Making the news today....

[Big J]

1 minute ago, Commando said:

Was there actually a crash in 2008? Or was it more a slowing down….

 

The economy contracted for 5 consecutive quarters, GDP took 5 years to recover and unemployment reached it's highest rate for 13 years. It's generally regarded as a crash.

[Mick Dempsey]

Big crash in house prices, had friends hand their keys in to the bank and walk away.

[devon TWiG]

As long as houses continue to sell then they are obviously affordable !!    still grossly overpriced though !!  

[Big J]

Just now, devon TWiG said:

As long as houses continue to sell then they are obviously affordable !!    still grossly overpriced though !!  

Affordability is determined by two factors really. The willingness of the creditor to lend you the money in the first instance and your ability to pay it back. 

 

Once the ability to pay it back is lost (through interest rate rises or loss of earnings) then the willingness of lenders to risk lending decreases. Affordability criteria then becomes stricter, reducing and limiting the maximum amount person a with income b can borrow. Once the lending cap is reduced, asset prices can only go down as people simply cannot get a mortgage to cover the cost of it. 

 

Then you're into an awful situation (which I remember friends in 2008 finding themselves in) of negative equity, at which point you have people doing what @Mick Dempsey  said.

 

Huge interest rate rises aren't likely though, it would appear. It would bankrupt almost every western government to do that, but it really does feel that the longer we go on without some sort of adjustment, the worse it'll be when it comes. 

 

I rather like the policy that the Dutch and German government use when it comes to building low cost housing. They will sometimes employ compulsory purchase orders for land, but will do so on the 'present use value'. So rather than an acre of building land costing £500k - £1 million, it'd be £9-12k. This would massively reduce the cost of constructing housing, and given that good quality, sustainable construction is less than £1500/ square metre, you could see top notch, 120 square metre houses for less than £200k. 

 

Owning a home isn't something that I regard as being fundamentally necessary. Living in a home of good quality and affordably however is  

[Mick Dempsey]

Negative equity isn’t the end of the world, those people could have held out and within a few years would have seen a profit.

 

One thing you notice here is that the expats are very averse to believe that their houses over here have either lost money or have not appreciated as they thought they might, even if they’ve added a pool and renovated the place.

 

It’s kind of a religion in the UK that your house should increase in value, not something all other countries share.

[Big J]

21 minutes ago, Mick Dempsey said:

Negative equity isn’t the end of the world, those people could have held out and within a few years would have seen a profit.

 

One thing you notice here is that the expats are very averse to believe that their houses over here have either lost money or have not appreciated as they thought they might, even if they’ve added a pool and renovated the place.

 

It’s kind of a religion in the UK that your house should increase in value, not something all other countries share.

 

Yeah, my Dad's pretty pragmatic about the fact that his house near Poitiers hasn't and probably won't appreciate much. It's served him well as a cheap and spacious home and didn't cost much in the first place. 

 

Fundamentally, in order to sort out the housing market, we've got to do away with the idea that a house is an investment. It's first and foremost a home. It has to perform adequately in that regard, and part of that is affordability. By treating homes as investments, we forget what their primary function is.

[Mick Dempsey]

22 minutes ago, Big J said:

 

Yeah, my Dad's pretty pragmatic about the fact that his house near Poitiers hasn't and probably won't appreciate much. It's served him well as a cheap and spacious home and didn't cost much in the first place. 

 

Fundamentally, in order to sort out the housing market, we've got to do away with the idea that a house is an investment. It's first and foremost a home. It has to perform adequately in that regard, and part of that is affordability. By treating homes as investments, we forget what their primary function is.

True, but the problem is that then it’s not worth investing in your property, so the stock deteriorates.

We want to tarmac and kerb/edge our courtyard and entrance, we can afford it but will we get our money back? In which case why bother?

Edited August 3, 2021 by Mick Dempsey

[devon TWiG]

low inflation keeps house prices relatively high , in relation to earnings , for example if 30 years ago you borrowed 3x income lets say for example £30 k ...then the debt will stay at £30 k ...but if 3x income after 10 years is now £60k  ( due to inflation )then the homeowner seems to have a bargain ! ...In recent years inflation has been very low which keeps the cost of servicing a mortgage high so even  after 5-10 years is almost as painful as in initial years .

[Big J]

1 minute ago, Mick Dempsey said:

True, but the problem is that then it’s not worth investing in your property, so the stock deteriorates.

We want to tarmac and kerb/edge our courtyard and entrance, we can afford it but will we get our money back? In which case why bother?

 

It's a rather philosophical question, I fear.

 

If we only do things that we see as being financially lucrative, we're fundamentally doomed 🤣 

 

We should be investing in our homes to make them better places to live, not because it makes us wealthier. I'd rather be in a house that is worth a lot less, but pay some of that excess money into the tax system so that the infrastructure, health care and schooling is better. 

 

You do notice the difference acutely between the UK and many European countries, in that we (as a nation) have a lot of amassed personal wealth. I say that insofar that individual properties can be sold for a lot of money, but all the infrastructure and services around them are terrible. 

 

I recall working down the bottom of a valley a few miles from Tiverton 2 years back. God awful little lane, pot holed to hell, both wingmirrors in the hedges are you drove it. No school, no pub, no services whatsoever. A 3-4 mile drive (at about 20mph max) to get to Tiverton, but forget it if it's icy. And then once you're into Tiverton, you're in a market town with some notable social issues. The high school has a permanent police officer there, for instance.

 

But despite this, the average house price on that postcode 2 years ago was about £658k. It feel that if the owners of these homes spent less on their mortgages and more in local taxes, the whole area would function better.

[devon TWiG]

5 minutes ago, Mick Dempsey said:

True, but the problem is that then it’s not worth investing in your property, so the stock deteriorates.

We want to tarmac and kerb/edge our courtyard and entrance, we can afford it but will we get our money back? In which case why bother?

this is why there seems to appear to the English at least , so many run down unloved properties in France with the potential to create a fantastic property that would be utterly unaffordable in the UK .  DIY why appears to be a non thing in France from my own observations !!