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Jonnybegood

Can Average Property Prices Fall Back To 3.5x Income

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Been thinking what impact property falling back to 3.5x single local income would have around the country.

There have no doubt been times when this has been the case but this was in the past, we must look forward, the past teaches us a lot but has no guarantee of what the future might bring.

People are living longer, the age of retirement is getting greater, the population at an all time high and is increasing, communication and transport links far better, these few examples of things that never happened in the past.

So is it possible now every town and city across the country to provide an average property for 3.5x the local average wage.

I just don't think we have enough property to allow it to happen, there will always been those who would snap up 2 or 3 properties and there is just not enough nice places to live to support all those on average wage to buy that average property.

It means that every town and city should have average type property, maybe a 3 bed semi in nice area for £100k (£80k up North and maybe £130k further South).

Just can't see how its sustainable when there is a chronic shortage of this type of property in areas that people who buy want to live.

So does it just mean that the average property for many towns and city is a 2 bed flat or 2 bed link property and the above average 3 bed semi.

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more dependents and less wage earners as a proportion means it may easily fall below that

wage inflation (is all you need) to bring them back down.

easily

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Been thinking what impact property falling back to 3.5x single local income would have around the country.

I just don't think we have enough property to allow it to happen, there will always been those who would snap up 2 or 3 properties and there is just not enough nice places to live to support all those on average wage to buy that average property.

you are making the classic mistake of considering a future pricing scenario based on current market conditions, when they fall back to 3 times, the actual scenario in which it happens will not be the scenario we have today, its like californians being told 2 years ago that prices will collapse and them arguing that it was impossible for similar reasons to those you state (huge economy, great place to live, nice homes will always be in demand etc etc). The scenario has however changed and accordingly the prices in californias current condition still cant attract all these buyers to snap up properties, tell them it 2 years ago and these same people would have told you if it did happen theyd be buying 4 or 5 properties if it happened.

Personally given the extreme over shoot of the UK bubble id be very suprised if sometime in the next 5-10 years prices didnt fall to around 2 * salary, and in the market conditions that that will happen still nobody will want to buy them even if they can afford to

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Been thinking what impact property falling back to 3.5x single local income would have around the country.

There have no doubt been times when this has been the case but this was in the past, we must look forward, the past teaches us a lot but has no guarantee of what the future might bring.

People are living longer, the age of retirement is getting greater, the population at an all time high and is increasing, communication and transport links far better, these few examples of things that never happened in the past.

So is it possible now every town and city across the country to provide an average property for 3.5x the local average wage.

I just don't think we have enough property to allow it to happen, there will always been those who would snap up 2 or 3 properties and there is just not enough nice places to live to support all those on average wage to buy that average property.

It means that every town and city should have average type property, maybe a 3 bed semi in nice area for £100k (£80k up North and maybe £130k further South).

Just can't see how its sustainable when there is a chronic shortage of this type of property in areas that people who buy want to live.

So does it just mean that the average property for many towns and city is a 2 bed flat or 2 bed link property and the above average 3 bed semi.

It won't be 3.5x earnings in every town and city in the country because people who work in richer areas, for example Zone 1 in London will generally commute there from cheaper places. For some of the cheaper areas of the country, the few people who actually do have a job there, for example doctors, may well commute from better areas to work there.

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I agree that there isn't a great supply of housing stock in this country. Restrictive planning laws see to that.

Also, lower interest rates can support higher multiples. The problem with the "it's ok to lend six times salary as we have low interest rates" is when interest rates need to rise. I think if they have to put interest rates up significantly then 3.5x times income is acheivable, and we'll have one hell of a crash to get us there!

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What, can prices fall back to 3.5 male full time income as per halifax?

It's an absolute no-brainer that we will do, or get very close to it, IMHO given that we were there as recently as winter 2001 [a time when, despite what the bulls would have you believe, they just as now hadn't built any new land for a long time and two-income households did exist] and the combination of high unemployment and end to loose lending that we're likely to see for the next few years.

It's only an average, though, across the whole country. It's entirely possible that local multiples could be anything from about 1.0 [in slums, a la modern day detroit, although what private landlords can earn from DSS tenants here will put some kind of floor on things] to well over 10.0 [e.g. picturesque local villages in cornwall or whatever].

Since 1983 the Halifax multiples seem to be along the lines of [it's far too small a dataset for this to be anywhere close to robust but you get the idea], based on male full time;

below about 3.25 - slump;

roughly around 3.5 - 'normal;

over 4 - boom; and

over 5 - insane.

we're currently close to the 4.5 mark...

TBH i half believe the lack of supply arguments and, as a pure guess, reckon that something in the very high 3.somethings might be sustainable in a way that it wasn't previously, so falls of another 10-20% are the most we can really hope for.

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What, can prices fall back to 3.5 male full time income as per halifax?

It's an absolute no-brainer that we will do, or get very close to it, IMHO given that we were there as recently as winter 2001 [a time when, despite what the bulls would have you believe, they just as now hadn't built any new land for a long time and two-income households did exist] and the combination of high unemployment and end to loose lending that we're likely to see for the next few years.

It's only an average, though, across the whole country. It's entirely possible that local multiples could be anything from about 1.0 [in slums, a la modern day detroit, although what private landlords can earn from DSS tenants here will put some kind of floor on things] to well over 10.0 [e.g. picturesque local villages in cornwall or whatever].

Since 1983 the Halifax multiples seem to be along the lines of [it's far too small a dataset for this to be anywhere close to robust but you get the idea], based on male full time;

below about 3.25 - slump;

roughly around 3.5 - 'normal;

over 4 - boom; and

over 5 - insane.

we're currently close to the 4.5 mark...

TBH i half believe the lack of supply arguments and, as a pure guess, reckon that something in the very high 3.somethings might be sustainable in a way that it wasn't previously, so falls of another 10-20% are the most we can really hope for.

Is that half believe as in we don't have much excess supply therefore houses can't drop to the equivalent of 500 dollars each like in the states?

I don't believe the bulls we have lack of supply therefore prices can't fall arguement, but also the bear "there is no lack of supply" when people are building sheds in their gardens and renting them out doesn't ring true either.

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Prices will fall to 3.5X income.

The snag is that it will be 3.5X household income and as many households have two incomes nowadays that probably equates to around £140K at todays salaries.

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Prices will fall to 3.5X income.

The snag is that it will be 3.5X household income and as many households have two incomes nowadays that probably equates to around £140K at todays salaries.

Why will it be household income? You only need to go back a few years to find 3-4x the main salary earner is used. Nothing has changed since, other than a flood of cheap money which caused the boom and the resulting bust.

You have to realise that the money being leant has to come from somewhere. That somewhere has traditionally been from savings (albeit in leveraged form). The cheap money has gone and the banks are holding more capital. So where is this money going to come from to stop prices returning to the long term average, based on the main earner?

People need to realise that it isn't just about risk, but about funding too. If the banks can't afford to lend the money, then they simply can't offer it.

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Why will it be household income? You only need to go back a few years to find 3-4x the main salary earner is used. Nothing has changed since, other than a flood of cheap money which caused the boom and the resulting bust.

You have to realise that the money being leant has to come from somewhere. That somewhere has traditionally been from savings (albeit in leveraged form). The cheap money has gone and the banks are holding more capital. So where is this money going to come from to stop prices returning to the long term average, based on the main earner?

People need to realise that it isn't just about risk, but about funding too. If the banks can't afford to lend the money, then they simply can't offer it.

I was most definately a bear until recently. But in my opinion whilst mortgage rates remain low and repossessions limited, the bottom will not fall out of the market.

I have just secured an 80% LTV mortgage at 4X JOINT salary and if I can do it I'm sure many others will also. I've also just sold my house to the first viewer at asking price (15% down on 2007 valuation). Maybe I've just been lucky??

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