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Sandwiches33

Property Market To Implode

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That's the assumption in the latest figures from think tank Resolution Foundation, which show that lower- and middle-income households are spending 26% of their salaries on housing, compared to 18% back in 1995. In London, households spend 28% of their income on housing.

The think tank said this is the equivalent to adding 10 percentage points onto income tax.

....26%?! And the rest! If people were really only spending 26% of their income on rent, then they're laughing - will be able to put away 25%+ in savings each month. I think it's more like 45% or 50% for a lot of renters / mega-mortgagers. Or are they doing some crude "average" with the stats i.e. including mortgage free and children (lol)?

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It's going to implode :lol::lol:

The Chinese alone are right now are increasing debt levels by 16% a year so an extra $1 trillion each and every quarter to funnel into London/UK house prices. That's on top of the UK government's own UK house price funnelling efforts.

Edited by billybong

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Yup. Inflation in every other area is subtracted from GDP. In housing, it is added (imputed rent)

They can call it what they want, GDP be damned. Its a cost and its squeezing other areas. Thats recessionary, regardless of what the statisticians want you to believe.

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Yup. Inflation in every other area is subtracted from GDP. In housing, it is added (imputed rent)

They can call it what they want, GDP be damned. Its a cost and its squeezing other areas. Thats recessionary, regardless of what the statisticians want you to believe.

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Probably not take-home, but gross figures are being used.

The trouble with the article is that they don't say - their statistics are awful (in that they're ill defined).

They do say 'of household income' which suggests pre-tax, but they should make it explicit.

Then you need to know if they're talking about median or mean income.

But I think the main problem here is that the data is treated as a normal (or homogeneous) distribution. I'd have thought that the normal (old-fashioned) way for housing costs to perform is that you buy a house at 25 (large % of income) then spend 25 years paying it off (lower % of income as you get pay rises, along with principal being eroded by inflation), and then have 15 years at the end with house paid off (zero cost - they didn't included maintenance - or at least they didn't say they included maintenance - stupid amateur report).

So - you could have 12.5 years at 100% of income, 12.5 years at 50% of income, 12.5 years (can't be bothered to do the sums for 15 years) at 0% of income - for this (made up reductio ad absurdum) is the average of 50% of income at all meaningful?

And what is worse - there is a whole cohort of the working age population who have been bailed out by inflation and/or by crazy low interest rates (which new purchasers can't get). You've probably got a bimodal distribution here, with pre 2004 vs post 2004 (if not even more complicated).

This would be relatively easy to resolve - just split out into age ranges of 30-40,40-50,50-60 - then you'd see the true cost of housing without the bailed out older owners. And even then they really should spell it out, otherwise you'd just get the standard response from boomers etc that you have to suffer when you're younger to get the benefits of ownership later - this isn't so true for buyers in the last 10 years.

Oh, and you might as well split out owners from renters - entirely different situation.

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What the chart does not show is the quality of the house low-middle incomes could buy back in 98' compared with the new-build-help-to-buy-a-shoe-box that they can now buy.

In reality the 25% may as well be 0% because the houses this group now buy are shit.

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