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House Prices vs Salaries


House Prices vs Salaries  

395 members have voted

  1. 1. When will the average UK house price return to less than 4x the single mean full time wage?

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On 23/05/2018 at 09:03, burk said:

wife has her head in the sand seeing as i was told  "when they finish their education they can bloody well move out".

The generation that is deluded. Happy to see house prices increase massively but still expect their kids to follow the same path that they did. 

They decided to have the kids so they need to do one of two things:

a) be a massive cheer-leader for the scrapping of schemes that inflate house prices and get very angry at the BTL industry.

b) be quiet with their perceived wealth and house their adult kids for good.

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58 minutes ago, UnconventionalWisdom said:

The generation that is deluded. Happy to see house prices increase massively but still expect their kids to follow the same path that they did. 

They decided to have the kids so they need to do one of two things:

a) be a massive cheer-leader for the scrapping of schemes that inflate house prices and get very angry at the BTL industry.

b) be quiet with their perceived wealth and house their adult kids for good.

Unfortunately so far there seems to also be the following option

c) Perpetuate the misery for other people's children by MEWing your own house to do BOMAD deposits for your kids to use HTB and then bang on about it like you're f*****g Mother Theresa/Einstein

Edited by stop_the_craziness
grammar
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I just can't see how banks are ever going to go back to assuming there was only one significant income per household when giving out mortgages, so it's a never from me.  

Does anyone know if there is any historical data on the ratio of average household income to house prices? To me, that seems like a more useful long term measure. 

Prices are determined by who can get the biggest mortgage. In the past that used to be single earners.  More recently it has been BTL speculators.  Going forward it will be most likely joint incomes or possibly lifetime/multiple lifetime mortgages with BOMAD deposits..

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10 minutes ago, Even Keel said:

Prices are determined by who can get the biggest mortgage. In the past that used to be single earners.  More recently it has been BTL speculators.  Going forward it will be most likely joint incomes or possibly lifetime/multiple lifetime mortgages with BOMAD deposits..

What worries me is that there will be a lot of people staying in unhappy relationships if two incomes are required. I know people in there mid 40s that have seen huge HPI, think its the norm so are now happy to go for a much more expensive house (and hence take on double their remaining mortgage debt). If things go sour, they won't be able to go separate ways without a huge decrease in living standards. 

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5 hours ago, Even Keel said:

I just can't see how banks are ever going to go back to assuming there was only one significant income per household when giving out mortgages, so it's a never from me.  

Who says it's the banks who get to decide how big a mortgage their customers will take out? Households have many things they want/need to pay for and a lot of them are very expensive: childcare, university, defined contribution pensions, care homes. Perhaps in the future things that are currently quite cheap will become expensive again e.g. food, energy, property taxes.

The size of the income stream available to pay for housing is not a fixed quantity.

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On 02/06/2018 at 16:03, Dorkins said:

Who says it's the banks who get to decide how big a mortgage their customers will take out? Households have many things they want/need to pay for and a lot of them are very expensive: childcare, university, defined contribution pensions, care homes. Perhaps in the future things that are currently quite cheap will become expensive again e.g. food, energy, property taxes.

The size of the income stream available to pay for housing is not a fixed quantity.

This is exactly why banks use a more general " affordability" calculation now rather than an income multiple.  They still set a limit on the maximum a household can borrow - the things you mention may make those who are more cautious not borrow up to that maximum, but if there is a less cautious borrower making an offer on the same house, they are likely to get the house and set the price. 

The system we have rewards recklessness with houses (in an attempt by the banks to maximise their profits), and unfortunately I can't see that changing in the near term

Edited by Even Keel
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On ‎04‎/‎05‎/‎2018 at 19:03, MattW said:

Touché! ;)

You're trying to shame me for being single but the reality is that outside of work I have a lot of freedom. And i get to spend all my money on ME! :P

Are you a MGTOW? Just interested.

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On ‎02‎/‎06‎/‎2018 at 10:18, UnconventionalWisdom said:

What worries me is that there will be a lot of people staying in unhappy relationships if two incomes are required. I know people in there mid 40s that have seen huge HPI, think its the norm so are now happy to go for a much more expensive house (and hence take on double their remaining mortgage debt). If things go sour, they won't be able to go separate ways without a huge decrease in living standards. 

Do what i did. Marry a Catholic, and refuse to convert. They are not allowed to get divorced, "in the eyes of the Church"! 

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  • 2 weeks later...
On 02/06/2018 at 09:41, stop_the_craziness said:

Unfortunately so far there seems to also be the following option

c) Perpetuate the misery for other people's children by MEWing your own house to do BOMAD deposits for your kids to use HTB and then bang on about it like you're f*****g Mother Theresa/Einstein

Get parents to take the risk of lending, perfectomondo. Banks with no liabilities. 

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On 02/06/2018 at 10:18, UnconventionalWisdom said:

What worries me is that there will be a lot of people staying in unhappy relationships if two incomes are required. I know people in there mid 40s that have seen huge HPI, think its the norm so are now happy to go for a much more expensive house (and hence take on double their remaining mortgage debt). If things go sour, they won't be able to go separate ways without a huge decrease in living standards. 

......anyone can increase their 'standard of living' by taking on huge amounts of debt and spending it, that's the easy bit.....so a decrease in a 'standard of living' is living a way many are already living, what have never had can never miss......living with money pressures is not living a quality 'standard of living'......living in an 'unhappy relationship' is not living a quality 'standard of living'........choices.?

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On 21/06/2018 at 14:32, renting til I die said:

Nothing will change until interest rates are forced up.

Low IR are what allow huge leaning multiplies and affordable monthly payments to exist. Most people have little cash flow and sitting on an asset that generates none will not help them when IR have to rise.

 

The problem is that higher interest rates imply higher bond yields which would push up the government's cost of borrowing, significantly.  Quite aside from the fact that they want to suppress interest rates to stimulate economic activity, they also will want to suppress yields to keep their own cost of borrowing down.

Basically, unless absolutely forced to by some market event (currency crisis?) , I can't see rates being raised.  Inflation will be massaged away in the official stats as far as possible and then ignored as it was in the past when we had it hitting 5% with absolutely no action taken.

 

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5 minutes ago, Sour Mash said:

 

The problem is that higher interest rates imply higher bond yields which would push up the government's cost of borrowing, significantly.  Quite aside from the fact that they want to suppress interest rates to stimulate economic activity, they also will want to suppress yields to keep their own cost of borrowing down.

Basically, unless absolutely forced to by some market event (currency crisis?) , I can't see rates being raised.  Inflation will be massaged away in the official stats as far as possible and then ignored as it was in the past when we had it hitting 5% with absolutely no action taken.

 

I once read an article saying that low interest rates are bad for the economy but sadly I cannot find it now.

If we must have cheap credit, it should be controlled to stop asset inflation and creating a time bomb for the future.

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1 hour ago, iamnumerate said:

I once read an article saying that low interest rates are bad for the economy but sadly I cannot find it now.

If we must have cheap credit, it should be controlled to stop asset inflation and creating a time bomb for the future.

The government don't care about what's right for the economy - they care about keeping the plates spinning long enough that it's someone else's problem when it all goes wrong.

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On 26/06/2018 at 11:24, iamnumerate said:

I once read an article saying that low interest rates are bad for the economy but sadly I cannot find it now.

If we must have cheap credit, it should be controlled to stop asset inflation and creating a time bomb for the future.

I think what you may be referring to is endogenous money creation. Money is definitely created endogenously in our economy, as outlined by the Bank of England. In a low interest rate environment, a lot of money gets created. That money usually leads to inflation of one sort or another. Currently we are dealing with a lot of asset inflation - housing, the stock market, the bond market. It's basically The Everything Bubble. You also may want to look into Hyman Minsky's theories.

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13 hours ago, Horseradish said:

I think what you may be referring to is endogenous money creation. Money is definitely created endogenously in our economy, as outlined by the Bank of England. In a low interest rate environment, a lot of money gets created. That money usually leads to inflation of one sort or another. Currently we are dealing with a lot of asset inflation - housing, the stock market, the bond market. It's basically The Everything Bubble. You also may want to look into Hyman Minsky's theories.

Thank you for that.

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On 26/06/2018 at 11:16, Sour Mash said:

 

The problem is that higher interest rates imply higher bond yields which would push up the government's cost of borrowing, significantly.  Quite aside from the fact that they want to suppress interest rates to stimulate economic activity, they also will want to suppress yields to keep their own cost of borrowing down.

Basically, unless absolutely forced to by some market event (currency crisis?) , I can't see rates being raised.  Inflation will be massaged away in the official stats as far as possible and then ignored as it was in the past when we had it hitting 5% with absolutely no action taken.

 

 

I agree and it may well play out like that. In which case the big gains in housing as an asset have been made and anyone thinking that more big gains will be made over the next 20 years will be sorely disappointed however that will also mean that prices are unlikely to drop by very much either, as the can continues to be kicked.

There is part of me that feels that things have been pushed far too far for too long and thinking of the current price to wage ratios as the new normal is just not going to last, whatever the BOE wants. We may see some sort of crisis that will make the cost of borrowing spike. What will trigger that or what else could be affected, I just don't know.

 

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6 hours ago, renting til I die said:

prices are unlikely to drop by very much either, as the can continues to be kicked.

Crack addict feeling nothing from it anymore still keeps on injecting.

The minority of people who benefited from HPI won't anymore. Also the people who only had a house to live in "felt" good from it even though they didn't really benefit. Anyone who bought at high price will end up losing to inflation.

I can't think who would benefit from that apart from a tiny elite somehow, or a somehow hoodwinked dumb ignorant population.

14 minutes ago, iamnumerate said:

I was thinking aren't we in a vicious cycle?  Low interest rates cause inflation, which damages the standard of living, so they lower interest rates or do QE which causes more inflation etc.

Cui bono? apart from some benefit for someone somewhere what's left but masochism?

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39 minutes ago, Arpeggio said:

Crack addict feeling nothing from it anymore still keeps on injecting.

The minority of people who benefited from HPI won't anymore. Also the people who only had a house to live in "felt" good from it even though they didn't really benefit. Anyone who bought at high price will end up losing to inflation.

I can't think who would benefit from that apart from a tiny elite somehow, or a somehow hoodwinked dumb ignorant population.

Cui bono? apart from some benefit for someone somewhere what's left but masochism?

The benefit is that there is not the severe short pain from solving the problem.

Not much of a benefit but it is like an addict who can't face reality so keeps taking drugs.

Sadly no politician wants to wean us off the addiction.

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2 hours ago, iamnumerate said:

I was thinking aren't we in a vicious cycle?  Low interest rates cause inflation, which damages the standard of living, so they lower interest rates or do QE which causes more inflation etc.

The sort of controlled inflation environment and repressed interest rates  that we are seeing is part of the overall process of transferring wealth from the general population to the debtors.   If you hold assets+debt (used to buy the assets in the first place), you are laughing.  Anyone dependent on an income or cash savings is being screwed over.

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4 minutes ago, Sour Mash said:

  Anyone dependent on an income or cash savings is being screwed over.

I agree with you about the second bit

But not the first bit

5 minutes ago, Sour Mash said:

The sort of controlled inflation environment and repressed interest rates  that we are seeing is part of the overall process of transferring wealth from the general population to the debtors.   If you hold assets+debt (used to buy the assets in the first place), you are laughing. 

Not really because although the cost of mortage etc have gone down, it will harm any children you have.  Most people have children and hopefully most of them (not all) would want them to have decent housing.

(Also in the past you could move up the ladder, now it is much harder).

In summary only people who have their perfect home and no children are laughing,.

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