Meet the people of 'Everystreet'
May 14, 2007 3:22 AM Subscribe
Albion Drive: a saga of modern Britain. Straightforward, thought-provoking piece in the Observer about the effect of rising house prices on ordinary folk in a street in London.
the same property rollercoaster taking us all on a dizzying ride
I stopped reading when the intro assumed that everyone reading the piece owns property in London.
posted by Mocata at 3:59 AM on May 14, 2007
I stopped reading when the intro assumed that everyone reading the piece owns property in London.
posted by Mocata at 3:59 AM on May 14, 2007
The property market in London is clearly due for a correction. Just one data point from Whitechapel: I purchased a two bedroom, two floor garden flat in 2001 for £115. I negotiated the price down from £125, and after my downpayment financed £92K on a five year fixed rate amortising mortagage.
I run a tight budget, and mark all my assets to market at least once a week. I stopped repricing my property at £250K when similar flats surged well above that high water mark. The last sale I noticed cleared £280K, and I've stopped looking as the situation has gotten too bizzare.
My place was a fixxer-upper as the previous tenant lived there for 30 years, filled it with rubbish and then expired in the lounge. It needed two months of cleanup and renovations (did all the work myself), and was hardly worth £115K (of course a counter argument is it clearly was worth that much as that's the price I paid).
Since I'm located equidistant from both financial districts (I walk to Canary Wharf in 25 minutes and The City in 20), the flat is in Zone 2 and there are several medical schools and Universities nearby, I agree there should be a healthy demand for property in this 'hood.
However a CAGR of some 17% pa across the term is clearly excessive.
I work in banking and know many, many people who have sold and are now renting. I might just do the same to capture the paper gain. On the other hand, I've been looking about with an eye towards trading up. My ideal flat is terraced, with four bedrooms across four stories but prices are totally outrageous, starting at well over £400K (and that's for a fixxer upper). As I'm currently only carrying £44K in mortgage debt I've got no appetite for a higher monthly payment and refuse to dump another £110-£150K of my own cash into a larger downpayment.
Somethings gotta give.
posted by Mutant at 4:02 AM on May 14, 2007
I run a tight budget, and mark all my assets to market at least once a week. I stopped repricing my property at £250K when similar flats surged well above that high water mark. The last sale I noticed cleared £280K, and I've stopped looking as the situation has gotten too bizzare.
My place was a fixxer-upper as the previous tenant lived there for 30 years, filled it with rubbish and then expired in the lounge. It needed two months of cleanup and renovations (did all the work myself), and was hardly worth £115K (of course a counter argument is it clearly was worth that much as that's the price I paid).
Since I'm located equidistant from both financial districts (I walk to Canary Wharf in 25 minutes and The City in 20), the flat is in Zone 2 and there are several medical schools and Universities nearby, I agree there should be a healthy demand for property in this 'hood.
However a CAGR of some 17% pa across the term is clearly excessive.
I work in banking and know many, many people who have sold and are now renting. I might just do the same to capture the paper gain. On the other hand, I've been looking about with an eye towards trading up. My ideal flat is terraced, with four bedrooms across four stories but prices are totally outrageous, starting at well over £400K (and that's for a fixxer upper). As I'm currently only carrying £44K in mortgage debt I've got no appetite for a higher monthly payment and refuse to dump another £110-£150K of my own cash into a larger downpayment.
Somethings gotta give.
posted by Mutant at 4:02 AM on May 14, 2007
Almost painfully true to read for me. I am a 25 year old graduate working in the City of London. My wife is expecting and we live in a studio flat (not even 1 bedroom) in Zone 2. The thought of bringing up our newborn in a single room depresses me hugely. My job is London-centric (as is my wife's) but the figures just do not stack up.
There truely is this huge immense barrier that stops up proceeding in any meaningful way. I know we are lucky to have a roof over our heads at all but one's environment makes such a difference to ones peace of mind. I worry of the consequences of this time and the impact it has, in terms of frustrations, on our relationship. As I say often to my wife and her sister's who are in similar difficult situations, the people at the top, those in positions who can actually do something about this sorry state of affairs are so inculcated and removed from everyday life that OUR world has NO bearing on them at all.
As the article states, they have property and a driver who chauffers them from quadrangle to quadrange, they have no conception of the dread, fear and sadness that comes from living in this environment.
You may think 'but this is your choice to live like this!' but our jobs (me an Insurance Underwriter and my wife a barrister) really are in London if we wish to make it in our chosen professions. The article I think it correct in that it is suprising there is not more pressure from the disaffected professional classes in their 20's.
Not a country of class structure but truly boils down to, do you own property or not? And the joke is the buildings are generally the same buildings (the same bricks and mortar) that people were buying 50 years ago. The property itself is priced out of all proportion to what you get.
2 arguably contentious but in my opinion undeniable factors:
i) Increased selfishness in respect of people wishing to live on their own and to assert their own independence.
ii) The globalised world and large influx of people into this City every day from all over the world (those officially acknowledged and those who bleed in from the shadows and periphery).
posted by numberstation at 4:04 AM on May 14, 2007
There truely is this huge immense barrier that stops up proceeding in any meaningful way. I know we are lucky to have a roof over our heads at all but one's environment makes such a difference to ones peace of mind. I worry of the consequences of this time and the impact it has, in terms of frustrations, on our relationship. As I say often to my wife and her sister's who are in similar difficult situations, the people at the top, those in positions who can actually do something about this sorry state of affairs are so inculcated and removed from everyday life that OUR world has NO bearing on them at all.
As the article states, they have property and a driver who chauffers them from quadrangle to quadrange, they have no conception of the dread, fear and sadness that comes from living in this environment.
You may think 'but this is your choice to live like this!' but our jobs (me an Insurance Underwriter and my wife a barrister) really are in London if we wish to make it in our chosen professions. The article I think it correct in that it is suprising there is not more pressure from the disaffected professional classes in their 20's.
Not a country of class structure but truly boils down to, do you own property or not? And the joke is the buildings are generally the same buildings (the same bricks and mortar) that people were buying 50 years ago. The property itself is priced out of all proportion to what you get.
2 arguably contentious but in my opinion undeniable factors:
i) Increased selfishness in respect of people wishing to live on their own and to assert their own independence.
ii) The globalised world and large influx of people into this City every day from all over the world (those officially acknowledged and those who bleed in from the shadows and periphery).
posted by numberstation at 4:04 AM on May 14, 2007
The two bedroom terrace flat that I just got evicted from is selling for what works out to almost half a million Canadian dollars. I showed my Canadian friends pictures and they were stunned. In Canada that buys you a proper home. I can only guess that the price would be at least doubled if it were London rather than a suburb of Birmingham.
The real estate prices must destroy England's ability to compete in the EU for anything other than financial services. When even HP Sauce manufacturing is being moved abroad it is pretty clear that something is badly wrong.
I'm only in the UK temporarily but if I was staying I would be very scared.
posted by srboisvert at 4:15 AM on May 14, 2007
The real estate prices must destroy England's ability to compete in the EU for anything other than financial services. When even HP Sauce manufacturing is being moved abroad it is pretty clear that something is badly wrong.
I'm only in the UK temporarily but if I was staying I would be very scared.
posted by srboisvert at 4:15 AM on May 14, 2007
The property market in London is clearly due for a correction.
Maybe the fact that everyone says that is part of the reason is ain't happening.
You may think 'but this is your choice to live like this!' but our jobs (me an Insurance Underwriter and my wife a barrister) really are in London if we wish to make it in our chosen professions.
It's still a choice numberstation. We halved our salaries, moved back to Stockholm, and now enjoy a much greater quality of life than we could ever afford in London. We still walk around in astonishment at how inexpensive everything seems in comparison to London - and this is by no means an inexpensive city.
And the joke is the buildings are generally the same buildings (the same bricks and mortar) that people were buying 50 years ago. The property itself is priced out of all proportion to what you get.
And a bad joke it is. The flat we bought here was built the same year (1888) as the Victorian flat in London we rented, it cost half as much as it would in London, and the standard is immensely superior. (We marveled this past winter at how warm it was INSIDE for a change.) I'm surprised so many people tolerate conditions in London when jobs are so mobile. What makes the influx easy also makes outflux easy.
posted by three blind mice at 4:31 AM on May 14, 2007
Maybe the fact that everyone says that is part of the reason is ain't happening.
You may think 'but this is your choice to live like this!' but our jobs (me an Insurance Underwriter and my wife a barrister) really are in London if we wish to make it in our chosen professions.
It's still a choice numberstation. We halved our salaries, moved back to Stockholm, and now enjoy a much greater quality of life than we could ever afford in London. We still walk around in astonishment at how inexpensive everything seems in comparison to London - and this is by no means an inexpensive city.
And the joke is the buildings are generally the same buildings (the same bricks and mortar) that people were buying 50 years ago. The property itself is priced out of all proportion to what you get.
And a bad joke it is. The flat we bought here was built the same year (1888) as the Victorian flat in London we rented, it cost half as much as it would in London, and the standard is immensely superior. (We marveled this past winter at how warm it was INSIDE for a change.) I'm surprised so many people tolerate conditions in London when jobs are so mobile. What makes the influx easy also makes outflux easy.
posted by three blind mice at 4:31 AM on May 14, 2007
Should I, at this point, put my cards on the table? Sarah Beeny tells me that the people 'who are really stuffed are the thirtysomethings who for one reason or another, and not through any fault of their own, didn't buy. They're absolutely stuffed.'
As one of those, I'm not sure how I'm stuffed. My all-in monthly payment for rent and bills together is substantially less than an interest-only mortgage would be on the flat I share with a friend. As numberstation says, the obsession with single people being able to buy a flat by themselves is driving the rise in prices. Single person home-ownership should be seen as the historical anomaly that it is. The observer article is interesting in this supposedly progressive paper completely buys into the idea that home-ownership is the be-all and end-all of human existence -- Thatcher's big ideology in the '80s. In other European countries families go through their entire lives without owning a house.
Anyway, what's wrong with renting? My savings from renting vs a mortgage go into investments that are doing not too shoddily compared to house prices and are more diversified than a single property will ever be.
One of the problems at the moment is that there's a weird dissonance between speculation and the desire simply to own a home to live in. People simply don't believe that prices will ever stagnate long-term (or god-forbid fall) - couple that with the huge number of people who are priced out of the market and you have a situation in which any sniff of a decline in prices will have them piling in to buy and the market will rise again. The only way this price support will disappear is a sustained decline in the economy (especially in the City) and an end to the net immigration to London...
Ultimately, I suppose I'm happy for the correction to come but it's unfortunate that it'll be highly correlated with me not having a job anymore.
posted by patricio at 4:32 AM on May 14, 2007
As one of those, I'm not sure how I'm stuffed. My all-in monthly payment for rent and bills together is substantially less than an interest-only mortgage would be on the flat I share with a friend. As numberstation says, the obsession with single people being able to buy a flat by themselves is driving the rise in prices. Single person home-ownership should be seen as the historical anomaly that it is. The observer article is interesting in this supposedly progressive paper completely buys into the idea that home-ownership is the be-all and end-all of human existence -- Thatcher's big ideology in the '80s. In other European countries families go through their entire lives without owning a house.
Anyway, what's wrong with renting? My savings from renting vs a mortgage go into investments that are doing not too shoddily compared to house prices and are more diversified than a single property will ever be.
One of the problems at the moment is that there's a weird dissonance between speculation and the desire simply to own a home to live in. People simply don't believe that prices will ever stagnate long-term (or god-forbid fall) - couple that with the huge number of people who are priced out of the market and you have a situation in which any sniff of a decline in prices will have them piling in to buy and the market will rise again. The only way this price support will disappear is a sustained decline in the economy (especially in the City) and an end to the net immigration to London...
Ultimately, I suppose I'm happy for the correction to come but it's unfortunate that it'll be highly correlated with me not having a job anymore.
posted by patricio at 4:32 AM on May 14, 2007
"The real estate prices must destroy England's ability to compete in the EU for anything other than financial services."
Even us banking types are getting scared off, in spite of what the media claims about huge bonuses driving prices upwards.
As I mentioned before, many of my colleagues have sold and are now renting, confident they'll be able to repurchase in a relatively short period of time. They certainly aren't investing in property.
Another curiousity: I've got an Excel model on my PDA and weekends after brunch sometimes wander by the Estate Agents, looking at prices. Most of them will have sales in one window, rentals in another, so its pretty easy to see what it would cost to acquire a flat, and how much income it would generate.
From talking to my banker I know what monthly repayments would cost me if I borrowed £100K, so I can back into total debt load for a buy-to-let mortgage.
I don't know how anyone is making money in this market unless putting down 40% or more of the asking price downpayment.
And why tie up so much captial in a property when interest rates are still rising (just hit 5.5% last week)? Just doesn't make sense to me, given the operational risk associated with renting flats.
Housing in London is a strange, strange market
posted by Mutant at 4:32 AM on May 14, 2007
Even us banking types are getting scared off, in spite of what the media claims about huge bonuses driving prices upwards.
As I mentioned before, many of my colleagues have sold and are now renting, confident they'll be able to repurchase in a relatively short period of time. They certainly aren't investing in property.
Another curiousity: I've got an Excel model on my PDA and weekends after brunch sometimes wander by the Estate Agents, looking at prices. Most of them will have sales in one window, rentals in another, so its pretty easy to see what it would cost to acquire a flat, and how much income it would generate.
From talking to my banker I know what monthly repayments would cost me if I borrowed £100K, so I can back into total debt load for a buy-to-let mortgage.
I don't know how anyone is making money in this market unless putting down 40% or more of the asking price downpayment.
And why tie up so much captial in a property when interest rates are still rising (just hit 5.5% last week)? Just doesn't make sense to me, given the operational risk associated with renting flats.
Housing in London is a strange, strange market
posted by Mutant at 4:32 AM on May 14, 2007
Yeah, we're fairly screwed on this.
I rent in London. I turned down the chance to buy an ex-LA but quite nice flat for £120k-ish in 2002 because I was absolutely convinced the market was about to go kaput. Five years later, it's still overheating, only more so. The agony when it crashes is not going to be pretty for anyone.
And how did this happen? A delibrate strategy on the part of the Bank of England to bankroll continuing consumer growth on the back of rising house prices but keeping interest rates unrealistically low. No wonder inflation is rising.
posted by WPW at 4:36 AM on May 14, 2007 [1 favorite]
I rent in London. I turned down the chance to buy an ex-LA but quite nice flat for £120k-ish in 2002 because I was absolutely convinced the market was about to go kaput. Five years later, it's still overheating, only more so. The agony when it crashes is not going to be pretty for anyone.
And how did this happen? A delibrate strategy on the part of the Bank of England to bankroll continuing consumer growth on the back of rising house prices but keeping interest rates unrealistically low. No wonder inflation is rising.
posted by WPW at 4:36 AM on May 14, 2007 [1 favorite]
Mutant - Perhaps the unwinding of the the buy-to-let market is the big pressure point. As you say, the rise in house prices has at least some driver in supply and demand - the increase in supply is minute compared to increased demand and salaries. The rental market though still has plenty of supply - all the new builds around me are bought off plan by buy-to-let investors - and from experience there is strong resistance to rent increases from the tenant-side. Perhaps all it takes is a few of the more highly-geared landlords to exit and set off a rush to sell in the market. oh, a man can dream can't he?
posted by patricio at 4:45 AM on May 14, 2007
posted by patricio at 4:45 AM on May 14, 2007
I sold a big (by British standards) house in the states before I moved over here. I don't expect to ever be able to buy a house in the UK. I understood that before I came here; it's OK, really. Ownership is overrated, anyway.
I don't personally find the idea of living near London very appealing (no offence intended, Londoners). I may end up changing my mind at some point, but I'm happier here, not that it's any cheaper. If our flat were on the market, it'd be about £250,000. That, to me, is ridiculous. It's like Monopoly money... I can't get my head round it.
posted by chuckdarwin at 5:19 AM on May 14, 2007
I don't personally find the idea of living near London very appealing (no offence intended, Londoners). I may end up changing my mind at some point, but I'm happier here, not that it's any cheaper. If our flat were on the market, it'd be about £250,000. That, to me, is ridiculous. It's like Monopoly money... I can't get my head round it.
posted by chuckdarwin at 5:19 AM on May 14, 2007
Yeah, when I was looking for a flat (to rent) a few years back, and was told that a postage-stamp sized ex-council flat near Newington Green, conveniently located next to some burnt-out cars, would probably sell for about a quarter of a million... that's when I pretty much gave up any hope of owning my own place at any time in the near future.
I say we have a revolution.
posted by flashboy at 5:33 AM on May 14, 2007
I say we have a revolution.
posted by flashboy at 5:33 AM on May 14, 2007
OK, flashboy! Who is to be first against the wall?
posted by chuckdarwin at 5:39 AM on May 14, 2007
posted by chuckdarwin at 5:39 AM on May 14, 2007
srboisvert , you must live very close to me...
posted by chuckdarwin at 5:42 AM on May 14, 2007
posted by chuckdarwin at 5:42 AM on May 14, 2007
The agony when it crashes is not going to be pretty for anyone.
I'm quite looking forward to it. I'll finally be able to buy something. And when I say looking forward to it, I mean I'm desperate for it to happen. I'm one of the people in his thirties that Beeny says is stuffed, (low paid job then getting my PhD up to 2002, no access to the Bank of Mum and Dad for deposit so still getting funds together for that) and that seems a fair assessment unless prices tumble. I'm actually luckier than a lot of the people where I live, at least I have a relatively decent wage so I'm in with a chance, the average annual earnings here are £16,000 p.a., while the average house price is £226,494 and an average flat is £161,792.
I can't agree with the description of single people buying something to live in alone as selfish, the situation in the country has been buy or get left behind for at least 5 years so its the only sensible thing to do. Why should they have to wait until they're with someone? I would further argue that the rise of buy-to-let housing, aiming at direct profit, is much more reprehensible.
posted by biffa at 5:43 AM on May 14, 2007
I'm quite looking forward to it. I'll finally be able to buy something. And when I say looking forward to it, I mean I'm desperate for it to happen. I'm one of the people in his thirties that Beeny says is stuffed, (low paid job then getting my PhD up to 2002, no access to the Bank of Mum and Dad for deposit so still getting funds together for that) and that seems a fair assessment unless prices tumble. I'm actually luckier than a lot of the people where I live, at least I have a relatively decent wage so I'm in with a chance, the average annual earnings here are £16,000 p.a., while the average house price is £226,494 and an average flat is £161,792.
I can't agree with the description of single people buying something to live in alone as selfish, the situation in the country has been buy or get left behind for at least 5 years so its the only sensible thing to do. Why should they have to wait until they're with someone? I would further argue that the rise of buy-to-let housing, aiming at direct profit, is much more reprehensible.
posted by biffa at 5:43 AM on May 14, 2007
OK, flashboy! Who is to be first against the wall?
You think we can afford a wall?
posted by flashboy at 5:47 AM on May 14, 2007
You think we can afford a wall?
posted by flashboy at 5:47 AM on May 14, 2007
Biffa: The term selfish was not necessary and overly emotive. I just meant to point out that the idea of individualistic achievment and independence is wrapped up with the fact that more and more people choose to live on their own these days. Clearly this is different to days gone buy and has thus added to the pressures on the existing housing stock.
posted by numberstation at 5:59 AM on May 14, 2007
posted by numberstation at 5:59 AM on May 14, 2007
We delayed getting a place for a long time because even my A-level economics suggested that the market was insane and unsustainable. Feel like a mug now as I had no idea the speculative swine at the trough, obscene bonuses and an insane planning system would conspire to make the impossible the everyday reality and we have missed out on a lot of the growth. We bought a two bedroom that needs a lot of work in Camberwell (not exactly the nicest of areas but OK) belatedly in 2005 after starting to panic and its value has gone up somewhat. Many of our friends now struggle to get one bedroom ex-local authority scumholes in Zone 3 for the same price.
It has become insane as prices do not reflect realities – crack infested neighbourhoods with more resemblance to the South Bronx circa 1979 or Grozny than a place someone would choose to live still require investments of £2XX,XXX+ to buy in. This is not just a London problem, it is problem in most of the economically active bits of the UK. A recent visit to Suffolk revealed small houses costing £650k+. With few jobs near them other than turnip picking, it was clear than untaxed bonuses had made them a rich man’s Dacha – crowding out any locals for good. Of course these neo gentry would be the first to the barricades if someone proposed erecting so much as a small hut anywhere near their lovely plaything.
It is a real policy failure as it represents the worst possible kind of economic situation – generational parasitism. This is just massive transfers of money from the struggling young to the old – with windfalls going to selfish baby boomers who bought their housing cheap selling to younger people financially crippled in the prime of life. Radical change to the planning system is needed (I remember reading in the FT that if Barker Review-esque planning was in place from 1980, housing in the South East would be 80%+ cheaper today), massive amounts of new housing should be built over the subsidised turnip fields surrounding much of the UK’s cities and in an ideal world windfalls and high priced transactions would be heavily taxed (I can’t see any major party proposing this, sadly). The truth is planning keeps people in the UK in small ‘human reservations’ while much of the country is taken up by economically pointless intensive agriculture made possible only by subsidy. Check out the PricedOut campaign and these great articles by Nick Cohen. Hopefully something will be done because lots of very very angry and bitter voters does no-one any good. Otherwise London in particular will become a place of the very rich and the very poor only - a recipe for US-style urban decay. However, I fear that a couple of generations have already been crippled and robbed of a future because of this inter-generational theft.
I feel for the other posters on here. My partner and I wonder how on earth we can ever have children when our jobs are tied to the South East, but cannot conceivably afford anything larger in the region than a two bed place without winning the lottery or going on a bank robbing spree. And that is before one even gets into the serious problems in the state schools in any area we can afford to live in. Being denied the modest dreams of one’s elders is a bitter pill.
posted by The Salaryman at 5:59 AM on May 14, 2007 [1 favorite]
It has become insane as prices do not reflect realities – crack infested neighbourhoods with more resemblance to the South Bronx circa 1979 or Grozny than a place someone would choose to live still require investments of £2XX,XXX+ to buy in. This is not just a London problem, it is problem in most of the economically active bits of the UK. A recent visit to Suffolk revealed small houses costing £650k+. With few jobs near them other than turnip picking, it was clear than untaxed bonuses had made them a rich man’s Dacha – crowding out any locals for good. Of course these neo gentry would be the first to the barricades if someone proposed erecting so much as a small hut anywhere near their lovely plaything.
It is a real policy failure as it represents the worst possible kind of economic situation – generational parasitism. This is just massive transfers of money from the struggling young to the old – with windfalls going to selfish baby boomers who bought their housing cheap selling to younger people financially crippled in the prime of life. Radical change to the planning system is needed (I remember reading in the FT that if Barker Review-esque planning was in place from 1980, housing in the South East would be 80%+ cheaper today), massive amounts of new housing should be built over the subsidised turnip fields surrounding much of the UK’s cities and in an ideal world windfalls and high priced transactions would be heavily taxed (I can’t see any major party proposing this, sadly). The truth is planning keeps people in the UK in small ‘human reservations’ while much of the country is taken up by economically pointless intensive agriculture made possible only by subsidy. Check out the PricedOut campaign and these great articles by Nick Cohen. Hopefully something will be done because lots of very very angry and bitter voters does no-one any good. Otherwise London in particular will become a place of the very rich and the very poor only - a recipe for US-style urban decay. However, I fear that a couple of generations have already been crippled and robbed of a future because of this inter-generational theft.
I feel for the other posters on here. My partner and I wonder how on earth we can ever have children when our jobs are tied to the South East, but cannot conceivably afford anything larger in the region than a two bed place without winning the lottery or going on a bank robbing spree. And that is before one even gets into the serious problems in the state schools in any area we can afford to live in. Being denied the modest dreams of one’s elders is a bitter pill.
posted by The Salaryman at 5:59 AM on May 14, 2007 [1 favorite]
I've been expecting a correction for about six years, and it ain't come yet. Might as well buy something while it's still in reach of an old-school 3x salary. Hm.
posted by bonaldi at 6:12 AM on May 14, 2007
posted by bonaldi at 6:12 AM on May 14, 2007
Although they say the value of a house is not the price it sells for, but 30 years of its rent, and by that measure Glasgow is wildly outstripping house values
posted by bonaldi at 6:15 AM on May 14, 2007
posted by bonaldi at 6:15 AM on May 14, 2007
The lure of incredible city salaries is quickly damped by the cost of living - and the horrors of commuting.
But what do you do when you have no option - as in, there are no jobs anywhere but in the city?
posted by spicynuts at 6:29 AM on May 14, 2007
But what do you do when you have no option - as in, there are no jobs anywhere but in the city?
posted by spicynuts at 6:29 AM on May 14, 2007
Another data point:
I'm a Canadian in my late twenties, earning £45K/annum base + ~£5K/annum in bonuses and so forth. I work West of London, and my share of a rented three-bedroom (loft conversion, terrible renovation, etc.) flat with four others in NW10 is £425p.c.m.
If I were to buy the place I live in, it would cost me roughly £415K. The area I'm in isn't * quite * the 'hood, but it is surrounded by it on all sides. My fellow London residents may remember the lawyer that was stabbed for some pocket change a travelcard last year...that was two minutes walk from my front door.
As it stands, I can afford to continue renting and buy a house in Vancouver, but I couldn't ever afford to buy in London, let alone in my neighbourhood. Even friends of mine from enormously wealthy families are renting or living at home these days...buying in London isn't just out of reach for the children of low-earners, it's out of reach for anyone upper middle class and below.
posted by Kreiger at 6:30 AM on May 14, 2007
I'm a Canadian in my late twenties, earning £45K/annum base + ~£5K/annum in bonuses and so forth. I work West of London, and my share of a rented three-bedroom (loft conversion, terrible renovation, etc.) flat with four others in NW10 is £425p.c.m.
If I were to buy the place I live in, it would cost me roughly £415K. The area I'm in isn't * quite * the 'hood, but it is surrounded by it on all sides. My fellow London residents may remember the lawyer that was stabbed for some pocket change a travelcard last year...that was two minutes walk from my front door.
As it stands, I can afford to continue renting and buy a house in Vancouver, but I couldn't ever afford to buy in London, let alone in my neighbourhood. Even friends of mine from enormously wealthy families are renting or living at home these days...buying in London isn't just out of reach for the children of low-earners, it's out of reach for anyone upper middle class and below.
posted by Kreiger at 6:30 AM on May 14, 2007
and buy a house in Vancouver, but I couldn't ever afford to buy in London
Well there's an indictment! As an emigrant Dubliner, similarly to some of those above I've resigned myself to never being able to afford anything at home in Ireland. It's an unpleasant feeling.
posted by jamesonandwater at 7:05 AM on May 14, 2007
Well there's an indictment! As an emigrant Dubliner, similarly to some of those above I've resigned myself to never being able to afford anything at home in Ireland. It's an unpleasant feeling.
posted by jamesonandwater at 7:05 AM on May 14, 2007
Heh, chiming in here too: I'm in much the same situation as biffa, and likewise I'm reluctantly desperate for a crash. But for all I know, the promise of the Olympics in 2012 will just keep everything sustained as it is/growing even further until all the banks actually physically explode at once due to some kind of economic dissonance feedback loop.
posted by Drexen at 7:08 AM on May 14, 2007
posted by Drexen at 7:08 AM on May 14, 2007
My fellow London residents may remember the lawyer that was stabbed for some pocket change a travelcard last year...that was two minutes walk from my front door.
That's not a very happy circumstance... did you get more paranoid about walking around your hood after that?
posted by chuckdarwin at 7:15 AM on May 14, 2007
That's not a very happy circumstance... did you get more paranoid about walking around your hood after that?
posted by chuckdarwin at 7:15 AM on May 14, 2007
"I've been expecting a correction for about six years, and it ain't come yet. Might as well buy something while it's still in reach of an old-school 3x salary."
In the equity markets there's an expression that goes along the lines "The time to buy is when the last bull turns bearish". In other words, it's best to purchase shares when everyone is sick to death of stocks. Makes sense; you're acquring something nobody wants.
Ignoring the fact we're discussing different asset classes and flipping this around, when discussing the UK housing market we'd have something like "The time to sell is when the last skeptic enters the property market". As mentioned before, several of my colleagues are now renting their primary residence, having sold and captured capital gains. They're looking to re-enter the market sometime in the future, and figure the cost of renting during the time this will take will not negate their profit. So that's an interesting position.
The Australian housing market corrected and the US housing market is in the process of correcting. Come parts of the Spanish property market are now correcting. The UK experience won't be any different in terms of the outcome; the value of houses, by various measures, will move lower, perhaps sharply.
Whether this is accomplished by an outright decline in house prices, or a sharp decrease in the house price / average annual income ratio (i.e., wages suddenly spike while house prices stagnate or perhaps decline during the same term) remains to be seen.
But they will correct. Only the mechanism and timing of the correction are uncertain.
posted by Mutant at 7:35 AM on May 14, 2007
In the equity markets there's an expression that goes along the lines "The time to buy is when the last bull turns bearish". In other words, it's best to purchase shares when everyone is sick to death of stocks. Makes sense; you're acquring something nobody wants.
Ignoring the fact we're discussing different asset classes and flipping this around, when discussing the UK housing market we'd have something like "The time to sell is when the last skeptic enters the property market". As mentioned before, several of my colleagues are now renting their primary residence, having sold and captured capital gains. They're looking to re-enter the market sometime in the future, and figure the cost of renting during the time this will take will not negate their profit. So that's an interesting position.
The Australian housing market corrected and the US housing market is in the process of correcting. Come parts of the Spanish property market are now correcting. The UK experience won't be any different in terms of the outcome; the value of houses, by various measures, will move lower, perhaps sharply.
Whether this is accomplished by an outright decline in house prices, or a sharp decrease in the house price / average annual income ratio (i.e., wages suddenly spike while house prices stagnate or perhaps decline during the same term) remains to be seen.
But they will correct. Only the mechanism and timing of the correction are uncertain.
posted by Mutant at 7:35 AM on May 14, 2007
But what do you do when you have no option - as in, there are no jobs anywhere but in the city?
This is the trap spicynuts. By "jobs" you mean jobs that pay £50K and up. It is hard for people on a "career path" to imagine taking any job that pays less. But it's not how much you make it's how much you keep and how well you live while you're making it.
I halved my salary moving to Stockholm and don't regret it in the least. Reading the tales of woe in this thread, I am ever more convinced that I made the only rational "career" choice for me. Money is a means to an end - nothing more.
For those of you hoping for a correction. I've been hearing that for years - bitterly expressed by those who had a chance to buy a few years ago and decided to wait.
posted by three blind mice at 7:56 AM on May 14, 2007
This is the trap spicynuts. By "jobs" you mean jobs that pay £50K and up. It is hard for people on a "career path" to imagine taking any job that pays less. But it's not how much you make it's how much you keep and how well you live while you're making it.
I halved my salary moving to Stockholm and don't regret it in the least. Reading the tales of woe in this thread, I am ever more convinced that I made the only rational "career" choice for me. Money is a means to an end - nothing more.
For those of you hoping for a correction. I've been hearing that for years - bitterly expressed by those who had a chance to buy a few years ago and decided to wait.
posted by three blind mice at 7:56 AM on May 14, 2007
It isn't just London, it's the whole of the UK. House prices have trippled in the last 10 years and wages have not kept up. 10 years ago the average home owner spent 20% of their salary on mortgage repayments. Now that figure is 40% and rising.
posted by bap98189 at 8:03 AM on May 14, 2007
posted by bap98189 at 8:03 AM on May 14, 2007
A lot of this has to do with the demise of council housing. The Thatcher government made it impossible for the councils to hold onto their existing stock through the Right to Buy scheme. Then they imposed financial restrictions which made it impossible for the councils to replace this housing.
The Right to Buy artificially depressed the purchase price of the houses, creating a broad base of entry-level housing for the first-time buyer. This stock has been recycled many times now, and the cheapness is gone. Trouble is, there's nothing else feeding in at the bottom. What that mens is that those already on the property ladder are profiting at the expense of two groups 1. The councils (and by extension) taxpayers who were forced to fund the original infusion and 2. Those who joined the party late (mostly by reason of having failed to be born early enough).
It's just another example of how Thatcher spearheaded the raising of economic drawbridges across Britain, and of how Blair has continued to dig moats and build walls to further that legacy.
posted by Jakey at 8:09 AM on May 14, 2007
The Right to Buy artificially depressed the purchase price of the houses, creating a broad base of entry-level housing for the first-time buyer. This stock has been recycled many times now, and the cheapness is gone. Trouble is, there's nothing else feeding in at the bottom. What that mens is that those already on the property ladder are profiting at the expense of two groups 1. The councils (and by extension) taxpayers who were forced to fund the original infusion and 2. Those who joined the party late (mostly by reason of having failed to be born early enough).
It's just another example of how Thatcher spearheaded the raising of economic drawbridges across Britain, and of how Blair has continued to dig moats and build walls to further that legacy.
posted by Jakey at 8:09 AM on May 14, 2007
I halved my salary moving to Stockholm and don't regret it in the least.
Do you have children?
But it's not how much you make it's how much you keep and how well you live while you're making it.
True...but if my only options are stock clerk at Home Depot or Greeter at Wal Mart, and I want to have kids, how much am I going to be able to keep and how well am I going to be able to live and provide for those kids? And where is the security?
posted by spicynuts at 8:37 AM on May 14, 2007
Since the average age of a first-time buyer is something like 33 or 34, we can assume, by Sarah Beeny's definition, widespread stuffed-ness. But as other posters rightly imply, it's not particularly relevant what Sarah Beeny thinks unless you happen to share her idea of what makes a happy life.
posted by game warden to the events rhino at 8:44 AM on May 14, 2007
posted by game warden to the events rhino at 8:44 AM on May 14, 2007
Buyers are willing to take on additional debt burdens in order to participate in a speculative market. Ease of qualifying for debt feeds this cycle. It's a credit bubble fueling housing speculation.
Wait till prices merely stagnate, and then, the plunge.
Access to equity in a home from refi's has been a major component in the US economy for the past 5 years, and now that the housing ATM is drying up the consumer will no longer be able to prop up the economy in general.
And be prepared to find out that the banks have not loaned money in a way that will allow them to survive any change in the market.
And if you happen to be one of the lucky equity winners, give serious consideration to beating the rush for the exits, and pocketing your "winnings" while you can.
posted by dglynn at 9:40 AM on May 14, 2007
Wait till prices merely stagnate, and then, the plunge.
Access to equity in a home from refi's has been a major component in the US economy for the past 5 years, and now that the housing ATM is drying up the consumer will no longer be able to prop up the economy in general.
And be prepared to find out that the banks have not loaned money in a way that will allow them to survive any change in the market.
And if you happen to be one of the lucky equity winners, give serious consideration to beating the rush for the exits, and pocketing your "winnings" while you can.
posted by dglynn at 9:40 AM on May 14, 2007
But they will correct. Only the mechanism and timing of the correction are uncertain.
Does this correction necessarily mean a sharp drop in house prices, like we had in the early 90s? Because I've been hearing about it since at least 2000, and it hasn't even hinted at happening yet here. Meanwhile, lots of other things continue to only trend upward: consumer goods, wages and so on.
I'm not doubting yr analysis, just looking for a reason why (and a better reason to not buy a house than "everyone says there's going to be a crunch", because as three blind mice points out, at lot of people have already "lost" a lot on that!)
posted by bonaldi at 9:51 AM on May 14, 2007
Does this correction necessarily mean a sharp drop in house prices, like we had in the early 90s? Because I've been hearing about it since at least 2000, and it hasn't even hinted at happening yet here. Meanwhile, lots of other things continue to only trend upward: consumer goods, wages and so on.
I'm not doubting yr analysis, just looking for a reason why (and a better reason to not buy a house than "everyone says there's going to be a crunch", because as three blind mice points out, at lot of people have already "lost" a lot on that!)
posted by bonaldi at 9:51 AM on May 14, 2007
For those of you hoping for a correction. I've been hearing that for years - bitterly expressed by those who had a chance to buy a few years ago and decided to wait.
If six people are playing Russian roulette and the first five players are rewarded with a dry click, that doesn't mean the sixth player is going to be okay.
posted by runkelfinker at 9:51 AM on May 14, 2007
If six people are playing Russian roulette and the first five players are rewarded with a dry click, that doesn't mean the sixth player is going to be okay.
posted by runkelfinker at 9:51 AM on May 14, 2007
As it stands, I can afford to continue renting and buy a house in Vancouver
We're having our own bubble here though, as you probably know. My mother's reasonably modest, three bedroom, post-war bungalow is now, by virtue of being located on the West Side, worth close to a million dollars (she bought it some twenty years ago for about 200K). Condos are being built so fast that sometimes it seems like the entire city is a construction site; and these 500 sq foot boxes go for 3 or 400 K. I'm just grateful beyond measure for the housing co-operative I moved into back in 1990-- I would be finding it difficult to rent in the city now, even if I could find somewhere (the rental housing stock is all being either torn down for condos or converted to them). Entertaining reading on all this at Condohype.
posted by jokeefe at 9:57 AM on May 14, 2007
We're having our own bubble here though, as you probably know. My mother's reasonably modest, three bedroom, post-war bungalow is now, by virtue of being located on the West Side, worth close to a million dollars (she bought it some twenty years ago for about 200K). Condos are being built so fast that sometimes it seems like the entire city is a construction site; and these 500 sq foot boxes go for 3 or 400 K. I'm just grateful beyond measure for the housing co-operative I moved into back in 1990-- I would be finding it difficult to rent in the city now, even if I could find somewhere (the rental housing stock is all being either torn down for condos or converted to them). Entertaining reading on all this at Condohype.
posted by jokeefe at 9:57 AM on May 14, 2007
Considering that from November this year Brussels will be at a relatively comfortable 1h50 by high speed train from St. Pancras, that the local real estate prices are still at comparatively sane levels (about 1/3 the prices in London, maybe even less), with plenty of really nice properties available, that mortgages in euros are considerably cheaper than in pounds, that Brussels is a massively more liveable city than London, and that there are even quite a few good English-language schools, I would expect to start seeing London-Brussels commuters quite soon, in particular self-employed professionals who could start working in the train every morning.
posted by Skeptic at 11:00 AM on May 14, 2007
posted by Skeptic at 11:00 AM on May 14, 2007
"Does this correction necessarily mean a sharp drop in house prices, like we had in the early 90s? "
Its anyone's guess, but a sharp drop in prices could be one way that affordability returns to the housing market, the other, of course being, increases in wages while house prices remain static or perhaps decline modestly.
As bap98189 points out, debt service is absorbing larger and larger portions of take home pay. This is hardly sustainable in the long term.
Interesting that almost all of the Central Banks, the Bank of England included, now are openly concerned about inflation (a curious exception being Japan). This implies higher rates in the future and increased debt service for consumers which can only slow the housing market. The UK mortgage market is singular in that fixed rate products seem to be the exception rather than the rule. So every time the Bank of England raises rates mortgage payments increase as well. Not good, especially so considering many people - desperate to get on the housing ladder - have taken out excessively large multiples of their annual salary with unrealistically high monthly mortgage payments. Of course the lenders are just as much, if not more to blame for this crap, but still all it will take is for certain sectors of the economy to start to cool (the strong pound is NOT good for any company that exports), redundancies to increase and default rates will spike for this class of marginal, highly leveraged borrowers. Curious that bad debt provisions at many banks are increasing; some firms are betting on stormy times ahead.
There was some interesting academic research published recently about expectations of inflation and observed rates in subsequent periods; with commodity prices still on the upswing I'm betting the Central Banks, BOE included, will continue to raise rates.
Skeptic has a good point about the Eurostar; I already know a couple of people who live in Paris and work in London. Faster connections will only increase the number of people engaging in such practices.
posted by Mutant at 11:27 AM on May 14, 2007
Its anyone's guess, but a sharp drop in prices could be one way that affordability returns to the housing market, the other, of course being, increases in wages while house prices remain static or perhaps decline modestly.
As bap98189 points out, debt service is absorbing larger and larger portions of take home pay. This is hardly sustainable in the long term.
Interesting that almost all of the Central Banks, the Bank of England included, now are openly concerned about inflation (a curious exception being Japan). This implies higher rates in the future and increased debt service for consumers which can only slow the housing market. The UK mortgage market is singular in that fixed rate products seem to be the exception rather than the rule. So every time the Bank of England raises rates mortgage payments increase as well. Not good, especially so considering many people - desperate to get on the housing ladder - have taken out excessively large multiples of their annual salary with unrealistically high monthly mortgage payments. Of course the lenders are just as much, if not more to blame for this crap, but still all it will take is for certain sectors of the economy to start to cool (the strong pound is NOT good for any company that exports), redundancies to increase and default rates will spike for this class of marginal, highly leveraged borrowers. Curious that bad debt provisions at many banks are increasing; some firms are betting on stormy times ahead.
There was some interesting academic research published recently about expectations of inflation and observed rates in subsequent periods; with commodity prices still on the upswing I'm betting the Central Banks, BOE included, will continue to raise rates.
Skeptic has a good point about the Eurostar; I already know a couple of people who live in Paris and work in London. Faster connections will only increase the number of people engaging in such practices.
posted by Mutant at 11:27 AM on May 14, 2007
I would expect to start seeing London-Brussels commuters quite soon, in particular self-employed professionals who could start working in the train every morning.
Brussels rocks. But would there be any possible way of doing this five days a week that didn't cost a couple of thousand pounds a month in train tickets? Which would sadly eliminate this for all but the wealthiest (who could afford to live in London anyhow).
posted by game warden to the events rhino at 11:38 AM on May 14, 2007
Brussels rocks. But would there be any possible way of doing this five days a week that didn't cost a couple of thousand pounds a month in train tickets? Which would sadly eliminate this for all but the wealthiest (who could afford to live in London anyhow).
posted by game warden to the events rhino at 11:38 AM on May 14, 2007
It's pretty shocking. It used to be that you could only get a mortgage up to three times your salary. My house (back to back in Yorkshire Mill town) is now worth over a hundred grand. At three times salary, I'd have to earn over £33,000.00 a year to newly mortgage my own modest two bedroomed house. I don't know what everyone else earns, but I think that'd be a pretty fantastic wage.
There's a lot of people I blame for this situation. However, I mainly blame the average Joes who seem to be blissfully and ignorantly happy that they own a property that has quadrupled in price in the last 5 years.
posted by seanyboy at 11:50 AM on May 14, 2007
There's a lot of people I blame for this situation. However, I mainly blame the average Joes who seem to be blissfully and ignorantly happy that they own a property that has quadrupled in price in the last 5 years.
posted by seanyboy at 11:50 AM on May 14, 2007
I sympathise with those who have to work in London - sadly I suspect I will have no option but to work there for my next job...
Even in Gloucester, which is quantum massively less desirable, the cheapest flats are now pushing the £100k mark - the average is £115k - which with an average salary of around £22k last year (source) means even here most people would have to borrow an eye popping 5.2X their annual salary.
The real roots of this problem is the Government's use of house prices as a way of hiding inflation and keeping the economy growing. Because the official UK inflation target (CPI) (which this Government adopted) doesn't include house prices or rent payments, the effect of cheap chinese imports on many goods which are in the measure, has been to artificially hide the real rate of inflation for ages. But, for most of us, the highest price we pay is our rent or mortgage - and as such we've asked our employers for more money to cover it - or been able to borrow against rising house prices and spend the money - all driving the economy, but also driving inflation.
The house price bubble is now a sort of lurking political land mine. If it goes off, and we have a revaluation under Brown it will pretty much ensure a Conservative victory at the election after, I'd have though - but if the Conservatives win before it happens they could very well carry the can for their predecessor's economic policies...
posted by prentiz at 12:08 PM on May 14, 2007
Even in Gloucester, which is quantum massively less desirable, the cheapest flats are now pushing the £100k mark - the average is £115k - which with an average salary of around £22k last year (source) means even here most people would have to borrow an eye popping 5.2X their annual salary.
The real roots of this problem is the Government's use of house prices as a way of hiding inflation and keeping the economy growing. Because the official UK inflation target (CPI) (which this Government adopted) doesn't include house prices or rent payments, the effect of cheap chinese imports on many goods which are in the measure, has been to artificially hide the real rate of inflation for ages. But, for most of us, the highest price we pay is our rent or mortgage - and as such we've asked our employers for more money to cover it - or been able to borrow against rising house prices and spend the money - all driving the economy, but also driving inflation.
The house price bubble is now a sort of lurking political land mine. If it goes off, and we have a revaluation under Brown it will pretty much ensure a Conservative victory at the election after, I'd have though - but if the Conservatives win before it happens they could very well carry the can for their predecessor's economic policies...
posted by prentiz at 12:08 PM on May 14, 2007
I sold a one bedroom apartment in London and bought a three bedroom detached house in Toronto. Then I sold that and am now building a (more bedrooms than you can count) house on 50 acres in the boonies, 15 minutes from the lake and our ski club with a view of 20+ miles.
UKP 800,000 would buy you the most beautiful 100 acres imaginable plus a 5000+ square foot architect designed house with all the trimmings.
I keep telling my British friends to sell their houses and rent while they still can, but nobody listens. Everyone really does think it's all going to last forever. It won't. Once mortgage payment outstrip rent by a factor of 2:1 you are in massive crash territory.
posted by unSane at 7:09 PM on May 14, 2007
UKP 800,000 would buy you the most beautiful 100 acres imaginable plus a 5000+ square foot architect designed house with all the trimmings.
I keep telling my British friends to sell their houses and rent while they still can, but nobody listens. Everyone really does think it's all going to last forever. It won't. Once mortgage payment outstrip rent by a factor of 2:1 you are in massive crash territory.
posted by unSane at 7:09 PM on May 14, 2007
chuckdarwin - Oddly enough, not really. I'd already become pretty inured to the street crime in London...the shock of it was that it wasn't confined to the 'bad' areas the way it generally is back home.
jokeefe - Yargh, I know. My brother is renting in Kits, and as much as I'd love to buy in his area and rent to him, I think I'll likely have to buy further out.
posted by Kreiger at 3:17 AM on May 15, 2007
jokeefe - Yargh, I know. My brother is renting in Kits, and as much as I'd love to buy in his area and rent to him, I think I'll likely have to buy further out.
posted by Kreiger at 3:17 AM on May 15, 2007
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This thread has been archived and is closed to new comments
Fed up with paying £375 per week for a tiny flat in NW3 and utterly unable to afford buying anything because all of our combined income went out in rent, council tax, and utilities, my wife and I decided we could no longer live in London. It's a great city, but it ain't that great. The lure of incredible city salaries is quickly damped by the cost of living - and the horrors of commuting.
posted by three blind mice at 3:46 AM on May 14, 2007