All seems a bit insane - check out the article - but first read this from the comments section (by a Guardian staffer and property wonk):
One estate agent told me last week that he valued a small 3-bed terraced house in a not very good street in Brixton for what he admitted was a “very chancey” £875k. It went on the market last weekend. Forty people viewed it on the Saturday. By the Monday it went to sealed bids, and eventually went for £100k over asking price, at £975k. I asked him where on earth he thought the money was coming from. He, like the rest of us, have no idea who is affording these prices
Who the f*ck can afford these prices - not only that - but who would spend this kind of money on a small three bed terrace in Brixton? And how does stuff like this happen in what is supposed to be the worst economic recession since the 1930’s? Is this bubble ever going to burst?
It looks like a bubble and sounds like a bubble…I’d say yes it’s a housing bubble but only in London. It’s not helped by the help to buy scheme which is meant to be for those who cannot afford a large deposit.
This is where I’m confused. You can now buy a £600k house and only have a 5% deposit. So therefore you would surely have to be earning around £100k a year to be eligible. They don’t sound poor to me.
But if they are and cannot pay back the loan, don’t worry because the government backed scheme guarantees 15% of the loan so we the taxpayers are liable.
Yeah - the help to buy scheme by the chancellor is unforgiveable in my opinion - the property bubble was partly responsible for the financial crisis and was due for a correction - it would help both the economy and society if housing returned to affordable levels - but the chancellor is creating a bubble on top of the bubble which caused the financial crisis in the first place!
But when will it burst? - Even back in 2005 when the economy was ok people were giving it about 5 years at the most - but here we are 8 years later having gone through a destabilising financial crisis, fiscal austerity and people losing their jobs and it’s still here? The economy doesn’t seem to make any sense any more :crazy:
People in the S. East value their houses with the licked finger method… And buyers just don’t seem to want/ be able to haggle…
In London in particular though there is a lot of crazy investment from abroad. London is a foreign millionaires playground nowadays.
As for Brixton, I know that in Greece it has this sort of cult perception like you’re living in an anti-establishment, bohemian area… You know Guns of Brixton and all that jazz… ok only by some but still
Based on one the basic principles of economics ‘supply and demand’ - then yes, more housing would help, but the majority of housing I have actually ‘seen’ being built in recent years ‘seems’ to fall into 3 categories:
Expensive, flashy, rabbit hutches on the Thames in Battersea/Chelsea and the Docklands (priced beyond the reach of most people)
Social/ Housing association/ key worker homes where there are many barriers to qualifying (must have kids/ be a key worker - nurse/fireman/teacher etc/ be on benefits/ able to prove that you cannot afford private rents etc).
Shared ownership housing schemes for first time buyers. Effectively you get a mortgage for say 60% of the value of the property and ‘rent’ the rest until you can afford to buy the whole thing. Unfortunately I don’t believe these offer very good value - have known a few people go for this scheme and they can end up trapped because of negative equity, ie despite a rising market, they have generally been over valued at the point of sale. They get stuck and find it nigh on impossible to trade up.
None of these address the needs of the average person in London, earning an average to above average salary (say £25,000 - £50,000) - at this level you’re too rich to qualify for the majority of social/ housing association based stock, but not rich enough to afford even the most basic property out in the burbs unless you have a squirreled away a decent deposit/had an inheritance etc.
Possibly we need to re-look at the concept of house ownership, perhaps it’s ok to only ever own 50% of a property, or we move to 40 year mortgages, perhaps we move to the equivalent of personal contract purchase schemes on houses - you just finance what you use, not the entire capital amount. The net result of these ideas is that the money-men continue to make even more as they would structure the deals and provide the capital (or leveraging) to fund what we cannot afford to.
If I didn’t own property already in London, I would get on the ladder elsewhere and do a buy-to-let, just to have skin in the game, whilst renting a pad down here.
Apparently (as FT Aug 2013) nearly 75% of all new homes in central London are bought by foreigners.
In fact they are marketed at overseas events before being advertised to UK buyers.
More than half of the homes were sold to buyers from Singapore, Hong Kong, China and Malaysia.
