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House Prices Have Only Increased By 10% Since 1971

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http://www.telegraph.co.uk/science/8120382/Inflation-and-earnings-what-is-the-cost-of-a-pint-of-beer.html

The price of a pub pint of beer could soon go up to £4 and ‘has doubled in the last 19 years’ said The Guardian a while back, in an article warning about the soaring price of barley. ‘Car road tax was a mere £10 in 1950 - think of what it is today,’ wrote a motoring journalist in a different paper. Every day we are bombarded with this kind of historical comparison of prices, intended to show how everything is soaring out of control and how badly off we all are.

It sounds plausible. My first house was worth £1100 in 1971, but it would sell for about £230,000 today. That’s a big increase. But how big? You have to allow for inflation. There are inflation calculators on the Internet. Type in the amount and the year: the site does the sums and tells you the equivalent in today’s money.

The results can be instructive.

That 1991 pint cost around £1.40, which is £1.80 in today’s money. The current price is around £2.80, so beer really is more expensive. On the other hand, the average salary in 1991 was £19,000, and today it is £38,000. Relative to what we earn, a pint costs exactly the same as it did 19 years ago.

Our house? That would be £125,000 today, so it has gone up by 84 per cent. Relative to average earnings, however, the increase is only 10 per cent.

The Guardian knows about inflation, and said that the pub pint has increased by 68 per cent in real terms. But this compares the real increase in new money with the original price in old money. If I did the calculation like that for my house it would have gone up by 850 per cent. Calculated sensibly, the rise in the price of beer is about 55 per cent relative to inflation, and zero per cent relative to earnings.

Annoyed about the high cost of petrol? For the same price relative to earnings, you can now buy nearly half as much petrol again as you could in 1950. Cinema tickets too expensive? They’ve gone down by a third. You can buy six times as many chocolate bars, beer is three-quarters the price, and that £10 road tax would be £260 now - around £80 more than the tax for a typical car today.

There are two things to remember about prices. One is basic economics: if something gets too expensive for people to buy it, they don’t. So prices and wages have to stay in step, broadly speaking - though with big fluctuations in some commodities, such as housing. The other is inflation. We all know it exists, but we forget that when we start comparing prices. ‘My God! A Ford Anglia cost only £295 in 1940!’ True, but the average salary then was £370. The equivalent price today is £30,000, which will buy you a Jaguar XF.

If I were king for a day, I’d make it illegal to quote comparative prices without allowing for inflation and changes to average earnings. That would stop us imagining everything was a lot cheaper a couple of generations back, when in most respects the cost of living was higher.

Some interesting comparisons, but I'd like to know where they get the average earnings figure of 38k from?

Edit: quite a good comment below that article regarding median and mean average salaries.

Edited by LiveAndLetBuy

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http://www.telegraph.co.uk/science/8120382/Inflation-and-earnings-what-is-the-cost-of-a-pint-of-beer.html

Some interesting comparisons, but I'd like to know where they get the average earnings figure of 38k from?

Exactly. He starts quite promisingly about being precise when quoting figures from different eras, but then completely blows it by coming up with nonsense figures.

Maybe it's his own salary he's talking about? Who knows.

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http://www.telegraph.co.uk/science/8120382/Inflation-and-earnings-what-is-the-cost-of-a-pint-of-beer.html

Some interesting comparisons, but I'd like to know where they get the average earnings figure of 38k from?

Edit: quite a good comment below that article regarding median and mean average salaries.

Possibly household income?

£19k in 1991 would've looked pretty d*** high too!

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Possibly household income?

For me that's where the problem is these days, back in the 1970's and you can argue the rights and wrongs of it the standard was the husband went out to work and wife stayed home and looked after the kids. Now both partners go out to work and this has pushed prices up to a level where affordability is based on a joint salary.

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.... I'd like to know where they get the average earnings figure of 38k from?

...

The Daily Telegraph internal intranet database of made-up statistics.

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http://www.telegraph.co.uk/science/8120382/Inflation-and-earnings-what-is-the-cost-of-a-pint-of-beer.html

Some interesting comparisons, but I'd like to know where they get the average earnings figure of 38k from?

Edit: quite a good comment below that article regarding median and mean average salaries.

Its the Haliwide 'average' salary - ie ignoring the 50% fall of owner occupier homebuyers that has occured since 2000 - it only includes people who actually take their mortgages and has nothing to do with actual earnings within the wider economy. If they only wrote 1 mortgage to someone earning £500k a year, the average salary would be deemed to be £500k.

A bit like porsche selling a car for £100k one year, doubling it to £200k the next year and, voila, the only people buying it are twice as rich.

The £38k is about as relevant to house affordability as solar cycles are.

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http://www.telegraph.co.uk/science/8120382/Inflation-and-earnings-what-is-the-cost-of-a-pint-of-beer.html

Some interesting comparisons, but I'd like to know where they get the average earnings figure of 38k from?

Edit: quite a good comment below that article regarding median and mean average salaries.

Bloody nonsense

Last ten years, inflation 1997 - 2009 is around 35 %

http://www.bankofengland.co.uk/education/inflation/calculator/flash/index.htm

full time weekly wage increase 1997 - 2009 is 48% median (£268.90 to £397.30), 54% mean (£312.50 to £480.90)

http://www.statistics.gov.uk/statbase/Product.asp?vlnk=14316

house price inflation is 165%

May 97 £63,219

Sep 10 £166,769

http://www1.landregistry.gov.uk/houseprices/

(All England Wales)

Ok, my figures for inflation is to 2009 whereas house prices are to sep 2010, but i think this is valid.

Average salary in 1991 cannot have been anywhere near £19k, median this year is £21k

Utter, utter bobbins. We should get onto that article and slate it.

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Bloody nonsense

Last ten years, inflation 1997 - 2009 is around 35 %

http://www.bankofengland.co.uk/education/inflation/calculator/flash/index.htm

full time weekly wage increase 1997 - 2009 is 48% median (£268.90 to £397.30), 54% mean (£312.50 to £480.90)

http://www.statistics.gov.uk/statbase/Product.asp?vlnk=14316

house price inflation is 165%

May 97 £63,219

Sep 10 £166,769

http://www1.landregistry.gov.uk/houseprices/

(All England Wales)

Ok, my figures for inflation is to 2009 whereas house prices are to sep 2010, but i think this is valid.

Average salary in 1991 cannot have been anywhere near £19k, median this year is £21k

Utter, utter bobbins. We should get onto that article and slate it.

But, but...the man is some sort of lecturer, how can this be?

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I got lucky. In 1992 i bought my house for 34k when i was taking home £200pw. 6 months later i'd got a contracting job and was taking home 30k a year for the next 3 years. I'm on about 20k a year now and the house is probably worth 100k.

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Its the Haliwide 'average' salary - ie ignoring the 50% fall of owner occupier homebuyers that has occured since 2000 - it only includes people who actually take their mortgages and has nothing to do with actual earnings within the wider economy. If they only wrote 1 mortgage to someone earning £500k a year, the average salary would be deemed to be £500k.

A bit like porsche selling a car for £100k one year, doubling it to £200k the next year and, voila, the only people buying it are twice as rich.

The £38k is about as relevant to house affordability as solar cycles are.

If that's true then I completely agree - it's not a statistic, it's a lie. And it also explains why house prices appear to track "average earnings" so well - of course they're bl00dy well going to track "average earnings" if the value for "average earnings" is only based on the earnings of those who can afford houses!

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Its the Haliwide 'average' salary - ie ignoring the 50% fall of owner occupier homebuyers that has occured since 2000 - it only includes people who actually take their mortgages and has nothing to do with actual earnings within the wider economy. If they only wrote 1 mortgage to someone earning £500k a year, the average salary would be deemed to be £500k.

A bit like porsche selling a car for £100k one year, doubling it to £200k the next year and, voila, the only people buying it are twice as rich.

The £38k is about as relevant to house affordability as solar cycles are.

Liar loans included.

How many NMW part time cleaners had £50K incomes?

in 1981, I bought a house for £23,000. I had to put 20% down and we were lucky to have a bank employees mortgage rate.

I earned an average £5000 plus commission and car. the mortgage was 4 times single salary, Actually 3 times mine plus the second.

Today, a rep for that same blue chip is on £20K plus car and commission... These self same houses, now 30 years older, are £180K.

so in 1981, that was about 4.6 times my salary.

today its 9 times that salary.

and 20% down is 36K and the mortgage, probably at the same rate as I was paying in 1981, would be £150K including moving costs...thats 7.5 times salary

No, something is very wrong indeed..

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The average salary is £38,000, what the fook is he talking about.

Maybe he accounting for both wages of a married couple.

Back in 1970 it was more common that only the man worked and his wage paid for everything. Now there is a double income, hardly surprising that prices have risen, doesn't make them more affordable though. He is a spanner.

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He is a spanner Emeritus Professor of Mathematics at the University of Warwick.

:blink:

Oh dear God. I hope he just wrote the article on his morning tea break. If that is the level of his research God help us.

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For wages to go up by 50% over 12 years, then say 1997 to 2009, so 12 years then you need a pay rise EVERY year of just under 3%.

So a rise of 3% every year over 24 years 1985 to 2009 would enable your wages to double over the 24 year period.

At a rough guess my old job in 1985 was paying a gross salary of around £13k per annum based on a 39 hour week. Today the same job based on a 37 hour week is paying around 28k per annum. So as an anecdotal the hours have been cut by 2 hours, and an average pay rise just above 3% per annum over a 24 year period.

In 1985 a house 2up 2down cost around £15k just before they went mad and trebled up to 1988. Today the same house is selling at £120k.

Its a mad mad world. But we die in the end.

P

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Also, 1971 was the peak of the first property bubble, with London prices increasing 50% in that year alone thanks to Heath's credit relaxation (sound familiar?). They crashed with the oil crisis in the next few years.

Edited by kenzdawg

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  • 239 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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