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House Price Crash Forum

House Prices vs Salaries  

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

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10 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.

Well, they supposedly cause inflation - but all people are seeing is asset inflation. While that does hurt people trying to buy houses, there haven't been large increases in the RPI/CPI i.e. the day-to-day cost of living. You can google for something like "where is the missing inflation" and read more about it. The Bank of England are a bit shifty on the QE aspect. They say that a lot of it has "ended up back on their books", and I believe that the treasury isn't going to pay interest on it. I suspect that they'll write it all off at some point rather than try to sell it, especially with Brexit coming up. At that point it basically will have just been printed money, except it didn't affect standard of living, just asset prices as mentioned.

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On 29/06/2018 at 19:33, Horseradish said:

Well, they supposedly cause inflation - but all people are seeing is asset inflation. While that does hurt people trying to buy houses, there haven't been large increases in the RPI/CPI i.e. the day-to-day cost of living. You can google for something like "where is the missing inflation" and read more about it. The Bank of England are a bit shifty on the QE aspect. They say that a lot of it has "ended up back on their books", and I believe that the treasury isn't going to pay interest on it. I suspect that they'll write it all off at some point rather than try to sell it, especially with Brexit coming up. At that point it basically will have just been printed money, except it didn't affect standard of living, just asset prices as mentioned.

Shrinkflation, same price lower grams/cl etc.

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On 29/06/2018 at 19:33, Horseradish said:

Well, they supposedly cause inflation - but all people are seeing is asset inflation. While that does hurt people trying to buy houses, there haven't been large increases in the RPI/CPI i.e. the day-to-day cost of living. You can google for something like "where is the missing inflation" and read more about it. The Bank of England are a bit shifty on the QE aspect. They say that a lot of it has "ended up back on their books", and I believe that the treasury isn't going to pay interest on it. I suspect that they'll write it all off at some point rather than try to sell it, especially with Brexit coming up. At that point it basically will have just been printed money, except it didn't affect standard of living, just asset prices as mentioned.

Im not 100% on QE. Its possible that a hedge fund could sue and say that a CB writing off debt amounts to a default. Then all the banks, whove been told to stuff their balance sheets with gilts are up shit creek.

Never discount clever ideas blowing up somewhere down the line.

The only thing that can the BoE is above average wage growth.

Almost impossible to do as tax cerdits have took 50% of families out ofthe work force, EE migrants have come in, inflating housing, reducing low to medium jobs. And the taxes to pay for alll this lunacy has caused the few people actually working to say 'Fux it. Im being taxed at 50%, expected to live in a tiny house and pay for half of Poland to p1ss around.

As I was tellign someone who was marvelling how much his house is worth - well you're jobs fuxxed as youve noone- and I mean noone- coming forward for the open jobs where he works. His firm has been in trouble for 3 years now due to lack of people.

 

 

 

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On 16/07/2018 at 07:43, Brendan110_0 said:

Shrinkflation, same price lower grams/cl etc.

Agree that this will have hidden some inflation. Also check out how things like the reweighing or replacement of goods works in the 'basket of goods'.

Shrinkflation does have its limits though... I mean how small can a chocolate bar get before it can't be called a bar!

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On 23/05/2018 at 09:03, 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 [email protected]*ked. 

 

 

Quick update 2 months on, my brothers had one old lady come to look at the house, didn't even make an offer, given the house is literally across the road from the local school (thinking of catchments) he thought it would fly out the door, maybe sentiment is changing?

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https://amp.theguardian.com/uk-news/2018/aug/04/super-rich-cash-in-london-property-prices-billionaire-bargains?__twitter_impression=true

Super rich billionaires picking up bargains in London 

 
 
But at the very top of London’s so-called “super-prime” property market – properties valued at more than £10m – business has picked up. The number of prospective buyers registering interest in that top price bracket was up 7% on 2017 levels in the first three months of this year.

Liam Bailey, Knight Frank’s head of research, said because sterling was relatively weak against other currencies, foreign buyers could make savings, with 60% of super-prime buyers coming from overseas, especially Europe, the Middle East, Russia and India.

 

super stupid 

 

 

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On 04/08/2018 at 13:29, mathschoc said:

https://amp.theguardian.com/uk-news/2018/aug/04/super-rich-cash-in-london-property-prices-billionaire-bargains?__twitter_impression=true

Super rich billionaires picking up bargains in London 

 
 
But at the very top of London’s so-called “super-prime” property market – properties valued at more than £10m – business has picked up. The number of prospective buyers registering interest in that top price bracket was up 7% on 2017 levels in the first three months of this year.

Liam Bailey, Knight Frank’s head of research, said because sterling was relatively weak against other currencies, foreign buyers could make savings, with 60% of super-prime buyers coming from overseas, especially Europe, the Middle East, Russia and India.

 

super stupid 

 

 

Hes lying.

Buying in London is nit the freeby thing it was.

Trying to live the good ole Blair years ago.

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The ratio was pretty stable over the last 100 years. The last 10 years have been distorted by the low interest rates. When rates go back to 4-5% the house prices will return 4-5 multiplier. I think the only hope for this to happen is for US/Europe rising the rates or a pound crash, BOE won't voluntarily  rise rate because it knows it will cause a crash, there is a lot of debt backed by houses. 

BTW way it is interesting to see that house prices are rising with salaries, owning a house is not only a good asset to hedge inflation but also to capture productivity gains (real rates) plus you got a yield from renting it, which doubles you return as rents are also rising with salaries . No wonder investors buying properties. Over a century we pay less for food but more for a right to live in our houses, as a percentage of our salaries.   

blob.png.015d364df75da6f1202cdcc105e32f80.png

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5 hours ago, renting til I die said:

Interesting graph, esp looking over such a long time frame. Almost 9 times salary back in 1900! Wow.

Do you have a link to the source? I would love to look into the data more.

Price to salary pre 1945 is entirely irrelevant to today. This is the type of misdirected statistical analysis that has lead to a portion of the population ignoring statistics altogether. 

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18 hours ago, renting til I die said:

Interesting graph, esp looking over such a long time frame. Almost 9 times salary back in 1900! Wow.

Do you have a link to the source? I would love to look into the data more.

It is based on BOE data set https://www.bankofengland.co.uk/-/media/boe/files/statistics/research-datasets/a-millennium-of-macroeconomic-data-for-the-uk.xlsx?la=en&hash=73ABBFB603A709FEEB1FD349B1C61F11527F1DE4

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12 hours ago, bushblairandbrown said:

Price to salary pre 1945 is entirely irrelevant to today. This is the type of misdirected statistical analysis that has lead to a portion of the population ignoring statistics altogether. 

You need to be more specific. Are you suggesting that presented data are inaccurate? If so please prove your claim.

Dismissing data without any argument put you in the category people who ignore data altogether, which you complain about.

I've cross checked them a little bit, from other sources 900 annual salary was around £50, average house costed around £200-300.  

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On 04/09/2018 at 07:37, slawek said:

The ratio was pretty stable over the last 100 years. The last 10 years have been distorted by the low interest rates. When rates go back to 4-5% the house prices will return 4-5 multiplier. I think the only hope for this to happen is for US/Europe rising the rates or a pound crash, BOE won't voluntarily  rise rate because it knows it will cause a crash, there is a lot of debt backed by houses. 

BTW way it is interesting to see that house prices are rising with salaries, owning a house is not only a good asset to hedge inflation but also to capture productivity gains (real rates) plus you got a yield from renting it, which doubles you return as rents are also rising with salaries . No wonder investors buying properties. Over a century we pay less for food but more for a right to live in our houses, as a percentage of our salaries.   

blob.png.015d364df75da6f1202cdcc105e32f80.png

Cameron and Gidiot certainly made good on their promise to get the housing market 'moving' again.

Straight up like f***ing arrow. ?

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Although I've started a thread on this it'll be hours until it's authorised....

There's a house I like, but needs work to make it right for us (knock through lounge diner, extend, new kitchen). It's on at £309k, estate sale. On at £305k a year ago, accepted offer, then family decided to rent it for a year. EA said the family now regret renting it out.

How do I work out how overpriced it is? Not compared to local market, but "normal" prices based on salaries etc.

I have no sense of true value, the 20yr bubble has clouded my brain.

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On 16/06/2018 at 18:13, Brendan110_0 said:

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

so you have a problem with parents helping their kids? 

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On 20/09/2018 at 14:07, happyguy said:

so you have a problem with parents helping their kids? 

BOMAD and HTB are symptoms of the broken market. If people understood the risks of pouring all of their capital into property this would not be a thing.

Almost any parent would do whatever they see in their power to help their children, still doesn't make it right.

Edited by renting til I die
Edit: spelling
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On 04/09/2018 at 07:37, slawek said:

The ratio was pretty stable over the last 100 years. The last 10 years have been distorted by the low interest rates. When rates go back to 4-5% the house prices will return 4-5 multiplier. I think the only hope for this to happen is for US/Europe rising the rates or a pound crash, BOE won't voluntarily  rise rate because it knows it will cause a crash, there is a lot of debt backed by houses. 

BTW way it is interesting to see that house prices are rising with salaries, owning a house is not only a good asset to hedge inflation but also to capture productivity gains (real rates) plus you got a yield from renting it, which doubles you return as rents are also rising with salaries . No wonder investors buying properties. Over a century we pay less for food but more for a right to live in our houses, as a percentage of our salaries.   

blob.png.015d364df75da6f1202cdcc105e32f80.png

Great Graph

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On 25/09/2018 at 10:22, renting til I die said:

BOMAD and HTB are symptoms of the broken market. If people understood the risks of pouring all of their capital into property this would not be a thing.

Almost any parent would do whatever they see in their power to help their children, still doesn't make it right.

PRECISELY.

And Nomad is a cowardly response to the VI campaign of Fear -- which has gone on for decades now.  It's tragic: It's just persuading parents to prop up the "market" x 6 === to match insane and unsustainable "prices".  If lnly the Bomads would understand - -- don't, DON'T blink.  DO NOT SURRENDER to this BLACKMAIL.

As for "Help to Buy Sell/keep the 'market' rigged" ....... Well -- words fail me.......:unsure::unsure::wacko:

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I think the market will stabilise at 4 to 5 times household income rather than single income. 

I actually think that house price has always been related to household income rather than single income. I do not mean to be sexist, but I think one effect with more women working in 21st century is that higher household income led to higher house price. And the reason previous house price seemly has been related to single income is because in those times, a man's single income WAS more or less the household income. 

I also think BoMaD is essentially a form of joint/inter-generation mortgage (as many MaDs have to equity release, i.e. borrow money to help their children). If we treat the joint income of parents + children as the new norm for "household income", then I think it may actually explain why currently average house price is 7 times of average single salary. It simply reflects that house price is related to the combined purchase power of parents + children. I remember it is something like 80% FTB had help from BoMaD, so that became the new norm.

In the extreme case of China (which also impacts Ozzi and Kiwi markets), it is not uncommon that three generations' wealth is all pooled together, which is why average Chinese property is around 30 times average single income.

 Don't be surprised if that happens in the UK, too. 

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On 12/11/2018 at 22:55, peter_2008 said:

I think the market will stabilise at 4 to 5 times household income rather than single income. 

I actually think that house price has always been related to household income rather than single income. I do not mean to be sexist, but I think one effect with more women working in 21st century is that higher household income led to higher house price. And the reason previous house price seemly has been related to single income is because in those times, a man's single income WAS more or less the household income. 

If you've not seen it, it's worth watching Elizabeth Warren's lecture on the subject - and it's worse than you think...
 

 

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