Hackney housing price bubble
There are a few stories flying around at the moment about the housing price bubble being particularly prominent in Hackney. Reports are that the average house price in Hackney is £500k and tiny flats are selling for crazy prices, the knock of effect being that rents are increasing too.
Although I suspect some of this is a little exaggerated for the story, it is just extreme and is no good for anyone, those who can’t afford to rent or buy are being priced out and those who are moving in are paying over the odds.
I was fortunate enough to get on an affordable housing scheme in 2005, which meant that I could just about afford to buy a share in a flat. I have no interest in my flat now being worth more than I could afford to (or would want to) pay for it, I’d rather a realistic housing market, equality for residents and the opportunity to stay in the borough I’ve called home for 10 years when I want to move.
I don’t know what can be done about it, but I’m interested in understanding how we as Hackney citizens may be able to try and counteract what’s going on. Any thoughts?
Some more info:
We wouldn’t be able to buy around here if we were buying today, luckily for us, we bought our flat in 1997 when prices were reasonable. I guess it is nice to sit on a profit, but we would have to move somewhere else, somewhere smaller to see that money, and we like where we live.
The prices are crazy, out of curiousity I looked up the value of our flat and it would be well out of our budget now. The benefits of being ancient I guess.
No idea what can be done, other than more house building, and an end to RTB, financial incentivesto encourage people who can afford to buy to buy privately to release their council home to someone genuinely in need. And bring back rent capping to make it less profitable for the buy to letters, if the rent returns go down, less people will buy to rent out, and property values will return to more sensiible affordable levels.
An interesting article over here: http://www.independent.co.uk/voices/comment/londons-property-bubble-shows-no-sign-of-bursting-but-hipsters-arent-the-problem-9136251.html – London’s property bubble shows no sign of bursting but hipsters aren’t the problem
Worth reading this too if you want someone to blame: http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/qb110301.pdf
Look at the chart on page 3 from 2011. The red line is what they planned to do to house prices in the name of “creating wealth” (taking from the poor and giving it to the already rich). We’re still in the “impact phase”. If you have the patience you might be able to wait for the “adjustment phase” of this giant pump and dump scam.
People with no understanding of economics shouldnt really discuss it too much for fear of highlighting their total lack of knowledge about it.
Of course heavily expansionary monetary policy is going to affect asset prices; its intention is after all to stimulate the economy. How you can conflate that with a wealth transfer from the poor to the rich is beyond me, though; that’s something that is more in the field of fiscal policy.
The long term solution to house prices in London or indeed anywhere is to align supply and demand. Reducing demand is fairly simple and quite equitable if you do it by targeting foreign investment in boltholes here. The elimination of the capital gains loophole is a good step in that direction but more can be done.
The other solution is to increase supply, which means building outward (difficult thanks to greenbelt legislation) or building up (difficult thanks to Ben’s beloved NIMBYs). Tightening up legislation on renting could also have an effect, though it isnt going to solve the problem on its own, whatever Diane Abbott tells you.
I think the foreign investment argument is overplayed – as far as I’m aware, most homes are still occupied (meeting demand), and much of the cash coming in to property markets like Hackney is domestic cash. It’s wealthy families tapping into family money to get on the ladder. So many people want to buy in Hackney, but only 25% of the borough’s housing is owner occupied – so demand to buy massively outstrips supply.
Only way to reduce demand is to make Hackney a horrible place to live!
I think increasing supply is the only way forward, and it’s clearly difficult for the reasons you’ve highlighted Gary. My old team at Shelter just released an epic, weighty report setting out a blueprint for how the next government might actually go about building the number of homes needed. Worth a read (even of the exec summary): http://thehomesweneed.org.uk/
My point about foreign demand is one of investment directly into Hackney but one into what is these days called ‘prime’ or ‘super prime’ areas which push up prices to levels where domestic buyers are displaced elsewhere. As such you get a wave of gentrification rippling out from what we might call traditional middle class areas as people that would otherwise have bought there look to pastures new, and as they do so, the remake it in the style that they would like to see (hence the old £3 loaf of bread on Chatsworth moan). Then those area becomes desirable in itheir own right and more people move there, pushing up prices to the level that the next wave outward begins.
This thread has a lot of interesting stuff on why London is (and remains) a very desirable location for foreign buyers. On a global city level, especially including the very favourable tax treatment it provides, London remains relatively good value.
Its clearly not the only factor involved, but it is the one for me that is probably easiest to get to grips from a policy perspective. There’s something wrong going on when entire developments in places like Stratford are sold entirely off plan to foreigners without domestic buyers getting a look in.
Yup, agreed. I think dealing with the housing shortage is one of those “every little helps” things – there is no silver bullet, which is why it’s only really big central government action on a range of different aspects can get the scale of change needed.
I was speaking to a neighbour last night – his dad bought their 5 bed house in E5 in 1976 for £6000 – probably worth £800,000 now. At the time he bought it, he was earning around £5,000 a year – pretty sure he isn’t on £800,000 a year now.