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Average House Price In 1935 Was 1.75 Times Average Salary=£40K In Todays Argent

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My mother told me, her father; my grandfather, bought his brand new 3 bed semi for 700 quid in 1929. At the time, his salary working in a shipping office was 350pa. So, he paid X2 his eanings.

At the peak, I reckon that house would have sold for 200k. There is no way a shipping clerk now would be on 100k pa.

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My Grandad paid £200 ( so I was told) for his end of terrace home in Ilford

He worked in a "good job" in the post office...Prices indicate houses there are now £275,000

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http://www.dailymail.co.uk/news/article-2025585/Good-neighbours-The-women-lived-door-76-years.html

just reading about two old dears that have lived next door to each other since 1935.points is that according to the wail, ave house/salary multiple was 1.75 not 8....it's gonna be a long way back down to £40,000 for a 3 bed semi that currently costs £168,000.

this is balance sheet tastic for all UK banks.......BUY.

Hi

I've come to think that because the supply of houses is restricted whilst credit has been extended and people have been allowed to have several mortgages house prices will always be in an "auction" situation.

An auction situation: demand exceeds supply so people have to bid against one another to secure the item rather than paying for the fundamental cost of the item.

If people could build freely in order to meet demand then houses would be worth the price of the land (there would not be a big difference between the price of land with and without planning as it would be easy to secure). Demand would have to be kept in line by only allowing people to own one primary residence.

Housing used to cost 3 times wages. This was because it cost that much to build a house. Productivity has increased. Houses should now cost under 3 times median wages for a basic house.

The restriction of supply means an inevitable auction situation. This means high borrowing for all participants. This means you have to pay back loads of interest to banks and also have a regular job where you work all hours so the government can take 30% of it (at least).

Productivity on everything has gone up. It used to be a man could work and provide for his family and his wife could stay at home. The efficiency on food production and clothing has gone up so now we are just left working all hours for housing.

Why does life have to be like this? If we had supply meeting demand in housing people could choose. If they want to dine out at fine restaurants and have an ipad they can work 5 days a week in a stressful job. If they want to spend time with their kids they can go work 3 days and have enough for food and clothing.

I believe that until housing supply meets demands there will be no HPC as the auction scenario plus near endless credit will always lead to people signing their lives away to get a house. People should be focussing more on planning law and on laws on multiple ownership. Anything else simply isn't going to see a return to fundamentals.

What is constraining supply?

- governemnt regulations

- NIMBYs

- multiple owners via BTL

What is allowing BTL?

- credit regulations

- government not regulating multiple ownership

Until we focus on the above we are fiddling at the edges.

If we could pay for a house what it costs to make we would own our own home and be free of the state.

Interest rates is just fiddling at the edges. If they go up it will flush out the market causing a big dip but then you have to get a mortgage at the increased rate. You might fare a bit better if you have a big deposit but again this isn't the price correction due to the fundamental forces of supply and demand.

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My mother told me, her father; my grandfather, bought his brand new 3 bed semi for 700 quid in 1929. At the time, his salary working in a shipping office was 350pa. So, he paid X2 his eanings.

At the peak, I reckon that house would have sold for 200k. There is no way a shipping clerk now would be on 100k pa.

1929 would have been the peak, 1935 was the bottom. It's possible that your grandfather's house could have lost half it's value between those two years.

According to my old man a 200 acre farm (average size at that time) could be picked up for 500 quid in the mid 30's!

Good thread this innit....

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Hi

I've come to think that because the supply of houses is restricted whilst credit has been extended and people have been allowed to have several mortgages house prices will always be in an "auction" situation.

An auction situation: demand exceeds supply so people have to bid against one another to secure the item rather than paying for the fundamental cost of the item.

If people could build freely in order to meet demand then houses would be worth the price of the land (there would not be a big difference between the price of land with and without planning as it would be easy to secure). Demand would have to be kept in line by only allowing people to own one primary residence.

Housing used to cost 3 times wages. This was because it cost that much to build a house. Productivity has increased. Houses should now cost under 3 times median wages for a basic house.

The restriction of supply means an inevitable auction situation. This means high borrowing for all participants. This means you have to pay back loads of interest to banks and also have a regular job where you work all hours so the government can take 30% of it (at least).

Productivity on everything has gone up. It used to be a man could work and provide for his family and his wife could stay at home. The efficiency on food production and clothing has gone up so now we are just left working all hours for housing.

Why does life have to be like this? If we had supply meeting demand in housing people could choose. If they want to dine out at fine restaurants and have an ipad they can work 5 days a week in a stressful job. If they want to spend time with their kids they can go work 3 days and have enough for food and clothing.

I believe that until housing supply meets demands there will be no HPC as the auction scenario plus near endless credit will always lead to people signing their lives away to get a house. People should be focussing more on planning law and on laws on multiple ownership. Anything else simply isn't going to see a return to fundamentals.

What is constraining supply?

- governemnt regulations

- NIMBYs

- multiple owners via BTL

What is allowing BTL?

- credit regulations

- government not regulating multiple ownership

Until we focus on the above we are fiddling at the edges.

If we could pay for a house what it costs to make we would own our own home and be free of the state.

Interest rates is just fiddling at the edges. If they go up it will flush out the market causing a big dip but then you have to get a mortgage at the increased rate. You might fare a bit better if you have a big deposit but again this isn't the price correction due to the fundamental forces of supply and demand.

Spot on...though we are being overtaken by events which could cause a re-set. Sh!t has happened before and will happen again.

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Spot on...though we are being overtaken by events which could cause a re-set. Sh!t has happened before and will happen again.

Not sure which events you have in mind. I can't see a scenario where the BoE raise rates. Boomers will use their voting power to block dramatic reform of planning laws. Where is my black swan coming from?

I appreciate inflation and in particular energy prices will have an impact but I think this will just make matters slightly worse for lots of people but will not create a big change. What did you have in mind?

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Spot on...though we are being overtaken by events which could cause a re-set. Sh!t has happened before and will happen again.

Aye great post. Don't normally read long posts as they are invariably full of waffle.

I read Camoron's favorite book Nudge and the one thing i remember most is an auction experiment.

Two auctions took place which were identical but for one respect. In one participants bidded using money from credit cards, in the other with their own money. The prices in the credit auction were double the level of the other one.

If credit were severly restricted, which it surely will be in the next decade or so as deleveraging takes place, then prices should halve.

And perhaps a bit more as they undershoot.

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Aye great post. Don't normally read long posts as they are invariably full of waffle.

I read Camoron's favorite book Nudge and the one thing i remember most is an auction experiment.

Two auctions took place which were identical but for one respect. In one participants bidded using money from credit cards, in the other with their own money. The prices in the credit auction were double the level of the other one.

If credit were severly restricted, which it surely will be in the next decade or so as deleveraging takes place, then prices should halve.

And perhaps a bit more as they undershoot.

Well yes. If you see a house that sold for 200k two years ago come on the market now at 189k, you may wait a bit if prices are falling in the same area. Then if the price slips again to say 179k you may put in a cheeky 150k offer, but otherwise decide to wait again. After all, prices are falling everywhere, so why not wait a year and save another 10 or 20k. Especially if you're unsure whether the economy is going to totally collapse. You can pick up a bargain place I'm sure in Detroit for 20k, but would you want to?

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Aye great post. Don't normally read long posts as they are invariably full of waffle.

I read Camoron's favorite book Nudge and the one thing i remember most is an auction experiment.

Two auctions took place which were identical but for one respect. In one participants bidded using money from credit cards, in the other with their own money. The prices in the credit auction were double the level of the other one.

If credit were severly restricted, which it surely will be in the next decade or so as deleveraging takes place, then prices should halve.

And perhaps a bit more as they undershoot.

Thanks - glad you liked it and that I could convey the idea. However I must have failed in emphasis somewhere as you are talking about credit as the root cause.

I believe the lack of supply due to planning regulation is the root cause. This shortage creates a situation where people must compete over a resource, which creates an auction situation. The banks then realised this and responded with near unlimited credit. This then creates a feedback loop where a check had previously kept a lid on things. This situation persists so long as you cannot self-build at the true cost of time and materials. The additional component is land with planning permission, which is far more expensive than regular land. This is the synthetic ingredient that keeps prices high. You have to drip feed it in or supply overtakes demand and prices collapse.

This is why even more restrictive credit, through regulation say max 3 times salary, or even interest rate rises, will not see true price discovery of near cost to build. People would just save before entering into a mortgage, thereby binding themselves into the longest achivable term, as people auction their whole lives for a house.

Housing is now the major cost by far. The debt is enslaving us.

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Thanks - glad you liked it and that I could convey the idea. However I must have failed in emphasis somewhere as you are talking about credit as the root cause.

I believe the lack of supply due to planning regulation is the root cause. This shortage creates a situation where people must compete over a resource, which creates an auction situation. The banks then realised this and responded with near unlimited credit. This then creates a feedback loop where a check had previously kept a lid on things. This situation persists so long as you cannot self-build at the true cost of time and materials. The additional component is land with planning permission, which is far more expensive than regular land. This is the synthetic ingredient that keeps prices high. You have to drip feed it in or supply overtakes demand and prices collapse.

This is why even more restrictive credit, through regulation say max 3 times salary, or even interest rate rises, will not see true price discovery of near cost to build. People would just save before entering into a mortgage, thereby binding themselves into the longest achivable term, as people auction their whole lives for a house.

Housing is now the major cost by far. The debt is enslaving us.

Sorry - I meant to add that we are thinking too small on this problem. People here are asking why houses that used to cost 300K are now 600K. This is not thinking fundamentally about labour. Don't use a fiat currency to measure this. It has no absolute value.

People used to be lent 3x salary. They had to work for 3 solid years to pay. Technology has advanced to improve productivity. So now I work in a job doing more than I would have done in 1970 yet I have to work for 8 solid years (at least) to buy a house of a similar standard.

Why the detatchment from this? Part of it must be population increases. But this is because the market has not been allowed to respond to demand due to planning laws.

We need to think bigger. I want to build a house at cost. This will then give me the financial freedom to work when I like as I could pay it off in a few years. I would then live frugally and spend time with my kids. I want this level of freedom and I will go abroad to get it if I have to.

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you must focus on demand supply in equal measure.we have had excess demand for ten to fifteen years due to

1 immigration-both from the EU and outside

2 housing benefit enabling some to live above the level that would be on a par with their socio economic position

3 societal move toward sole occupation

these three factors are already beginning to move demand the other way.our ability to bring in and service unlimited immigrant families is reducing with each monthly deficit.we quite simply can't afford for people to come here,take a low paid job send their kids to our schools at £4000 per annum/use medical services.On top of that,the oppurtunities that were there three years aren't there any more ,particularly in construction.

HB has already been identified for major surgery and rightly so given that it heavily distorts rental prices.

Finally,I'm starting to see more people looking for lodgers,more couples sharing etc etc.

demand is reducing before our eyes.

This isn't the same thing. The ability to pay the absurd prices is dropping due to inflation. Inflation is eating into income as energy and food take a larger percentage of the pay packet. Say it's now 40% for those two. If you took that back down to 38% some people would start renting again. It's the same problem only the pressure changes slightly. Prices are still determined by the average wage less the cost of food / transport / energy. Ie you are forced to pay the maximum you can afford due to the auction created by a lack of supply.

To achieve real change where prices refelct the underlying cost to build a house we must have ease of self-build. This will allow true price discovery and will give power back to the people.

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I appreciate inflation and in particular energy prices will have an impact but I think this will just make matters slightly worse for lots of people but will not create a big change. What did you have in mind?

Yes, things will become 'slightly worse' for people every year until things start to get exponentially worse. It's the boiling frog thing. The government hopes that people won't notice but they are starting to, the riots are the first signs of this.

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in terms of pricing,credit is the main determining factor.

have you read much of steve keen's blog?

http://www.debtdeflation.com/blogs/

if everyone who wanted a bentley could get the credit then the price would move up.

Disagree. If everyone wanted a Bently and could get credit here is what would happen:

- people would buy Bently's - the price would go up

- they would make more, reducing the unit cost and meeting demand, seeing prices correct

- if they didn't make more someone else would make a big luxury car for less and people would buy that

- others would move into the market also increasing competition

In the housing market you only get step 1 because supply is artificially constrained. Then in response to that banks realise that in an auction scenario people will borrow the maximum amount possible (and beyond as people are dumb). So they ease credit.

If I could go and build a house at cost (no ultra expesive land with planning permission) then I would. But I can't and that's the magic level.

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you must focus on demand supply in equal measure.we have had excess demand for ten to fifteen years due to

1 immigration-both from the EU and outside

2 housing benefit enabling some to live above the level that would be on a par with their socio economic position

3 societal move toward sole occupation

these three factors are already beginning to move demand the other way.our ability to bring in and service unlimited immigrant families is reducing with each monthly deficit.we quite simply can't afford for people to come here,take a low paid job send their kids to our schools at £4000 per annum/use medical services.On top of that,the oppurtunities that were there three years aren't there any more ,particularly in construction.

HB has already been identified for major surgery and rightly so given that it heavily distorts rental prices.

Finally,I'm starting to see more people looking for lodgers,more couples sharing etc etc.

demand is reducing before our eyes.

Was just about to type nobody had mentioned unchecked immigration particuarly from Eastern Europe which pushed up rents (and pushed down wages). Cheers Alan Johnson!

article-1222049-06E9AAB8000005DC-842_468x694.jpg

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'When Catherine and Violet first met in 1935:

l The Prime Minister was Stanley Baldwin l The average annual salary was £200 l A three-bed house cost £350 l A pint of beer cost 2p.'

valuing them as a multiple of beer gives

£350/.02=17500 x £3(average price of a pint)=ave house 17500x3 = £52,500

Surely she means tuppence not two pence?

In 1935 there were 240 pennies in a pound

£350 / ((£1 / 240) x 2) = 42000 pints per £350

42,000 x £3 = £126,000

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http://www.dailymail.co.uk/news/article-2025585/Good-neighbours-The-women-lived-door-76-years.html

just reading about two old dears that have lived next door to each other since 1935.points is that according to the wail, ave house/salary multiple was 1.75 not 8....it's gonna be a long way back down to £40,000 for a 3 bed semi that currently costs £168,000.

this is balance sheet tastic for all UK banks.......BUY.

'When Catherine and Violet first met in 1935:

l The Prime Minister was Stanley Baldwin l The average annual salary was £200 l A three-bed house cost £350 l A pint of beer cost 2p.'

valuing them as a multiple of beer gives

£350/.02=17500 x £3(average price of a pint)=ave house 17500x3 = £52,500

Easy finance is the only way house prices can increase. The limit of this has been shown with the property crash. House prices are now at their long-term high and it's impossible for them to go above this level permanently as people are struggling to pay the mortgage and pay living expenses with interest rates at a historic low. At the very best they can stay at their current price, that is until pay increases. But the current situation is pay rises are less than inflation so at best I'm looking at a gradual decrease in value of houses at 2% per year. The BOE and government will put measures in place to prevent a crash. My best estimate is a decrease in house prices of about 2% a year for the next 5 years which in real terms with inflation at 5% is a 7% decrease in real value every year for the next 5 years.

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Surely she means tuppence not two pence?

In 1935 there were 240 pennies in a pound

£350 / ((£1 / 240) x 2) = 42000 pints per £350

42,000 x £3 = £126,000

Yes but house sizes were still measured in cubits not square feet, so you got much bigger houses ;)

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Thanks - glad you liked it and that I could convey the idea. However I must have failed in emphasis somewhere as you are talking about credit as the root cause.

I believe the lack of supply due to planning regulation is the root cause. This shortage creates a situation where people must compete over a resource, which creates an auction situation. The banks then realised this and responded with near unlimited credit. This then creates a feedback loop where a check had previously kept a lid on things. This situation persists so long as you cannot self-build at the true cost of time and materials. The additional component is land with planning permission, which is far more expensive than regular land. This is the synthetic ingredient that keeps prices high. You have to drip feed it in or supply overtakes demand and prices collapse.

This is why even more restrictive credit, through regulation say max 3 times salary, or even interest rate rises, will not see true price discovery of near cost to build. People would just save before entering into a mortgage, thereby binding themselves into the longest achivable term, as people auction their whole lives for a house.

Housing is now the major cost by far. The debt is enslaving us.

Im sorry, but it was credit that allowed prices to rise...on checking ilford in rightmove, there are hundreds of places for sale....

Sure, S+D has a part to play, but not in a market where buyers are able to outbid well beyond their means.

1miilion houses for sale in 2008 just on rightmove and x hundred thousand unused homes dont signify a shortage.

Unsellable now means either the price is too high for the available credit, or other houses are simply better value.

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Easy finance is the only way house prices can increase. The limit of this has been shown with the property crash. House prices are now at their long-term high and it's impossible for them to go above this level permanently as people are struggling to pay the mortgage and pay living expenses with interest rates at a historic low. At the very best they can stay at their current price, that is until pay increases. But the current situation is pay rises are less than inflation so at best I'm looking at a gradual decrease in value of houses at 2% per year. The BOE and government will put measures in place to prevent a crash. My best estimate is a decrease in house prices of about 2% a year for the next 5 years which in real terms with inflation at 5% is a 7% decrease in real value every year for the next 5 years.

Agreed - but they only way you will see them return to near "at cost" is if planning laws are eased considerably. There is a big gap between this and reductions due to lending restrictions, and on the latter you are also constrained by those same limits.

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That would be amazing if house prices ever got that low again , i'd easily have saved up enough by now to pick up one.

No - it shows what proper regulation of bankers does.

None of this fairy story electron/illusionary numbers appearing in a ledger (nothing in bank vaults to cover their obligations to their savers) fractional reserve crap that they managed to impoverish a huge percentage of the country with and suck all the created wealth out of the economy.

In addition we would be back to multiple year queues to get a mortgage loan.

Any other business in the UK run on this constant bankrupt model would be shut down immediately by the authorities and the owners/Directors jailed for knowingly running a fraudulant business

When are we going to get some twerp in Westminster who knows this, understands this and takes on the frauds in the City along with their fraudulant accounting firms who sign them off each year.

How much is your pound worth?

The answer is that the US dollar has lost 98.17% of its purchasing power and the pound sterling 99.42% of its purchasing power in less than 100yrs. One dollar today should buy something like a single person's weekly food shop, not a single daily newspaper. Well done then, I suppose, for surpassing even the great tyrants of old who plagued the citizenry of both nations!

The fraud that the Bank of England/Mervyn are running right at this moment (he's going to 'retire' and disappear off the scene soon after this massive fraud on the people of the UK!)

(The Bank of England is a PRIVATELY OWNED BANK - Nothing to do with UK population - except fraud and legalised extortion of the wealth of the UK!)

By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some.(in the City)

"Our modern day Neros and Henry VIIIs are those we call our Prime Ministers and our Presidents. We are told they are all well meaning men and women. That may well be the case. They have however, since World War I, sat on the single greatest debasement of our wealth in human history.

Last year the UK raised over £200 billion by one part of the government issuing debt and the other part buying it. So £200 billion of new money is now in circulation. Nero and Henry VIII would blush at the brashness of this debasement. This is done wholly at the expense of yours and my very own purchasing power."

http://www.cobdencen...ntrol-of-money/

Edited by erranta

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Average salary was £200/year.

Rent was 5s8d/week

A three bedroom house was £350

A pint of beer 2d

Annual Rent was 7.4% of average annual income

The cost of a house was 1.75* annual income

Annual income would purchase 24000 pints of beer.

Fast forward to today;

Average salary is £25000/year

Rent is £60/week (council), £100/week (private)

A three bedroom house costs £160k

A pint of beer £2.50

Annual Rent is 12.5% of average annual income (council), or 20% (private)

The cost of a house is 6.4* annual income.

Annual income would purchase 10000 pints of beer.

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...and in 1910, the Letchworth 'cottages' cost £150, or in todays money, about £10,000, (those same cottages nowadays fetch £250-500k+) So houses in 1935 probably seemed hideously expensive too.

But in 1910, the average farm labourer earnt in todays money, about £5000.

OTOH Food, especially, has got a lot cheaper over past decades.

I think its a bit pointless comparing prices from so long ago.

We know theyre unaffordable now, we also know they were affordable in the mid/late 90s. So 1996 or so prices +50% wage inflation is a pretty good target (ie £75-80k for the average home)

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Was just about to type nobody had mentioned unchecked immigration particuarly from Eastern Europe which pushed up rents (and pushed down wages). Cheers Alan Johnson!

article-1222049-06E9AAB8000005DC-842_468x694.jpg

I love how the standard lefty and globalist argument is England is underpopulated because 97% or whatever is 'rural'

Uhh, yeah, farmland. Quite important for our survival.

Guess what, 99.99999% of the Sahara Desert is rural too, and yet probably still overpopulated because it cant support much life.

We are less than 60% self sufficient in food.

We are less than i dont know how much self sufficient in fuel and minerals, but im guessing under 50% with north sea oil and gas virtually exhausted.

We exceeded our Carrying Capacity long ago.

Stop imports and exports and see how long we last. Then tell me we're not overpopulated.

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Not sure which events you have in mind. I can't see a scenario where the BoE raise rates. Boomers will use their voting power to block dramatic reform of planning laws. Where is my black swan coming from?

I appreciate inflation and in particular energy prices will have an impact but I think this will just make matters slightly worse for lots of people but will not create a big change. What did you have in mind?

If you know where it's coming from it's not a black swan. :P

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  • 338 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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