House Prices vs Salaries

[awkwardturtle]

On 11/05/2018 at 21:35, Funn3r said:

About the poll, at the moment almost 58% have clicked "they never will". Would be interesting to know voting demographics by age. What I mean is I have lived through 2 genuine UK crashes but younger people have not. If you've never seen a really filthy yawning money-sucking omfg crash (such as early 90s) I think you're more psychologically inclined to believe things genuinely can't change that much. Why would you if they have been that way your entire housebuying life.

I am 31 and I picked "They never will"

There have been plenty of boom and bust cycles historically, but have any of them been so heavily manipulated or globally coordinated?

I know no different, I know only exponentially rising property prices. It feels as though there is vanishing hope for a return to affordability because of a willingness among those who control the money to rewrite the rules (QE, ZIRP). This seems unique to this era and a permanent blocker to normality.

Short of global warfare I'm unable to imagine a scenario that will bring the house of cards down when they're more than willing to keep applying crazy glue to each new card.

I wasn't old enough to understand the credit crunch when it happened, but researching it later in life I understand that would've been the natural correction to this cycle. So if credit supply is the natural brake and policy makers have smeared the brake discs in vaseline, when will it ever end? I don't have an understanding of what the metaphorical brick wall is that we're going hit.

[dougless]

53 minutes ago, awkwardturtle said:

I am 31 and I picked "They never will"

I wasn't old enough to understand the credit crunch when it happened, but researching it later in life I understand that would've been the natural correction to this cycle. So if credit supply is the natural brake and policy makers have smeared the brake discs in vaseline, when will it ever end? I don't have an understanding of what the metaphorical brick wall is that we're going hit.

I think your analogy has answered the question.  The affordability ratio has got further out of line because of the aforementioned 'vaseline on the brakes'.  When credit tightens again, for whatever reason, that vaseline means there is less space/time before we hit the wall (have a major financial crisis of confidence).  When we hit that wall we will be going bloody fast....that's what worries me.

[Arpeggio]

According to this Basel 3 will make it worse?  https://www.ft.com/content/fa6ae2e2-50e1-11e7-bfb8-997009366969

"In Basel III, those standard mortgage weightings are expected to fall again."

 

[dougless]

9 minutes ago, Arpeggio said:

According to this Basel 3 will make it worse?  https://www.ft.com/content/fa6ae2e2-50e1-11e7-bfb8-997009366969

"In Basel III, those standard mortgage weightings are expected to fall again."

 

Good.

[Arpeggio]

1 hour ago, dougless said:

Good.

No I meant worse as in house prices going up. Just realized you might not be able to read the article.

I just spotted an HPC thread on that article.

Also interesting...

http://www.marketmoving.info/new-basel-rules-mean-buy-to-let-mortgage-interest-rates-will-jump/

"Mortgages have a risk weight of 35% — in other words, only 35% of a bank’s mortgage loan portfolio is taken into account when calculating assets against which it must keep capital – whereas loans to small and medium sized enterprises have a risk weight of 100%.

Naturally, then, banks will prefer to lend money to those purchasing houses than to those developing a business. These regulations have been a big part of the reason why property prices keep going up despite lack of investment by businesses and stagnant salaries."

Others here will know more bout this than me.

Edited May 20, 2018 by Arpeggio

[Si1]

4 hours ago, Arpeggio said:

No I meant worse as in house prices going up. Just realized you might not be able to read the article.

I just spotted an HPC thread on that article.

Also interesting...

http://www.marketmoving.info/new-basel-rules-mean-buy-to-let-mortgage-interest-rates-will-jump/

"Mortgages have a risk weight of 35% — in other words, only 35% of a bank’s mortgage loan portfolio is taken into account when calculating assets against which it must keep capital – whereas loans to small and medium sized enterprises have a risk weight of 100%.

Naturally, then, banks will prefer to lend money to those purchasing houses than to those developing a business. These regulations have been a big part of the reason why property prices keep going up despite lack of investment by businesses and stagnant salaries."

Others here will know more bout this than me.

What about mortgages within a ltd company structure? Small business lending or mortgage?

[CunningPlan]

10 hours ago, SOLZHENITSYN said:

Not really. Why should they return to long-term average of 4.5x a SINGLE salary? Why a single salary now that bank lending (which is the ultimate control on price)  is based on two incomes?

What if new MMR rules decide that any couple are likely to have children at some point, either removing the second income are adding in massive childcare costs. 

In that case it would be prudent to discount most of the second wage.

[Arpeggio]

36 minutes ago, CunningPlan said:

What if new MMR rules decide that any couple are likely to have children at some point, either removing the second income are adding in massive childcare costs. 

In that case it would be prudent to discount most of the second wage.

Agree. It would be nice if bringing up children was taken seriously again rather than prioritising the price of a house that does the same function whether it’s 70k or 250k.

[Arpeggio]

3 hours ago, Si1 said:

What about mortgages within a ltd company structure? Small business lending or mortgage?

Don’t know. Others might know more. The risk weighting seems disproportionately low for residential mortgages given that in many cases a person wages, in effect, come from business, which is regarded higher risk.

[CentrinoDuo]

9 hours ago, Arpeggio said:

Don’t know. Others might know more. The risk weighting seems disproportionately low for residential mortgages given that in many cases a person wages, in effect, come from business, which is regarded higher risk.

1

It's not as simple as that - the 35% risk weighting is pre-Basel III and only for the Standard Rules method of calculating the risk. Basel III adds even more complexity on an already complex risk model, on a high level the risk weighting depends on the LTV. Lower LTV lower risk weighting.

Risk management's complexity in banking has increased dramatically in the past decade post the global financial crisis. It has "generated" so much work for grossly overpaid but very much mediocre software developers, BAs and PMs in the financial services industry ... it's tongue-in-cheek comment but there is plenty of truth in that

 

[burk]

Had an interesting conversation over the BBQ last weekend with my brother and his wife; they've been umming and arring about whether to extend their current property or move to one with more space, (kinda ties in with the above poll - affordability & consequences) turns out its cheaper for my bro and his family to move to something bigger than extend. Problem is his wife (my SIL) isn't having any of it - lists of demands regarding location, spec etc has started causing problems between them,  reading between the lines its clear to me she doesn't wanna move, and talking to her one on one shows she doesn't want to extend the property because of "all the hassle".

Thing is i was chatting to my brother a few weeks previous and told him "you know your kids are probably never leaving home" its just an impossibility given house prices, (as much i would love them to collapse) I think hes realised this and to give him some credit i think hes trying to sort something out for the longer term. Hence the move to a bigger place where his two kids are out of their box rooms t but his (stay at home) wife has her head in the sand seeing as i was told  "when they finish their education they can bloody well move out". She just doesn't have a clue and the worry on my brothers face is actually quite noticeable now.

FWIW i voted for "they never will" as much as i would love to believe otherwise, but i just cant see anything changing and it really pisses me off although i'm slightly conflicted insofar as i work in the building trade so if there ever was a downturn i'm pretty much f@*ked. 

 

 

[stop_the_craziness]

I am in the age demographic where a lot of my friends have children just about to finish university.  The big talk?  Jobs with accommodation.  One of my friends has a boy that wants to join the police.  First thing she said  to me was "Do they still house them these days?"

[Nabby81]

7 hours ago, burk said:

Had an interesting conversation over the BBQ last weekend with my brother and his wife; they've been umming and arring about whether to extend their current property or move to one with more space, (kinda ties in with the above poll - affordability & consequences) turns out its cheaper for my bro and his family to move to something bigger than extend. Problem is his wife (my SIL) isn't having any of it - lists of demands regarding location, spec etc has started causing problems between them,  reading between the lines its clear to me she doesn't wanna move, and talking to her one on one shows she doesn't want to extend the property because of "all the hassle".

Thing is i was chatting to my brother a few weeks previous and told him "you know your kids are probably never leaving home" its just an impossibility given house prices, (as much i would love them to collapse) I think hes realised this and to give him some credit i think hes trying to sort something out for the longer term. Hence the move to a bigger place where his two kids are out of their box rooms t but his (stay at home) wife has her head in the sand seeing as i was told  "when they finish their education they can bloody well move out". She just doesn't have a clue and the worry on my brothers face is actually quite noticeable now.

FWIW i voted for "they never will" as much as i would love to believe otherwise, but i just cant see anything changing and it really pisses me off although i'm slightly conflicted insofar as i work in the building trade so if there ever was a downturn i'm pretty much f@*ked. 

 

 

Guy at my work just remortgaged to extend house as needed more space as kids still at home  and doesn't look they they will be moving out anytime soon 

[burk]

9 hours ago, stop_the_craziness said:

I am in the age demographic where a lot of my friends have children just about to finish university.  The big talk?  Jobs with accommodation.  One of my friends has a boy that wants to join the police.  First thing she said  to me was "Do they still house them these days?"

I think this will be a massive problem going forward trying to get staff where they're required, i understand similar problems exist in education according to a mate of mine who's a headmaster that and absolutely no budget to work with.

4 hours ago, Nabby81 said:

Guy at my work just remortgaged to extend house as needed more space as kids still at home  and doesn't look they they will be moving out anytime soon 

yeah Ive worked on a few projects over the years where we've built a house within a house, dunno if its illegal but from the outside it looks like an ordinary every-day suburban house but split into wholly separate living spaces, kitchens & bathrooms etcwithout the separate front doors.

One place near me looks like a bungalow from the road but it is infact three bungalows deep, i know the guy in passing and the back two he told me are dwellings for his son and daughters families.

I think this will become more commonplace as the madness continues, who knows eh?

[frankvw]

One of my nieghbours has, alongside his house, a hobbit house that is obviously a converted double garage into a bungalow, extended into the back garden. His wife pretty much nagged him into getting it done so the daughter and her daughter's husband could move in and get their kids into the local school. I don't know how they got planning permission as it looks as ugly as hell and is very obviously a garage with a bit of tudor cladding on it. Amazing a family of four live there but it's kind of like an extended family living arrangement. When I am up in London, I've actually noticed this isn't that uncommon, I've seen lots of hobbit house garage conversions around. When you are looking out for them, you notice it more.

Regarding prices-vs-salaries, another thing that has changed massively in the UK is the shift towards extended families. It was always culturally common within the Asian British families but I think it's another EU import in recent times. I spent a fair amount of time living and working around Europe when I was young, especially in Southern France and Spain, before all the Maastricht and Lisbon stuff accelerated changes. Funny, whenever I cam back then, one thing I liked about the UK was that our cities were less oppressive, lots of people actually lived in houses with a garden, not a whole family crammed into little blocks of flats everywhere like Europe, especially the Latin and Slavic nations. Despite low property prices, due to even lower wages and economies. Makes you wonder, with the huge increase in unskilled Southern/Eastern European immigration over the past two decades, expansion of BTL and debt, as well as stagnating wages, it's almost like we are heading towards the European model of extended families crammed into city center flats, probably never owning, with an ever expanding state over seeing it all.

Sort of a kick back of the Napoleonic and centrally controlled/dictatorship  arrangements that particularly Central and Eastern Europe has had. I vaguely remember from school a book by Niche that Britain (and by extension the US) was culturally different than the rest of Europe because of the collapse of the Roman Empire and nearly a thousand years after of independent city states loosely trading. That was a very different path to almost the whole of the European continent in shaping a national psyche.

Edited May 25, 2018 by frankvw

[thewig]

On 23/05/2018 at 10:58, stop_the_craziness said:

I am in the age demographic where a lot of my friends have children just about to finish university.  The big talk?  Jobs with accommodation.  One of my friends has a boy that wants to join the police.  First thing she said  to me was "Do they still house them these days?"

People want to join the police? My real world experience it’s what people do when they can’t get a job.

see also: teaching

[Arpeggio]

On 23/05/2018 at 10:58, stop_the_craziness said:

The big talk?  Jobs with accommodation.

In that case, in effect, holiday camps like Butlins might pay more than most jobs.

[Tapori]

deleted

Edited May 27, 2018 by Tapori

[Tapori]

On 23/05/2018 at 08:03, burk said:

Had an interesting conversation over the BBQ last weekend with my brother and his wife; they've been umming and arring about whether to extend their current property or move to one with more space, (kinda ties in with the above poll - affordability & consequences) turns out its cheaper for my bro and his family to move to something bigger than extend. Problem is his wife (my SIL) isn't having any of it - lists of demands regarding location, spec etc has started causing problems between them,  reading between the lines its clear to me she doesn't wanna move, and talking to her one on one shows she doesn't want to extend the property because of "all the hassle".

Thing is i was chatting to my brother a few weeks previous and told him "you know your kids are probably never leaving home" its just an impossibility given house prices, (as much i would love them to collapse) I think hes realised this and to give him some credit i think hes trying to sort something out for the longer term. Hence the move to a bigger place where his two kids are out of their box rooms t but his (stay at home) wife has her head in the sand seeing as i was told  "when they finish their education they can bloody well move out". She just doesn't have a clue and the worry on my brothers face is actually quite noticeable now.

FWIW i voted for "they never will" as much as i would love to believe otherwise, but i just cant see anything changing and it really pisses me off although i'm slightly conflicted insofar as i work in the building trade so if there ever was a downturn i'm pretty much f@*ked. 

 

 

tfw when Bob can't fix the macroeconomic mess that is our financial system.

[Tapori]

On 23/05/2018 at 09:58, stop_the_craziness said:

I am in the age demographic where a lot of my friends have children just about to finish university.  The big talk?  Jobs with accommodation.  One of my friends has a boy that wants to join the police.  First thing she said  to me was "Do they still house them these days?"

Sold most of it off because "Market knows best and we need to make savings and raise revenue."

[Tapori]

On 25/05/2018 at 19:50, thewig said:

People want to join the police? My real world experience it’s what people do when they can’t get a job.

 

Listen sunshine, DCI Tosh will have you know it takes guts and skill and

oh looks like they've closed and sold off me Sunhill station to a property developer shifting hutches to BTL's.

[CentrinoDuo]

On 23/05/2018 at 10:58, stop_the_craziness said:

Jobs with accommodation.  One of my friends has a boy that wants to join the police.  First thing she said  to me was "Do they still house them these days?"

1

A vicar job still comes with a house   but you'd better sort yourself out during your time because when you retire the CoE won't help you (much).

 

[CentrinoDuo]

On 25/05/2018 at 16:01, frankvw said:

crammed into little blocks of flats everywhere like Europe, especially the Latin and Slavic nations.

Not just the Latin and Slavic nations ... it's endemic everywhere in Europe's big cities. 

[maverick73]

On 29/05/2018 at 11:27, CentrinoDuo said:

Not just the Latin and Slavic nations ... it's endemic everywhere in Europe's big cities. 

European culture... mostly rent driven, as they cannot afford to buy. Hence why the rent market has been driven up. It is because of expereinced renters are willing to fund it. Once the exit happens 4 million renters abandon the UK and turning the country into a ghost town. 

Edited May 31, 2018 by maverick73

[Pulpstar]

It'll either be never or 2031+. Things can definitely change in 13 years..