Amazing how many wide-eyed people get their first contract on their doorstep (because they could wait for the right opportunity) and think contracting is a breeze.
Yeah, wait til you have to commute to a different country to find work!
High rates of home ownership increase the unemployment rate, says a new study. This doesn't, at first, sound very sensible; we'd probably think that anyone with a house is working so damned hard to pay the mortgage that they'd have no time to be unemployed. However, it is actually true that there is a correlation between the …
Buy to let owners will be the wall against which others are shot.
Without their subsidised input, house prices would be lower. There would also be fewer stupid developments aimed at them rather than real people.
When something happens to the economy that means they have to sell because rental income << mortgage payments, house prices will become very much lower, very quickly. All in all, it'll be HOUSE PRICE APOCALYPSE time, thanks to them and the people prepared to finance them.
When something happens to the economy that means they have to sell because rental income << mortgage payments, house prices will become very much lower, very quickly.
Don't know about the rest of the country, but that's already happening (well, the first bit) in my neck of the woods. There are a lot of people competing for very few rented properties at the moment, a lot of whom (I'm told) have been kicked out because the landlord is selling up.
House prices appear unaffected though sadly, though they might come down in time
One reason house prices are not falling far, and are unlikely to, is people simply cannot sell for much less than than their original purchase price (thanks to high loan-to-value mortgages) and be able to settle the outstanding mortgage debt.
What's more likely to happen, as is the happening now, is that house prices will flatline (near to 0% changes) for an extended period of time and inflation will cause the relative value to decrease (i.e. the actual asking price of any particular house is unlikely to change but how what the "worth" of that amount of money is going down).
"What's more likely to happen, as is the happening now, is that house prices will flatline (near to 0% changes) for an extended period of time and inflation will cause the relative value to decrease "
It's not just house prices, but also trading volume (number of houses being bought/sold) which needs to be taken into account. All this jolly talk in the media about prices might make one think that the recession is over, but the reality is that trading was down by 95-98% in the 2 years leading up to the crash and is still well down on "normal" with almost all the trading occuring at the top end of the market.
Prices have indeed flatlined, mainly because people "can't afford to sell at a loss", however the only reason that decision isn't being made for them by mortgage forclosures is that the govt and banks can't afford any further loss of confidence in the market.
There's also a lot of resistance to increasing rentals, due to the average man in the street having lost about 40% of his purchasing power since 2002. In some cases it means that it's cheaper to let a house sit empty than to pay extra taxes associated with having a rental property in occupancy (you can blame councils for that particular bit of madness).
In most situations when there's been a bubble things return to sanity fairly quickly, but because it's housing, this time complete collapse has been artificially prevented. This WILL have worse long-term effects than if the market had been allowed to collapse along with the banking sector (going bankrupt isn't always a bad thing).
might make one think that the recession is over, but the reality is that trading was down by 95-98% in the 2 years leading up to the crash and is still well down on "normal" with almost all the trading occuring at the top end of the market.
But in some sense that's the real question isn't it? What is "normal"? Is normal the housing market prior to Bears, Leahman, and AIG? Is it what we had while the baby boomers were growing up? Or is what we see now the real normal because there was both a real bubble plus we're downsizing as the boomers retire? Even if it is well below what we were doing a mere decade ago.
The rest of your points are spot on too.
"In some cases it means that it's cheaper to let a house sit empty than to pay extra taxes associated with having a rental property in occupancy (you can blame councils for that particular bit of madness)."
Err... how does that work? If I have a tenant paying £400 a month, then (ignoring the basic allowance) I'd be paying 20% income tax on that, £80 a month. If it was empty I'd be paying "empty property" council tax, £85 a month, and after two years £127 a month.
House prices need to be artificially inflated by the banks and building societies because if the market readjusted 50% down - where the market OUGHT TO BE IN REALITY - ALL of the banks and building societies would collapse because they are ALL over leveraged by a massive amount the same as the US sub-prime bubble was.
Fraud on a massive scale and call me Dave is concerned with windmills and gay marriage.
We should just have government mandated rents for given areas. (They do even in the US).
At the moment the reason our housing benefit bill is so big is because of paying private landlords.
(The bedroom tax is for council housing that is not the problem).
I hope anything possible happens to make buy to let owners lose everything.
"(The bedroom tax is for council housing that is not the problem)."
Bedroom tax is also for private rentals, it's been there forever. The only change is that it is being introduced for council tenants.
Private sector Housing Benefit has ALWAYS been "for your assessed needs", until this year council housing Housing Benefit was "as much as you can eat". The changes this year have been to bring council housing Housing Benefit in line with private sector Housing Benefit to be "for your assessed needs".
I used to sit on a Housing Benefit Review Board before it was abolished ten years ago, dealing with exactly these issues.
> All in all, it'll be HOUSE PRICE APOCALYPSE time
House price apocalypse time is nearly a decade overdue anyway - and it would not be a bad thing at all (and I speak as a home-owner). And the longer it is postponed the sharper the adjustment will be.
All of the very biggest market crashes of any denomination (stock market, housing, etc.) were always preceeded by the notion that the prices can only ever go up. This is the ill thought out mindset that a lot of people follow today.
Here is a history lesson with scary parallels. In the '90s when the Barings bank collapsed, the biggest cause wasn't just a rogue trader, it was the way the markets were inflated in the first place. Certain financial institutions were effectively offering insurance against losses on the market. Since everybody was insured against losses and could only make money on betting the market will go up, everybody just bet on the market going up. Such insurance was then outlawed by the financial watchdog, and the insanely over-inflated market crashed spectacularly.
More recently, the same happened to the housing market, and the lenders' insurance against losing money on foreclosure this time was known as credit default swaps (CDS). This lead to mortgages being given to people who blatantly never had a snowflake's chance in hell of paying them back, and when a large chunk of them didn't the insurers issuing CDS-es got hammered out of existance - except the insurers were the same financial institutions doing the lending, including to each other. It doesn't take a genius to work out how that resulted in the events since 2008.
All of this has happened before and it will happen again. The problem is that falling house prices don't win votes for politicians, so the only alternative is to apply some psychological smoke and mirrors and have rampant inflation instead, which will wipe out the value without eroding the numbers, plus a hot-spot known as London that is easy to wave in people's faces and say "Look! The house prices are still going up! We saved the housing market! Vote for us!" when the reality is anything but that rosy.
Let it burn - it is the only sane thing to do. Let the Darwinian force do it's job. Propping up lame ducks only prolongs the pain on the way to the inevitable.
Wow. You understand just about enough to sound convincing, while getting it all hopelessly wrong.
You misunderstand completely the relationship between Nick Leeson, Barings, and "the Market".
Your knowledge of Credit Default Swaps is hopelessly misguided.
Is the housing market expensive? Yes, but less so than it was in 2008. Will it fall further? In real terms (inflation adjusted) yes it probably will, but not much further. I say not much further because the economy is starting to show signs of a (very slow) recovery.
Given the hideously costly rental rates in this country I don't think private landlords are heroes. Perhaps the answer is to buy, but be prepared to rent out the property you own and then rent yourself as you chase the work around. You can at least have the prospect of rental and mortgage free home ownership when you eventually retire. The problem with that is the discrepancy between rental rates - they tend to be higher where the work is, so if you want to buy in an area with low employment, perhaps because it's where you grew up and want to return to, the rental income if you can even find tenants wont cover your own rent elsewhere.
So what's a better answer?
But if you do own the rental property outright, and you're in the 40% tax bracket, then you're treated rather harshly for tax purposes.
Let's assume you own your house outright and rent it out, while working in another city where you rent from a landlord. Assume that both houses cost the same in rent. Your rental income only covers 60% of your rental cost because the rest goes on tax.
The only way to avoid this is to take out a mortgage on the first property and use it to buy a home in the city where you work. The current tax system actually encourages you to load up on debt so as to minimise your tax bill. A cynic might suggest that that is a deliberate feature, not a bug.
If the problem is one of labour mobility, then surely the answer is to make mobility easier.
I can't see the private capital flooding into to supplant all (largely subsidised) local authority and RSL housing, nor the mortgaged sector. But there are plenty of things government could do, but choose not to, to enhance mobility. Like more and cheaper trains (noting that people won't pay for these at market rates, so we're talking about even more subsidies than the £6bn rail currently gets). Better roads, lower taxes on road fuel. The abolition of stamp duty on house purchases, the abolition of crappy government paperwork like "energy performance certificates".
There's also the problem that government have failed to dent London's economic hegemony in the UK. Having the centre of commerce, finance, politics and law in one place guarantees a skewed economy, regional imbalances and labour immobility. They need to do a lot more than send the BBC hoi polloi to Machester, and the paper pushers of DVLA to Cardiff if they want to resolve this.
Personally I can't see the needs of the 99% being put ahead of the 1%, and the 1% rather like the status quo.
Yes, whereas in America, "Asian" is taken to mean "East Asian" or "Southeast Asian", in Britain it generally refers to people from South Asia or the Indian Subcontinent.
As for the "-American" suffix being the "politically correct" term, this story is amusing:-
If the lack of an IT angle ever becomes too pressing, why not have these stories automatically generated? Take any arbitrary unpleasant conservative viewpoint, stir in some further right wing takes on economics, and bravely leap forth to present a logically-untroubled conclusion of some collective good. You can probably even use the whole idea to pay less tax.
As a contractor, and renter (and former almost private landlord, in that the ex used to rent out her place), I can totally understand this. The only problem with the rental sector is that it's brutally expensive, and rental agents think nothing of charging two months' rent in total fees to a prospective landlord, and then charging another £250 to the landlord for credit checks that (a) cost them £2 and (b) the tenant already paid for.
If we cleaned up the sharkpool that is the estate agencies and made RSL housing more fluid, we might stand a chance of economic productivity picking up again.
In the meantime, let's all continue towards the economic doom of a massive wave of bankruptcies and recession like we had in the 80s by keeping those house prices high and those Daily Express readers happy, eh?
It's not clearing up the shark pool of estates agencies, it's removing the meddling of the politicians in the free market of renting. For instance, ASL sides with the tenant so that landlord has to compensate with raised rents. Remove the expense of owning a rented property and the prices will come down.
The reason neither party can tackle this is that both understand the value of communities,and having one requires people live in the same place for long periods of time. In they are so valuable in fact, that we better figure out how to bring the work to where people are, not the other way round:
By not having a job for a period of time, people are demonstrating that for a job that comes to them, they will accept a lower salary. The market is failing to use this fact, so the market is failing. Wow, a failing market. Who would have thought it?
This fail is for the author.
Just to expand on this, take London as case in point. Businesses could make huge savings by moving up to the north or out to Wales through lower wages and cheaper office space. By being reasonably close to an airport and mainline rail station, they can still get good links to London, and failing that, there're the interwebs.
It will be interesting to see if HS2 indeed moves more businesses out of London, or simply turns Bimingham into another commuter belt. I, for one, sadly fear that it will be the latter.
The commuter belt is where the shops end up, because while people are willing to do a daily point-to-point train commute for work, they won't be bringing the weekly shop home on that train.
So the effect is to boost the local economy.
The downside is that house prices go up as locals now compete with bankers who can buy a house with their monthly bonus...
That inequality of income actually the problem. The bigger the gap, the worse everything is.
The bigger the gap, the more incentive there is to work harder and move yourself up the income curve.
The locals have already spent the past decade competing with not for profit housing associations - essentially they have been outbid for houses by the unemployed. Worse still are the soviet levels of public sector employment in much of "the regions" as they get outbid again by the public sector workers they have to pay for.
Capping benefits, and reducing the lavish public sector packages (through regional bargaining) are the real answer, rather than expensive and under utilised train sets.
In most country's it would work by allowing people who can not afford London prices to live in the midlands. In the UK it will not work as the train ticket prices will still be over 160GBP a day to get into London before 9am and out any earlier then 7pm.
I used to live on the mainline and could get into london in around an hour so even with existing infrastructure it is doable. However at the price they want (even for a season ticket) i could either buy a car and drive in (and have change) or rent in London as the cost of transport outweighed the cheaper rent.
You could say that high unemployment causes high home ownership - maybe something to be celebrated.
Or there could be something (i.e. technological advances in the last few centuries) that have led to high home ownership and high unemployment. As a species we can now achieve more and work less. Which is OK as long as the achievement and reduction in working are spread around fairly evenly.
>You could say that high unemployment causes high home ownership
No you can't. Do you understand the meaning of lagged? Home ownership goes up followed by higher unemployment. They are not hand in hand. Let's examine what you say you are able claim, specifically, unemployment goes up followed by higher home ownership. Just think about that and then think how many mortgages banks are going to give to someone who is unemployed.
Also, all this "Correlation <> Causation" is over used. If there are enough studies and an absence of any other viable explanation then correlation does equal causation.
"Also, all this "Correlation <> Causation" is over used. If there are enough studies and an absence of any other viable explanation then correlation does equal causation."
Do you think that people can't see you when you cover your eyes with your hands as well ?
"Also, all this "Correlation <> Causation" is over used. If there are enough studies and an absence of any other viable explanation then correlation does equal causation."
Just because *you* can't think of another explanation doesn't mean you already have the answer.
Absence of evidence is not evidence of absence.
*YOU* need to learn some logic.
>*YOU* need to learn some logic.
Let's give you some simple logic.
If I put my unprotected hand in a bucket of boiling water it smarts somewhat. If you put your unprotected hand in a bucket of boiling water it will smart. If anyone puts their unprotected hand in a bucket of boiling water it will hurt. That's 100% correlation. What is the cause of the pain in your hand? Or as it's only correlation would you put your unprotected hand in a bucket of boiling water?
I know some smartarse will claim technically that it's all to do with heat transfer, however if you hadn't put your unprotected hand in the bucket of boiling water that wouldn't have taken place.
OK so you do need some basic logic lessons then. Shame really, because you sound otherwise intelligent.
If you can completely isolate *ONE* thing. And test that *ONE* thing, then dur! of course you can have your lovely 100% correlation.
This is not so in the real world and especially not with economics, which is more smoke and mirrors than almost any other field.
>If you can completely isolate *ONE* thing. And test that *ONE* thing, then dur! of course you can have your lovely 100% correlation.
Irrelevant. You either claim "correlation <> causation" or you qualify it with correlation does not always equal causation. The black and white statement is not true, it only needs one exception to prove that. Also you should note in my original comment I stated in the "absence of any other viable explanation". You have to accept that your lovely cliche is not 100% valid.
Oh and logic is usually one of two states so my hand in boiling water => pain, hand out of boiling water => no pain is perfectly valid logic.
Err... Broadly speaking the pain is caused by energy transfer triggering a reaction in your nervous system. Also, when it comes to your well being I (personally) think it's a good idea to have some idea of causation if possible - just in case you are surrounded by masochists who have administered a local anaesthetic to the hand they have in boiling water.
"I hope your role in IT is not as an analyst because your logic is deplorable.", oh the glorious irony.
I'll get my coat, it's the one with Chris W's copy of "Logic for Dummies" in the pocket that I am in the process of returning to him. Apparently he dropped it because his hands are very badly scalded after an uncomfortable lesson in wit, etiquette, causation and logic.
There isn't an absence of another explanation here, it could well be that some third factor increases home ownership, and later leads to unemployment.
Or, of course, high home ownership happens in housing bubbles, which burst, causing economic collapse, and thus high unemployment. So anything that leads to a housing bubble can explaing the figures
Moving from rental is longer and more costly than moving between purchased houses. 6 month minimum rentals, massive deposits, lag between moving and getting the deposit refunded, huge costs associated with 'referencing' and the delays there - not to mention the hassle of finding a house where your kids and pets are acceptable to the landlord.
Selling up and buying are much quicker in any market where the price is sensible.
The problem at the moment is the very over inflated house prices - pushed up by buy to let landlords who make a colossal 'killing' out of over inflated rents - sustained in large part by the same landlords over inflating the purchase price in the first place.
When will business and the government learn that we (the normal plebs) need somewhere to live, something to eat and fuel to get to work, the company that employs us will need energy for the office. So by uniting to increase energy, fuel and food costs by the 'green agenda' and propping up unsustainable house prices the government policies are the reason companies are shutting and moving abroad and are the reason for the unemployment.
While everything you say about renting is true, do you really want to sell and buy a house every six months? You know, with the stamp duty and all the fees?
And FWIW it seems to take at least a year to find a buyer for property round here. And then the chain falls through (behind or ahead of you) and there's another six months delay.
I have to agree: When I moved to my first mortgaged house the letting agents seemed to want to gouge their pound of flesh while pretending to be all nice and smiley to me at the same time. The main sticking point was that I was on a two month rolling contract and they wanted two months notice for me to cease the contract, otherwise they wanted a month of rent. The kicker was that they would only take notice on the rent day, the first of the month. I pointed out to them that this effectively made the notice period three months on a two month contract, but they wouldn't have it.
Still every conversation they had with me, while adding extra requirements to get my deposit back, did end in "we understand moving to your first house is difficult, so anything we can do to help..."
This was one of the more legitimate letting agents in the area...
I don't know where you live or your personal circumstances, but your story is all tosh to me.
I've bought and sold many properties and rented as a tenant a number and also rented out some of my properties. In all cases the renting was quick the buy/selling took an age. Took me 5 months to rent out my first property, my current property has had 3 voids all of just a couple of weeks each time. When I rented it took me a couple of weeks to find a good property and I moved in within a week. Buying a house took 3 months minimum after the 6 months looking for one. Selling took a 3 months for one and a year for another.
AST does mean that as a tenant you are stuck for 6 months, but it is legal to rent for shorter but at a higher rent to compensate the landlord for the increased hassle. After the 6 months most contracts are rolling monthly. In my case my tenants give 1 month notice, I have to give 2.
And house prices are not pushed up by BtL landlords. If they were then they are pricing themselves out of the market as there is only so much you can raise rents and the location defines that. House prices are pushed up by the banks that allow many multiples of salary to be used rather than the old double. Allowing people to spend more will naturally mean that they will use up that allowance.
And no way should the government get involved in arranging the place where and I how I live. The government can't usually organise itself out of a paper bag and you want it to organise what is a free market in renting? I've got a bridge you might want to buy.
Try being a landlord, and then tell me about your "colossal killing". I can tell you, owning and renting out a place is a bloody awful way to make a pittance, the costs are higher than you are seem to think, and the returns commensurately much lower. High prices make for high rents, but the only real return often is the capital gain on eventual resale, and that is taxable as well in many cases.
So before you wax all indignant, try informing yourself, knee jerk "hate the landlord" rants are sort of what one expects from the socialistas, but completely fact free in general.
>> Try being a landlord, and then tell me about your "colossal killing". I can tell you, owning and renting out a place is a bloody awful way to make a pittance, the costs are higher than you are seem to think, and the returns commensurately much lower.
Indeed. I think too many people only see those programs on telly - the ones where someone comes along, buys a property, and rents it out for a profit after allowing for the mortgage and cost of capital tied up. I worked out recently that the return on renting my flat was approximately zero. Yes I really did write zero there - and that's not with a 100% mortgage either (it's a somewhat more modest LTV). So even borrowing only part of the purchase price, the return is next to nothing.
And what does the poor exploited tenant get out of it ?
Well they get to enjoy use of a property for a lot less than the repayments would be on a mortgage - correction, just the interest payments even on a personal mortgage if it was a high LTV. They don't have any repair costs, the landlord stands those - even where they are higher because some people don't really care about other people's property. Eg, boiler breaks down ? Just complain to the landlord and demand a replacement - while refusing to pay the rent from the moment it broke down ! Can't afford to run the heating, no problem, let the place get damp and mouldy - it's the landlords problem to fix it when they've scarpered.
All this, and you can up and leave with just a months notice.
Truthfully, at the moment, even with the p**s poor interest rates, I could still get more income from my cash from a savings account ! Of course, if you read certain elements of the press, we just keep hiking the rents to cover our ever increasing costs. Well I did manage to get a very modest increase recently - only the second in 9 years. Overall, just a 10% increase in 9 years, or an average of just 1%/year compounded - while inflation has done what ? The CPI (12 month rate) hasn't dropped below 1% at all in those 9 years, and has at times been over 5%. The RPI (12 month rate) did go negative during the crash of 2009, but overall it too has generally been considerably above 1% for most of the last 9 years. I reckon a 30% rent increase over those last 9 years would just about have kept pace with inflation.
So why am I a landlord ?
Well sooner or later I will need my own place - so I chose to buy the property I want when it's on the market instead of having to take what's on the market when I need it. In the meantime I let others have the use of it - for considerably less than the cost of the money tied up in it. In the long term it *might* make capital gains - but as pointed out already, I'll get well and truly taxed on that thanks to Gordon Brown abolishing taper relief.
Back in the 1970s I decided that going overseas was the only way to build the cash for a deposit, so that is what I did. I ended up staying there for the next 20 years, bought the house and saved like crazy.
Recently I helped my daughter to buy her own place, it is about 30% cheaper to buy than to rent and you should see the cr*p that she was offered for rental purposes.
I do agree that the only wedge between home ownership and rental is the issue of deposits. However, I also have a real issue with the spend and enjoy habit of most of the young. They give up, do not save, pile into junk purchases and wonder why they have no way to buy a property. Living in a pile of cast off 'once must have' shoes, T shirts, etc. just does not have the same 'feel' as a home.
PS. As a result of buying a home for myself, wife and children for more than 20 years I have been paying the REAL bedroom tax to subsidise others to have empty spare rooms.
Theres more now... 'affordability'.... recently I was told that I couldn't afford a mortgage whose repayments were 20% less than the rent I was paying...
And another bank decided that I could only afford a mortgage of 90% of my annual permanent salary because I was paying maintenance for my boy... never mind a 3x or 4x salary mulitplier try a 0.9x
That's fine if (like me) you're single, but not much use if you're a dual income household or have children at school.
And that's apart from the point given further up this thread that you are taxed on what you rent your property for, but can't claim tax back on the property you are living in.
We did this a couple of years ago, and it's a good plan if you're moving to a different area and don't want to wait to sell. One problem is that you have to pay tax on your rental income, so the amount left over may not cover the rent that you need to pay (though you can offset your mortgage against the rent). The other problem is that any landlord has to budget for times when the property is empty, so if your tenants move out you may find you don't have any rental income for a couple of months, which is a pain if you need that to pay the rent on where you're living.
But this one is rather easy
>Which rather leaves us mystified as to why the politicians keep propping up house prices.
For the same reason they do everything, it's in their own interest. They all own properties in London which they rent to each other or if they can get away with it themselves. Oh, silly me some of them did get away with it.
...at the end you have nothing. There's no equity in a property you don't own. You can't sell it and downsize or move to a different country or... If you think rental is brutal now, what is it going to be like when you retire?
There's a reason people want to own their own homes, and I'm pretty sure it isn't to sway unemployment statistics!
The catch with owning a property is that the prices can go down as well as up. Willing to take the risk? Negative equity ring a bell?
With rental there are few catches. Got a leak, ring the landlord. Boiler doesn't work, ring the landlord. You just have the same outgoing every month, no nasty surprises when the power shower breaks.
Why this obsession with owning by politicians started by Maggie Thatcher in a blatant attempt at gerrymandering? In a normal market unfettered by the meddling of politicians renting would mean paying less than a mortgage and you can save up for your retirement (retirement which normally would mean covering the living costs for a few years of the few who lived a little bit longer than the average, not 30 odd years).
How exactly does the landlord pay the mortgage if the rent is less than the mortgage payments?
The rent must be significantly higher as the landlord is hoping to make a profit on the enterprise.
If thats not through the rental income being much higher than the outgoings, they are betting on house prices going up and selling the property after a few years - which kicks the tenant out as the new owner must up the rent to cover their new, more expensive mortgage.
The general rule is that the rental income should be around double the mortgage payments, so that "voids" don't result in a loss and the landlord can afford the necessary maintenance, repairs and replacement items.
Renting can only be cheaper if multiple tenants pay for the same property - flats or multiple-occupancy houses - or the landlord owns the house outright thus has no mortgage.
...appears to be a complete disaster. It seems there are loads of dodgy tenants, dodgy landlords and dodgy rental agents around. Honest individuals (be they tenant or landlord) do not know if they are dealing with a conman, so leading to problems. The stories I have heard about flats getting trashed, or about rental agents being absolute cnuts, or deposits being effectively stolen are dreadful.
So it is no surprise that buying properties seems like the best, most stable option for most people. Why would someone with a family risk a dubious landlord if they can avoid it?
Why does Germany have a much bigger private rental market than the UK? Shouldn't we try to replicate that?
Germany is interesting in this context. As I understand it, which is poorly, German rent rates are regulated by the government, with even better tenant protections. Independently of that, many countries and cultures don't have the same aspirations to property ownership as the UK does, and therefore the rental model is seen as the norm. Not necessarily right or wrong, just how it is.
....its hard to feel like you live in your own home if you're renting. This is especially true for families.... I've mostly worked the expat contract route and I've lived in over twenty countries. So I understand the renting angle raised by the author, especially regarding those countries which have cheaper rents than your home market. But to the key point: "the state to guarantee mortgages. This is effectively recreating the US’ Fannie Mae and Freddie Mac on English soil,". Holy F*ck this is a dreadful idea! Run the numbers and see the mess those entities are in.....
Those of us who do move around the country also have privately owned houses, so presumably it is not the rate of home ownership, but the availability of accessible remote accommodation that is important.
One real annoyance for peripatetic home owners such as myself is Council Tax. I have to pay 100% of my home CT. Living in a rented flat as a single person I should get 50% discount for single occupancy. BUT the flat is counted as a second home so only qualifies for 10% discount.
Therefore, as a flexible worker I have to pay 190% of CT.
It does mean, however, that as employment demand varies around the country over time and that a large part of the workforce is immobile, then there will be areas with high demand for employment.
For each area of high unemployment due to immobility, there will be another area with employers struggling to find workers. I suppose those employers will have to pay over the going rate to attract staff and they'll become uncompetitive.
Pay over the odds? Not a chance. Devon and Cornwall are prime examples at the moment. The local companies are all claiming there are massive problems with lack of talent and demanding all sorts of 'action' - but - I notice that none of them - not one - is paying the national average wage while expecting to get qualified IT professionals with 30+ years of experience in the very latest technologies... amusing if it weren't so misguided and sad.
>Pay over the odds?
To support what Dave 15 has already said take a look at Spain. High unemployment has lead to employers taking advantage of people's desperation to earn a living and offering the lowest wages possible creating a generation of mileuristas (look it up) and as things have become worse we now have nimileuristas.
Back to the UK. Job adverts often offer the "going rate" which basically means whatever they can get away with. They can't tell me or anyone else that in the whole of Devon and Cornwall there aren't enough sufficiently skilled people to cover vacancies. There are only employers/big corporations wanting to increase their profits.
Blame the crisis? What is this magic word? There isn't a crisis just an excuse to make the rich richer and the poor poorer. Only recently it was published that the largest growing sector in the UK was the luxury goods market, sales of Lear jets, Aston Martins are up. Presumably sales of Asda brand baked beans are down as the proles stuggle to find the money for them. And the only shame I can see in this is that the cause was Labour party policy. Mr smiley man Blair, oh bugger why did I have to think of him. Fortunately for you I can't go on, just the thought of what that man did to the UK has made me physically sick.
Housing policy should recognise that homes are meant for living in, not making money out of.
What is needed is (probably a whole package of legislation containing) a law fixing rents no higher than the equivalent of the interest portion of a 25-year mortgage on the same property. That would ensure that renting would never be more expensive than buying. (This does not mean you cannot still make money renting out a property. A mortgage is paid off after 25 years; but you can keep on claiming rent on a house for as long as it is still standing.) Also a law making it a criminal offence -- outside of certain, very specific circumstances -- to leave someone homeless.
<cite>So all rents change every tie the BoE changes interest rates?</cite>
Rents did change a couple of times in Switzerland when the local equivalent of the BoE rates changed. That was when renting through a large agency though, I have since rented direct with an owner and there has been no such adjustment.
But of course we are not talking about the huge rate swings we saw in the UK in the 80s and early 90s.
You'd need to take into account the following costs as a bare minimum, as well as mortgage interest:
buildings insurance/maintenance charges
general maintenance (drip feed fund to pay for redecoration, replacement of fixtures and fittings etc...)
Of course, you pay for most of these as a homeowner anyway, it's just not the headline cost of the mortgage.
As for the homeless thing, that's bull. If someone isn't paying the bills, they should be evicted - private landlords aren't charities, and if they invest in a property, whilst I don't agree on them making a whopping profit up-front, they shouldn't be forced to make a loss.
I fully intend to rely on bricks-and-mortar as my pension - a property you own outright that gives you a regular monthly income is far safer than most financial instruments, IMO.
"As for the homeless thing, that's bull. If someone isn't paying the bills, they should be evicted - private landlords aren't charities, and if they invest in a property, whilst I don't agree on them making a whopping profit up-front, they shouldn't be forced to make a loss."
Persistent non-payment of rent would be among the sort of exceptional circumstances that might justify an eviction -- subject to due process, of course. (Though with the rent that a landlord can claim limited by law, it's unlikely that a tenant would ever be evicted simply in favour of someone with more money -- as happens nowadays.)
"(Though with the rent that a landlord can claim limited by law, it's unlikely that a tenant would ever be evicted simply in favour of someone with more money -- as happens nowadays.)"
I fail to see why this is such a bad thing. The landlord is under no obligation, either legal or moral, to accept a below market rent to subsidise your standard of living.
If you want indefinite tenure at a fixed rate, go buy your own house.
>That would ensure that renting would never be more expensive than buying
And who's going to pay for maintenance in this utopia of yours? Would you trust a tennant to maintain your proprty to the same standard you would? Not to mention all the restoration and cleaning needed between tennants, at least a complete paint job and replacements for either damaged or stolen furniture (mattresses seem to be a popular choice), believe me a deposit doesn't cover that. Then there's also the rent lost while that's being done. What would you suggest, banks don't charge interest or repayments while you don't have tennants?
I let flats to make money not to break even for the benefit of someone else. I'm not heartless, I don't charge full rate as I remember renting myself, I'd rather the tennants can pay comfortably. But I'll be damned if I'm going to put up with the hassle involved in renting for nothing. It's not easy money, being called at two in the morning because the hot water heater isn't working when you have to be up at six for your normal job is no fun, so it has to pay. I keep making that point just so you understand it.
>Also a law making it a criminal offence -- outside of certain, very specific circumstances -- to leave someone homeless.
You mean such as not paying rent? That would be a great idea, at least you've made one reasonable comment. As it stands tennants can just stop paying rent and, unlessyou know a few big Russian guys, not be thrown out without a long and expensive fight.
"a law fixing rents no higher than the equivalent of the interest portion of a 25-year mortgage on the same property"
Hold on, that rent has to pay not just the interest, but the capital, the building insurance, the maintenance, the ground rent, etc. This is the classic trap people get into when they swap their £200 rent for £200 mortgage payments and suddenly find the place falling apart around their ears.
Who on earth would get into the rental market if rents were legislated?
One of the main drivers of high prices in the first place is that demand for housing significantly outstrips supply in most areas thanks to artificial restrictions on availability (ie: planning authorities whose members often live in cloud cuckoo land and the UK's fanatical obsession with "The Greenbelt")
The article just describes the natural tendency of "pure bred" capitalist system to gravitate towards a situation of wealthy landowners and their mansions, commuting by first class transport and accommodation, offset by a more feudal looking serfs roving around in mobile homes and tents, chasing income, almost never building up capital through property or any other statically positioned wealth.
As an earlier commenter noted: "What's to stop you renting out your owned house and renting another in a different area?".
The answer is simply: maintenance. Which many home owners still do themselves at least in part. For that one has to be often on location. Land and estate property has been a common way to secure or safely accumulate wealth but normally not by sleeping but by maintaining or developing it on location. Something a tenant obviously doesn't have to do as it's in the rental price, so not very cost-effective or bound to natural responsibility in most cases.
More importantly there's a cultural value imposed on static living and spreading roots in local communities. With the breakdown of the social and the notion of family life itself this obviously puts into question this very evaluation. But it's very uncertain if it can be phrased as pure economical issues without even addressing transport, teleworking and the possibility of constructing worker hotels. At least it's a more complex social-economical issue but more likely just a vector of some social theory "du jour" that happens to be in place.
When looking at *why* it's so expensive to move house (either rented or owned), it's pretty clear that there just aren't enough houses, full stop.
There are many reasons for this. We don't build council houses any more because that's not politically fashionable, we can't build on green belt land, banks don't want to lend money to either developers or buyers, more people want to live alone, the population is rising and so on.
Lack of affordable housing housing and decent jobs are the biggest problems in modern Britain, and they aren't unrelated.
"When looking at *why* it's so expensive to move house (either rented or owned), it's pretty clear that there just aren't enough houses, full stop."
Not enough houses in the right area. Some areas have a lot of empty properties, some areas have none.
"We don't build council houses any more because that's not politically fashionable, we can't build on green belt land, banks don't want to lend money to either developers or buyers"
We do build council houses, they're called housing associations now. Green belt doesn't literally mean green, it could already have houses on it but planning won't allow new builds. Banks don't lend because that damned meddling government tells the banks that they have to save up for the fund that pays out for when they next go bust.
"the finding that a “high” home ownership rate leads to unemployment is, once explained, "
Shame it isn't explained then:
In the words of the authors of the report
"We are not sure what explains our correlation"
"Our hunch, on which further work will be needed, is that the housing market exerts powerful externalities upon the labour market"
My hunch is that high home ownership and higher structural unemployment are both features of a much more complex economic history.
If nothing else the simplistic comparison of Spain to Switzerland is laughable:
"Famously, Switzerland has 3% unemployment and 30% home ownership, while Spain has 25% unemployment and 80% home ownership."
So what - there are massive historical and structural economic differences between the two countries. Is the author really trying to claim that Switzerland's stability arises mainly from better mobility? I bet I can find an EU working paper that disagrees with that - oh here it is:
Job Mobilities Working Paper No. 2006-01, Chapter 8
"In the beginning of the eighties, Bassand et al. (1985) observed that the attitude and
plans related to the professional activity of the Swiss population did not lead much to
mobility. Only a male minority, rather high managers or university graduates, already familiar
to a certain mobility and with good chances of promotion, took a stand on being ready to
move to another region for professional reasons."
Now - I'm not saying that the EU must be right but ignoring such a major study does suggest that Oswald is doing the conclusions before the research.
There is a problem with there not being an acceptable long term rental contract. But the problem before assured tenancies (mid 80s they came in) was that there were no valid short term contracts. As soon as someone got a tenancy they were almost impossible to shift out. Supply of private rentals did rise very strongly when the shorter, 6 month tenancies became available. It meant that if you did make a mistake with the tenant then you'd not have made a 5 year mistake but a 6 month one.
I rented a place in Germany last year. I wanted it for 6 months. There was loads of very decent property to rent at very decent prices. But only one flat in the whole town that I could have for only 6 months.
I've thought for a while, that instead of paying a deposit into the letting agents hands, there should be a compulsory insurance scheme for tenants that the agent could approach for compensation in the event of damages or default.
This would keep the thieving few agencies from making bogus claims against tenants deposit and would also work to punish genuine dodgy tenants (just try getting the insurance after you've had a couple of claims against you)
Very reasonable but I feel bound to say that defaulting is always a deliberate act to defraud - besides obvious circumstances such as redundancy/bankruptcy/theft I know one case where the tenant had to move in the middle of the night for the safety of them (and their children).
It wouldn't hurt for there to be something in the other direction so that tenants could get access to emergency repairs when the agent or landlord won't pull their finger out.
If you want a more mobile population we could build a lot more properties to buy. We scrap pretty much all tax for someone buying to own 1 property and ramp up the tax for every house you buy. This way the cost falls greatly for first time buyers and the majority with a single home while the difference is made up of those owning more and more homes.
And as it would be a lot cheaper for those with a single home to move they could follow the work!
The reason it takes so long to transfer across council housing is the lack thereof, which leads to long waiting lists. Since the shortage was caused by the massive selling off of council stock under Thatcher and her clones, this is not a case of social housing being even worse than private ownership but of private ownership being even worse that it appears. Indeed, the bulk of economic problems we have today are due to the home-ownership fetish of Thatcherite politicians, including Blair and Brown.
All it's given us are over-priced crap houses provided by industrial-scale cowboy builders like Barratts and their ilk. And, of course, something like 800,000 empty homes in the middle of a "housing shortage".
Bit radical, but perhaps one way to alleviate this is for EVERYONE to rent, and no-one is allowed to privately own property? You rent your house from an approved housing association (note not the government!) whose job is to maintain properties and build/demolish them as local demand requires.
That way freedom of labour movement is much simpler, as all kinds of properties will be available to rent, not just beige studio flats and damp terraces. There would be no restriction on rent charges - it can be a free market based on supply and demand, with the possible exception of regulation demanding housebuilding where demand becomes excessive due to insufficient numbers of properties.
You would require the housing associations to be run as social, non-profit enterprises, or, if you're feeling really radical, as consumer co-ops so the tenants would have a share in the profits.
Having said all this, excessive mobility in the population reduces social capital and community cohesion, which tends to lead to an increase in crime, anti-social behaviour, mental illness, neglect of public spaces, vandalism etc etc. So maybe we should all own our houses, like the government wants (but will never achieve)?
There are different types of landlord - many, maybe not most, are buy-to-let, running 1-4 properties, using an agent, looking for a return on investment, chasing a narrow margin above the mortgage. They are seeking longer term tenants, and a stable and consistent income. They may or may not be evil.
Accordingly (punitive) contractual fees and terms ape the mortgage sector - they don't want people moving around - they are not going to help this situation, in fact I would posit they are a contributory factor.
There are other landlords who offer short term lets (under 6 months), typically for cash, deposit optional, often for migratory workers (EU rather UK would be typical). This is a high risk type of letting for both parties, quality varies, for both parties.
Unfortunately the law is currently geared against this - you could let a room for 3 months, and then if that person doesn't leave and doesn't pay rent, it could then take a further 6 months to legally evict them. (Hence, in part, the drive towards high non-refundable fees, high deposits, and the dearth of short term lets - and it is only short term lets that would facilitate the worker mobility that is being described in the article).
What would help would be a new type of property tenancy under law with balanced protection for landlord and for tenant, but would also fast track eviction based on say 50% of the tenancy term (rather than 200%). Where the landlord could be assured of repossession within 6-8 weeks after the end of a 3 month tenancy where the tenant then doesn't leave.
In reality this type of tenancy does exist now, but it's fairly brutal and unregulated and at the lowest end does involve garden sheds, bunk beds and baseball bats.
In fairness I would say that the ability to evict people faster is not the solution being proposed; evictions are rare; it's about creating landlord (and tenant) confidence in the market for super short term lets (SSTLs)
SSTLs being the point between B&Bs and assured shorthold tenancies. Again, being aware for these do exist for B2B letting but pricing can be £200 per day - not relevant here.
is, obviously, that right-wing national governments have spent decades eliminating council housing. This makes it hard to get into one of the remaining houses.
Also, it's been commonly understood for a while that urban mass home ownership doesn't really work, and isn't practised in other countries.
This does unfortunately leave most people paying rent to the lucky sperm club who own the property, but with sufficient competition - or with subsidised social housing - gouging doesn't particularly happen.
Having said all that... even with flexible provision, moving house is a colossal hassle. People do it if they have to, but it's best avoided otherwise.
You not actually read the papers at all and see the massive splurges of reserved-for-social-housing bits in the new estates popping up all over the country?
Not that they're any good for contractors anyway. They go almost invariably to tenancy-for-life people who get onto the system during their apprenticeship then still reaping the benefit 20 years later.
I'm a private landlord so have a bit of experience. The whole buy tho let thing caused a lot of bad lazy (cough, yuppie) landlords who get fleeced by estate agencies who get high percentages for providing a rubbish service. Neighbour landlords who use agents have been a pain - the agents phone us direct and try to force commission works in communal areas and so on. Their markup of 'respectable' high street agents is utterly cowboy ridiculous. These charges of course go on the rent, which I where I going direct avoid viewing fees and have lower rents, plus get to vet the tenants myself on my gut feeling about them rather than references. Of course it can be hard work - being called up at 3 am because a stereotypically ditzy female tenant doesn't know how to change a flourescent tube can be ... irksome.
Fine in theory, but I'm in whole different country from my flat and remote direct management isn't practical. Yes the 15% for the agent is irksome, but there's not a lot of choice in my situation. If I lived within an hour's drive of the place, then yes, I'd dispense with an agent in a heartbeat.
Blanchflower and his imbecile friends of the MPC still haven't figured out that the simple relationship between supply and demand applies not only to the houses, but to the money that is exchanged for them.
House prices have not doubled or tripled because there are twice as many people in the country or because there is a 'shortage' of property. They have doubled or trebled because low interest rates enable people to borrow 2 or 3 times as much money.
Much more money chasing same number of houses = massive price rises
As for the moribund economy, and lack of investment in companies that generate jobs - Blanchflower and his chums still haven't figured out why low interested rates and QE to prop up a housing bubble is not stimulating the economy, it is killing it. Because not only is it keeping Britain uncompetitive in terms of living costs, it is underwriting property as an investment class that cannot lose (because the government will intervene with more QE if it looks like it will). Why risk money to invest in a company that might expand and create jobs when you risk losing all your cash for a meagre return, when you can get 5% from a BTL and know that the government will print as much money as necessary to ensure the price of your asset continues to rise.
The MPC are idiots, and the politicians are fools for letting them look after their banker chums to everyone else's detriment. So please stick the MPC up in front of the BTLers against the wall when the revolution comes.
I fell into being a buy-to-let landlord a few years ago because I needed to move house (baby on the way) but could not sell the one I lived in - no-one would buy it.
So it seems I'm now to be the wall against which all others are shot, come the revolution. Now, does this mean I end up being shot or not? Answers on a post card.
Since being a landlord however I'm astonished at the demand for houses - you stick it on Gumtree for 5 mins and 10 people want to come round and look straight away. Not quite right that.
Slight problem with the farcial idea that house ownership causes high unemployment - the Fwench economy is worse off than ours and they have a tiny minority of home owners, renting being more common in Fwench cities than here in the UK. And, whilst the idea could be argued as a problem for contractors that shift job regularly, big news - the majority of workers (even inside the IT industry ) do not contract.
I poured money down the rain as rent for years and all it did as mean that when I took out a mortgage the house prices had gone up compared to when I started renting. My advice is get on the housing ladder as early as you can afford it (even before you can afford it) becasue it is a lot cheaper in the long run.
I offer the two following points for consideration (or shooting down, what the hell..):-
The house price bubbles began not long after the limits on salary multiples for lending were relaxed. Strangely enough when you could only borrow 2x combined income the house prices were fairly stable but once they went to 4x or even 5x then all that happened was you bought the same property you would have just at a much higher price. Who benefited...oh yeah, the banks. So ownership is bad as it encourages house price inflation-.
With home ownership comes materialism, all the time rental is more common that ownership, people do not accumulate much clutter as it is a pig to keep moving it. Once they own a house though the rules change and more money get spent on 'stuff' to fill the house with so ownership is a good thing. isn't itI
I've always rented. Why? a) Because Housing Benefit gives accommodation security in case I'm out of work, and b) so I can follow the work if I need to and c) BTL landlords have pushed up house prices so high that I could never afford a house, at least not in this part of the UK.
I never used to worry about a pension, I never thought I'd live that long. But now I'm 50, the retirement age is going up, and the outlook for a state pension in 30 years time looks pretty bleak, I've taken to saving my money and looking for somewhere to invest it. Stocks & Shares? In the current global economic environment, not on your nelly. Building society account? Only see capital diminishing in real value. Gold? Already at an all time high, probably a bad time to buy. Property? Well here's the joke:
I can't get a mortgage for a house to live in myself, but I *can* get a mortgage for a house to let to other people, so I did. That way, I can remain mobile by continuing to rent, while providing accommodation to:
2 people who were homeless immediately prior to moving in, and a series of people needing a place to stay while they sorted out other personal circumstances like marital breakdown. Not *all* BTL landlords rent to people who have such a level of need, but most of the ones I've met *do*.
Put me up against the wall if you must, but you'd have on your conscience the fact of making my 5 tenants homeless.
PS After 10 years of working with various 'idealists' to set up co-operative housing, I am completely disillusioned by the fact that 'idealists' who rail against landlords quickly lose their ideals when they realise the potential profit to be made from letting their units in co-operative housing.
...Germany. Coincidence? I think not.
Anyway, the shackles caused by "getting on the ladder" have always seemed fairly obvious to me (at a personal and a macro level), even though I ended up doing it myself, I was lucky enough to buy somewhere in London and keep that while renting myself elsewhere. Being a landlord AND a tenant certainly lets me see both sides of the coin, and while I don't think I'd stretch to the word "hero", the rental landlord does fulfil an essential service, and through a combination of renter-friendly legislation and expediency (its better to keep a regular tenant than swap and change) I think there are far fewer dodgy landlords around than there used to be.
Of course if working from home was a genuinely viable proposition for most people rather than a minority pursuit not really trusted by managers (and in Ireland where I live currently its viewed with much more suspicion than the UK), then home ownership would cease to be an unemployment issue. It'll never happen though.
"...Germany. Coincidence?....." Yes, a coincidence. Their reluctance to shaft themselves with rediculous wage demands, unlike the PIIGS (or our own incredibly stupid unions in the past in the UK), was a much bigger factor in their current level of economic strength, along with their simpy being the largest individual economy in Europe. Of course, now their socialist politicians have shafted them by tying their economy to the rest of Europe's, meaning they have to pay out for the PIIGS, they may not have such a rosy future.
No, there is a direct correlation between the cost of Stamp Duty and unemployment - with the lagging indicator of course.
It is Stamp Duty (so £10 k for the most modest of SE England homes (seen by all as a total and unproductive waste of money) that really puts people off even thinking about moving to chase work
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