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apom

Can We Discuss This..?

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but the correction will be a collapse and I can prove it..

Well providing you agree with me.

Okay, take five coins and make two piles.. these represent the "take home pay" of us UK citizens...

Now move two coins into a pile.. this pile represents the long time average cost of home purchase..

Look at the other pile.

Three coins of the five.. This pile represents the average contribution to the economy of your hard earned money.. It buys goods to support industry.. it is taxed at purchase point.. it goes back to pay for services and goods that pays for other peoples wages.. taxes that go toward governemtal and social costs..

Look hard at that pile.. three coins represent the long term average contribution to the economy.. now take a coin and slide it to the "Home Purchase" pile

..

this now represents todays cost of housing.

Look at the ballence..

And now.. consider what you believe sets the price of housing.. is it speculation or greed...? or is it the economy..?

if you can convince yourself that the economy can cope with this level of shortfall then you can convince yourself that houe prices need not come down..

But look long and hard at the piles of coins..

I believe that long term houseprices are set by the economy and as a multiple of salary they have returned to the same levels.. Time and Time again..

The economy is powerful, it seeks its natural ballence.. and we can only temporarily cause aberations..

anyway.. discuss..

Not my spelling.. but my theory.

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but the correction will be a collapse and I can prove it..

Well providing you agree with me.

Okay, take five coins and make two piles.. these represent the "take home pay" of us UK citizens...

Now move two coins into a pile.. this pile represents the long time average cost of home purchase..

Look at the other pile.

Three coins of the five.. This pile represents the average contribution to the economy of your hard earned money.. It buys goods to support industry.. it is taxed at purchase point.. it goes back to pay for services and goods that pays for other peoples wages.. taxes that go toward governemtal and social costs..

Look hard at that pile.. three coins represent the long term average contribution to the economy.. now take a coin and slide it to the "Home Purchase" pile

..

this now represents todays cost of housing.

Look at the ballence..

And now.. consider what you believe sets the price of housing.. is it speculation or greed...? or is it the economy..?

if you can convince yourself that the economy can cope with this level of shortfall then you can convince yourself that houe prices need not come down..

But look long and hard at the piles of coins..

I believe that long term houseprices are set by the economy and as a multiple of salary they have returned to the same levels.. Time and Time again..

The economy is powerful, it seeks its natural ballence.. and we can only temporarily cause aberations..

anyway.. discuss..

Not my spelling.. but my theory.

Problem is, there are not a fixed number of coins. The government can make more. Inflation in other words. I agree to your long term trend theory though: Ignore trend at your peril.

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true .. inflation can move it back into the same "pile" ballence that i am looking to discuss.

But can the argument be dis-credited?

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I think the multiple argument of 3.5 x still holds even when you consider inflation because low inflation implies you should repay capital where as high inflation means you should primarily worry about interest. The problem is that you don't require any self discipline to take care of the capital if you have high inflation. With low inflation you still get people on intrest only loans with no knowledge / understanding that some time they will have to pay off capital and that is a bit of a recipe for disaster.

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anyway.. discuss..

Now imagine because of higher tax, council tax, NI contributions etc in real terms private incomes have actually fallen for over two years, so in reality you now only have 4.5 coins to spend, at the same time things like fuel, utilities and basic living costs have risen half a coin! Then add in higher interest rates and potentially higher taxes still. Nice differential going on there.

Now look at it from the government point of view, they take more coins out of the economy to pay for yesterdays' profligacy at the same time they also borrow less coins and inject fewer new coins into the economy. Less in, more out.

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Guest wrongmove

....I believe that long term houseprices are set by the economy and as a multiple of salary they have returned to the same levels.

Maybe our calculation of the trend has been wrong. Maybe it is not "prices = 3.5x earnings", but "interest payments = 25% of household earnings".

In the past, this would have equated to the same thing - IRs were volitile, but averaged around 7-8%. If we really have entered a period of "permantly" low real and nominal interest rates, then prices may have risen permanently.

If rates stay low, and if unemployment is stable, do many here see a reversion to 3.5x any time soon ?

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  • 301 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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