Aparently we have it all wrong - houses have never been more affordable!

[Goodafterbad]

Received a link to this Telegraph article http://www.telegraph.co.uk/money/consumer-affairs/stop-whingeing-milennials-and-look-at-the-facts-youve-never-had/ from my Dad. It claims that that on several measures houses are back in line with long term affordability - we've never had it so good!

I thought I'd leave it here to be torn to shreds.

[Pablosammy]

The only thing I took from that article, apart from how selective the facts were, was that I learned about the new Lifetime ISA. Very interesting indeed.

[XswampyX]

It was a stroke of luck that they just happened to pick 1990 as their base year. Two years either side of that and his whole article would look like garbage.

What are the chances of that? 

[darkmarket]

I'll have a quick go:

"For all the doom and gloom, millennials (those in their 20s and early 30s) have more opportunity to accumulate wealth than many of their parents."

Median wages are ~ the same now as in 2000; the hardest hit age group is 18-24.

https://www.ifs.org.uk/uploads/Presentations/Understanding the recession_230915/SMachin.pdf

12th worst labour market security in the world:

http://stats.oecd.org/Index.aspx?DataSetCode=BLI

"Yet it is cheaper to buy a home today than it was during much of the Eighties and Nineties, because high prices have been more than offset by tumbling borrowing costs."

Aside from the obvious absurdity of a claim that only looks at interest rates and ignores deposit requirements, assuming your mortgage lasts longer than one business cycle, median salaries are unable to cope with any raise in interest rates. Without market interference, most buyers since the Great Recession will have their homes repossessed.

"During this time, many borrowers paid interest of up to 17pc. "

During this time, interest rates were not suppressed by QE and so savers were paid equivalent interest. Salaries were increasing proportionately, albeit with some delay.

"And raising a deposit is no longer such a stumbling block for young buyers. A number of lenders, such as Barclays or Bath Building Society, will lend 100pc, with a parental guarantee."

This is a sure sign of a bubble market, i.e. grossly overvalued, not affordable, assets.

"Wage growth has been slower post-crisis for young workers"

As per the link above, wages have dropped by 16% for 18-24s. This is not slower growth.

"Today workers are taxed in their own right and enjoy an £11,000 personal allowance. They can invest tax-free £15,240 in an Isa annually, rising to £20,000 from April. Or they can earn a 25pc bonus from the Government, if they invest in a Help to Buy Isa which is used for property purchase."

Most people have nothing to invest.

"More than 16m people in the UK have savings of less than £100" - http://www.bbc.com/news/business-37504449

And why do people not save? Aside from unprecedented levels of corporate marketing, "savings accounts will LOSE you cash as inflation jumps to 1% - http://www.dailymail.co.uk/news/article-3849880/Now-savings-accounts-LOSE-cash-inflation-jumps-1-Millions-Britons-getting-poorer-rates-fail-cost-living.html

"In recent years nearly seven million employees have joined a workplace pension since the introduction of auto-enrolment, which will eventually ensure everyone in work has a pension.

This enables them to save up to £40,000 annually and receive tax relief at their highest rate."

Great, but there's nothing there to pay out, in fact there's a deficit of well over £700bn - https://www.theguardian.com/money/2016/sep/01/uk-defined-benefit-pension-fund-deficit-grows-100bn-one-month-pwc

Meanwhile, the BoE is buying all the pension fund gilts, they're forced into the stock market to try to cover costs, so the stock market is the other asset bubble caused by QE, and what happens to bubbles, pension funds invested or not?

"Yet in their parents’ day fewer than one in 10 enjoyed higher education, compared with roughly half today."

And most of those are earning less than if they hadn't gone to university: http://www.independent.co.uk/student/news/graduates-earning-less-than-those-who-did-not-go-to-university-research-reveals-a6981811.html

This is a skewed opinion piece, where the conclusions determine the evidence, masquerading as data journalism.

 

[Blod]

Its these very kind of articles that demonstrate why we are in the mess that we are. And this was written by an individual with the power to borrow and vote, they have absolutely no idea. 

[zugzwang]

The typical FTB deposit has risen 90% since 2007, and now stands in excess of £33,000 nationally.

Squirreling away 10% of his after tax income/year our prospective homeowner on an average regional salary requires 30+ years of saving to even qualify for a mortgage on an averagely priced house in London, Brighton and most of the South East. It will take him as long to save the deposit as it will to service the mortgage!

 

 

[Si1]

Journalist Teresa hunter, btl writer:

 

http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11751956/Buy-to-let-five-ways-landlords-can-beat-new-tax-hikes.html

[Si1]

As soon as someone ignores nuance and starts banging on about 'facts' I suspect they're very wrong

[Fully Detached]

10 minutes ago, Si1 said:

As soon as someone ignores nuance and starts banging on about 'facts' I suspect they're very wrong

I suspect they're also shitting it.

[TheCountOfNowhere]

Plenty people out there tell you monthly affordability is great.....now that thery are sitting on a £1M house that they bought for £10,000

It's a pyramad scam I tell you.

[canbuywontbuy]

The Telegraph - like most mainstream press - are an abysmal dogs dinner of what should be described as journalism.  No wonder they stopped comments.  No wonder they let you view just one single article on a desktop computer before getting their subscription begging bowl out.  Fúck the press - you have to go to youtube and alternative media to get the truth on anything, and that's only with a discerning eye.  The mainstream media have really become utterly irrelevant now.

[Motor_Blade]

Josef Goebbels would have been proud of such propaganda. 

[london_thirtythree]

I have a spreadsheet that tracks the figures for buying a 2-bed flat in London between £450k to £600k - I would challenge anyone to take a look and then make an argument for 'affordability'..

I think that would be the Oxford Debate Society's 'final boss' or something similar.. 

[BorrowToLeech]

Yet homeownership is declining.

Funny that.

[jo_gian]

You need to repay the capital from your wage and when prices are 3x your salary - like in the nineties - it is 3 times easier to save it up and buy on cash/with very low mortgage than now when price per wage ratio in London is way above 10x.

 

If you have 100K today and want to buy the average flat in London (500K), you need mortgage for 400K. if rate is 2% that is monthly 1700 forever + rates will go up of course at some point. If the price would be third of it (166K) and interest rates 15% that is 845 monthly maybe only for 1-2 years as even a 15K early repayment tkaes out a huge chunk from your capital.

 

Plus they had big inflation, which inflated away the debt in a few years time. So they had like 3-5x easier time buying. And some of them still failed to buy with those easy conditions, now that tells you how "hard" they've been saving up and how "tight" they were on money. Today they would be living on the streets as they couldn't even save up for the skyhigh rent.

 

A lot of people - especially top earners bought outright in the old times, mortgage was only needed for people on average or on low wages, today even top earners are struggling, people on average and low wages has no chance of owning ever.

[Si1]

41 minutes ago, Motor_Blade said:

Josef Goebbels would have been proud of such propaganda. 

The banality of evil. Mark Carney. Just following orders sir.

[winkie]

11 hours ago, Pablosammy said:

The only thing I took from that article, apart from how selective the facts were, was that I learned about the new Lifetime ISA. Very interesting indeed.

Yes...very interesting, is it another way of saying, Folks we have reached real peak property prices so you can no longer rely on HPI to keep you in wealth, retirement and financial security.......this is our way of giving something back to those who will lose out?

[iamnumerate]

The article ignores the fees that mortgages cost now.  Also that students used to be able to sign on during the vacactions.  It is articles like this which mean the Telegraph is deservedly doomed.  I thought things were bad in 2001 but now days prices are so much.  It also refers to a mortgage which needs a parental guarantee, I never heard of such things until about 10 or 12 years ago.

[hi5lo5]

27 minutes ago, iamnumerate said:

The article ignores the fees that mortgages cost now.  Also that students used to be able to sign on during the vacactions.  It is articles like this which mean the Telegraph is deservedly doomed.  I thought things were bad in 2001 but now days prices are so much.  It also refers to a mortgage which needs a parental guarantee, I never heard of such things until about 10 or 12 years ago.

On the note of students and their affordability.

 

http://www.ibtimes.co.uk/student-accommodation-award-judges-refuse-pick-winner-because-rents-are-too-high-1588102?utm_source=social&utm_medium=twitter&utm_campaign=/adm/article/publish

[juvenal]

'During this time, many borrowers paid interest of up to 17pc. ' Telegraph

I wish I had a fiver for every time I see this mentioned by older people.

I have a record of every mortgage payment I made during this period. These sky-high rates lasted only for a couple of months/payments. Thereafter (with a few blips) they steadily dropped month after month.

If anyone's interested, here's my own record of a Leamington Building Society Mortgage (fairly typical?)

Rate increased in June 78 by 1.25%

Rate increased in November 1978 by .75%

Rate increased in Jan 1979 by 2%

Rate increased in Jan 1980 by 2.5%

December 1980   I paid £22,000 for a three bed cottage with decent-sized garden and outbuilding. Surrounded by cornfields. Mortgage of £10,300 at  14.75% 

 

Jan 1981 rate reduced by 1%

Mar 1981 rate reduced by 1%

Nov 1981 rate increased by 2%

Apr 1982 rate reduced by 1.50%

December 1982 rate reduced by 2%

July 1983 rate increased by 1.5%

April 1984 rate reduced by 1%

August 1984 rate increased by 2.25%

Oct 1984 rate increased by 0.5%

Jan 1985 rate reduced by 1%

Feb 1985 rate increased by 1%

April 1985 rate increased by 1%

Sept 1985 rate reduced by 1.25%

May 1986 rate reduced by 0.75%

 In summary, houses were dirt cheap then, doer-uppers plentiful, wages were rising and savings rates were good. Higher education was free, with grants available. Plenty of jobs about. Healthcare was adequate and final salary pensions common.

I knew guys in labouring jobs who bought starter homes (2/3 bed sound Victorian terraces) with a good size deposit simply by saving for 12 months and doing any overtime available.

My lot were a golden generation. We had it better than any generation before or since. 

Younger people today are under the cosh from all directions like never before. 

Let's hear no more from oldies peddling (by implication) the nonsense that they only survived a 25 year fixed rate of 17.5% by going without furniture and cutlery.  And, of course, by heroic hard graft and financial prescience. 

We had free education, dirt-cheap houses, rising wages and  good savings rates.  What a start we got compared to now!

My lot got lucky, that's all, and won't bring themselves to admit it.

 

PS : If any of this post stays in your mind, it'll be the buying of a three bed country cottage for £22K. If you want it today, it'll be £300k plus.

That's how lucky we were.

At those prices, mortgage rates were almost an irrelevance.

Edited October 25, 2016 by juvenal

[Wayward]

i won't read the article and give it the dignity of an extra click.  I can well imagine what it says...rather than defending this outrage TPTB should be hanging their heads in shame...never in generations have we had such a dramatic shift in wealth from the poor and young to the rich and old...its criminal and I am sure in the future people will look back aghast...

I think the market is currently self sustaining, it seems that's possible at low volumes in the short term...people are selling tulips to buy tulips, ie swapping them between each other.  What will snap I wonder and when...I expect we need unemployment to return before we will see meaningful falls...so unlikely to be a great outcome for anyone.

[Si1]

24 minutes ago, Wayward said:

i won't read the article and give it the dignity of an extra click.  I can well imagine what it says...rather than defending this outrage TPTB should be hanging their heads in shame...never in generations have we had such a dramatic shift in wealth from the poor and young to the rich and old...its criminal and I am sure in the future people will look back aghast...

I think the market is currently self sustaining, it seems that's possible at low volumes in the short term...people are selling tulips to buy tulips, ie swapping them between each other.  What will snap I wonder and when...I expect we need unemployment to return before we will see meaningful falls...so unlikely to be a great outcome for anyone.

Oooooh you're so morally concerned. Do you feel warm and fuzzy inside?

[Wayward]

no?

[Wayward]

...i feel angry as you well know and like we all should feel. I dont think my point was worthy of mockery.

[canbuywontbuy]

16 hours ago, jo_gian said:

If you have 100K today and want to buy the average flat in London (500K), you need mortgage for 400K. if rate is 2% that is monthly 1700 forever + rates will go up of course at some point. If the price would be third of it (166K) and interest rates 15% that is 845 monthly maybe only for 1-2 years as even a 15K early repayment tkaes out a huge chunk from your capital.

Yep.  It takes anyone with GCSE level maths and 60 seconds of their spare time to work out that borrowing £400K is more expensive than borrowing £166K regardless of the interest rates.  Even at 15% IR, your savings are earning something similar, and your wages will be going up similar too.  It's never about the capital with these people - it's as if the captial sum doesn't exist.  All that exists are interest rates.