The Lemon Fool

monabri wrote:

Tara wrote:

CliffEdge wrote:

Tara wrote:

monabri wrote:I'm afraid it's called Capitalism...some folk have more than others either by luck, by birth or by hard work...sometimes all three. As long as the wealth is acquired honestly and " does no harm " then one should be free to spend it as one choses.

But that is the problem. The acquisition of housing wealth over the last 20 or 30 years has done enormous harm to society as a whole and the younger generation in particular. A single person on average UK earnings could easily afford an average price house in the 1980s. But now it is impossible. If your idea of Capitalism means that a person on average earnings can no longer afford a decent home, then what use is it?

Rubbish. A single person on average earnings could not ever easily afford an average price house. They would have to scrimp and scrape and save like we all did to buy a starter home or flat. Nowadays young people seem to feel entitled. I wonder why.
Your ideas are so wrong that I find it frightening that someone can be so misguided. What's worse is you are certainly not alone.

Yes I am certainly not alone, and you will probably find that my views are shared by the majority of the UK public. Also probably shared by most Labour MPs and probably even most Conservative MPs.

House prices were about 3x average earnings in 1997, and they are about 12x average earnings now.

If you cannot see that there is a housing affordability crisis in the UK, and that UK house prices are absurdly overvalued, then you must be very uninformed.

https://conservativehome.com/2022/08/22 ... r-housing/

https://www.mirror.co.uk/news/uk-news/u ... ers-313276

"The average wage in 1997 was £16,500 a year, according to the Office for National Statistics.
In the same year the average house price was £75,762 - around five times people's salaries."

The link does not work.

The multiple you have quoted for 1997 is approximately 4.5x average earnings, and the multiple now is approximately 12x average earnings.

Tara wrote:

monabri wrote:

Tara wrote:

CliffEdge wrote:

Tara wrote:
But that is the problem. The acquisition of housing wealth over the last 20 or 30 years has done enormous harm to society as a whole and the younger generation in particular. A single person on average UK earnings could easily afford an average price house in the 1980s. But now it is impossible. If your idea of Capitalism means that a person on average earnings can no longer afford a decent home, then what use is it?

Rubbish. A single person on average earnings could not ever easily afford an average price house. They would have to scrimp and scrape and save like we all did to buy a starter home or flat. Nowadays young people seem to feel entitled. I wonder why.
Your ideas are so wrong that I find it frightening that someone can be so misguided. What's worse is you are certainly not alone.

Yes I am certainly not alone, and you will probably find that my views are shared by the majority of the UK public. Also probably shared by most Labour MPs and probably even most Conservative MPs.

House prices were about 3x average earnings in 1997, and they are about 12x average earnings now.

If you cannot see that there is a housing affordability crisis in the UK, and that UK house prices are absurdly overvalued, then you must be very uninformed.

https://conservativehome.com/2022/08/22 ... r-housing/

https://www.mirror.co.uk/news/uk-news/u ... ers-313276

"The average wage in 1997 was £16,500 a year, according to the Office for National Statistics.
In the same year the average house price was £75,762 - around five times people's salaries."

The link does not work.

The multiple you have quoted for 1997 is approximately 4.5x average earnings, and the multiple now is approximately 12x average earnings.

I suspect we'll more likely see "multi-generation" mortgages (50 to 100 year terms) being offered sooner or later and former 25 year mortgages become less common/things of the past. Where in practice even with just part of interest only 'pay-down' the value can rise such that after 25 years you own maybe a third of the then home value, half after 33 years, two-thirds after 50 years and for some where downsizing or other sources of income/savings might enable debts to be cleared after 30 odd years (owner occupier, even if a downsized version).

US already have 50 year mortgage options, and in Japan I believe there are 150 year versions.

During periods of high inflation, bricks and mortar tend to see prices keep up, broadly, but may dip for a while during the earlier phase as number of jobs decline, but then bounce up again as wages/jobs catch back up again. Riding through such periods tends to be better than trying to time things (such as selling to rent - looking to buy back again later, that is inclined to have you out and less able to actually buy back a place on the property ladder again).

Tara wrote:

monabri wrote:

Tara wrote:

CliffEdge wrote:

Tara wrote:
But that is the problem. The acquisition of housing wealth over the last 20 or 30 years has done enormous harm to society as a whole and the younger generation in particular. A single person on average UK earnings could easily afford an average price house in the 1980s. But now it is impossible. If your idea of Capitalism means that a person on average earnings can no longer afford a decent home, then what use is it?

Rubbish. A single person on average earnings could not ever easily afford an average price house. They would have to scrimp and scrape and save like we all did to buy a starter home or flat. Nowadays young people seem to feel entitled. I wonder why.
Your ideas are so wrong that I find it frightening that someone can be so misguided. What's worse is you are certainly not alone.

Yes I am certainly not alone, and you will probably find that my views are shared by the majority of the UK public. Also probably shared by most Labour MPs and probably even most Conservative MPs.

House prices were about 3x average earnings in 1997, and they are about 12x average earnings now.

If you cannot see that there is a housing affordability crisis in the UK, and that UK house prices are absurdly overvalued, then you must be very uninformed.

https://conservativehome.com/2022/08/22 ... r-housing/

https://www.mirror.co.uk/news/uk-news/u ... ers-313276

"The average wage in 1997 was £16,500 a year, according to the Office for National Statistics.
In the same year the average house price was £75,762 - around five times people's salaries."

The link does not work.

The multiple you have quoted for 1997 is approximately 4.5x average earnings, and the multiple now is approximately 12x average earnings.

House prices tend to follow the ability to pay, so when interest rates are abnormally low, lenders lend abnormally high multiples of earnings and prices rise. The effect is compounded by FTB parents seeing their own house rocket in value so feel able to gift some capital to offspring without damaging their own finances much. Also, average houses tend to be peoples' second or third purchase after they have built up some equity, so earnings multiples are not the only factor affecting affordability.

When interest rates return to the 15%-ish we had in 1980, house prices will probably return to multiples of 3 x joint earnings. I doubt we will ever go back to 3 x single person earnings as population has risen by a quarter since then and not that many new homes have been built, and it is the now norm now for FTB couples both to work.

Also, there has been a 'housing crisis' according to the media for the whole of my adult living memory. I doubt that is ever going to change because no matter how many houses we build or how low the coming recession depresses them, there will ALWAYS be people in such dire circumstances they don't have a prayer of buying a house even if they wanted to. The homeless people you see sleeping in the streets in Birmingham for example, I doubt would qualify for a mortgage even if prices fell to 1 x annual income. How would earnings multiples returning to 3 x single person income help them?

Mike4 wrote:House prices tend to follow the ability to pay, so when interest rates are abnormally low, lenders lend abnormally high multiples of earnings and prices rise. The effect is compounded by FTB parents seeing their own house rocket in value so feel able to gift some capital to offspring without damaging their own finances much. Also, average houses tend to be peoples' second or third purchase after they have built up some equity, so earnings multiples are not the only factor affecting affordability.

"ability to pay" I'm sure used to mean something beyond just "keeping up loan repayments"

as long as i can remember there have been tinkering and scheming to keep the market inflated because it's seen as a generator of cash
- lending beyond "value" (my first mortgage was for 102%), increasing multipliers, extending loan durations, interest only loans, buyers' shared equity schemes, playing with stamp duty thresholds, bailing out banks that lend inappropriately

it has rarely ever been allowed to find a natural operating point

too important and too big to fail - but not worth proper oversight and consideration

-sd

In the Midlands one can buy a 3 bed semi for £160k/£170k. Allowing for a 10% deposit, the amount to fund for a mortgage drops to £153k.

Average salary ( regional) for the West Midlands is reported as £30k. So a multiple of 5.

https://www.statista.com/statistics/416 ... by-region/

The biggest con trick perpetrated on couples, the necessity for both to work framed as equal opportunity, but what was the alternative? My mum didn't work until my dad died young leaving her with a young child to bring up. Fortunately life ins paid off the mortgage.
Anyway, affordability is a different subject, loosely correlated but only one of many factors. To get back to the question...
No there will not be a property crash,. There might be a few rare bargains for the unlucky and lucky few, depending which side of the transaction you're on. The market will freeze for a few years. Prices will gently drift lower around 11% over five years, with the exception of a few hotspots like Reeth in Yorkshire where prices will rise 2.36% pa.

CliffEdge wrote:The biggest con trick perpetrated on couples, the necessity for both to work framed as equal opportunity, but what was the alternative? My mum didn't work until my dad died young leaving her with a young child to bring up. Fortunately life ins paid off the mortgage.
Anyway, affordability is a different subject, loosely correlated but only one of many factors. To get back to the question...
No there will not be a property crash,. There might be a few rare bargains for the unlucky and lucky few, depending which side of the transaction you're on. The market will freeze for a few years. Prices will gently drift lower around 11% over five years, with the exception of a few hotspots like Reeth in Yorkshire where prices will rise 2.36% pa.

I agree there will not be a collapse in house prices, but I do think prices in Reeth might rise 2.37% pa

The only way to get a large fall in house prices, back to 3 times earnings, would be to deport 25% of the population to the colonies. Unfortunately I don't think that is possible any more!

scrumpyjack wrote:
The only way to get a large fall in house prices, back to 3 times earnings, would be to deport 25% of the population to the colonies. Unfortunately I don't think that is possible any more!

You mean Brexit won't make that possible? Don't tell the older Brexiteers, they'll be marching on London with their Zimmer Frames. Hang on. You can't, they've mostly died.

CliffEdge wrote:The biggest con trick perpetrated on couples, the necessity for both to work framed as equal opportunity, but what was the alternative? My mum didn't work until my dad died young leaving her with a young child to bring up. Fortunately life ins paid off the mortgage.
Anyway, affordability is a different subject, loosely correlated but only one of many factors. To get back to the question...
No there will not be a property crash,. There might be a few rare bargains for the unlucky and lucky few, depending which side of the transaction you're on. The market will freeze for a few years. Prices will gently drift lower around 11% over five years, with the exception of a few hotspots like Reeth in Yorkshire where prices will rise 2.36% pa.

Twaddle.

I think it irresponsible to be stating exact figures like this as fact when I suspect they are actually nothing more than your personal opinion.

So lets get this straight, you hold that house prices in Reeth will rise by 2.36% pa in perpetuity? Yes? This seems vanishingly unlikely! Or have you seen this forecast by some reputable organ somewhere?

Who cares ? The vast majority of the population have never heard of the place and are unlikely to ever visit or buy property there.
The only people it'll affect are a few dozen who live there and buy or sell in the next few years.

Interesting to read the comments on here and read different comments from the same person.

In one post, person 1 defends high house prices and later on you can see the start of them accepting its not a good thing.
But. They. Just. Can't. Quite. Say. The. Next. Bit.

Then you get the arguments of the type:
'Back in my day we didn't even have central heating.'
'If you think that's bad, I didn't even have a blanket.'
'You were well off, I didn't even have clothes!'

The penny is dropping. Rather like house prices will be.
Slow at first. Then rather quickly.

Mike4 wrote:So lets get this straight, you hold that house prices in Reeth will rise by 2.36% pa in perpetuity? Yes? This seems vanishingly unlikely! Or have you seen this forecast by some reputable organ somewhere?

Yeah. The BBC.

absolutezero wrote:

Mike4 wrote:So lets get this straight, you hold that house prices in Reeth will rise by 2.36% pa in perpetuity? Yes? This seems vanishingly unlikely! Or have you seen this forecast by some reputable organ somewhere?

Yeah. The BBC.

But no link, I notice.

Get off that hobby horse!

CliffEdge wrote:

scrumpyjack wrote:
The only way to get a large fall in house prices, back to 3 times earnings, would be to deport 25% of the population to the colonies. Unfortunately I don't think that is possible any more!

You mean Brexit won't make that possible? Don't tell the older Brexiteers, they'll be marching on London with their Zimmer Frames. Hang on. You can't, they've mostly died.

I think that the ability to send large numbers of undesirables to Australia ended a long time before the EU was concocted.
Mind you, there was a rather amusing tale of a British arrival at Sydney airport who was asked if he had a criminal record. He replied that he hadn't realised it was still an entry requirement

Mike4 wrote:

absolutezero wrote:

Mike4 wrote:So lets get this straight, you hold that house prices in Reeth will rise by 2.36% pa in perpetuity? Yes? This seems vanishingly unlikely! Or have you seen this forecast by some reputable organ somewhere?

Yeah. The BBC.

But no link, I notice.

Get off that hobby horse!

I was being sarcastic about the reputability of the Fake News BBC.

absolutezero wrote:

Mike4 wrote:

absolutezero wrote:

Mike4 wrote:So lets get this straight, you hold that house prices in Reeth will rise by 2.36% pa in perpetuity? Yes? This seems vanishingly unlikely! Or have you seen this forecast by some reputable organ somewhere?

Yeah. The BBC.

But no link, I notice.

Get off that hobby horse!

I was being sarcastic about the reputability of the Fake News BBC.

No it's difficult to be precise more than 5 years into the future.

CliffEdge wrote:

absolutezero wrote:

Mike4 wrote:

absolutezero wrote:

Mike4 wrote:So lets get this straight, you hold that house prices in Reeth will rise by 2.36% pa in perpetuity? Yes? This seems vanishingly unlikely! Or have you seen this forecast by some reputable organ somewhere?

Yeah. The BBC.

But no link, I notice.

Get off that hobby horse!

I was being sarcastic about the reputability of the Fake News BBC.

No it's difficult to be precise more than 5 years into the future.

What I'm trying to get at is what made you choose to claim 2.36% then (and not, say, 2.35%, or 2-3%, or even plain "about 3%")?

servodude wrote:

Mike4 wrote:House prices tend to follow the ability to pay, so when interest rates are abnormally low, lenders lend abnormally high multiples of earnings and prices rise. The effect is compounded by FTB parents seeing their own house rocket in value so feel able to gift some capital to offspring without damaging their own finances much. Also, average houses tend to be peoples' second or third purchase after they have built up some equity, so earnings multiples are not the only factor affecting affordability.

"ability to pay" I'm sure used to mean something beyond just "keeping up loan repayments"

as long as i can remember there have been tinkering and scheming to keep the market inflated because it's seen as a generator of cash
- lending beyond "value" (my first mortgage was for 102%), increasing multipliers, extending loan durations, interest only loans, buyers' shared equity schemes, playing with stamp duty thresholds, bailing out banks that lend inappropriately



it has rarely ever been allowed to find a natural operating point

too important and too big to fail - but not worth proper oversight and consideration

-sd

Yes, so many “schemes” and “tricks” from the UK Government to keep UK house prices constantly inflated and overvalued for the last 30 years. You might even say it was just like some giant “Ponzi” scheme run by the UK Government in order to make the people think they are getting richer.

Of course every “Ponzi” scheme has to end at some point, and then it crashes, and it looks like UK interest rates headed to about 6% or 7% will be the end of this UK house price “Ponzi”.

Tara wrote:

servodude wrote:

Mike4 wrote:House prices tend to follow the ability to pay, so when interest rates are abnormally low, lenders lend abnormally high multiples of earnings and prices rise. The effect is compounded by FTB parents seeing their own house rocket in value so feel able to gift some capital to offspring without damaging their own finances much. Also, average houses tend to be peoples' second or third purchase after they have built up some equity, so earnings multiples are not the only factor affecting affordability.

"ability to pay" I'm sure used to mean something beyond just "keeping up loan repayments"

as long as i can remember there have been tinkering and scheming to keep the market inflated because it's seen as a generator of cash
- lending beyond "value" (my first mortgage was for 102%), increasing multipliers, extending loan durations, interest only loans, buyers' shared equity schemes, playing with stamp duty thresholds, bailing out banks that lend inappropriately



it has rarely ever been allowed to find a natural operating point

too important and too big to fail - but not worth proper oversight and consideration

-sd

Yes, so many “schemes” and “tricks” from the UK Government to keep UK house prices constantly inflated and overvalued for the last 30 years. You might even say it was just like some giant “Ponzi” scheme run by the UK Government in order to make the people think they are getting richer.

Of course every “Ponzi” scheme has to end at some point, and then it crashes, and it looks like UK interest rates headed to about 6% or 7% will be the end of this UK house price “Ponzi”.

I agree, we are heading for 6-7% base rates. This could easily lead to house prices falling but I think by about one third at the most. Although base rates have been in the 1% territory for a few years, mortgage rates have not. They never fell below 3 to 4% unless I failed to notice, which banks used to rebuild their capital base.

Now banks are in a good position, I can imagine mortgage rates rising to say 7%, which might knock 30% off prices. Hardly a Ponzi scheme crash where everyone still invested loses everything.

I take it you don't own a house and are hoping to buy when the crash comes?

Not a Ponzi scheme, it is simply supply and demand.

Demand exceeds supply, so prices are going to continue to go up.

The population growth uk is 0.6%, or c. 400k per annum, vs. New houses bring built c. 200k per annum.

So they can't (and won't) build houses fast enough. The only way can be done is a massive social housing build under a labour govt, but can't see that happening unless very big political will behind it.

It's tough for young people, but it's what it is. Have to rely on bank of Mum and dad if lucky. What might see is a pause in prices during the predicted recession then go up again.