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Tempest

Property Does Not Always Go Up Over 25 Yrs

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Found this nugget on the "Elliot Wave" website while googling. http://www.elliottwave.com/features/defaul...id=2052&time=am

"Here’s a fun fact. In the 25 years from 1973 to 1998, the UK’s inflation-adjusted house prices showed no change. And in the 6-year period between 1998 and 2004, those prices more than doubled."

I can't verify this but have no reason to doubt it. I wonder if any HPCers can do so?

Sounds not unexpected in some ways - buy at a market peak in 73 (the highest to that date in term so f multiples) through a bottom and back up through a mini boom and a bigger boom in the late 80s followed by a mother of long drawn out bottoms in the 90s. Point is, even I as a bear believed the VIs that there must have been real increases since 73 even after inflation?

Apparently not!!! So if it is true and this can be the case once why can it not happen again? Who is to say property will be worth more in real terms in 20/25yrs yrs?

BTw asked my Mum about 73 - parents bought a big family house in late (!) 73, we moved in in early 74. Dad paid well over 4x salary (consultant doctor) to bag it. Who says it is a modern disease...

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Found this nugget on the "Elliot Wave" website while googling. http://www.elliottwave.com/features/defaul...id=2052&time=am

I can't verify this but have no reason to doubt it. I wonder if any HPCers can do so?

Sounds not unexpected in some ways - buy at a market peak in 73 (the highest to that date in term so f multiples) through a bottom and back up through a mini boom and a bigger boom in the late 80s followed by a mother of long drawn out bottoms in the 90s. Point is, even I as a bear believed the VIs that there must have been real increases since 73 even after inflation?

Apparently not!!! So if it is true and this can be the case once why can it not happen again? Who is to say property will be worth more in real terms in 20/25yrs yrs?

BTw asked my Mum about 73 - parents bought a big family house in late (!) 73, we moved in in early 74. Dad paid well over 4x salary (consultant doctor) to bag it. Who says it is a modern disease...

Some important and very telling words in the last paragraph. BIG FAMILY HOUSE and DAD I take it this means that your mother was not working and the house was very nice indeed. At the end of the day what is the point in saddling yourself with a lifetime of debt for a very poor location/property (which I think all would agree anyone buying today at today's prices would more often than not be doing). Something has to give. I still have faith in a crash, and will wait as long as it takes, because I don't want to be a debt riddled pensioner! If no crash occurs (unlikely though possible), then I will look to buy abroad.

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figures can be spun to make it look like a convincing case.

why choose 1998-2004 as a comparison....why not 1992-1998?

the long-term moving average is the only reliable guide to where prices should be....right now we are just coming off a peak,and when prices come down there WILL be a period where it undershoots.....which is where we want to buy in...but don't expect major gains in housing for years after it hits bottom.

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figures can be spun to make it look like a convincing case.

why choose 1998-2004 as a comparison....why not 1992-1998?

the long-term moving average is the only reliable guide to where prices should be....right now we are just coming off a peak,and when prices come down there WILL be a period where it undershoots.....which is where we want to buy in...but don't expect major gains in housing for years after it hits bottom.

I broadly agree with you. Its just interesting to see the usual "always up over 25 yrs" story shown to be wrong. It is taken as mantra by most of the country.

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My understanding is that wages tend to go up 2% above inflation and house prices rise with earnings.

Inflation is currently around 2% - 2.5% (and seems relatively stable at this level since 1997) so we can expect 4% nominal wage and house price growth.

Unless you decide to look at recent price rises and long term trends... which might indicate a large fall is on the cards.

Anyway, we all know prices are high compared to long term averages, and investing should be done to maximise the effects of cycles, not to get you screwed over by them. The point is, assuming you don't find yourself buying at the tale-end of a property boom, UK residential property is a good way of getting a real return in line with economic growth.

FF

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Guest Charlie The Tramp
BTw asked my Mum about 73 - parents bought a big family house in late (!) 73, we moved in in early 74. Dad paid well over 4x salary (consultant doctor) to bag it. Who says it is a modern disease...

If you take the price paid in 1973 and multiply by 7.7 that will give you the equivalent monetary value in 2003 taking into account normal inflation but not HPI.

1973 inflation running at 9.2% multipler 7.7

To calculate the modern-day price, multiple the price by its year's multiplier - for example, £25,000 in 1973 is the equivalent of £192,500 (£1000 * 7.7) in 2003. The multipliers are rounded to two significant figures.

Therefore a good wage of £3,500 in 1973 would amount to £26,950 in 2003 to keep pace with inflation.

A true case, a house bought in 1964 for £6,000 x 13 being the multiplier would in fact be equivalent to £78,000 in 2003.

Sold 2005 for £500,000.

Their income in 1964 £3,000 equivalent to £39,000 in 2003

I say again the 60s and 70s was a great time for potential Home Buyers

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If you take the price paid in 1973 and multiply by 7.7 that will give you the equivalent monetary value in 2003 taking into account normal inflation but not HPI.

1973 inflation running at 9.2% multipler 7.7

To calculate the modern-day price, multiple the price by its year's multiplier - for example, £25,000 in 1973 is the equivalent of £192,500 (£1000 * 7.7) in 2003. The multipliers are rounded to two significant figures.

Therefore a good wage of £3,500 in 1973 would amount to £26,950 in 2003 to keep pace with inflation.

A true case, a house bought in 1964 for £6,000 x 13 being the multiplier would in fact be equivalent to £78,000 in 2003.

Sold 2005 for £500,000.

Thanks. I see housing has a valid reason to be (and record as) a proxy for an economic growth rate of return. I also see the multipier works if you can look purely to monetary pricing and ignore asset pricing and asset price inflation and bubbles/bust cycles. £6000 in the stock market would also produce a spectacular figure if one picked a good 41 year period from the 60s.

The house I refer to is now worth around 22 times what my parents paid for it in 73 (they sold during a bit of a downturn in mid/late 70s but made up for it by renting (!) for a couple of years and buying in at the next bottom in 79). Interestingly, in 98 it was only worth around 9 or 10 times the 73 price which is not too far off the multiplier.

Shows again how far off beam things can get.

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Found this nugget on the "Elliot Wave" website while googling. http://www.elliottwave.com/features/defaul...id=2052&time=am

I can't verify this but have no reason to doubt it. I wonder if any HPCers can do so?

Sounds not unexpected in some ways - buy at a market peak in 73 (the highest to that date in term so f multiples) through a bottom and back up through a mini boom and a bigger boom in the late 80s followed by a mother of long drawn out bottoms in the 90s. Point is, even I as a bear believed the VIs that there must have been real increases since 73 even after inflation?

Apparently not!!! So if it is true and this can be the case once why can it not happen again? Who is to say property will be worth more in real terms in 20/25yrs yrs?

BTw asked my Mum about 73 - parents bought a big family house in late (!) 73, we moved in in early 74. Dad paid well over 4x salary (consultant doctor) to bag it. Who says it is a modern disease...

So much for us lucky boomers. I got into a debate on another thread where I was saying that it was hard buying my first place in the early 70's . No one believed me!

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My understanding is that wages tend to go up 2% above inflation and house prices rise with earnings.

Inflation is currently around 2% - 2.5% (and seems relatively stable at this level since 1997) so we can expect 4% nominal wage and house price growth.

Unless you decide to look at recent price rises and long term trends... which might indicate a large fall is on the cards.

Anyway, we all know prices are high compared to long term averages, and investing should be done to maximise the effects of cycles, not to get you screwed over by them. The point is, assuming you don't find yourself buying at the tale-end of a property boom, UK residential property is a good way of getting a real return in line with economic growth.

FF

Hi Father Fred,

Good to see you still posting occassionally.

I would agree that this is the right way to look at property trends (as a whole) over the long term in the absence of some special (GENUINE) phenomenon that will change things permanently - essentially it is inflation plus the real increase in our nation's wealth (plus or minus some random fluctuation).

However I fear we've already had too many of the future years' returns already (current prices are just based on debt "borrowed" against future economic growth) and stagnation is pretty much as good as it gets (obviously I expect a correction).

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figures can be spun to make it look like a convincing case.

why choose 1998-2004 as a comparison....why not 1992-1998?

the long-term moving average is the only reliable guide to where prices should be....right now we are just coming off a peak,and when prices come down there WILL be a period where it undershoots.....which is where we want to buy in...but don't expect major gains in housing for years after it hits bottom.

But surely most of the people on here don't actually WANT major gains in housing? Surely that would just lead to the same problem for future FTBs. Many people posting say they just want prices to come down so that the can afford a decent home -- is that true ? ..or do they really want prices to plummet so they can buy.... and then profit from the next above inflation rise in HPI?

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If you take the price paid in 1973 and multiply by 7.7 that will give you the equivalent monetary value in 2003 taking into account normal inflation but not HPI.

1973 inflation running at 9.2% multipler 7.7

To calculate the modern-day price, multiple the price by its year's multiplier - for example, £25,000 in 1973 is the equivalent of £192,500 (£1000 * 7.7) in 2003. The multipliers are rounded to two significant figures.

Therefore a good wage of £3,500 in 1973 would amount to £26,950 in 2003 to keep pace with inflation.

A true case, a house bought in 1964 for £6,000 x 13 being the multiplier would in fact be equivalent to £78,000 in 2003.

Sold 2005 for £500,000.

Their income in 1964 £3,000 equivalent to £39,000 in 2003

I say again the 60s and 70s was a great time for potential Home Buyers

What was the Miras tax rebate on a house mortgage?

25% from what I recall someone writing!

Oil subsidised buying houses for the boomers!

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Oil subsidised buying houses for the boomers!

not really. it was just good government. not interested in generating spending booms and feeding off its own people. and introducing ID cards and new taxes.

back then, you paid tax and got something back.

oil paid for most of our cold war.

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Guest prudence

I broadly agree with you. Its just interesting to see the usual "always up over 25 yrs" story shown to be wrong. It is taken as mantra by most of the country.

because many people don't understand that nominal figures have to be readjusted for inflation\deflation

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Locally a 3 bed semi was circa £3,000 in 1973 and had risen about 22 fold to £66,000by by 1998.

Average wage was about £1,700 in 73 and about £22,000 in 98?

So probably not that far out.

Client I took on yesterday -

they bought det in Cambridge in 1975 (after real falls and salaries had risen so this house moved into their radar) for £11,000. Value at peak £500k.

Untenable!

They had devil of a time paying mortgage and raising kids (their daughter already my client born 75) for years. But now - next month they pay off their mortgage........wait for it......£5,000!

They will have £45k pensions and lots of other money. His 90 yr old dad has a £1.2m London home.

They so realise how lucky their generation has been - albeit with hard work.

They now understand that our inflation changes has moved us from a front-loaded society to a back-loaded one ie in terms of when we pay back the mortgage.

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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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