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and to think I thought a uni mate was crazy for paying 240k for a flat in zone 2 in 2004ish, to all intensive purposes it is a house as it has a front door and rooms downstairs and up... Must be worth 700k+ now...

It's interesting how language evolves. You've heard an expression and think what you heard was 'to all intensive purposes'. A few people may read what you have read and start using the expression themselves. Orignally, that expression was 'to all intents and purposes'.

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The target market for the suburbs was the over growed manual workers who were living in the cities.. They were sold for between £450-£1200 , back then , you put a £5 deposit down on resevation and then made up the other £20 needed by the time the house was built.

Read recently that you needed an income of about £3 a week to buy a house, many got in trouble with the payments and there was what we describe today as a sub prime crises . After that the lenders tightned up lending .

My parents bought one for £3,750 in 1961 , and were told they were mad and should hang on as prices would soon drop. 25 years ago it was valued at £70k , a few years later it went to £130,000 dropping back to about £80k in the last crash. This time around it peaked at £350,000 dropped by about 5% and is now back to £350,000.

Indeed, when I grew up the owners of those houses (my mates' parents) were joiners, brickies, baggage handlers at the airport and various blue collar jobs.

I figure that today, the new owners of those houses will be lawyers, accountants, head teachers and contractors earning a minimum of 80k a year.

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Indeed, when I grew up the owners of those houses (my mates' parents) were joiners, brickies, baggage handlers at the airport and various blue collar jobs.

I figure that today, the new owners of those houses will be lawyers, accountants, head teachers and contractors earning a minimum of 80k a year.

everybody earns 80K a year...dontchaknow.

except that 97% of people dont.

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everybody earns 80K a year...dontchaknow.

except that 97% of people dont.

But it doesn't take that many. And, in London, a lot of people earn what an average wage earner would consider serious money.

In a street of 100 houses, if 2 come on the market a year, it only takes 2 high earners to want to buy and the deals are done.

Next year, another two. And so on. Over the course of 50 years the whole complexion of the neighbourhood changes. Surely you must have observed this so called 'gentrification' happening. It's been happening in London for decades. 40 years ago places like Shepherd's Bush and Hammersmith were almost no go areas. Parts of Acton were actual no-go areas. Now they houses are all a million quid each and a completely different social class occupies them.

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But it doesn't take that many. And, in London, a lot of people earn what an average wage earner would consider serious money.

In a street of 100 houses, if 2 come on the market a year, it only takes 2 high earners to want to buy and the deals are done.

Next year, another two. And so on. Over the course of 50 years the whole complexion of the neighbourhood changes. Surely you must have observed this so called 'gentrification' happening. It's been happening in London for decades. 40 years ago places like Shepherd's Bush and Hammersmith were almost no go areas. Parts of Acton were actual no-go areas. Now they houses are all a million quid each and a completely different social class occupies them.

Yes exactly

Where my dad lives the people who have bought in the last few years are in far higher paying jobs than the people who were there when i was young.

Next door but one to my Dad , there is a familly who own a clothing import bussiness.

They must have £150,000 of car on the drive two massive 4x4's and a nice mini copper for the wife to get the shopping in. There are 3 teenage kids that have all the latest stuff.

About 35 years ago my Dad got a company car and it was new, the first new car we had ever had , it was the talk of the street , as most had second hand cars that they kept for years on end .

The people in these houses and their incomes have changed beyound all recognition.

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everybody earns 80K a year...dontchaknow.

except that 97% of people dont.

Earned income is not the only income , due to house price growth and savings from the last 50 years inherited income is on the rise . How many couples in their 40's have inherited half a house each . one house split between two children x two for a married couple. Falls into their lap just as their own mortgage on a house that has gone up 5x since they purchased it is about to be paid off. This money is either invested in buying a bigger house , a second house , or invested for long term income. Yes sometimes it gets pi--ed up the wall lol.

Very common occurance in the 40+age bracket.

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Indeed, when I grew up the owners of those houses (my mates' parents) were joiners, brickies, baggage handlers at the airport and various blue collar jobs.

I figure that today, the new owners of those houses will be lawyers, accountants, head teachers and contractors earning a minimum of 80k a year.

That is exactly what is happening around here. It is the bankers salaries that are the problem. A few years ago, a typical professional earning that type of money would have spent a few years living in central London and then moved down to a commuter town like Esher or Weybridge where they could afford a nice big house.

Those big houses are still there, but instead of being £600k like they should be, they are £1.5m+ because there are so many bankers looking to move into those type of areas. People earning normal good salaries can't compete with those six figure bonuses, so they have to look elsewhere.

That is when they start to move to the suburbs, and their buying power is pricing out the typical buyer of this type of house in the same way. This is happening all the way down the chain. The road that I am talking about is full of Porsches and Range Rovers now. A few years ago, I bet most of the residents of the same road would have been lucky to have a newish Ford Escort.

We are now in a situation around here where you need to have a £100k joint salary to buy a flat in a decent road. As you said in your original post, this is a zone 6 suburb, not Kensington & Chelsea.

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It is crazy, but prices have remained so high for so long that people just get used to talking about massive sums of money for very ordinary houses.

I live in an area similar to the one that you describe. Even as a relatively dedicated 'HPCer', I was actually thinking the other day that I would be prepared to buy one of these 3 bed semis when/if the ones in the road that I want hit £400k. Considering that they are north of £600k at the moment, that is quite some crash that is going to be required before I buy!

That got me thinking - if I am considering that type of price reasonable, what is the majority of the public who don't come onto this site regularly thinking?

The houses that I am now looking at peaked close to £700k (actual sold prices). Even if we get a 50% drop in prices, that will still leave them at £350k, meaning that someone would need a £100k salary and a good deposit to buy one reasonably. I am not sure that was the type of target market for these modest houses in a zone 6 suburb when they were built 80 years ago or even when they were changing hands 25 years ago!

I have been thinking about this lately, and I am not so sure about the strict nature of lending multiples at this price range - for the same reason that people talk about VAT increases being regressive. I think once you get past a certain wage range, say 50K for arguements sake, a greater proportion can reasonably be used to fund things like mortgages, as you have progressively more disposable income.

IMO this highlights the need for a tax on land value.

everybody earns 80K a year...dontchaknow.

except that 97% of people dont.

Are you saying 3% earn 80K or more? I think that's quite high to be honest.

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snip

Are you saying 3% earn 80K or more? I think that's quite high to be honest.

In all honesty, I think you are correct, all I know is the top 5% earn over £35K. most earn less than 25K.

According to the local rag yesterday, the AVERAGE income in Colchester is around £21K.

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In all honesty, I think you are correct, all I know is the top 5% earn over £35K. most earn less than 25K.

According to the local rag yesterday, the AVERAGE income in Colchester is around £21K.

But how many living in Colchester travel up to town and earn far more.

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well, they are putting the average up.

I know few who are earning 20+ IN Colchester.....most I know earn £15 or less.

[/quote

Average wages is a very hard nut to crack and find out what the median wage is .

I have a niece who earns £30k in an insurance company in town she is 22, her boyfriend sometimes earns nothing as he is a self employed heating fitter , sometimes he earns £2000 a month. They live with her mum in Dagenham , where the average wage would be quoted about the same as Colchester , however they are on far far more than that between them if you take a good month and on the less in a bad month.

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well, they are putting the average up.

I know few who are earning 20+ IN Colchester.....most I know earn £15 or less.

[/quote

Average wages is a very hard nut to crack and find out what the median wage is .

I have a niece who earns £30k in an insurance company in town she is 22, her boyfriend sometimes earns nothing as he is a self employed heating fitter , sometimes he earns £2000 a month. They live with her mum in Dagenham , where the average wage would be quoted about the same as Colchester , however they are on far far more than that between them if you take a good month and on the less in a bad month.

It is a hard nut to crack.

Fortunately, the dead hand of the economy needs no calculation to see people are hard up....most of them anyway.

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ame='miko' date='31 August 2010 - 01:37 PM' timestamp='1283258238' post='2692676']

It is a hard nut to crack.

Fortunately, the dead hand of the economy needs no calculation to see people are hard up....most of them anyway.

There are plenty of hard up , always have been and always will be, however as i said in another post on this topic earned income is not the only income that more and more people now have . As well as hard up there are also many people with lots of money.

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In all honesty, I think you are correct, all I know is the top 5% earn over £35K. most earn less than 25K.

According to the local rag yesterday, the AVERAGE income in Colchester is around £21K.

But surely if there is one thing that has become (self?) evident over the last 7 years (from when the market first started cooling in 2004/5, exploded again in 2006 after IRs were dropped in August 2005, fell in 2008 post credit crunch and went back up in 2009 courtesy of 300 year interest rate lows and QE) it must surely be that average wages being 20k or 25k (or whatever they are in any particular area) does not constrain house prices. The evidence suggests that, so far, there is almost no link.

I realised a few years ago that the other factors at play, principal amongst which is that prices are set at the margin, means that the housing market correction might take 20 to 30 years.

During this period society may well change with a huge increase in the number of people renting.

This is a scenario where, instead of house prices moving back to average earnings, people earning average money never buy and people earning above average earnings gradually buy up all the property and rent it to the average earners. This scenario is in place at the moment and has been for some years now. Current events have not managed to stop it yet.

The only way I can see it stopping is if young people wake up - en masse - realise what is happening to them and act colletively. A rent strike or a refusal to rent (sorry Mum and Dad, your generation has priced us out of home ownership, we can't afford to rent, so we've got to raise a family with you) would do the job. But not if just a few people do it. The world turns while a few sit out of the market and more and more youngsters will be priced out forever.

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There are plenty of hard up , always have been and always will be, however as i said in another post on this topic earned income is not the only income that more and more people now have . As well as hard up there are also many people with lots of money.

and?

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And nothing, apart form the fact that house prices are not dependant on what people who you know earn in little Colchester.

exactly my point.

Its credit inflation that determines price.

You will hear the VIs bleating about deflation in credit every day this crisis continues. A crisis, by the way, is a turning point.

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exactly my point.

Its credit inflation that determines price.

You will hear the VIs bleating about deflation in credit every day this crisis continues. A crisis, by the way, is a turning point.

Not always credit inflation sent price's soaring over the last five decades . But for many fake or not that money is now real and locked in .

Credit was given out like confeti so Mr and Mrs average's house that they paid £5k for at the start of the 60's was sold for 350-450k at the height of the boom after their death. This was split between their two adult children , who by then were set up themselves. Their respective partners also had a similar windfall. That money is now out of property and in the bank the money is real ( might not be if all the banks go belly up but for now that money is there ) . Much of that money will or is returning to the property market it is not based on what these people earn.

One couple I know , not to far from you in Essex, both worked in the city , she was paid above average but not silly money . He earn't big bucks maybe £200k per year with his bonuses. They bought a big house in Essex about 8 years back for £380 k and paid it off. It was maybe worth 3/4 of a million at the peak . But it does not matter how much it is now worth as boom or bust they will not be moving they will stay put to bring up their three young children.

She left work to look after the kids , he got made redundant and at 45 was far to old for the city ,he now earns peanuts south of 20k. But over the last few years they had not one but three inheratances left to them . Her parent's his parent's ,and a spinster aunt. Total £900,000. Half is invested for a monthly income the other half went back into buying 3 flats for cash one for each child , the rent from these flats builds up in the kids accounts for uni fees. The flats are paid for , the earned household income is below the national average but their paid for property portfolio does not reflect this in any way.

This is not an isoloated case there is much of it about. Seen it amoung many friends and unless daddy pi--es it all up the wall me and two brothers are going to be getting the same . Not all the property market is based on debt and or wages.

Edited by miko
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Not always credit inflation sent price's soaring over the last five decades . But for many fake or not that money is now real and locked in .

Credit was given out like confeti so Mr and Mrs average's house that they paid £5k for at the start of the 60's was sold for 350-450k at the height of the boom after their death. This was split between their two adult children , who by then were set up themselves. Their respective partners also had a similar windfall. That money is now out of property and in the bank the money is real ( might not be if all the banks go belly up but for now that money is there ) . Much of that money will or is returning to the property market it is not based on what these people earn.

One couple I know , not to far from you in Essex, both worked in the city , she was paid above average but not silly money . He earn't big bucks maybe £200k per year with his bonuses. They bought a big house in Essex about 8 years back for £380 k and paid it off. It was maybe worth 3/4 of a million at the peak . But it does not matter how much it is now worth as boom or bust they will not be moving they will stay put to bring up their three young children.

She left work to look after the kids , he got made redundant and at 45 was far to old for the city ,he now earns peanuts south of 20k. But over the last few years they had not one but three inheratances left to them . Her parent's his parent's ,and a spinster aunt. Total £900,000. Half is invested for a monthly income the other half went back into buying 3 flats for cash one for each child , the rent from these flats builds up in the kids accounts for uni fees. The flats are paid for , the earned household income is below the national average but their paid for property portfolio does not reflect this in any way.

This is not an isoloated case there is much of it about. Seen it amoung many friends and unless daddy pi--es it all up the wall me and two brothers are going to be getting the same . Not all the property market is based on debt and or wages.

we dont deal in "all" here. we dealin mr and mrs average.

next you'll be saying the Queen is fairly well off.

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Not always credit inflation sent price's soaring over the last five decades . But for many fake or not that money is now real and locked in .

Credit was given out like confeti so Mr and Mrs average's house that they paid £5k for at the start of the 60's was sold for 350-450k at the height of the boom after their death. This was split between their two adult children , who by then were set up themselves. Their respective partners also had a similar windfall. That money is now out of property and in the bank the money is real ( might not be if all the banks go belly up but for now that money is there ) . Much of that money will or is returning to the property market it is not based on what these people earn.

One couple I know , not to far from you in Essex, both worked in the city , she was paid above average but not silly money . He earn't big bucks maybe £200k per year with his bonuses. They bought a big house in Essex about 8 years back for £380 k and paid it off. It was maybe worth 3/4 of a million at the peak . But it does not matter how much it is now worth as boom or bust they will not be moving they will stay put to bring up their three young children.

She left work to look after the kids , he got made redundant and at 45 was far to old for the city ,he now earns peanuts south of 20k. But over the last few years they had not one but three inheratances left to them . Her parent's his parent's ,and a spinster aunt. Total £900,000. Half is invested for a monthly income the other half went back into buying 3 flats for cash one for each child , the rent from these flats builds up in the kids accounts for uni fees. The flats are paid for , the earned household income is below the national average but their paid for property portfolio does not reflect this in any way.

This is not an isoloated case there is much of it about. Seen it amoung many friends and unless daddy pi--es it all up the wall me and two brothers are going to be getting the same . Not all the property market is based on debt and or wages.

so what you are saying is that their personal wealth is highly tied up in property and is about to crash? excellent...

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But surely if there is one thing that has become (self?) evident over the last 7 years (from when the market first started cooling in 2004/5, exploded again in 2006 after IRs were dropped in August 2005, fell in 2008 post credit crunch and went back up in 2009 courtesy of 300 year interest rate lows and QE) it must surely be that average wages being 20k or 25k (or whatever they are in any particular area) does not constrain house prices. The evidence suggests that, so far, there is almost no link.

yes - it is what has become known as a bubble

I realised a few years ago that the other factors at play, principal amongst which is that prices are set at the margin, means that the housing market correction might take 20 to 30 years.

again yes

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exactly my point.

Its credit inflation that determines price.

You will hear the VIs bleating about deflation in credit every day this crisis continues. A crisis, by the way, is a turning point.

In a market with a small number of transactions, surely it's possible for house prices to go up without credit inflation.

In a road with 100 mortgaged houses - each month the mortgages on each house are being paid down. One of them comes on the market and, its price having gone up by 100k since it was last on the market, someone borrows 100k extra to buy it.

Everyone in the road thinks 'great, our houses are now worth X but, of course, no extra credit has been created'.

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we dont deal in "all" here. we dealin mr and mrs average.

next you'll be saying the Queen is fairly well off.

No we deal in everything ,

What's the "all" about.

My post you answered explained in detail how Mr and Mrs average's average house one generation down has set people up who came from average backgrounds , but have now got property worth vast amounts more than they could ever afford via what they earn . Wages for them do not come into the equation.

We hear on this forum the ponzi house price bubble and from people like you that it will all go wrong , but contray to popular beliefe not everyone is maxed out on a 125% NR mortgage and one interest rate rise away from disaster.

I do beleive that there will be a house price crash of big amounts as the bottom can not keep up however what was talked about on this topic today was how were people being able to pay huge amounts for average property . You continually declared about wages , and debt, I just said wages and debt are not the only factors.

But you do not like it when someone has a different point of view to you and puts it accross , sorry but we don't all live in a little bubble in Colchester earning £15k .

As you like to deal in averages i have included the word many times in my post , is there enough use of the word average for you or would you like me to say average a few more times.

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yes - it is what has become known as a bubble

My worry is that it is a bubble which may not burst. It may be a bubble which changes the nature and distribution of property ownership across the UK. Last figures I saw the percentage of owner occupation had gone down (perhaps for first time in the last 100 years?).

While some people can borrow money cheaply and command huge rents - I can't see things changing significantly in the future.

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