Jump to content
House Price Crash Forum
Sign in to follow this  
john_d_uk

Is This Why Houses Are Unaffordable

Recommended Posts

Right - The demographic arguement; all this talk about people living longer. Fair enough, but people are also working longer aren't they? (More NI and pension contributions) And now, both partners are generally working (paying even more money in NI and pension contributions)

What I don't understand about this country, as has been mentioned previously, is that you now have a professional couple earning, say £60,000 between them living in a 3 bed terraced house worth £200,000, that 100 years ago a factory worker used to live in. How on earth has that happened?

My Dad and mum in the late 1960s could afford a 3 bed detached house in the westcountry on his wages - alone. She stayed at home to look after my sisters and me. It makes me wonder who the mugs really are.

This might be a bit controversial, but I think the reason house prices and the cost of living generally are so high is that most households now have 2 earners.

It works like this; Generally speaking about 30 years ago, most women stayed at home and the man worked. The man earned X pounds per year and the family could afford a house 3.5 times this anount.

Now the man still earns X, but his wife/ partner etc also earns say 0.9X The money the 'household' has to spend has now nominally 'increased' to 1.9X Therefore the house they can afford is 3.5 times this amount.

You would think this means that they can afford a better house, but actually what it means is that they can only afford the SAME HOUSE. This is because the demopgraphics are generally the same, with the extra singletons / immigrants filling the new housing stock. Because the woman (generally) now has to work, to enable the couple to afford the house, child care (nursery places / child minders) are also required. In the end, I think on average people are now worse off than the same household would have been 30 years ago, in both financial terms and quality of life terms.

It is simple supply and demand - ie more 'earned money' is now available to purchase a finite stock of housing, so the housing prices increase to take account of it. Now I am not against the women work thing, I just wonder as a society has this actually benefitted anyone in the long term?

:(:ph34r:

Share this post


Link to post
Share on other sites

In part true.

But NOTHING radically changed in the 2 earner stakes over the last 5 years.

The last 5 years have been about speculation and lax monetary condtions and in some cases outright market fraud with people pushing prices up by overstating salaries - not but but two in some caese!

There have been many two income families going back decades. The only thing now is that there are two incom families who cannot survice with any breaks in employment - hence falling birth rates, No children, ;ess need to go up the ladder (not that many can afford to they are already maxe out on their current borrowing).

Share this post


Link to post
Share on other sites
Depends how houses are viewed. Just because households are earning more doesn't necessarily mean we should spend more on houses. For instance would you pay 1.9 times more on pants now?

A fair point, except we do not buy our houses from a infinite supply source called China. That is where my pants come from, even the nice M&S ones.... Therefore, The price for a lot of imported consumer goods has fallen in real terms, to probably less than the equivalent value 30 years ago.

:)

Share this post


Link to post
Share on other sites

I have a feeling it has contributed slightly, in the case of FTBers who have entered the market. They will be thinking in the lines of 'well, since we both earn 25k each, we can still afford the shoe box for £100k.'

Us girlies wanted a better job for a better life but its like our generation has become trapped by it. My peers are now looking at the girls who didn't pass thier GCSEs and became stay at home mums with a house now worth 200k as the sucessful ones rather than the girl who got a 1st degree and became top of her field. :angry:

Share this post


Link to post
Share on other sites
I have a feeling it has contributed slightly, in the case of FTBers who have entered the market. They will be thinking in the lines of 'well, since we both earn 25k each, we can still afford the shoe box for £100k.'

Us girlies wanted a better job for a better life but its like our generation has become trapped by it. My peers are now looking at the girls who didn't pass thier GCSEs and became stay at home mums with a house now worth 200k as the sucessful ones rather than the girl who got a 1st degree and became top of her field. :angry:

Ironic isn't it? But I think this has less to do with a rise in women's material expectations than a downgrading of the value of being a good parent (which we should all bear responsibility for)... somehow it became the consensus that to be a stay at home mum (or Dad) was a terrible thing and a waste of your life - when in actual fact being a good parent is surely the greatest contribution that any one person can make to the future wellbeing of our race.

Instead we have supplanted it with a cold lust for material advancement. Well, we're about to get what we deserve.

Share this post


Link to post
Share on other sites
I have a feeling it has contributed slightly, in the case of FTBers who have entered the market. They will be thinking in the lines of 'well, since we both earn 25k each, we can still afford the shoe box for £100k.'

Us girlies wanted a better job for a better life but its like our generation has become trapped by it. My peers are now looking at the girls who didn't pass thier GCSEs and became stay at home mums with a house now worth 200k as the sucessful ones rather than the girl who got a 1st degree and became top of her field. :angry:

Wow, a very frank admission. I guess it comes down to a general work/life balance. What is the point of both working if you can't afford to live/have a family etc.

The trouble with being in the Rat Race is that even if you win, you are still a rat..... :blink:

Share this post


Link to post
Share on other sites

[quote name='john_d_uk' date='Oct 6 2005, 04:29 PM' post='207638'

The trouble with being in the Rat Race is that even if you win, you are still a rat..... :blink:

LOL, great quote, and very true. A slave to your very own rat run, even if is double backed deep shag.

Share this post


Link to post
Share on other sites

No, it's even simpler than that. Mortgage companies in the 60s only offered 2.5 x salary and replayment only. Now, over the last 5-10 years we've seen multiples of 4-6 offered on interest only with lapse rules; no questions asked. BTLs have taken advantage of this massive geering & it's all pushed up market values to a stupid level.

But don't worry, I'm sure it will be reverting sooner or later.

Share this post


Link to post
Share on other sites
Wow, a very frank admission. I guess it comes down to a general work/life balance. What is the point of both working if you can't afford to live/have a family etc.

The trouble with being in the Rat Race is that even if you win, you are still a rat..... :blink:

I want to give up work to look afte kids and I will look into that when the moment arrives, but once the kids have grown up, its good to have something else in your life or you become inert. Although in putting it like that, I pictures myself doing a 'hobby' job, rather than a 'procedure' dominant demanding job. Looks like we will need all the pennies we can get, at the rate this country is going, just to have what our parents took for granted.

PS I don't mind being a rat, so long as I am a stress free rat, running in the opposite direction to everyone else!

Share this post


Link to post
Share on other sites

In addition to having a higher percentage of the adult population working, which undoubtedly has had the effect you describe over time, we also have a far higher proportion of our pay to spend on things beyond bare necessities (food, clothing, heat etc). Some goes on luxuries, but some will also go on increasing the price of illiquid assets, such as housing. Housing does fall into the "bare essential" category, before you mention it, but the effect is much the same as having the extra income.

This goes to explain why the value of housing over time rises by more than the rate of inflation. It does not explain why prices have doubled in the past 5 years, except that they were below trend then and above trend now.

Share this post


Link to post
Share on other sites

yes, the old perpetuating cycle..............People can't afford to buy on one income so both partners work.....

so prices rise so both partners have to keep working......

Now we've reached the point where there's no going back ........to drastically restricted 1960s type lending....

This explains why Hp rises will not outstrip inflation in the next 3o years like they have over the pat 30 years.

Share this post


Link to post
Share on other sites
A fair point, except we do not buy our houses from a infinite supply source called China.

Maybe Houses are finite, but then again, so are the Buyers. As a lot of sellers are beginning to realise!

It would be that this Boom has not been driven by shortage of housing, more to do with "demand" due to

Speculative buying by the masses, as they thought everyone would get rich as house prices only go up, etc.

Share this post


Link to post
Share on other sites

You might also add the changes Nigell Lawson ex Tory Chancellor made in terms of allowing banks to sell mortgages. Prior to that this was a separate business run by the mutual building societies. They were generally sensible about lending criteria. Then came demutalisation and a much more competive mortgage market and hence lending standards easied - detrimentally IMHO. I recall a conversation with an estate agent/mortgage broker in 1995. This chap was taking a redundancy package and was telling me he didn't fit in with the modern way of doing business in the mortgage market. He recalled how in past he would sit down with a customer and go through their finances making sure they could afford the repayment and still have something left to live. He wasn't complementary about the new techniques. It does have an element of paternalism - but on reflection I think it probablly saved a lot of people from getting in over their heads as is currently the case.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 302 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.