?

“Yes, but not to anywhere in SouthEast England.”

“They might be flexible on the pay”.

“The money is fine, thank you. Southeast England isn’t. That’s what I’ve escaped from, and I’m not about to go back”.

“Oh. So you wouldn’t be interested?”

“As I said, I’m happy to go up there from time to time.”

[winkie]

snip

.....unless selling and physically handing over cups of coffee daily to London customers and similar work, very many more people are now working remotely....technology is making this happen....no more nine to five traveling ( in uncomfortable, expensive, congestion) to an office, when an office can be anywhere, a need to touch your customers (or boss ) every so often anywhere or better still invite them over to clinch the deal......best of both worlds.

[Si1]

Same as any other market: rarely driven by fundamentals

Err

[Si1]

It's the father Ted defence again

Can't really see it myself...

[iamnumerate]

It is because London is bonkers

A friend of mine works at Nestlé in York. He was recently offered a promotion that meant moving to croydon. Even though it is a significant promotion with a big pay rise, he said no. To move into a comparable house he would go from mortgage free to using most of his savings and still needing a £500k mortgage. He could afford that, but just can't stomach it.

Can't blame him.

The thing is that there could be affordable houses in London but Government policy stops it.

[Guest_growlers_*]

The thing is that there could be affordable houses in London but Government policy stops it.

I thought we'd established supply / demand wasn't the principle source of HPI!?

Or do you mean gov policy funnelling credit through numpty BTLers? If so, in agreement.

Edited October 3, 2015 by growlers

[dances with sheeple]

If you can`t afford something you can`t pay it, the article is nonsense.

[Saving For a Space Ship]

Even 4 to a room. Easy if 2 of them work nights. Hang on, I've heard of a place that does that! It's called a hostel. How much does a hostel cost in London now days.....

£18- £30 + a night

http://www.yha.org.uk/

[frederico]

If you can`t afford something you can`t pay it, the article is nonsense.

Are you sure? Surely you can just keep borrowing.

[dances with sheeple]

Are you sure? Surely you can just keep borrowing.

Not so sure, the average coffee pourer has far less access to credit than their counterpart did say 12 or 13 years ago? Plus they are likely to have a hefty student debt that someone back then wouldn`t have been carrying?

Edited October 3, 2015 by dances with sheeple

[bristolhunter]

If you can`t afford something you can`t pay it, the article is nonsense.

On that basis, anything less than 100% of income is 'affordable', which is nonsense.

There's a long established principle that affordable rent is 1/3 of income. Many people nowadays are paying in excess of 1/2. In particularly unpleasant markets, they're paying more. They can pay this, but it reduces the money they have for paying utility bills (quarterly, so easy to put off/sweep under mental carpet as the rent needs to be paid sooner), council tax, and for consuming goods and services both that they need to live, and to keep the economy going. It also wipes out any chance of savings. This is all assuming they're not simply funding it by borrowing, due to being charged more than they can genuinely afford.

The crunchpoint where tenants en masse simply tell landlords 'no' is coming, they've milked this cow too far.

[Bland Unsight]

The crunchpoint where tenants en masse simply tell landlords 'no' is coming, they've milked this cow too far.

I've got big reservations about the landlord bashing. Landlords don't set rents. Rents are a market price and emerge from the market. I know that we focus a lot on the empirical evidence suggesting that absent constant credit, increasing housing supply won't necessarily lower house prices, but it seems to me that it really ought to lower rents, all other things being equal. That said, I'd much rather we dealt with the problem of pockets of high rent in some parts of London by making the economy less weighted towards London. I think I'm right in saying that one of the reasons why you have people like me being horrified by Streatham being up and coming is that we remember its reputation from when London was depopulating.

Source

Moving on to the substance and the consequences of households breaking the informal 30% rule, this is clearly biting, (recall that the authors of the below figure propose that so called Squeezed Britain is 1 in 3 working age households, including 9.8 million adults representing 7.8 million workers and accounting for 5 million children). I always maintain that we hpcers are not the oddballs because we go on about this stuff, its the sheeple who demand explanation because they choose to ignore it!

Source: Resolution Foundation, Squeezed Britain, 2013

Edited October 4, 2015 by Bland Unsight

[porca misèria]

I've got big reservations about the landlord bashing. Landlords don't set rents. Rents are a market price

Rents are an effective monopoly price. The monopoly in question being the floor set by housing benefit.

[winkie]

Rents are an effective monopoly price. The monopoly in question being the floor set by housing benefit.

.....and how many bodies are prepared to share a room.

[Bland Unsight]

Rents are an effective monopoly price. The monopoly in question being the floor set by housing benefit.

Fair point that in a local market LHA sets a floor, but still lots of room for something not wholly unlike a market. For example, though now very happy where I am, I initially moved somewhat reluctantly to where rents were cheaper. I basically swapped a morning drive north of a bit over 10 miles for drive west of about the same distance. Also, looking forwards the strength of that floor will be tested by the reduction in the amount of housing benefit being paid directly to landlords, (a housing benefit rent is all very well, but once the payment is no longer direct the gap between what is there to be paid and what is received by the landlord may be non-zero).

If I wanted to rescue my position I'd argue that rents are a market price on which the taxpayer as a buyer has in the recent past exerted an almost defining influence, via LHA driven housing benefit payments, but your point is well made, and well taken.

[frederico]

So far it has all come down to the limit lha which under labour the sky was the limit, well meaning but unsustainable.

[pipllman]

There was a piece in the The Times magazine on Sat 3 Oct about shared rentals. Didn't sound a lot in that case. Did anyone else see it?

Here is a link http://www.thetimes.co.uk/tto/magazine/article4570134.ece

Edited October 5, 2015 by pipllman

[hp72]

In my field engineering I'm getting lots of head-hunted from the south-East wanting me. I tell each and everyone that although the wages are much better the cost of housing is insane, that I'm very sorry that the business is located there.

slowly the recruiters will hopefully feed this back, we at HPC can only do our own little bit to bring this bubble down. But I'm sure I'm one of many!

Same here.

I've told several headhunters that almost doubling my income to six figures for a job in London would not be viable without home working at least 3 days a week. I have actually pointed out that I would not be able to get a family house for 5 in london based on a salary multiplier of 4 without either a commute of >3.5 hours a day, or huge rail costs, or never seeing my kids. No thanks.

[Snugglybear]

Some people are trying to attract companies out of London.

Anyone who has gone from Cardiff Central Station to the Millennium Stadium lately will have seen the hoardings around the building being flung up by the bridge (1 Central Square), with the advertising slogan (if memory serves) "The closest capital to London".

[dances with sheeple]

On that basis, anything less than 100% of income is 'affordable', which is nonsense.

There's a long established principle that affordable rent is 1/3 of income. Many people nowadays are paying in excess of 1/2. In particularly unpleasant markets, they're paying more. They can pay this, but it reduces the money they have for paying utility bills (quarterly, so easy to put off/sweep under mental carpet as the rent needs to be paid sooner), council tax, and for consuming goods and services both that they need to live, and to keep the economy going. It also wipes out any chance of savings. This is all assuming they're not simply funding it by borrowing, due to being charged more than they can genuinely afford.

The crunchpoint where tenants en masse simply tell landlords 'no' is coming, they've milked this cow too far.

Can`t really relate because the flat I have now is only 50 p.m more than a similar sized one I had in the late 90`s (that one was 350 p.m which seemed expensive at the time so I took a spot in a shared bedsit for about 220 p.m and eventually moved into the biggest room which was massive) This is Edinburgh, but it is the reality of what you can find if cheap renting is your thing, and I believe that the reality on the ground, even in London, is different to what stats and surveys would have us believe. If people were really at breaking point they would have broken by now? What is at breaking point is the Ponzi Debt property price model and the BTL model, so expect many more "tenants being squeezed" stories in the HPI loving media. As someone else said the voting demographic is shifting, so really really not the time to be carrying large mortgage/BTL debt, especially on recent bubble price purchases. IMO of course

Edited October 5, 2015 by dances with sheeple

[Noallegiance]

Slightly off topic but definitely related but I need to ask for personal reasons - anyone know how letting agents check prospective tenant income levels? Bank statements? Direct with employers? Relying on just the credit check?