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What can the median full time male wage buy in your area?


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3 hours ago, RushRoad said:

However the criteria for affordability should not be, is it the same price as it was 20 years ago?

Presumably you mean; 'However the criteria for affordability should not be "Is it the same price as it was 20 years ago?"'

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Currently builders earn a return on holding land for a long time before building (land-banking). Couldn't the government buy the land itself (compulsory purchase, or just hint at or impose land value

This could probably be argued several ways, but it's important to note that regulations exist at least in part for the benefit of big business. This is particularly true of builders and banks. Co

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Some thoughts:-

  • RushRoad suggests Moston as a place for a median male full-time worker to live in 2017.  15 to 20 years ago, the median male full-time worker in Manchester could have bought a 3-bed semi in Chorlton/Heaton Moor/Didsbury/Withington.  That's a massive difference in lifestyle and aspiration.  Now I know you think that house prices will only go up, and I also know that you know that wages aren't keeping up with house price increases, so where would you suggest Mancunians live in 10 years' time? Leeds?
  • if house prices are affordable, why have we had 8 years of unprecedented interest rates? The base rate prior to March 2009 was never below 2%.  It's never been above 0.5% since March 2009.  Surely if house prices are affordable, the BoE can tighten lending?
  • Why was HTB introduced? According to you, no help is required.

Enjoy your 3-bed semi in Moston.

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9 hours ago, RushRoad said:

 

Sure but what has that got to do with buying the average house?

A single part time workers could never historically have been able to buy the average house nor could said person buy the average house even if house prices fell 50%

 

Its probably best practice to look at a couple both working full time and see if they could buy the local average house and the answer to that is yes in the vast majority of area they indeed can.

I bought in 2001, so hardly aeons ago... a nice 3 bed house in a nice area on the edge of the Peak District, had a 20% deposit (£8k) and I was on a single, part time, unskilled wage, oh and I paid the mortgage off in less than 10 years

I'm now full time and higher up the pay scale but couldn't afford to buy the same house at today's prices

 

Do please carry on...

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20 minutes ago, nome said:

I bought in 2001, so hardly aeons ago... a nice 3 bed house in a nice area on the edge of the Peak District, had a 20% deposit (£8k) and I was on a single, part time, unskilled wage, oh and I paid the mortgage off in less than 10 years

I'm now full time and higher up the pay scale but couldn't afford to buy the same house at today's prices

Do please carry on...

Not to mention that RUNNING a house is way more expensive in 2017 than it was in the early 2000s.  Utility and council tax bills have for many years outpaced wage inflation. 

In the end, we all know the reality.  RushRoad can put a positive spin on the housing market on an obscure internet forum and in doing so, persuade nobody.  Meanwhile, reality marches on.

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6 hours ago, canbuywontbuy said:

In the end, we all know the reality.
RushRoad can put a positive spin on the housing market on an obscure internet forum and in doing so, persuade nobody.
Meanwhile, reality marches on.

 

The reality that marched on since this website was founded is as follows

Year : House Price Increase In England

2003  :  14.9%

2004  :  13.5%

2005  :  5.0%

2006  :  9.2%

2007  :  5.5%

2008  :  -15.2%

2009  :  7.2%

2010  :  0%

2011  :  -0.2%

2012  :  1.5%

2013  :  6.5%

2014  :  7.8%

2015  :  8.6%

2016  :  5.6%

Up a total 91.3% between Jan 2013 - Jan 2017

 

Do you really think it wise that you continue to listen to those who need more than a 100% house price crash to break even (once you include the higher rent than mortgage payments) on their punts in 2003 that house prices were too expensive and needed to crash before they buy?

The actual reality is that house prices in 70-80% of the country are affordable to a single man working full time on the median wage in their are. Much of the rest of the country is affordable to a couple working full time. That is the reality.

Even in the last 12 months (Feb 2016 - Feb 2017) prices in England are up £13,839 according to the Land Registry which is +6.3% on the last 12 months. Is that not reality?

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1 hour ago, RushRoad said:

 

Up a total 91.3% between Jan 2013 - Jan 2017

 

Do you really think it wise that you continue to listen to those who need more than a 100% house price crash to break even (once you include the higher rent than mortgage payments) on their punts in 2003 that house prices were too expensive and needed to crash before they buy?

More than 100% crash implies prices would become negative. I think you mean more than 50%.

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2 hours ago, RushRoad said:

Up a total 91.3% between Jan 2013 - Jan 2017

Do you really think it wise that you continue to listen to those who need more than a 100% house price crash to break even (once you include the higher rent than mortgage payments) on their punts in 2003 that house prices were too expensive and needed to crash before they buy?

The actual reality is that house prices in 70-80% of the country are affordable to a single man working full time on the median wage in their are. Much of the rest of the country is affordable to a couple working full time. That is the reality.

Even in the last 12 months (Feb 2016 - Feb 2017) prices in England are up £13,839 according to the Land Registry which is +6.3% on the last 12 months. Is that not reality?

You can't have it both ways. You can't say house prices have risen 91% in 4 years, and yet house prices are still affordable.  Tell me - why did house prices fall 15% in 2008 (when, in your view, they would have been as cheap as chips)? Crashing the base rate from 4.5% to 0.5% stopped further losses.  

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Do you really think it wise that you continue to listen to those who need more than a 100% house price crash to break even (once you include the higher rent than mortgage payments) on their punts in 2003 that house prices were too expensive and needed to crash before they buy?

I don't listen to anyone in particular.  If I listened to people I'd either be renting or owning property in the UK. 

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1 hour ago, Muddlehead said:

More than 100% crash implies prices would become negative. I think you mean more than 50%.

 

They need a 50% crash just to get back to 2003 England prices but they need prices to crash more than 50% to also cover 14 years of higher rent payments over mortgage payments for that time.

 

And this website was not the first with these views there are forums with posts from 1996/97 saying London prices had got too far ahead and were in a bubble due to crash. There needs to be a 85% house price crash to get back to 1996 levels add in 20 years of higher rents vs mortgage and anyone who thought it not good to buy in 1996 needs a more than 100% house price crash to break even

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19 minutes ago, canbuywontbuy said:

You can't have it both ways. You can't say house prices have risen 91% in 4 years, and yet house prices are still affordable.  Tell me - why did house prices fall 15% in 2008 (when, in your view, they would have been as cheap as chips)? Crashing the base rate from 4.5% to 0.5% stopped further losses.  

I don't listen to anyone in particular.  If I listened to people I'd either be renting or owning property in the UK. 

 

But you can have it both ways

Do you agree London was cheap in 1995? Yes. Do you agree London was cheap in 2000? Yes. The fact that prices went up 75% between 1995 to 2000 did not mean in 2000 London was overpriced it was clearly not just affordable but cheap in 2000

So just looking at prices nearly doubling in england over the last 14 years is not sufficient evidence to conclude a bubble or price unaffordability.

You need to look at median full time male wage for a given area vs the average house price for a given area and if they can buy clearly prices are affordable.

 

As for why house prices fell 15% in 2008 it should be seen in the context of 5.5% growth in the year before and 7.2% growth in the year after. In the same way that you would not look at one week or months stock market moves but would have a rolling average if you had a rolling average of three years for England house prices they haven't gone down in nominal terms probably forever

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8 minutes ago, RushRoad said:

 

They need a 50% crash just to get back to 2003 England prices but they need prices to crash more than 50% to also cover 14 years of higher rent payments over mortgage payments for that time.

 

And this website was not the first with these views there are forums with posts from 1996/97 saying London prices had got too far ahead and were in a bubble due to crash. There needs to be a 85% house price crash to get back to 1996 levels add in 20 years of higher rents vs mortgage and anyone who thought it not good to buy in 1996 needs a more than 100% house price crash to break even

You say "anyone" but I think you really mean anyone who left their money in a bank or under a mattress. Equities perform much better.

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10 minutes ago, Muddlehead said:

You say "anyone" but I think you really mean anyone who left their money in a bank or under a mattress. Equities perform much better.

 

Using a cash purchase 1997 to 2017 England house has gone from £55,800 to £234,500 so up 4.2x while the FTSE100 has gone from 4,200 to 7,200 or up 1.7x

So England house prices have been the FTSE100 by a huge margin. Also importantly you would have had 20 years of saved rent while the divided returns would not have covered your rent. £55.8k in 1997 is worth £95k now and if the FTSE provides 4% today that £95k will return jist £3,800 in annual dividends while the house will save you closer to £12,000 in annual rent

So no the FTSE would not have saved our person from renting instead of buying.

 

What's more realistic is that the 1997 purchase was made with 20% down and 80% mortgage if you do the sums that way the buyer is even more ahead of the theoretical FTSE investor

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55 minutes ago, RushRoad said:

 

But you can have it both ways

Do you agree London was cheap in 1995? Yes. Do you agree London was cheap in 2000? Yes. The fact that prices went up 75% between 1995 to 2000 did not mean in 2000 London was overpriced it was clearly not just affordable but cheap in 2000

So just looking at prices nearly doubling in england over the last 14 years is not sufficient evidence to conclude a bubble or price unaffordability.

You need to look at median full time male wage for a given area vs the average house price for a given area and if they can buy clearly prices are affordable.

 

As for why house prices fell 15% in 2008 it should be seen in the context of 5.5% growth in the year before and 7.2% growth in the year after. In the same way that you would not look at one week or months stock market moves but would have a rolling average if you had a rolling average of three years for England house prices they haven't gone down in nominal terms probably forever

You say they nearly doubled in 4 years (2013 to 2017), now it's 14 years.  Actually they've more than quadrupled in 20 years and tripled in 15 years. 

Now we've had 8 years of ZIRP and property sales volumes extremely low for all of that time, and extremely low now.  What gives, sage? Why HTB? As you say, property is super-affordable now...yet the government felt they needed to help, and for some reason we have sub 1% mortgage rates...in an era of affordability? A contradiction in terms. 

 

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8 minutes ago, canbuywontbuy said:

You say they nearly doubled in 4 years (2013 to 2017), now it's 14 years.  Actually they've more than quadrupled in 20 years and tripled in 15 years. 

Now we've had 8 years of ZIRP and property sales volumes extremely low for all of that time, and extremely low now.  What gives, sage? Why HTB? As you say, property is super-affordable now...yet the government felt they needed to help, and for some reason we have sub 1% mortgage rates...in an era of affordability? A contradiction in terms. 

 

 

I said 70-80% of the country is highly affordable but politics is decided in Westminster and house prices in and around Westminster are expensive even for the PM just on his PM earnings.

Volumes just tell us how frequently people move not if prices are affordable or not. Or by your definition over the last 5 years volumes have been increasing so did homes become more affordable over the last 5 years?

 

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1 hour ago, RushRoad said:

 

Using a cash purchase 1997 to 2017 England house has gone from £55,800 to £234,500 so up 4.2x while the FTSE100 has gone from 4,200 to 7,200 or up 1.7x

So England house prices have been the FTSE100 by a huge margin. Also importantly you would have had 20 years of saved rent while the divided returns would not have covered your rent. £55.8k in 1997 is worth £95k now and if the FTSE provides 4% today that £95k will return jist £3,800 in annual dividends while the house will save you closer to £12,000 in annual rent

So no the FTSE would not have saved our person from renting instead of buying.

 

What's more realistic is that the 1997 purchase was made with 20% down and 80% mortgage if you do the sums that way the buyer is even more ahead of the theoretical FTSE investor

 

2 hours ago, RushRoad said:

 

They need a 50% crash just to get back to 2003 England prices but they need prices to crash more than 50% to also cover 14 years of higher rent payments over mortgage payments for that time.

You aren't responding to what I wrote. I didn't claim equities always outperform property. I suggested that equities are a better comparison than assuming people earn zero return whilst renting*. You argue property would have to lose all of its value for people who had a choice and rented over the long term to be better off. This relies on zero return, which is unlikely in equities.

 

FTSE up 1.7 in 20 years is approximately 2.6% per year. Add a 4% dividend (return 6.6% per year) and the increase is x3.8, which isn't far below the x4.2 growth in property. Bear in mind this was a bad time for equities (typically equities give a higher return than property) and you may have done much better, e.g. in FTSE 250, smaller companies, including European, Asian, American  and Emerging Markets. In this case the renter has a capital value almost as large as the property. How much rent has been paid in that time? How much has been spent on mortgage interest and how much on maintenance and improvements? You simply mention saved rent and dividends not covering rent. It's important to consider how much. What were rental yields in 1997? Has he paid £212,000 in rent?

 

*even if people kept their money in savings account for 20 years from 1997 you should consider interest rates were much higher for part of that time.

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6 hours ago, RushRoad said:

 

The reality that marched on since this website was founded is as follows

Year : House Price Increase In England

2003  :  14.9%

2004  :  13.5%

2005  :  5.0%

2006  :  9.2%

2007  :  5.5%

2008  :  -15.2%

2009  :  7.2%

2010  :  0%

2011  :  -0.2%

2012  :  1.5%

2013  :  6.5%

2014  :  7.8%

2015  :  8.6%

2016  :  5.6%

Up a total 91.3% between Jan 2013 - Jan 2017

 

Do you really think it wise that you continue to listen to those who need more than a 100% house price crash to break even (once you include the higher rent than mortgage payments) on their punts in 2003 that house prices were too expensive and needed to crash before they buy?

The actual reality is that house prices in 70-80% of the country are affordable to a single man working full time on the median wage in their are. Much of the rest of the country is affordable to a couple working full time. That is the reality.

Even in the last 12 months (Feb 2016 - Feb 2017) prices in England are up £13,839 according to the Land Registry which is +6.3% on the last 12 months. Is that not reality?

I can't comment from 2003, as I didn't have any financial resources behind me at that time, but I can comment from late 2007 when I started on my journey.  Your table suggests a capital gain CAGR for residential property of 2.2%.  On top of that, if it's an investment, you need to then add the rental yield of the property less interest, maintenance, insurance, letting costs etc to compare to other options.  As a Landlord I'm guessing you'll be able to tell me what that total CAGR number is for comparison purposes? 

In comparison I've been buying a portfolio of equities (UK, US, EU, Japan, Aus, Emerging), bonds (UK Index Linked, International Corporate, NS&I ILSC's), gold, REIT's (UK and EU) and some cash.  I then rebalance according to a few rules.  Over the same period my portfolio has managed a total return CAGR of 6.9%.

The big differences from where I sit:

  • by being exposed to multiple countries and asset types I'm less exposed to country/asset type 'events' (S24 anyone)
  • I wasn't able to leverage myself up.  Instead I had to go out and earn the money I wanted to invest.  Leverage is great on the way up but I'd guess pretty darn stressful when prices are falling.

Full disclosure: I don't need a HPC of 100% [sic] to break even.  I'll just ride off into the sunset with my £1.2M or so in diversified assets, no debt, then buy a home to live-in with my family (I have no interest in houses I just want a home) and live happily ever after.

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8 hours ago, RushRoad said:

 

The reality that marched on since this website was founded is as follows

Year : House Price Increase In England

2003  :  14.9%

2004  :  13.5%

2005  :  5.0%

2006  :  9.2%

2007  :  5.5%

2008  :  -15.2%

2009  :  7.2%

2010  :  0%

2011  :  -0.2%

2012  :  1.5%

2013  :  6.5%

2014  :  7.8%

2015  :  8.6%

2016  :  5.6%

Up a total 91.3% between Jan 2003 - Jan 2017

In the same period the FTSE 100 was up a modest 202.3%, but the FTSE 250 was up a healthier 507.6%. I think that might be enough to pay your rent and still be ahead of the home owner.

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11 hours ago, RushRoad said:

I said 70-80% of the country is highly affordable but politics is decided in Westminster and house prices in and around Westminster are expensive even for the PM just on his PM earnings.

Volumes just tell us how frequently people move not if prices are affordable or not. Or by your definition over the last 5 years volumes have been increasing so did homes become more affordable over the last 5 years?

If 70% to 80% of the housing market in the UK is highly affordable,:-

  • why are banks continually reducing their lending rates? This indicates desperation on their part.  Indeed, the banks are all making a lot less money these days, yet are STILL cutting lending rates - because a customer on 0.89% lending rate is better than no customer at all.  Why is this happening when housing is highly affordable?
  • why are sales volumes at historic lows since 2009, despite record low lending rates. Why is this happening when housing is highly affordable?
  • why was HTB introduced? Your joke answer of "housing was expensive in Westminster" shows you know nothing about HTB.  It was introduced to new builds first! So that shatters your notion that it was to try to make Westminster cheaper (which is a ridiculous notion).  So why was HTB introduced when housing was / is already highly affordable?

If someone took a time machine to 1996 and told everybody that from 2009 onwards, lending rates would slowly fall from 3% to 2% to 1% to... sub 1% AND that sales volumes would STILL remain low, with average age of FTB creeping up and up past 30 years old, it would not make sense to them.  Not unless you told them housing was unaffordable - then all the pieces fit together.  THAT'S why lending rates are so low, THAT'S why we have HTB.  THAT'S why we have historically low sales volumes

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1 hour ago, Conquistador said:

In Exeter that would buy you a two-bed flat in a middling area or a two bed terrace in a crappy neighbourhood.

I won't be checking, but I'd take a punt that in any of this imagined (fantasised?) 70% of the country, you are actually looking at a sub-region of a local housing market where rents are anchored to the LHA and where the LHA is low when expressed in terms of local median earnings (by place of work).

You're basically looking at places where people with jobs don't want to live and where the state can afford to house welfare recipients in the PRS fairly cheaply. These two factors may not be wholly independent of one another.

 

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On 24/04/2017 at 6:30 AM, nome said:

I bought in 2001, so hardly aeons ago... a nice 3 bed house in a nice area on the edge of the Peak District, had a 20% deposit (£8k) and I was on a single, part time, unskilled wage, oh and I paid the mortgage off in less than 10 years

I'm now full time and higher up the pay scale but couldn't afford to buy the same house at today's prices

 

Do please carry on...

That is also my experience, I bought on my single wage a 2 bed house for £33,500. I now earn 3.45 times what I earned in 1999 and could just about get a 3 bed house on the same street. From my experience - 2 x 29 year old brother in laws and a few 20 - 30 something women have give up the dream of ownership now, shock wave due down the line.

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