the average price of a detached house in the royal borough of kensington and chelsea is now approx £4.9m
In lots of other inner london boroughs it’s an affordable £1m-£1.5m
in the outer london boroughs it can be as cheap as £600k (lol)
now taking all the caveats about the availability of detached houses in an area like kensington and chelsea into consideration, the horrific arguments about mean v average v median v credibility of source stats (https://www.gov.uk/search-house-prices) and, ye ken, a’ that typical internet stuff ditto, how long has this bubble got?
I have no idea. I always seem to have one big issue which affects my vote at elections but which never gets mentioned in the campaign. In 2010 it was ID cards (I was against) and this time it was house prices. When I bought my flat it was for just over three times my wage, which was considerably less than the national average. Now it would take three times the wage of someone on the threshold of high rate tax to buy my place on one salary. It’s absurd, but anyone who has bought or even moved in the last decade or more has so much ‘wealth’ tied up in overinflated property that it would disastrous if the price redressed to a more realistic level. As it is, it’s disastrous for young people trying to find somewhere to live. I have no solutions, and I’m no economist – just someone who thinks the current position of sky high prices funded by cheap credit is a very dangerous situation for everyone.
It’s all bonkers. I have a reasonable job but were I to move to Edinburgh today, there’s no way I’d be able to afford the house I live in. I know more and more people who, having come up three bells on the property slot machine, have decided to buy another one to rent out. It’s an epidemic. And yet they are astonished when their children can’t afford a place of their own…
It’s a massive issue in Sydney at the moment. The Federal Treasurer was asked recently how ordinary people are supposed to afford a house. His answer was “get a good job that pays good money and get a loan”.
My daughter and her partner are coming to live at our place next year so they can save some money. It’s the only way those who aren’t born into wealth can get ahead.
It’s exactly the same thing here in Stockholm.
(Except here it’s the inner city where the rich people live – and me, with a huge loan of course but I still bought it cheap compared to what it’s worth today. No good to me, since I want to live where I live, but my relatives will be happy the day I kick the bucket I guess)
And as it will take a very long time to build enough new houses to meet the demand, I can’t see the prices going down much any time soon.
Same here in Auckland. It’s definitely a bubble but the estate agents, banks and property investment seminar wankers are in full throttle. It will go pop. It always does. It’s just so depressing that it keeps happening.
Interesting comparison here to the “tulip bubble” in Holland as far back as the 17th century
http://www.thebubblebubble.com/tulip-mania/
As long as the global rich continue to regard the central London property market as a sensible place to invest some or all of their wealth, and interest rates remain low. the current inflation will continue. I’m not even sure we’re at the peak yet – houses are still selling quicker than they can get the boards up.
My guess is the next crash will come quite quickly once interest rates start moving again, perhaps within a year of the first rise. The thing is, even though we know it’s coming, how many of us are really prepared to sell our homes and rent? It makes financial sense – there’s your pension, right there, gaining interest while house prices plummet – but we’d have to give up our homes for it, and that’s hard. So round we go again.
I could tell you a thing or two about the property crash in Ireland and my own personal consequences, but not here, I’ll natter happily in person over a drink…
I would like to join you and compare notes on my own personal experience of the property crash in the US. Don’t get to hear much about the personal side – I wonder why – but millions have, and continue to be, devastated by the consequences of a 50% drop in house prices. Broken dreams and, in many cases, broken lives.
Serious question: why would large numbers of people be devastated by a 50% drop in house prices?
I’m talking about people with mortgages who are suddenly plunged into massive negative equity. There’s been millions of them since the property crash. In these markets demand is very low and you will find it very difficult to escape any changes in personal circumstances by selling your house. You go broke. You get divorced. Maybe you kill yourself.
But this only really affects people who need to sell their house and not buy another one. Negative equity, while doubtless annoying (I’ve been there), has a real impact on only a relatively small number of people.
In the US last year alone, 643,000 homes entered the foreclosure process. Outside the absolute hotspots like the Upper East Side and Hollywood, the market has utterly collapsed and remains stagnant. I think the number of people affected is quite large.
643,000 seems a large figure, I agree (UK comparator is about 50,000 I think). However presumably those 643,000 families were unable to meet their mortgage payments and negative equity simply compounded the problem by removing their ability to sell; it didn’t cause their inability to pay in the first place.
If anyone fancies upping sticks to Spain, we’ve got a few million empty homes you can move into (9% of the EU’s population; 30% of its unoccupied housing.)
Yes Archie. If only there were a few jobs to go with them.
Unemployment is down to only 46% in my town now. Austerity is working!
These are really sobering posts.
Here in NZ we haven’t had the property bubble bursting yet. I don’t understand what’s going on, so I sold up a couple of years ago with the proceeds squirreled away. Everyone thinks I’m daft, but I was in negative equity in the early 90s and lost the flat that I had lived in for 6 years -it was the most miserable time of my life.
@lando-cakes
I’m afraid not, “annoying” and “a few” are slight under statements. In 2012, by the time things had really bottomed out in Ireland, up to 66% of mortgages were estimated to be in negative equity.
http://www.independent.ie/opinion/analysis/daniel-mcconnell-twothirds-of-mortgages-by-value-now-in-negative-equity-26820767.html
I don’t doubt it. But so what? You pay money for a house, financed by a mortgage. As long as you can continue to pay that mortgage, what does it matter how much the house is worth? If the worth of my house was to drop by 50% – along with everyone else’s – then I struggle to see how I would be, in any real sense, worse off. It is, I agree, bad news if you can no longer meet your mortgage payments, however that affects a relatively small number of people.
On the other hand, continued inflated house prices cause continuing misery for those priced out of the market or fleeced by grasping rentiers.
On balance then, it’s hard to see why a bursting of the housing bubble would not be a good thing.
It’s a bad thing if you need to sell your house. If you lose your job, or your marriage ends, or you need to move for work, or your kids can’t get into a half decent school. It’s also a bad thing if the bank increases your mortgage payments because your loan to asset value ratio dips.
I would imagine there are further negative effects for the rest of the economy. I was still a kid during the last real housing crash, but I don’t imagine that people in negative equity have much work done on their houses, or particularly feel like spending the money they have.
A gentle deflation of the housing balloon would be best, rather than an abrupt bursting of a housing bubble.
If you lose your job or your marriage ends, yes. If you need to move, no – because the house you move to will also be cheaper.
@lando-cakes
Well, as I said above, there’s a larger pub conversation needed for this. But looking at Ireland as a whole, the property price collapse/negative equity explosion doesn’t “reset” the market, as you seem to intimate. It just becomes another driver of inequality, people find themselves in very difficult situations beyond their control, banks remain liable for that debt. You say “no longer meeting mortgage requirements” affects a “relatively small number of people,” but this is not true. Property prices don’t collapse in isolation, it coincided in Ireland with a spike in unemployment. We now have record rates of homeless families. Families! Plus a spike in suicides, namely 30&40-something males. Meanwhile there’s a tranche of society who did their citizenly duty of getting on the property ladder in more expensive times who are now burdened with an “asset” that is preventing them from moving on with their life, either to a different part of the country/world or perhaps into the family home they now need. We have a finance minister who is delighted at the rise of Irish property prices in the last 18 months because it reduces bank liabilities and the burden on the state. It’s a catch 22: prices rise and the toxic debts disappear, but then the stage is set for mother collapse…
But yes, if you’re in the house you want & have jobs stability, sure you can weather the storm. And if you’re timing was fortuitous compared to some other soul, well, you just got lucky.
Well fair enough. If you’re going to drag facts and evidence into it, then I guess I’ll just have to change my mind; negative equity is a problem for a large number of people.
My intuitive reaction was to see it as another facet of the phenomenon of people who have a house worth a lot of money who imagine that they are now rich.
You can’t easily move in negative equity. It means you owe the bank more than your house is worth. Even if you find a buyer, you’d need extra cash to pay out the remaining excess mortgage.
It’s been so long since I moved house that I can’t remember how it all works. If you need to pay back your mortgage and take out a new one then, yes, I can see that would be difficult,
Yes, what Bingo said. Buy house for €500k, pay off €50k, need to move, your house is now worth €250k, sell house… Congratulations, you owe the bank €200k, have no “asset”, and now no one will give you a new mortgage.
I was a 49er when I moved to the West Country (it was 2003 actually) and in subsequent years, the past five or so especially, the amount of incomers from the south east is increasing steadily. Economic flight and standard of living eg facilities/schools/open spaces etc. Whatever part of the property ladder you are able to purchase on, you will be able to buy something at a fraction of London/SE prices eg. a detched in the region of £250,000 – £3,000 grand would cost you double that easily in the SE. What worries me is that the quality of life here will inevitably change as the region fill sup and prices and the cost of living rises.