Comment by awjr | Hacker News Reader

Comment by awjr | Hacker News Reader

In the UK it's normal practice to get in a chain. You sell yours, line up the one you want to buy, and all 14 people in the chain complete on the same day. Not sure you should be selling your house, then deciding to look.

You have to ask yourself what changed in the UK mortgage market to create this increase in housing value. It comes down to a bank regulation change the government put in place in 1996. Banks were able to offer buy-to-let mortgages.

This has fundamentally distorted the housing market in the UK.

In London you also have another issue. Apparently 40% of new build apartments are bought and never lived in. They are used as an investment to hold money 'safely' primarily by foreign buyers.

[EDIT] Citation for "buy to leave" http://www.theguardian.com/business/2014/dec/04/property-inv... http://www.theguardian.com/commentisfree/2014/dec/08/islingt...

So you have a situation where the Banks leant like crazy inflating the housing market, the crash happened, the banks hardened their mortgage lending criteria, which forced most people into renting, enabling landlords to maximise returns and invest further in rental properties using buy to let mortgages that use rental income as part of the payment calculation.

It's one hell of a vicious circle.

From my point of view I have benefited, but I honestly cannot see my 11 year old daughter ever owning her own property.

"Apparently 40% of new build apartments are bought and never lived in" : this is totally incorrect

Can anyone provide a more accurate figure?

I posted above but here are a couple of links on "buy to leave" http://www.theguardian.com/business/2014/dec/04/property-inv... http://www.theguardian.com/commentisfree/2014/dec/08/islingt...

I'm guessing it very much depends on the development with some stating sales being 85% to foreign investors.

<< Only 2.1% of homes in London are empty compared to 3.12% of the rest of England >>

http://www.londoncouncils.gov.uk/londonfacts/default.htm?cat...

Errr... have you been following the Battersea Power Station development at all?

> Not sure you should be selling your house, then deciding to look.

It's buying a house before you've sold yours that's a problem, not this way around (think cashflow), especially if you don't mind putting your furniture in storage and renting for a few weeks in between.

I seriously doubt that 40% figure. Why would "foreign buyers" who by flats as investments not take home the (very substantial) London rents? It would be financially imprudent.

I suspect that this is really a form of xenophobia, used, among other things, to sensationalise newspaper articles.

Use diminishes value.

Having tenants requires work, adds cost, and might just not be worth your time.

You might just want a house for a weekend, and not want plebs messing your shit up.

And it probably has some degree of truth, You can stand outside 'new' buildings for a week and never see lights on in some windows.

Use diminishes value, but this is nicely compensated for by rent, and more than compensated by London rental levels. Leaving a property empty is also not without problems (think heating, burglary, squatting, taxes). The number of people rich enough to buy pied-a-terres in (one of) the world's most expensive real estate markets is too small to justify the 40% figure (or anything like it).

These buy-to-leave flats are generally newly built (and were bought off plan), in high rise buildings with concierge / security, so there are no worries about heating, burglary or squatting...

I'd guess the price of these is around £350k - £1.5m (for a reasonable 1 - 3 bed flat in a new build), which is well within the reach of well off foreign middle class investors.

It is within reach, but it would be financially wildly imprudent to forgo the £1000 - £3000 monthly rental income that such properties would fetch. Bear in mind that you will have to pay council tax and other fixed costs anyway. It would be a desperately terrible investment, much worse than other, more liquid assets. The global middle class cannot afford such investments. Maybe members of the Saudi royal family, but they won't be that interested in 1 bedrooms in Islington.

It's interesting that I'm being downvoted for the message above. What's wrong with it?

Incidentally, I just had lunch with an architect and a guy who runs a building company, both London-based. I asked them about this. They both agreed that no sane investor would leave flats bought as investments empty. Investment means basically having tenants. The agreed that there is a media-driven moral panic about this. The architect said he had one client who had a 12 bed-room house in central London that was empty for most of the year ... that customer was a member of Kuwait royal family.

There is not much of a rental market for these £1m flats which to cover costs would have to rent at £40-50k a year. The number of people who can afford this us minute.

True, but rent and property value are strongly positively correlated, so there would also not be a very liquid market for buying and selling such flats. That would make it even worse as a speculative investment. `

I'm not saying such speculative investment doesn't exist, I just doubt it is as ubiquitous a phenomenon as claimed.

http://www.theguardian.com/business/2014/dec/04/property-inv... http://www.theguardian.com/commentisfree/2014/dec/08/islingt...

It's called "buy-to-leave" and no it's not xenophobia, it's a symptom of a housing bubble very much centred on London.

The article is a bit sketchy on the methodology used. The fact that not everybody flat investigated has somebody on the electoral register can easily be explained by several factors.

- The central London population is very transient. Many stay only for a few weeks, months or at most a year or two. Why bother registering?

- Many central Londoners, especially the young and newly arrived, move about quite a lot before they settle in one place for longer. They would not bother with registration.

- Many, probably the majority of central Londoners are foreign and don't bother with the electoral register because they can't vote in the general elections anyway, and may not know that the can vote for the major (or may not care).

- There's a lot of legally questionable subletting going on (think AirBnB), where the subletter and / or sublettee might not necessarily want to be on an official register.

- Some owners may simply fail to find a tenant, for example because they pitch rent too high.

As a piece of anecdotal evidence, I offer myself: I only got on the electoral register about 10 years after I moved to London.

Because it's probably less hassle to sit on the property while it increases in value. Seriously, this is becoming a major problem in London, especially from overseas buyers.

There was an article posted on HN a few months back (which I can't locate right now) which explained this problem.

The rental income from properties is not worth the hassle. It turns a relatively liquid asset into a much more illiquid one – tenancy rights in the UK are quite strong.

If you want to park your money in property, the worst thing you could do is hand control of that money to a group of people with legal right to keep if for certain periods.

I agree on liquidity, but housing, occupied or not, is quite illiquid anyway. If you care about liquidity, you'd rather invest in other asset classes.

Property prices and rental income in London are extremely high. I cannot see how anyone but the extremely wealthy could afford letting London property stay empty as an investment. And there are not enough extremely wealthy around to account for the large number of empty properties that London is allegedly seeing.

> I seriously doubt that 40% figure. Why would "foreign buyers" who by flats as investments not take home the (very substantial) London rents? It would be financially imprudent.

Would they be? What's a realistic amount of rent to charge on a GBP 5,000,000 flat? How many people can afford that and are looking to rent?

(Also I think many appreciate having their London flat available for the few days a year they're in town)

I don't know about rent for such luxirious flats. There are so few of them that they cannot account for the 40% empty rate that has been claimed. Almost all new housing in London are small 1 and 2 bedroom flats that cost under £1,000,000.

They've already shown financial imprudence by buying property at over the market rates.

I thought a major reason was Thatcher letting people who should not be owning a house buy one at a cut price?

No - 'right to buy' is not related to the UK's housing crisis, aside from the fact it depleted social housing stock (which is a separate issue that should not have been allowed to happen).

Offering cut-price sales of social property to council tenants is an amazingly powerful tool for giving people ownership over their communities.

Depletion of the social housing stock was an explicit objective of the policy. It was part of a transfer of power from the labour-controlled ""collectivist"" councils. That's why they were prevented from spending the revenue on new housebuilding.

It gives people ownership of their houses, not their communities. It's a micro version of the general privatisation problem of selling public assets at a discount for the benefit of private interests; it's just a variant that everyone's allowed a crack at, like the royal mail shares.

"who should not be owning a house"

I think that's a bit harsh - my wife's parents bought their house under the Thatcher Right to Buy scheme and they were both hard working and financially prudent - they could have purchased a house but it wasn't what skilled working class people did in Glasgow so they didn't do it for cultural, not financial, reasons.

People used to joke that you could tell council houses where the owners had purchased because they had a new front door - and that is true - people look after property a lot more when it's there and whole neighborhoods have been improved that way.

What I do think was wrong with the Right to Buy Scheme was that it didn't spend the money raised on building new social housing.

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