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Affordable Housing for First Time Buyers Watch

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    Why would anyone agree with this policy? [Unless they are liars, who are profiting from it?]

    How could anyone agree that the transfer of debt from one generation to another is acceptable?


    Please do not trust people like Quady. He is stating that this is acceptable!

    They are either corrupt or brainwashed.. The corrupt make profit from your misery.

    [ As has been PROVEN above..........:0) ]

    Labour are the enemy of the UK. READ the above and make your own mind up!
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    Im just planning on renting at first
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    (Original post by Dan1el[4.In his 1997 budget, Brown abolished dividend tax credits on pension funds. Companies saw the writing on the wall and immediately ended their final salary pension schemes to new employees shortly after the ‘Brown raid’.* The value of pension funds have since lost around £5bn per year since the 1997 tax relief cuts. Pension funds holding the cash that almost everyone in the country had planned to use for our retirement have lost around £100 billion over 12 years. [1997-2007)
    The advice Brown was given by this Treasury Paper, in 1997 was as follows:

    ‘The changes in incentives are likely to lead to substantial changes in portfolios. Pension funds will find equity relatively less attractive, and will prefer other assets – particularly interest bearing securities and foreign equity – and may also be prompted to consider more direct property investment.’

    This was ignored by Brown. Those funds were then channelled into fuelling an unsustainable property bubble, {Buy To Let portfolios,} which developed because of Labours complete lack of regulation of the Banks.This was followed by rising house prices, ever increasing toxic mortgage debt, and this was followed by the bank bailouts.
    Roughly 60% of houses historically acquired by First Time Buyers, were then acquired by the Buy To Let brigade. This figure rose year on year, from 1998-2003.
    FTBers were priced out completely.

    This is just one example of Gordon Browns incompetent decision making which helped to create the cornerstone of the debt bubble.

    ...

    That is the state of the UK. There are millions of people in this position. And it is solely the fault of the Labour Party.
    Your analysis severly lacks cause and effect. It simply does not follow from changing tax reliefs on equities to a fair level playing field (rather than the former status quo of a HUGE tax subsidy to pensioners - perhaps if we didn't subsidise pensioners so much they wouldn't sit on huge piles of property wealth creating the problems you describe?) that you see anything like the huge price increases we have seen. Yes pension funds reconsider their asset allocations in the light of changes to the tax system, but that doesn't fundamentally change the yields of property portfolios, doesn't make UK property a better asset class than all the other types of asset that are available and doesn't imply that pension funds are suddenly going to be prepared to pay 3x more for the same property.

    Its also unfair to blame buy-to-let buyers. Buy-to-lets are a good thing for people in our situation. Your attitude of "everyone must buy a house as soon as possible" does not have any foundation in fact and is partly the cause of the house price problem. A situation like that of European countries where renting is more common creates much more sensible markets for asset-poor groups like young people.

    This is all underlain by supply-and-demand. There just aren't enough houses for the demographic changes we are experiencing - people living longer and living in smaller units. And this doesn't happen because of mass middle-class opposition to changes in the planning system. You really can't blame the banks, Labour's changes to the tax system or buy-to-let buyers because they don't change the playing field and they don't fundamentally change the supply/demand, attractiveness or yields of property. Buy-to-let buyers, pension funds and banks will only buy or lend against property with a certain value/yield, but they don't control the demand for property. Basically, you are trying to find scapegoats which make small changes to the outside rather than addressing the actual problem.
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    (Original post by Soph1990)
    Im just planning on renting at first
    Renting is not that bad, you sometimes get exaggerated pressures from the older generation about "you need to get a mortgage" because for the past generation home ownership was seen as the be all and end all and a lot of people saw their homes as a pension fund because it was a way of making easy money. I very much doubt that will be the case for our generation. House prices are already high and difficult for first time buyers to afford so there isn't the room any more for prices to escalate on the scale they did before, so first thing is don't think of a house as a big investment in terms of making money any more.

    I think before buying a house you need two things, 1) to be established enough in your career to know what you want to do and know that you want to stay in that location to do it. I know loads of people in mid-late 20s who have moved around because job opportunities that they never could have predicted, have popped up, and they've had the ability to go. 2) you need to be in a couple, with someone who you know you are going to stay with, you can't really afford a house on one income so you need a joint income, but it then becomes terrible if you split up so you have to be sure.

    Yes renting is to an extent 'dead money' but home ownership is not the golden ticket that people sometimes make out - I find that the people who give me hassle about renting are homeowners who whinge and whinge about how difficult life is when you own your own home and then have all the extra bills and repairs etc that your landlord takes care of.

    I reckon when I get a job in a city that I'm keen to settle I might look to buy an apartment rather than a house, but that's just me I am not that bothered about having a family and I cba mowing a lawn or having a big house to waste time taking care of, I prefer to have a small place and having been over to friends who live in apartments like in Salford Quays or Clarence Dock in Leeds I like the social environment of that kind of set up, it's kind of like an upmarket version of uni halls.
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    (Original post by Dan1el)
    In 1997, according to the Office of National Statistics, the national average wage was £16,666.
    According to the Nationwide Building Society the Average House price in 1997 was £55k.
    £16,666/£55,000 = 3.3x salary [mortgage]

    * The Average First Timer Buyer mortgage in 1997 was just £41.5k [CML]

    By 2007, at the peak of the boom [according to the Office of National Statistics] the national average wage had risen to £23.5k
    The Average House Price in 2007 was £185k.
    £185,000/£23.5k = 7.8x salary [mortgage]

    Conclusion:
    The national average salary in the UK has risen by around £6K from 1997 to 2007 as house prices have more than trebled.

    The Average house price would need to fall by around 60% in value, from its peak 2007 valuation, to return to historically acceptable inflationary affordability of 3 – 3.5x salary
    That isn't a point, its reference information. You could have written to them and told them the height of the tallest mountain in the world, how its height has changed over the millenia and how it compares to mountains on other planets.

    If that is your point then why are you informing your MP? Just an FYI for them?

    I'm not disagreeing with what you've said, just that there is any need to write to your MP to inform them, it just makes you a loon.

    Why are you unhappy that lots of people bought houses at what you consider to be too high a price?
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    you complain about the new student fees but despite the increased fees the monthy repayment it set to dramatically drop, making a mortgage more affordable for graduates.

    as far as the rest of it goes, it was for too long so I didn't bother to read it.
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    (Original post by Dan1el)
    How could anyone agree that the transfer of debt from one generation to another is acceptable?[/B]
    No generation has passed less debt from one generation to another since the Bank of England was setup.

    Where is your evidence that doing so is a bad thing?

    Havent we got a better standard of living now than in 1790?
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    (Original post by Dan1el)
    1) You read it.

    2) Its true that Brown kept Interest Rates far too low for too long. I agree. As I have already mentioned in my original post. One of his many mistakes.

    [Although I think you'll find the long term average median Interest Rates are more like 5%. According to the Bank Of England...]

    3) Record low interest rates has fuelled Cheap credit which in turn fuelled the housing boom, and liar loans, due to the tripartite system, and complete lack of regulation. [Again, as I have already posted!] But credit is only cheap if the Interest Rates stay low.....[Unfortunately IR are being stolen from Savers at the moment to pay for this toxic mortgage debt. As I already posted.]

    What was your point again exactly?

    4) The points I have made are very clear. I suggest you re-read them. And answer them individually if you can.

    [Seems you do not like the points, hence your acerbic response.]

    5) Attack my post as much as you want. But It's all basically true. That is what Labour have done to us.


    6) Whats your political ideology? Free market Libertarian? Socialist? Democrat?

    7) If so, how can you morally and intellectually agree with what Labour have done?

    You cannot. Its impossible.

    8) [Even Tony Benn, the one person I have some respect for in Labour, has publicly stated that New Labour was a MISTAKE]

    9) [Unless of course, you are one of the people who were suckered into buying a house at the peak of the market, and you are panicing, with regards to the coming house price falls? If so, I feel for you, but point the finger of blame where it deserves to be pointed. If Not. Announce your interests then.]

    -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    10) Try to imagine, after studying really hard, finally getting a good job. Imagine the well deserved pride you would feel!

    Then imagine working in a tough workplace enviroment. Long hard days. Day after day. Month after month.
    And at the end of each month, having to give away, a big pile of your cash to a landlord.
    Say, £600-£800 each and every month.
    [Thats a big wad of cash. Imagine what it looks like.]

    Month after Month. Year after year. For over ten years.......

    [Now imagine that your landlord lied to the bank to buy the house, which you are paying the mortgage for!
    It was fraud!
    You are paying for his retirement!
    Without being able to afford your own pension, or your own house.
    So you are working for nothing.
    This man lied about his income to borrow the money from the bank to buy the house! So he is a criminal.
    And you also know that he was allowed to do this, because of Labours enforced lack of regulation. [Tripartite System]
    [For years Brown encouraged this RISK based banking system. Look at his mansion house speeches to the bankers.]

    11) Then the bank that fraudulently lent your landlord the money for the house you are paying for goes bust. But the government bails out the bank with your money! [Theft] This policy, also means that house prices will remain overinflated, ensuring you will never be able to afford your own house.

    So as well as paying for his house, you are re-paying the bank which should never have lent him the money in the first place!

    12) Labour created, allowed, and encouraged this system. [And they do not even have the decency to admit to it, or apologise for it.]

    Imagine how despairing and angry you would feel then.

    Knowing its just sheer incompetence, and thievery which has stopped you from getting anywhere. All that money. Gone. After a while, believe me, you will wonder why you are even bothering to work. You are in indentured slavery.

    13) Its even worse for you, as you will also have tuition fees to pay as well.

    14) That is the state of the UK. There are millions of people in this position. And it is solely the fault of the Labour Party.

    Its completely indefensible.
    Heres a lot of writting which will make you not be bothered to read and hence not reply - a similar writting style you employed when writting to your MP.

    1) No, I skimmed it (you later say I should read what you wrote, highlighting you knew I hadn't, as I said)

    2) Brown did not have control of monetary policy, do you mean he should have taken back control and under what basis?

    3) So why didn't you just say that in your letter? Because everyones knows that already(?) - man there have been documentaries and books a-plenty since '07, do you think your MP doesn't know that?

    So are you proposing Base Rate should be say 5%? Savers are doing pretty well, the spread between Base Rate and savings rates has increased since the crisis.

    4) I didn't read it (I even told you I hadn't), you don't have a point you have a list of information which everyone knows with a series of dodgy conclusions (some reasonable ones but some dodgy)

    5) So you don't think Greenspan/the USA had anything to do with this? Or are you calling for us to decouple trade (and should have done) with other countries so we aren't effected but other countries economic problems? Or do you think the Labour Party pulled the USA, Japan and the Eurozone into recession.

    6) errmmmmmmm pragmatist? I don't fit into an idology, none of us do, they are models and we are all on a spectrum. I don't believe in a free market or in socalism because neither in practise achieves their aims.

    7) Because they were democractically elected and the population actuvely wanted them to carry out the economic decisions they made (unlike the wars, ID cards ect) the economic position had a mandate from the people and people were happy until it fell apart. Thats how I justify it.

    Also as previously pointed out, the crisis started in the US, if the US hadn't blown up we would have had a slow down, a bit more unemployment but nothing like what we have seen.

    8) Why don't you have any respect for Jeremy Corbyn?

    9) No, why would I have bought a house in a bubble? That would have been stupid, although it was equally stupid not to have done, I'd have done alright. Might interest is I don't like people talking rubbish.

    I mean why on earth did you say:
    (Original post by Dan1el)
    Not one MP represented the average wage earner.
    You clearly didn't know this guy:
    http://en.wikipedia.org/wiki/Dave_Nellist
    (although you said you don't respect him as hes in the Labour party but isn't Benn)

    How does he not represent 'the average wage earner? Surely you just spouted junk without any basis in fact?

    Anyway I'll finish this latter, gotta go for now EDIT: Back

    10) Shouldn't you have got a better job? That isn't much cash - a salary of what £7,500 to £11,000. They shouldn't choose to give a big wad to a landlord. Tenants drive up rental yields by offering to pay big wads. How would the FSA being part of the BoE have stopped such mortgages being given? What changed which meant banks were allowed to accept self-cert? (clue: nothing)

    11) You realise that taxpayers contributed nothing to the bank bailour right?

    12) What did they change that allowed it? Just saying 'tripartite system' doesn't really cut it does it, otherwise you could blame the tripartite system for the budget deficit. What did Labour actually do which made this happen (baring in mind the Republicans made the same thing happen on a larger/worse scale in the USA).

    13) Errrrrrrrrr only students who graduated before 2000 (ie on the Conservatives loan scheme) would be paying back student loans with a salary of £11k so that statement didn't work at all.

    14) So people weren't in that position in 1997? Ever listened to Chumbawumba (particularly their '97 song 'drip, drip, drip' about landlords)? Since when could someone on under £11,000 buy a house?

    I look forward to you reading this and your response to the points raised.
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    Without the bank bailouts, house prices would have crashed and reverted to their long term median average affordability of circa 3 - 3.5x salary.

    But instead of a return to a 'free market' future generations are having their money, via taxes and QE, stolen [by policies implemented by Labour], to pay for this toxic mortgage debt.

    Thus Keeping house prices massively overinflated, ensuring generations can never afford our own house.

    Its Complicated thievery.

    Our money is being stolen, by our government, to pay for our neighbour's house's.

    Wouldnt a fairer democratic balance be that my neighbour loses tens of thousands off the 'fake' valuation of his house, [ just as we have already been forced to waste tens of thousands in rent as year after year, house prices have risen further and further out of our reach?!]

    A debt transfer has taken place. [Polite language for THEFT.]

    For some to win, the rest of us have to lose. [Because of Labours incompetence Theft and Cronyism]

    The average age of a FTB is now about 38 years old. Hardly Young.

    Some of the Comments on here in response to my original comment. [cannot figure out to multiquote,] are simply lies.

    For instance: That Brown had no control over economic policy, or that neither the banks, BTL'ers, or Labour are to blame. Or that the debt that has been passed onto a younger generation, now, is no greater than it has ever been. Or that we should have got a better job! etc....

    Ridiculos insinuations. Laughable.........[Plus a healthy lack of understanding]


    Someone mentioned demand versus supply.

    There are over one million empty homes in Britain.

    [Including all the 2nd and 3rd properties, not used as full time homes.]

    How many people could that house temporarily and permanantly? 2,3 Million? More?

    Not to mention Brown Field sites. Land Banks owned by conglomerates.

    If the empty properties were released onto the market, there would actually be a surplus of homes available.

    Labour built , an average of 26,000 fewer homes each year between 1997 and 2009. Under Tony Blair and Gordon Brown, the country witnessed the lowest level of house building in peacetime since 1924. Yes.

    But If you take away the ludicrous tax advantages given to BTL at the expense of FTB'ers, by the Labour Party and consider raising CGT on second properties, and increase Interest Rates, the situation would very quickly resolve itself.

    You could go further and consider a Land Levy Tax. [Possibly even offsetting Income Tax liabilities]

    The 'not enough houses' argument is smoke and mirrors. And its easily resolvable. All that has ever been lacking was the politicial will to do so.
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    (Original post by Dan1el)
    W
    So you didn't fancy answering then?

    You just thought you'd add to your original guff instead?

    Smooth. I hope your MP treats you in the same fashion.
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    Its having the time to do so.

    You said you only skimmed my original post.

    I shall not do you the same discourtesy. I'll be happy to answer them.
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    Okay, I’ve read all the posts here – including Daniel’s “long” one. (It’s not really very long – it only takes around 15 minutes to read). I think Daniel has a lot to say, and is bursting to get it all out – but is struggling to get it all across succinctly. I can feel the anger and earnestness in his posts.

    I have to say, I agree with Daniel. The increase in tuition fees is nothing compared to the financial problems you’re going to face when you leave university if house prices remain as they are. And high house prices are one of the legacies of the previous Labour government.

    The problem is, to understand where we are, economically, there is a lot of technical detail that has to be absorbed and understood – conveying this detail is not easy. I would suggest readers be patient and to not just take Daniel’s word for it, but look up some of the things he has mentioned – and do your own research.

    In terms of housing prices, Labour have presided over an unprecedented explosion in house prices – an increase between 1997 and 2007 of nearly 250% (Source: Nationwide). However, wages have not kept up at the same rate – an increase of about 40% over the same period. (Source: ONS).

    This means it is proportionately more expensive to buy a house now, than it was, say, 13 years ago. i.e. a larger proportion of one’s salary goes on paying the mortgage, than it did before.

    The cause of the rise in prices is undoubtedly the huge increase in mortgage lending by banks, which stoked demand for housing. Banks moved away from careful vetting of borrowers (and restricting lending to about 3 times earnings), and moved towards the more short-term lending practice of selling loans on via “securitisation” and “collateralised debt obligations”. This meant that the banks arranged mortgages with borrowers, and then sold the loan package on to someone else who would then effectively collect the money from the borrower. Thus the banks no longer cared if the borrower could repay – and so they relaxed their lending criteria. Bigger and bigger loans were made to more and more people with poor credit records.

    Gordon Brown commended the banks for this style of lending in various Mansion House speeches throughout the last decade, as it enabled people who would normally be refused credit, to take out mortgages and buy houses.

    The result? The nation went on a mortgage borrowing spree – thus demand increased – thus house prices went up. Because people had a lot of borrowed money at their disposal, general spending in the high street also went up. The government saw this as an expansion of the economy – it believed that people were getting “richer” – and it was a vindication of their economic policies. In actual fact, people were getting increasingly into debt.

    Whatever your opinion on the government at the time – all of this happened on Gordon Brown’s watch. He did nothing to curb it, but, rather, encouraged it by promoting his “light touch” regulation. He was warned by several different individuals and groups – notably the IMF – that “over-valued” house prices were putting the UK economy at risk. Gordon Brown waved the warnings away. Under Gordon Brown’s stewardship, the health of the British economy has become inextricably linked to the value of peoples’ houses. I would suggest this is a very unhealthy situation to be in.

    To suggest that the UK’s financial problems “started in America” (as Gordon Brown did) indicates a lack of understanding of the UK’s economic situation prior to the crash. If you drove your car blindfold, and a car in front of you stopped suddenly, causing you to crash, would you argue the crash was the other car’s fault for braking so hard? A car crash was inevitable – the exact timing, and who you collided with was unpredictable. In like manner, the UK was willfully (and blindly) following the US model of banking and house-price inflation. It just so happened that the US market collapsed before the UK’s did. It could easily have been the other way round.

    To suggest that the economic crash was unforeseen and unavoidable (as Gordon Brown did) beggars belief. To The Next Left; this is not something that is only obvious with the benefit of hindsight. It was right in front of everyone’s noses for a long time, and obvious to anyone who had heard of, for example, the 1929 Wall Street Crash, the South Sea Bubble, the Tulip Bulb Bubble etc. Lots of people were raising alarms and warnings for nearly 8 years, and predicting the exact consequences we find ourselves with. But they were drowned out by the noise of the stampede of the masses as they rushed headlong into a mire of crippling life-long debt – all the while being cheered on by Gordon Brown.

    In my opinion, house prices are significantly overvalued and unsustainable in the long term. They are damaging to the economy and a big correction is inevitable. I’ve held this opinion since about 2002, and have been aghast at the steps taken by various groups to prop the prices up.

    If anyone responds to my post, I respectfully request that you refrain from ad hominem attacks, and focus rather on the points made.
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    (Original post by DeMotu)
    Okay, I’ve read all the posts here – including Daniel’s “long” one. (It’s not really very long – it only takes around 15 minutes to read). I think Daniel has a lot to say, and is bursting to get it all out – but is struggling to get it all across succinctly. I can feel the anger and earnestness in his posts.

    I have to say, I agree with Daniel. The increase in tuition fees is nothing compared to the financial problems you’re going to face when you leave university if house prices remain as they are. And high house prices are one of the legacies of the previous Labour government.

    The problem is, to understand where we are, economically, there is a lot of technical detail that has to be absorbed and understood – conveying this detail is not easy. I would suggest readers be patient and to not just take Daniel’s word for it, but look up some of the things he has mentioned – and do your own research.

    In terms of housing prices, Labour have presided over an unprecedented explosion in house prices – an increase between 1997 and 2007 of nearly 250% (Source: Nationwide). However, wages have not kept up at the same rate – an increase of about 40% over the same period. (Source: ONS).

    This means it is proportionately more expensive to buy a house now, than it was, say, 13 years ago. i.e. a larger proportion of one’s salary goes on paying the mortgage, than it did before.

    The cause of the rise in prices is undoubtedly the huge increase in mortgage lending by banks, which stoked demand for housing. Banks moved away from careful vetting of borrowers (and restricting lending to about 3 times earnings), and moved towards the more short-term lending practice of selling loans on via “securitisation” and “collateralised debt obligations”. This meant that the banks arranged mortgages with borrowers, and then sold the loan package on to someone else who would then effectively collect the money from the borrower. Thus the banks no longer cared if the borrower could repay – and so they relaxed their lending criteria. Bigger and bigger loans were made to more and more people with poor credit records.

    Gordon Brown commended the banks for this style of lending in various Mansion House speeches throughout the last decade, as it enabled people who would normally be refused credit, to take out mortgages and buy houses.

    The result? The nation went on a mortgage borrowing spree – thus demand increased – thus house prices went up. Because people had a lot of borrowed money at their disposal, general spending in the high street also went up. The government saw this as an expansion of the economy – it believed that people were getting “richer” – and it was a vindication of their economic policies. In actual fact, people were getting increasingly into debt.

    Whatever your opinion on the government at the time – all of this happened on Gordon Brown’s watch. He did nothing to curb it, but, rather, encouraged it by promoting his “light touch” regulation. He was warned by several different individuals and groups – notably the IMF – that “over-valued” house prices were putting the UK economy at risk. Gordon Brown waved the warnings away. Under Gordon Brown’s stewardship, the health of the British economy has become inextricably linked to the value of peoples’ houses. I would suggest this is a very unhealthy situation to be in.

    To suggest that the UK’s financial problems “started in America” (as Gordon Brown did) indicates a lack of understanding of the UK’s economic situation prior to the crash. If you drove your car blindfold, and a car in front of you stopped suddenly, causing you to crash, would you argue the crash was the other car’s fault for braking so hard? A car crash was inevitable – the exact timing, and who you collided with was unpredictable. In like manner, the UK was willfully (and blindly) following the US model of banking and house-price inflation. It just so happened that the US market collapsed before the UK’s did. It could easily have been the other way round.

    To suggest that the economic crash was unforeseen and unavoidable (as Gordon Brown did) beggars belief. To The Next Left; this is not something that is only obvious with the benefit of hindsight. It was right in front of everyone’s noses for a long time, and obvious to anyone who had heard of, for example, the 1929 Wall Street Crash, the South Sea Bubble, the Tulip Bulb Bubble etc. Lots of people were raising alarms and warnings for nearly 8 years, and predicting the exact consequences we find ourselves with. But they were drowned out by the noise of the stampede of the masses as they rushed headlong into a mire of crippling life-long debt – all the while being cheered on by Gordon Brown.

    In my opinion, house prices are significantly overvalued and unsustainable in the long term. They are damaging to the economy and a big correction is inevitable. I’ve held this opinion since about 2002, and have been aghast at the steps taken by various groups to prop the prices up.

    If anyone responds to my post, I respectfully request that you refrain from ad hominem attacks, and focus rather on the points made.
    I disagree that the rise in fees 'is nothing' compared to 'the financial problems' when you leave uni, and I don't see how high house prices are a problem. The 15k fee increase means you'll be racking up debt after uni at £300-£400/year faster than you would have done, and at a rate of £1,000/year in total. Thats an increase equivalent to six months council tax, and a total equivalent to two months rent. High house prices aren't a burden anyway as graduates don't buy houses on graduation (and never have), and rents are reasonable.

    So you'd say house prices weren't stoked by the BoE rate being far lower than its medium-long term average? Lending criteria has tightened in the last three years, but valuations have hardly collapsed. You said you've believed house prices have been too high since 2002, CDOs didn't start taking off until 2004, how how can you blame them? Sure they helped rocket prices in the last few years of the major house price rises, but they weren't 'the cause'.

    There is always a set of people who are too optimistic and always a set of people who are too pessimistic, Calling wolf for 8 years before the crash doesn't mean those people really 'saw it coming', otherwise prices would be back to 1999 levels, clearly they are wrong (for now at least). Just in the same way as someone continually saying 'buy' on RBS from mid 2007 wouldn't have been proved right when the price stops going through the floor.

    Unlike the USA, the UK has not yet seen widespread default, nor did we see mass negative equity. Thats what sets us apart from the States. Houses bought here might have been/are 'expensive' but the loans were being serviced, which in the US they weren't. That was the trigger for bank losses, and an impact on the UK, but we haven't had the problems the USA has been though.
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    To the OP

    The one major problem with your analysis is the cost of building a house.

    If house prices were to drop the 50%-60% that is sought, I doubt they could actually be built for the amount you are prepared to pay.

    As a very crude rule of thumb you could say allow circa £1,300 per sq metre as build cost, add to this your professional team at circa 10%, another £130 per square metre and then think of roads/infrastructure etc per unit. You will be hard pushed to build within your price target.

    Right now the company I work for has a site with planning for 25 houses, ignoring the land cost and planning costs to date it is still not economic to build on the site. Build costs and infrastructure etc is higher than SP. The banks are taking the same position, very few housebuilders are being lent the funds required to build, house price drops will make the position even worse.

    Also the comparison of average earnings with average prices is a very crude affordability measure, interest/mortgage rates, taxation levels etc have to be considered.

    A better measure is comparing % of take home pay required to buy a home, anything over roughly 33% is edging high, by this measure both interest rates and taxes are brought into the equation.

    If you use this as a measure then yes, homes are more expensive than in 1997, but do not require anything like the % drop in prices you believe they require.

    As a first step ask a Surveyor, who is experienced in site valuation models using desktop analysis, how many sites he can find these days (outside London) where the numbers work; in the worst case examples at present the site valuation comes out as a negative.

    Accordingly if house prices fall of a cliff, house shortages will increase as there will be little new build.
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    3 points:

    1. The OP has some fairly good points but comes across like some sort of zealot
    2. The Next Left - you argue like a 16 year old! "Ooh, you are unintillegent! Ha ha, that proves it!"
    3. The mass media has done a good job of brainwashing the population into thinking £250k is not a lot of money.

    I'm probably a generation older than most on here, and from where I'm sitting you have been right royally shafted! Keep working hard. Save up. Get married BUT DON'T have kids. Then, and only then you may just be able to afford the shoe box of your dreams.
    And who's watch did this happen under?!
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    Ok,forget the party politics. I'm old enough to have been taken in by New labour (voted for em in 97) and know the taste of disappointment. But that doesn't mean I expect any better from the Tories. Also old enough to remember them last time round - the only "good" thing about having them in power is that they're so blatant about putting the boot in that people are more likely to protest against the worst of their policies. With Labour the spin was intolerable, and too many people were taken in.

    But regarding house prices, some on this thread have been too quick to dismiss the OP. I'm afraid it is true that your financial woes about fees are as nothing compared to how you're going to feel at house prices if they stay at current multiples of average salary. My student loan more than DOUBLED during a long deferral period when my salary was under the threshold for repayment because interest rates went up in the 90s and wages weren't all they'd been cracked up to be in the "graduate prospects" propaganda around at the time. It took me 13 years to pay it off after graduating. It was a fraction of what your generation's loans will be, so I really sympathize with you on the fees issue. The debt levels you are expected to take on are outrageous. But again.. these are nothing compared to the debts you'll be expected to take on if you ever want to own a house.

    You might think, ok, well what's the problem with renting? Having rented all my adult life, I can tell you it gets tedious paying a third of your salary to satisfy the retirement aspirations of your landlord, whilst wondering where on earth you will be living when you retire and still having to find money for the rent. In your 20s security is optional, but as you get older, it becomes more salient, as it dawns on you that you won't have your good looks, your health or your will-to-socialise forever. You crave privacy more, your own space. You want to raise a family in a safe neighbourhood. You want to have room to air inevitable domestic differences, rather than listen through the cardboard walls to next-door's farts, realising that you might as well discuss relationship or child-rearing concerns on the Jeremy Kyle show as try to sort them out privately in a typical private rented flat.

    Life changes you. It's as inevitable as puberty was although it once seemed that childhood would go on forever. Even if you don't have kids, your parents will get older and require care, and then eventually you will too. Now renting through all this might be fine and dandy if renters had the kind of long-term security in their tenancies as in many European countries. But do you really want to be be perpetually ready to quit your home at 8 weeks notice, even when your kids are in nappies say, or a parent has terminal cancer, or even when you are developing the first signs of arthritis or glaucoma or angina?

    Secure shelter is a fundamental human need. A flat-share is great while you're still able to flit around the globe and don't want to be tethered by long-term contracts that tie you to a place of abode. But life has a habit of tethering you. You'd have to be practically a sociopath to avoid the various claims which will be made on you. In turn, most people want to be able to stake their own claim to four secure walls, at the very least so they have a safe place to retreat to at the end of a long day that's been heavy with demands.

    Fight for your right for secure, affordable housing, as much as you do for affordable education. Get this issue on your radar and then get it on the nation's.
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    Just thought I would stick my penny'orth in. I think that an illustration will help the young'uns grasp just how severely they have been shafted.

    When I was 21 (20 years ago!) after graduating (first of several degrees) I bought a house with my husband for £17,000 (it was in a nice part of Essex). I can remember barely thinking about the deposit they were asking - it was so small - just emptied our current accounts. (My account was well in the black after doing my degree). Wages seemed relatively generous - even though we rated ourselves as 'struggling'. I can remember buying bottles of wine, eating out and travelling was all easily within our budget. How many of you can think about a lifestyle like that now?

    You really should be angry with our generation - I am. 'We' stitched you up good and proper. Don't be fobbed off with 'affordable housing' schemes - they are just another kind of cynical scam IMO.
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    (Original post by Lily Black)
    I can remember buying bottles of wine, eating out and travelling was all easily within our budget. How many of you can think about a lifestyle like that now?
    My take home pay is around £1,700, over a thousand pounds of disposable income a month is certainly enough for those things. Sod bottles of wine, I've bought a barrel of whisky!

    OK, so I can't secure a huge debt to buy a house, but typing on my 40" (not trying to show off with that, its just the way of the world) TV life seems pretty good.
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    Reply to Quady at #33

    Quady:
    I disagree that the rise in fees 'is nothing' compared to 'the financial problems' when you leave uni
    Yep, okay, in attempting to draw attention to the price of housing, I may have understated the problem of high tuition fees. I agree that leaving university with a debt of around £30K (or more) is not a good way to start adult life. I won’t argue with that here. My point was intended to be about house prices.

    Quady:
    So you'd say house prices weren't stoked by the BoE rate being far lower than its medium-long term average?
    I’m not sure apparently “low” interest rates alone stoked the house price boom. I believe base rates between 2000 and 2008 were, for the most part, slightly below the long-term average of 5%. As a crude measure, the mean average for those years was:

    2008 – 4.63% 2003 – 3.69%
    2007 – 5.52% 2002 – 4.00%
    2006 – 4.65% 2001 – 5.08%
    2005 – 4.65% 2000 – 5.98%
    2004 – 4.40% (Source: BOE)

    During this period, there were no record lows as far as I am aware. Granted, during the 70’s and 80’s interest rates averaged around 10%, but that was definitely an anomaly in the long view. Only since 2008 (after the fun and games began), has the average been around 0.5%.

    Quady:
    ...CDOs didn't start taking off until 2004, how how can you blame them?
    My point was that lax lending was the root cause of rampant house price inflation. CDOs were just a part of that. I think the start of the rise in prices was due to “normal” interest in an asset that was rising in value. But I think significant rises would have been curtailed fairly quickly if lending practices had remained constant. Instead, prices moved into a classic bubble that fed upon itself.

    I actually think there were a number of other factors that worked hand-in-glove with securitisation (& CDOs) to promote growth. These include:

    - Promotion of buy-to-let mortgages
    - Promotion of interest-only loans
    - Promotion of self-certified mortgages (“Liar Loans”)

    BTL mortgages rose fairly linearly from around 60,000 loans in 1999 to 1.2 million loans in 2008 (Source: CML). These made it easy for private individuals to buy multiple houses, on the assumption that they could guarantee rentals or house prices would continue to rise. This caused an increase in demand which pushed prices up initially.

    Interest-only loans allowed people to borrow higher sums relative to their income, as they only had to pay back the interest initially. I don’t know how banks could responsibly sell these, given the debacle of mis-sold endowments from the previous decade. Without an investment vehicle, repayment is entirely dependent upon rising prices. Again, the ability of individuals to borrow more than before placed upward pressure on prices.

    Finally, the “piece de resistance” – Self-Certified mortgages. The banks chose not to check the borrower’s ability to repay the loans. In turn, mortgage brokers encouraged borrowers to embellish their earnings to gain larger loans. Once again, this allowed even larger sums to be borrowed, putting upward pressure on prices.

    I would describe each of these as “lax” lending practices that did not need initially need CDOs. CDOs helped maintain the supply of money to the banks so they could make more of the above-mentioned loans. They provided the fuel for the whole merry-go-round to keep going.

    And I haven’t even mentioned the role of 125% mortgages and shared ownership arrangements in pushing prices up.

    The result was that anyone and everyone was “investing” in houses. A huge bulk of the UK banking system and the nation's apparent "wealth" now sits upon house prices. People require them to always rise. Pension investors rely on house price rises. Millions of borrowers are hoping house prices will rise.

    (I know all prices generally grow in the long term, but recent rises are way above the trend, and definitely out of step with wages.)

    And just to re-iterate – Gordon Brown praised the banks for their lending practices. One classic commendation was “What you have done for the City of London I hope to do for the British economy” – Gordon Brown addressing Lehman Brothers executives, when opening their Canary Wharf offices in 2004. Some irony, eh?

    Quady, I was going to reply to your other good points, but this reply is already rather long, so I’ll have to leave it for another time.

    Ten years ago (when I bought my house), 3 times your salary (from what you said in #38 I'm guessing around £30K p.a. pre-tax) could have bought you a nice 4 bedroom town house round where I live - you could have had a nice place of your own to house your shiny new telly. And repayments would be around £550 per month at 5%. Wouldn't you rather it was like that now? - Just a thought.
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    (Original post by DeMotu)
    Quady, I was going to reply to your other good points, but this reply is already rather long, so I’ll have to leave it for another time.

    Ten years ago (when I bought my house), 3 times your salary (from what you said in #38 I'm guessing around £30K p.a. pre-tax) could have bought you a nice 4 bedroom town house round where I live - you could have had a nice place of your own to house your shiny new telly. And repayments would be around £550 per month at 5%. Wouldn't you rather it was like that now? - Just a thought.
    I quite agree with the entirety of that post which paints a much fuller picture.

    The main difference between two day and pre-70s/80s high interest environment is that households have two wage earners, which has been a considerable factor. Salaries might not have risen exponentially, but household income has to a much greater extent. This has been noticeable even since the early 90s.

    You've guessed my income spot on :P from what I can tell though, my job would have been around the 22-24k mark between 1998-2002 and my rent is £400/month for a smaller but substantial place. Yes I'd prefer it (probably less than you imply I might due to the factors outlined) but like the OP I think prices have to come down over the next decade or so and I'll buy when the price is right.

    What annoys me about these threads is that the posters are often (as here) zealous about buying a house, whilst saying they are overpriced. The banks contributed, but people sure as hell want to buy houses, even though they think they are overpriced, which I think destroys their argument that they actually overpriced.

    Very good post though, I'd be interested in your thoughts on demographic shift to duel wage earners though.
 
 
 
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