All Blogposts contain only personal views and are published in an entirely personal capacity. However, I do not accept any legal responsibility for the content of any comment unless I have refused to delete the comment following a valid complaint. Any complaint must set out the grounds for the deletion of the comment. I also reserve the right to delete comments that - in my opinion, are offensive or make unsubstatiated accusations against persons or groups. Like the BBC, this Blog is not responsible for the content of external internet sites. (with thanks to Valleys Mam's blog where I nicked most of this from).


8 Jun 2011

Ours Is A Nice House Ours Is

That old favourite - the housing crisis.

Anglesey Shared Ownership Housing Project For The 21st Century

I read a very interesting report the other day called  7th Annual International Housing Affordability Survey: 2011 by a group called Demographia who are apparently widely respected in this field.   In the report they studied major metropolitan markets in Australia, Canada, Ireland, New Zealand, the United Kingdom, the United States and Hong Kong.  The data in the survey is current to the third quarter of 2010 and covers 325 markets in the aforementioned 7 nations including 82 major metropolitan markets with populations in excess of 1 million people.  The report is authored by Joel Kotkin, a Distinguished Presidential Fellow in Urban Futures at Chapman University in California.

Now without stealing the report's thunder,  the basic thrust is that the cost of a median house in any given area - large or small,  should be somewhere around 3.5 times the gross median household income for that area.  To far beneath that level is indicative of a mix of over-supply/longterm entrenched local economic decline/lack of buyers/lack of credit/lack of well paying jobs.    To far above it and it signifies a mix of local shortages/over supply of credit/wage levels to high/specific local distortions which will eventually cause a severe correction  and the longer the correction is held off,  the bigger the impact when it does happen.

So what does that mean here on Anglesey?   Basically that our median wage levels are way to low (this we know)  and just as crucially our median house price is way to high (again this we know) - in short an economic double-whammy where both have to be corrected towards each other or the local economy will collapse further. and - as in America,  smash house prices through the floor. In short we need a lot of higher paying jobs to raise the median income AND lower priced housing to house the workers for the benefit of not only the workers themselves but also the local economy at large.   The median household income on the island is currently hard to assess as the figures do not include the loss of Anglesey Aluminium however it would be fair to say that it certainly doesn't top £25K (probably way less than that - one figure I found was as low as 16.3K)  and therefore the median cost of family housing on the island should be certainly no higher than £87.5K for a standard 3 bed semi.  Obviously that is island wide and so in some areas it should be more and in others it should be less but I reckon from a quick perusal of the Holyhead estate agents that it's probably around 5 times median household income across most of the island.

This 'over-pricing' then impacts in other areas such as private sector rent levels which at £400pcm for a 2 bed terraced are at least 25% over-priced  in comparison to income levels - money that should be getting spent in the local economy. It makes it difficult for workers to remain so they leave.  It the makes it difficult for employers to locate/expand because the available capable workforce simply isn't there and because the jobs aren't there more people who are able to, leave.  In a non-desirable area this leads to a rapid and often fatal collapse in the local economy and a proper collapse of house prices (see the figures for parts of the mid-west of USA and north east of England).  In a desirable area it leads to an influx of outsiders exploiting what are low house prices in relation to their spending power thus sustaining over-pricing despite there being no underlying jobs to support those prices and driving more local workers out.  It also encourages private landlords who, because they have bought overvalued property in relation to the underlying economy of where it is, charge overvalued rent to finance it.     This in turn prices more workers away and slowly demographics take over and the ratio switches to low-paid workers subsidized with benefit top-ups,  retirees, long-term unemployed and rents being met from the social purse. This then trickles down into reduced consumer spending due to lack of local disposable income and the subsequent decline of local retail areas and local independent tradesmen struggling for business.  Starting to ring any bells?

Now the formulae used in the report are more complex than the simplistic description I have given above but I strongly recommend you read the report in full (and also visit the demographia website) and consider the long term and unavoidable implications of trying to stop housing dropping in price to realistic levels, failing to build an adequate supply aimed at the average local requirement and actually attempting to kick-start a housing boom of what is an already  way over-priced essential commodity.

Keyworker Affordable Housing Scheme Of The Future

Famous Documentary   Cathy Come Home    Doomed For Repetition?


Prometheuswrites said...

Excellent post Red Flag.

Thanks for the links.

kp said...

There is no housing crisis in Anglesey, just a rather poorly educated population that has come to rely rather too heavily upon welfare.

If 'couples' don't have children until they can afford the responsibility, and if couples don't have more children than they can rightly afford at any one time many of our current problems would vanish almost immediately.

As for the matter of jobs, if you educate the kids well they will be able to compete for jobs on a world scale. If you don't, they will stay home and breed like rabbits. And this next generation of kids will do likewise.

Sounds familiar?

Anglesey is a perfect rest place for the retired, the elderly and those in search of something other than material riches. It should also be very good for agriculture, tourism, sea ports and the like.

Yes, it may be an area best to live in after you have made your fortune elsewhere, but so what and why not? If you can afford to live here you have the right. And by living here you help to sustain a local community, a local community that includes many of those with the skills and services that we all rely upon.

But what Anglesey is not good at is supporting a community that is under educated and immobile. A community that has come about largely through boredom. And now we need to prevent this very generation perpetuating the cycle. In short, we either need to dramatically improve the educations system or else start shipping these undereducated kids and their families out. Out to places where they can find jobs, out to places where they can learn to lead normal, responsible lives. Out to places where their societal contributions are considered worthwhile and meaningful.

And by doing so we will end up with a more tolerable, more law abiding, more harmonious society here on Anglesey. And a hell of a lot more houses available for purchase and/or rent.

The Red Flag said...

Youi haven't actually read what is written have you - just gone off on your usual Daily Mail bigoted tangent.

I will explain what the report says in more simple terms for you in relation to Anglesey. because the housing is to expensive in relation to the jobs available, anyone who knows how to do anything leaves. That prevents employers bringing in well paid jobs which encourages more people to leave.

To reverse this you need to feed in better paying jobs at the same time as cheaper housing

Children here are not proorly educated. The ones who are left behind are the poorly educated ones thus distorting the figures and that can only be reversed by more and cheaper housing along with better paying jobs. Nearly every point you bring up cannot be addressed except by more and cheaper housing and more better paid jobs.

And a hell of a lot more houses available for purchase and/or rent. It's not just quantity - it's price. Rents and house prices are to high on Anglesey to sustain the community in the longterm.

kp said...

Sorry Red Flag, but I would ask to you re-read my contribution. It mirrors exactly what you are saying, but presents an alternative (and much more sensible and long lasting) solution.

Daily Mail it may well be, Frankfurter Allgemeine it is for sure!

The Red Flag said...

It doesn't mirror mine at at all.

as for Franfurter Allegmeine if we were to impose German-style housing market in the UK we wouldn't have this problem at all.

Germany - straight repayament mortgage, 90% LTV max, 20 year mortgage standard, people rarely buy until in 40's, interets rates fixed for the duration from day one. No rolling over, no interets oonly, No equity loans, no other loans using house as security until it's paid for. Net result, houses rise roughly in line with inflation. Private owenrship low as property seen as somewhere to live as opposed to an investment. rents very low in comparison to UK with tenants afforded more security and rights. Private landlords licensed and controlled by the loacal state. Maximum rents set by local state.

There has been no house boom or crash in Germany (not since the RAF stopped in 1945 leastways). My daughter in Treer has just bought a brand new two double bedroom apartment, both bedrooms with their owen bathrooms, lounge, dining room, kitchen, laundry room, storage room, underground parking, lift to floor. Block fully wired with fiber-optic, outside maintained grounds €80,000 & €100 a month servicing/mainatenance charges. Prior to that she rented a 3 bed cottage in the moselle valley - €350 pcm.

One of my mates - Colin, bought a 3 bed detached, small dip pool, front and back gardens, double garage, rural area mid way between Hamburg and Hannover (30-40 mins from each) - €95,000.

I have anopther mate - Sean Kelly, who lives in France and it's very much the same there.

Those are normal prices in Germany. We have allowed our property market to become a casino and we haven't even started to pay the consequences in tterms of social breakdown yet.

kp said...

Sorry again, but you continue to miss the central point. Let me try another way:

You think we need more houses. I think we need to achieve a balance between people and housing.

You think each and every time a 'couple' start a family we should build a new family house. I think they shouldn't start the family until they have the means to purchase a suitable house.

You think more, more, more (of everything) is a sign of progress. I think living within one's means is a sign of a good education.

You admire Germany because you think things are cheap. I admire Germans because they are disciplined and live within their means.

The Red Flag said...

No KP it's you who miss the point. For starters Germany is not 'cheap' - it's normal house-price wise - they control it to around 3.5 median income. It's the UK that is decidedly out of synch and deserves what will ultimately happen.

As for couples and kids - we have a seriously declining birthrate in this country that is actully of serious concern to government - there simply are not enough children to support the elderly in years to come. Therefore given that the birthrate is in serious decline then your age group must have been breeding like rats and the problem is actually that there are too many of you.

And what's 'purchase' - there should be no need nor pressure to buy, there should be sufficient dwellings of a suitable standard and size for rent at a suitable level for the incomes in that area.

As for the Germans being disciplined and living within their means that is a cultural thing that most UK people - probably even yourself, would resent if it were imposed here. It relies on tight control, obedience and accepting administrative fines without question. For instance they consider it decidedly abnormal to use credit cards for anything. People who attempt to use one in a supermarket for example are viewed with great suspicion and attempting to pay your rent or mortgage with one is verbotten. This culture pervades other areas for example in the area I lived you were only allowed to use binbags bought from the council - transparent and coloured for different types of rubbish. All serial numbered so they knew excatly who's bag it was if you put the wrong rubbish in the wrong bag. You were fined just over 30 quid fixed penalty if you did. The local shops were not allowed to sell anything that could be recycled unless they provided recycling facilities for that particular thing so even a little corner newsagent would have paper, cans, cellophane, cardboard, battery, plastic recycling facilities. When you parked your car - even on your drive, you were expected to put a drip tray under it. If you didn't - fined. If it dripped oil, your drive would be dug up, 1 metre down, cleaned, replaced and the bill dropped in your lap whether you agreed to it or not. You were not allowed to have satellite dishes or TV aerials - everyone was on cable with the basic channels free. All shops (even supermarkets) closed midday saturday until monday. No alcohol sold on a monday - all bars, restaurants etc closed. No BBQs or washing hanging out or kids playing in your garden on a sunday - quiet day by law. Different ages had to be indoors or with an adult by certain times. Failure to produce ID card on request meant mandatory arrest until your identity was ascertained. Likewise not having all your driving documents, 5 litres of fuel in a can, authorised breakdown kit, first aid kit and 100 marks (about 35 quidback then) in cash - your car would be impounded there and then until you produced them. Even if you were 100 miles form home. And you would have to pay the impounding fees.

I wouldn't say the Germans are disciplned so much as controlled very tightly and slammed if they step out of line even for petty things.

It was also a very violent place. Not much nicking goes on but fights, stabbings, shootings, public drunkeness do.

Jac o' the North said...

This is fascinating reading and bears out a number of things I've been saying for years.

Using housing as an investment and, effectively, gambling on its value increasing year on year is a problem largely confined to English-speaking countries.

When people, especially young people, are struggling to bring up kids and pay a mortgage then it must impact on the wider economy because those people have less disposable income.

A great post, RF, keep it up, and don't be distracted by kp - God! how we all love him!

kp said...

Oh Red Flag, such a narrow view of life in Deutschland. In some ways true, but you can soon get used to it and then you quickly appreciate the reasons for having such rules.

Surprised you didn't mention car parking etiquette. Now, how sensible is that.

As for your concerns about the falling birthrate and the need to support the elderly, you reinforce my points over and over again.

If your learn discipline at an early age your education will benefit. You won't have kids that you cannot afford to house and look after. If you are educated, you work, and if you don't have too many kids and you don't overspend you will be able to save throughout your life. And these savings will be available for you either in the form of pension provision or savings in the latter years.

Each generation must look after itself, not rely upon the next. This is just perpetuating the mess we are already in.

Again, here in Anglesey we are an attractive place for the more wealthy of retirees. Thank goodness for this. These retirees provide valuable income for some of our more talented youngsters. We need more of them, not less.

What we need less of is this poorly educated population that has come to rely rather too heavily upon welfare.

By all means have kids, as many as you want ... but accept that the responsibilities of parenthood last for both you and their lifetimes.

Robert said...

You get them on every site....

Prometheuswrites said...

KP: I have to admire your desire to transform the place you live into a vision of what you think it should be like. (I suppose that's why we all write our points of views on theblogs)

Though in all practicality it would be a lot easier for an individual to move to a place that has a lifestyle they admire than to try change the lifestyles of many of the individuals who live locally.

I believe that we measure our societies by the way we treat those less advantaged. I can't condone 'shipping out the less educated/unemployed/homeless'

we'd end up like Australia, a beautiful (and prosperous?) land, where the advantaged are welcomed to live a 'westernised' lifestyle, but with a socially excluded and marginalised indigenous population, that is all but invisible and unmentioned to casual visitors.

What's that core value of popular war movies? - "No-one gets left behind".

As you say - no real disagreement over the data, just how it's interpreted.

PS. I like KP's comments - I might not agree with his intepretation, but he does give debatable reasons for his position. QED

Prometheuswrites said...

PPS. The PS is ambiguous: It should read: "I like it that KP makes comments ... that are contentious"

After all, if we were all agreed there wouldn't be any debate. :)

Anonymous said...

KP is a she.

Prometheuswrites said...

Anon 15:18

Apologies. Thank you for that piece of information.

PS. KP can you confirm?

Anonymous said...

Is she sexy?