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House Prices vs Salaries

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

 

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.

Well it is sexist. You clearly meant to be. Blaming increasing house prices on what women do when it's the banks who are to blame. Apart from the post-war boomer years the majority of women throughout history have worked. Mainly from making things or in service until the industrial revolution got going. Don't forget 90% of us used to be working class at one point and everyone including children was at it.

Even if society collapsed tomorrow and we ended up back in tribes living off the land the majority of adults and older children would be working in the fields, just like in the third world.

We've been conditioned by the boomers to think the nuclear family living off an income from Dad is normal when it isn't. 

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17 hours ago, EnglishinWales said:

Well it is sexist. You clearly meant to be. Blaming increasing house prices on what women do when it's the banks who are to blame. Apart from the post-war boomer years the majority of women throughout history have worked. Mainly from making things or in service until the industrial revolution got going. Don't forget 90% of us used to be working class at one point and everyone including children was at it.

Even if society collapsed tomorrow and we ended up back in tribes living off the land the majority of adults and older children would be working in the fields, just like in the third world.

We've been conditioned by the boomers to think the nuclear family living off an income from Dad is normal when it isn't. 

It's not sexist because a) it's true and b) gender is irrelevant. And while you could blame the banks, really it's just an inevitable outcome - house prices reflect both income and bank lending - if the amount the average households earn goes up, or the amount that banks are willing to lend to average households goes up, then house prices will follow.

I do urge you to watch the Elizabeth Warren video, but the main points are as follows:

  1. Dual incomes have forced house prices up
  2. The amount of disposable income, both as a percentage and as an inflation adjusted figure, has gone down
  3. Households are more leveraged
  4. An important safety net has been removed

The last point needs some detail - when families generally had one adult in full time work, if that adult lost their job, then both adults were available to find short-term piece-work to maintain their income. That option is no longer available.

Another interesting stat from her lecture is health-insurance (a specifically US metric, but it's still informative): when single-worker (full time) families were the norm, the average uninsured person was a single man in his early twenties. Now, it's a middle-aged man, married with kids. Bottom line, we were better off and had more safety nets when households largely consisted of one full-time worker and one 'spare'.

BTW your assertion that one income households are some modern artifact is not really true. First, you should probably exclude the pre-WW1 working class, and focus on the middle class (because, when discussing house prices, that's really what we're talking about) - one income families were very much the rule for several centuries.

Edited by tomandlu

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Hmm... A perfect storm could be brewing.

Buy to let landlords have all but dried up in the Midlands (Suspect elsewhere too), anti-immigration rhetoric plus stronger immigration controls post Brexit coupled with the beginning of the demise of the baby boomers should see demand for property reducing. This should slow down house price growth.

An increased availability of housing stock has began with many private landlords selling off their portfolios as higher taxes start to bite.

With Immigration under stricter control, employers will find it harder to recruit staff and wage increases should naturally rise.

So with property prices stagnating and wages increasing, we could one day see borrowing levels return close to the previous 4x salary. 

I wouldn't expect it for another 10 years though!

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Ideally we should balance most women working by reducing working hours. It would be liberating for both sexes. We would have more leisure, stronger communities, and parents could spend time with their kids (I make a lower income by working from home, but its worth it).

We should also be more accepting of men staying at home. If my wife made more than me I would be delighted to stay at home with the kids.

Also, I do think couples or households should be able to share their tax allowances and rate slices (right terminology?). 

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On 22/11/2018 at 10:08, tomandlu said:

if the amount the average households earn goes up then house prices will follow.

This is the accepted wisdom for all the reasons given. However, in plenty of other markets, how much people can afford is a much smaller factor in determining prices.

e.g. Beer doesn't get generally pricier nationwide due to higher incomes (which have actually been stagnant). Computing power doesn't get more "bang for your buck" due to wages falling. I'm sure there are more examples.

The lynch pin / critical underlying factor that makes it so with housing is controlled supply. If it wasn't for that, income would be a less significant factor in determining house prices.

Controlled supply has meant that not only income determines house prices (in the relatively passive way it would as a result of), but also all the other deliberate economic rent-seeking mechanisms that have taken advantage of this such as QE, ZIRP, HTB, Tax incentives, money laundering etc. etc. I'd say the compounding effect of all of this actually makes income an even greater factor than it otherwise would be.

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11 hours ago, Arpeggio said:

The lynch pin / critical underlying factor that makes it so with housing is controlled supply. If it wasn't for that, income would be a less significant factor in determining house prices.

Indeed. How much is a glass of water worth? In the desert when you're dying of thirst, every penny you've got, and every penny you can borrow - particularly if you're competing against someone else.

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On 29/11/2018 at 21:06, Arpeggio said:

how much people can afford is a much smaller factor in determining prices.

e.g. Beer doesn't get generally pricier 

The lynch pin / critical underlying factor that makes it so with housing is controlled supply. If it wasn't for that, income would be a less significant factor in determining house prices.

 

1. Limited supply is a myth. It's purely btl. 

2. We are now in a recession. It's a global recession. The plane may still be at 30, 000 feet but the engines have stopped; we're going down. 

3. Assuming women work full time after children with no loss of income is untru; childcare costs are prohibitive.  

4. The current maths of house price equals  4x2 incomes only works when house prices are rising. Once they are stagnant, the sole ft worker cannot pay it. We are now in that position.  

5. The usual government response is more benefits to mothers  and more immigration. Rather than let multiples fall. 

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1 hour ago, 24gray24 said:

1. Limited supply is a myth. It's purely btl. 

2. We are now in a recession. It's a global recession. The plane may still be at 30, 000 feet but the engines have stopped; we're going down. 

3. Assuming women work full time after children with no loss of income is untru; childcare costs are prohibitive.  

4. The current maths of house price equals  4x2 incomes only works when house prices are rising. Once they are stagnant, the sole ft worker cannot pay it. We are now in that position.  

5. The usual government response is more benefits to mothers  and more immigration. Rather than let multiples fall. 

Agreed, and I like your bearish outlook.I said controlled supply though, not limited.

4. Just to check, is that basically because they are in a Ponzi scheme where not having realistic payment prospects doesn’t matter, neither to the banks who have the asset of a rising in price house. Whereas with stagnant or falling prices, the actual borrowers are the only source of repayment for loan.

5. It should be about addressing the cost of living and as you say, letting multiples fall. It’s such a ponzi.

Edited by Arpeggio

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4. Yes with rising prices if owners can't manage payments they sell and pay bank back. 

But when prices fall, if buyers can't pay , bank makes a loss. 

Hence why banks tightened lending critera. But way too little and too late. 

So now everyone on 4xjoint goes bust. And bank collects in 16 years time. Plus interest. Bank loses now. Ex buyers repay in 16 years plus interest. Life wasted. 

 

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On 06/01/2019 at 09:07, 24gray24 said:

1. Limited supply is a myth. It's purely btl. 

2. We are now in a recession. It's a global recession. The plane may still be at 30, 000 feet but the engines have stopped; we're going down. 

3. Assuming women work full time after children with no loss of income is untru; childcare costs are prohibitive.  

4. The current maths of house price equals  4x2 incomes only works when house prices are rising. Once they are stagnant, the sole ft worker cannot pay it. We are now in that position.  

5. The usual government response is more benefits to mothers  and more immigration. Rather than let multiples fall. 

There is no global recession - where do you get this from? The UK has not had one quarter of negative GDP recently either.

When the USA have problems then I might start to believe you

Edited by bear.getting.old

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On 22/11/2018 at 10:08, tomandlu said:

It's not sexist because a) it's true and b) gender is irrelevant. And while you could blame the banks, really it's just an inevitable outcome - house prices reflect both income and bank lending - if the amount the average households earn goes up, or the amount that banks are willing to lend to average households goes up, then house prices will follow.

I do urge you to watch the Elizabeth Warren video, but the main points are as follows:

  1. Dual incomes have forced house prices up
  2. The amount of disposable income, both as a percentage and as an inflation adjusted figure, has gone down
  3. Households are more leveraged
  4. An important safety net has been removed

The last point needs some detail - when families generally had one adult in full time work, if that adult lost their job, then both adults were available to find short-term piece-work to maintain their income. That option is no longer available.

Another interesting stat from her lecture is health-insurance (a specifically US metric, but it's still informative): when single-worker (full time) families were the norm, the average uninsured person was a single man in his early twenties. Now, it's a middle-aged man, married with kids. Bottom line, we were better off and had more safety nets when households largely consisted of one full-time worker and one 'spare'.

BTW your assertion that one income households are some modern artifact is not really true. First, you should probably exclude the pre-WW1 working class, and focus on the middle class (because, when discussing house prices, that's really what we're talking about) - one income families were very much the rule for several centuries.

Damn good post

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On 28/11/2018 at 01:25, Steamerpoint said:

Hmm... A perfect storm could be brewing.

Buy to let landlords have all but dried up in the Midlands (Suspect elsewhere too), anti-immigration rhetoric plus stronger immigration controls post Brexit coupled with the beginning of the demise of the baby boomers should see demand for property reducing. This should slow down house price growth.

An increased availability of housing stock has began with many private landlords selling off their portfolios as higher taxes start to bite.

With Immigration under stricter control, employers will find it harder to recruit staff and wage increases should naturally rise.

So with property prices stagnating and wages increasing, we could one day see borrowing levels return close to the previous 4x salary. 

I wouldn't expect it for another 10 years though!

I hope you are right however although there is anti immigration rhetoric it does not mean that immigration will be controlled.

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There will still be plenty of immigration post brexit, it supports our pensions and drives the economy (via jacking up house prices) the hilarious thing is all the racists who voted for brexit will suddenly find less white European immigrants are coming, and suddenly much more international immigrants are coming. 

but the overall numbers won’t change, in fact with a post brexit depressed economy if anything they will need to increase immigration 

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3 minutes ago, jiltedjen said:

There will still be plenty of immigration post brexit, it supports our pensions and drives the economy (via jacking up house prices) the hilarious thing is all the racists who voted for brexit will suddenly find less white European immigrants are coming, and suddenly much more international immigrants are coming. 

but the overall numbers won’t change, in fact with a post brexit depressed economy if anything they will need to increase immigration 

We had a depressed economy in 92 and had very little immigration compared to now - and don't have a massive deficit.

I don't think immigration causes as many problems as others think but it is hard to argue looking at the past that we need it.

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21 hours ago, jiltedjen said:

There will still be plenty of immigration post brexit, it supports our pensions and drives the economy (via jacking up house prices) the hilarious thing is all the racists who voted for brexit will suddenly find less white European immigrants are coming, and suddenly much more international immigrants are coming. 

but the overall numbers won’t change, in fact with a post brexit depressed economy if anything they will need to increase immigration 

And so it all goes on and on and on and on.....

 

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On 15/02/2019 at 14:09, jiltedjen said:

There will still be plenty of immigration post brexit, it supports our pensions and drives the economy (via jacking up house prices) the hilarious thing is all the racists who voted for brexit will suddenly find less white European immigrants are coming, and suddenly much more international immigrants are coming. 

but the overall numbers won’t change, in fact with a post brexit depressed economy if anything they will need to increase immigration 

Isn't it funny how the only people who claim the referendum result was due to racist voters predict a terrible future post brexit. Quite obviously a bitter remoaner who needs to get over it.

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On 15/02/2019 at 14:09, jiltedjen said:

There will still be plenty of immigration post brexit, it supports our pensions and drives the economy (via jacking up house prices) the hilarious thing is all the racists who voted for brexit will suddenly find less white European immigrants are coming, and suddenly much more international immigrants are coming. 

but the overall numbers won’t change, in fact with a post brexit depressed economy if anything they will need to increase immigration 

Sounds like you've swallowed the darling/osbourne coolaid to me............................................

 

 

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If house prices keep on rising in the UK the cheapest 3 bedroom house will cost 1 trillion pounds whilst the average wage will be 50k at the moment its 35k a year I am exaggerating when I say this but what if I wasn't and what ever happened to the normal boom and bust cycle 

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Just one more thing I would like a 40-60 % crash but another part of me feels guilty about wanting this because it puts people into negative equity especially those that have brought at the top of the market you just cannot win there always has to be a loser in the property game why can't we just all win. And no I don't come from the far left of politics lol

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This isn't about feminism FGS.

Any trend or change in social habits, earnings, legislation, lending practices etc etc needs to be monitored and the effects considered and predicted. This is why we have armies of civil servants, government employed economists a chancellor of the exchequer, a head of the BOE and the FSA. Feminism (or I think we should be using the term gender equality in this context), is one of the greatest modern day causes. Everything about equal opportunities and equal pay in the employment sector is GOOD and should not be being sneered at.

The problem or unwelcome effect of the rise of women taking to the workplace (and earning proper wages), has been the unsettling of average earnings of families, couples and people buying houses together. The relative affluence brought about by the influx of a second income only gave people advantage when it wasn't the norm. Once we reached the stage where two incomes became the norm, we were back to a level playing field (or for couples at least). House prices are almost unique in the sense that they are totally out of the reach of most to buy in cash and are totally market driven. The only way most people can buy a house is  with a mortgage or loan and the only limit on what most people will borrow is how much the banks will lend them (especially when home ownership is so persistently regarded as the best and safest investment anyone could make). So, what I'm saying here, is that if we raised everybody's income by 20% today, then they would have 20% more income by which to assess their lending capacity or loan-to-income ratio. Consequently they will seek to get a mortgage 20% greater than they could achieve yesterday and average house prices will rise by that 20% (because everyone is doing the same).

The controlling factors in order to prevent greed and speculation in the housing market start with control over the loan-to-value and loan-to-income ratios (as we learned from 100% and above mortgages). Further to this, there are actions which could be taken directly by government, as well as controlling reckless lending, they can control taxation. When I say this, I'm not referring to the abominable land tax or stamp duty I'm talking about the tax benefits! Simply by applying index linking to the capital gains made on primary residence residential property (for the purpose of taxation), it could be made far less attractive to force up property prices and speculate in residential property. If every penny made in capital gain on residential property (after applying inflation through index linking) was subject to CGT then there would be far less appetite for forcing up house prices and stamp duty could be abolished (shifting the burden onto those profiting from a sale and not the buyer). This would also draw a line under the nonsense of declaring a primary dwelling for tax purposes.

So, anyone on here sniping at gender equality and making any veiled sexist comment should be ashamed. Women's right to work and earn the same as any man doing the same job is a basic human right and as we've seen recently, there's still work to be done in enforcing this. The distortion of the housing market (as a consequence of the rise of the second income family) is apparent but blame lies fully in the hands of those paid by us to predict and manage such social changes. If you want to blame any one single, modern day, change which had an unprecedented effect on distorting the UK housing market then I think the "right to buy" legislation should be in your sights.

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On 4/15/2019 at 12:22 AM, mjn said:

Just one more thing I would like a 40-60 % crash but another part of me feels guilty about wanting this because it puts people into negative equity especially those that have brought at the top of the market you just cannot win there always has to be a loser in the property game why can't we just all win. And no I don't come from the far left of politics lol

you should not feel sorry for them...a mega crash is needed to stop once and for all the exploitation of a basic human need in this country.....it should never have come this far...but it has.....it needs to roll back.....there will be casualties......you cannot fight a war without collateral damage.....and this is a war to stop a new kind of feudalism.....

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This earnings v house price report from the ONS was released 28 March, so I guess that it was linked to elsewhere in the forum, but this topic seems to be the right place for it.

https://www.ons.gov.uk/peoplepopulationandcommunity/housing/datasets/ratioofhousepricetoworkplacebasedearningslowerquartileandmedian

The first thing that surprised me when sorting by price to earnings ratios (say in the final tab 6c) was that all the regions are perfectly grouped - not even any intermingling between say the highest NE authority with the lowest NW authority. Seems odd - perhaps I'm making a Doh! error.

The second thing is wondering whether a crash is likely in the NE/NW given the current ratios (*3 to 4)- perhaps if there is large scale unemployment?

The third thing was that London is relatively more affordable than SE, SW and Wales, so whilst the ratio is still nuts (*10) perhaps it is better shielded from the crash than the bonkers (*15) elsewhere.

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  • 221 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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