Jump to content
House Price Crash Forum
zamo

Why Cant i afford to buy a house

Recommended Posts

https://medium.com/iipp-blog/why-cant-you-afford-a-home-9c5cf009be21

 

A remarkable transformation is occurring in advanced capitalist economies. Home ownership and housing more generally is becoming unaffordable for large swathes of citizens. Anglo-Saxon economies — where home ownership is deeply culturally embedded — have been particularly badly affected. In big cities such as London, Manchester, Sydney, Melbourne, Auckland, Vancouver, Toronto, Los Angeles and San Francisco, median house prices have risen to over seven times median incomes — with three times generally seen as ‘affordable’.

The hardest hit have been younger adults: the ‘millennials’. In the UK, for example, in 1996 two-thirds of 25-35 year-olds on middle incomes owned a home; by 2016, this had fallen to just a quarter. In the United States in 2004, almost 45% of the same age group were home owners, a figure that dropped to 35% by 2016. In Australia, home ownership among the under forties declined from 36% in 2001 to 25% in 2015.

The foundational promise of liberal capitalist economies that ‘if you work hard enough you can have a home of your own’ no longer holds true. There have has been major falls in the levels of home ownership since the turn of the century across all the major English-speaking economies, as shown in the chart below.

 
1*QbAAClecpD_Hw3bEQx4jhg.png

How did we get here? The explanation you will most likely hear in the media and from many politicians is that we are not building enough homes. The culprits are usually the planning system, the construction sector or excessive immigration. While these are certainly relevant factors in many countries, they are not so useful in explaining the housing affordability crisis of the last few decades shown in the chart above. Planning systems did not suddenly become more restrictive at the turn of the century or construction firms more monopolistic. House prices have been rising even in cities with stable populations.

To understand today’s housing crisis, we must go beyond just looking at the supply of housing and examine demand, in particular the demand for housing as a financial asset and land as a form of collateral. And looking at the demand for housing and the land underneath it leads us to consider much bigger questions about the social and economic structure of modern capitalist economies.

In particular, the increasing political preference for home ownership over other forms of tenure, coupled with wider shifts in political economy, have led to two important — and perhaps unintended — developments in the housing and land market. Firstly, the windfall gains that naturally accrue to landowners in a growing economy — generally referred to as ‘land rents’ — have been allowed to grow as taxes on property and the public provision of affordable housing have both withered. Secondly, and most significantly for explaining the rises in house prices in the last two decades, the deregulation of the financial system has created a positive feedback cycle between finance and house prices. Finance has become addicted to property just as citizens in many capitalist economies have come to expect to own a home.

Money creation, bank lending and house prices

When property prices rise faster than incomes........

Share this post


Link to post
Share on other sites

Falling interest rates since 1982 as we had a dis-inflation.Thats just ended.House prices will now revert to mean and well past on the downside.In the west the US long bond controls most outcomes,the rest is noise.

Share this post


Link to post
Share on other sites
1 hour ago, durhamborn said:

Falling interest rates since 1982 as we had a dis-inflation.Thats just ended.House prices will now revert to mean and well past on the downside.In the west the US long bond controls most outcomes,the rest is noise.

But it is illogical. If prices rose as interest rates fell, because people could borrow more and service the loans, then affordability has not changed. Yet the thread title says that affordability is worse. This can only be because demand is up for any given level of affordability. Demand is up because the population has grown.

Share this post


Link to post
Share on other sites
1 hour ago, durhamborn said:

Falling interest rates since 1982 as we had a dis-inflation.Thats just ended.House prices will now revert to mean and well past on the downside.In the west the US long bond controls most outcomes,the rest is noise.

This is probably completely wrong.

Share this post


Link to post
Share on other sites
43 minutes ago, onlooker said:

But it is illogical. If prices rose as interest rates fell, because people could borrow more and service the loans, then affordability has not changed. Yet the thread title says that affordability is worse. This can only be because demand is up for any given level of affordability. Demand is up because the population has grown.

Go and calculate the mortgage payment with a 20% deposit on a property of your choice in London and compare it with the rent you'd pay on the same property. Remarkably similar. Affordability to pay the mortgage hasn't changed (much). Affordability to actually save the deposit has changed. Affordability to ever complete paying for that property before the 30 -> 35 -> 40 -> 45 year mortgage is up has changed.

Previously, higher interest rates, shorter terms, similar monthly payments, much cheaper property prices. Then wage inflation, falling interest rates = paid off expensive house in your 40s or 50s. Never going to happen for todays generations. No wage inflation, rates not going any lower.

Biggest transfer of wealth in generations, but you know, keep blaming the immigrants. That usually works.

Share this post


Link to post
Share on other sites
23 minutes ago, dugsbody said:

keep blaming the immigrants. That usually works.

Rents increased enormously within the advent of free movement - all these facts are borne out by RICS which is oft quoted on here when they say the market is falling

That attracted into the market many investors who would not have considered buying place to rent prior to freedom of movement

That reduced the stock for buyers who want to by a place as a home.

A lack of supply and increased demand pushed the price up.

Since Brexit prices have fallen as EU migrants have stopped coming and or left.  It is not the only factor but is does contribute - again borne out by RICS and the Office of Fiscal Studies.
Supply and demand is the most basic of all economic principals one one which is taught at school in the first lesson of economics.  

29 minutes ago, dugsbody said:

This can only be because demand is up for any given level of affordability. Demand is up because the population has grown.

A voice of reason :) 

Share this post


Link to post
Share on other sites
7 minutes ago, happyguy said:

Rents increased enormously within the advent of free movement - all these facts are borne out by RICS which is oft quoted on here when they say the market is falling

Rents increased in line with historical norms.

And you've misquoted me in the last part.

You guys are blinded. Absolutely unwilling to think outside your narrow blame the outsider box to understand the wider causes. You're having it spelled out for you in many different ways but you don't want to believe it. Your version where it is Vlad the Eastern European's fault is so much better for your conservative world views, so that's the one you'll choose to believe. 

Share this post


Link to post
Share on other sites
1 hour ago, dugsbody said:

Rents increased in line with historical norms.

And you've misquoted me in the last part.

You guys are blinded. Absolutely unwilling to think outside your narrow blame the outsider box to understand the wider causes. You're having it spelled out for you in many different ways but you don't want to believe it. Your version where it is Vlad the Eastern European's fault is so much better for your conservative world views, so that's the one you'll choose to believe. 

As I have said many times, no one is actually blaming Vlad, they are blaming the Government for letting him (and many others) come here without thinking about where Vlad is going to live.  You are misrepresenting your opponents views, why?

Share this post


Link to post
Share on other sites
3 hours ago, dugsbody said:

Biggest transfer of wealth in generations, but you know, keep blaming the immigrants. That usually works.

The British barely have replacement birth rates.

If Britain contained only British for the last 50 years every 2 parents would leave an average of 2 children their inheritance.

Wealth inequality would not be a thing. House prices would remain stable or even decrease as the population stayed the same but houses continued to be built.

-----------------------------------------------------------------------------------------

https://www.bbc.co.uk/news/uk-politics-eu-referendum-36271390

The official net migration figures are over 2million every 5 years. The houses built are less than 700,000 every 5 years. an extra 1.3million people competing for housing every 5 years.

The unofficial NI numbers add an extra 1.2million NI numbers every 5 years.

3.3million People competing for 700,000 Houses .. EVERY 5 Years

Since the financial crash 6.6million extra people competing for 1.4million homes.

---------------------------------------------------------------------------------------------

https://www.theguardian.com/housing-network/2016/jun/22/housing-benefit-cost-claimants-single-mothers

5million people on housing benefit receiving an average of £500 per MONTH. Over 50% SINGLE MOTHERS.

150 BILLION total spent on benefits - 50% of the population on some sort of state benefit - An average of £5000 per citizen per YEAR.

---------------------------------------------------------------------------------------------

Our own wages are subsidizing the same people we are competing with for housing to the tune of £500 a month and people think interest rates increasing the mortgage costs by £50 is gunna change anything. How naïve.

stop the immigration of people with no savings. stop the housing benefit. It all goes away within a generation.

Share this post


Link to post
Share on other sites
4 hours ago, onlooker said:

But it is illogical. If prices rose as interest rates fell, because people could borrow more and service the loans, then affordability has not changed. Yet the thread title says that affordability is worse. This can only be because demand is up for any given level of affordability. Demand is up because the population has grown.

Immigration has increased house prices, sure, but it only accounts for a part of the rise not the whole.

Other factors include BTL

IO Mortgages and easy lending

Offshore speculators

 

etc

Share this post


Link to post
Share on other sites
17 minutes ago, TryingToWin said:

The British barely have replacement birth rates.

If Britain contained only British for the last 50 years every 2 parents would leave an average of 2 children their inheritance.

Wealth inequality would not be a thing. House prices would remain stable or even decrease as the population stayed the same but houses continued to be built.

-----------------------------------------------------------------------------------------

https://www.bbc.co.uk/news/uk-politics-eu-referendum-36271390

The official net migration figures are over 2million every 5 years. The houses built are less than 700,000 every 5 years. an extra 1.3million people competing for housing every 5 years.

The unofficial NI numbers add an extra 1.2million NI numbers every 5 years.

3.3million People competing for 700,000 Houses .. EVERY 5 Years

Since the financial crash 6.6million extra people competing for 1.4million homes.

---------------------------------------------------------------------------------------------

https://www.theguardian.com/housing-network/2016/jun/22/housing-benefit-cost-claimants-single-mothers

5million people on housing benefit receiving an average of £500 per MONTH. Over 50% SINGLE MOTHERS.

150 BILLION total spent on benefits - 50% of the population on some sort of state benefit - An average of £5000 per citizen per YEAR.

---------------------------------------------------------------------------------------------

Our own wages are subsidizing the same people we are competing with for housing to the tune of £500 a month and people think interest rates increasing the mortgage costs by £50 is gunna change anything. How naïve.

stop the immigration of people with no savings. stop the housing benefit. It all goes away within a generation.

This post should be a sticky a great summary of why low interest rates are not the whole problem.

Edited by iamnumerate

Share this post


Link to post
Share on other sites
1 hour ago, TryingToWin said:

The British barely have replacement birth rates.

If Britain contained only British for the last 50 years every 2 parents would leave an average of 2 children their inheritance.

Wealth inequality would not be a thing. House prices would remain stable or even decrease as the population stayed the same but houses continued to be built.

-----------------------------------------------------------------------------------------

https://www.bbc.co.uk/news/uk-politics-eu-referendum-36271390

The official net migration figures are over 2million every 5 years. The houses built are less than 700,000 every 5 years. an extra 1.3million people competing for housing every 5 years.

The unofficial NI numbers add an extra 1.2million NI numbers every 5 years.

3.3million People competing for 700,000 Houses .. EVERY 5 Years

Since the financial crash 6.6million extra people competing for 1.4million homes.

---------------------------------------------------------------------------------------------

https://www.theguardian.com/housing-network/2016/jun/22/housing-benefit-cost-claimants-single-mothers

5million people on housing benefit receiving an average of £500 per MONTH. Over 50% SINGLE MOTHERS.

150 BILLION total spent on benefits - 50% of the population on some sort of state benefit - An average of £5000 per citizen per YEAR.

---------------------------------------------------------------------------------------------

Our own wages are subsidizing the same people we are competing with for housing to the tune of £500 a month and people think interest rates increasing the mortgage costs by £50 is gunna change anything. How naïve.

stop the immigration of people with no savings. stop the housing benefit. It all goes away within a generation.

Cut benefits and you'll have to incarcerate a lot more people for petty crime, mostly for stealing food and basic life necessities at great expense mind you, greater than the 'benefit' expense.  Glad you don't make those policy decisions.

And competition for houses... what is with you people? There aren't multiple millions of homeless here. So what, people rent. Big deal.

Houses and housing really aren't an issue in a leading first world country like the UK.

Bigger problem is the revenue stream for pensions and medical care for boomer pensioners.. as in, where is this money going to come from? Even if oldies start selling off houses to fund retirements & health care it's only going to support them for perhaps a few years with current rules. Its going to break the western economies. Brexit isn't going to improve anything either.

Some of you lot are like Homer Simpson when he became the Sanitation Commissioner for naivety.

 

Share this post


Link to post
Share on other sites
4 hours ago, dugsbody said:

Rents increased in line with historical norms.

And you've misquoted me in the last part.

You guys are blinded. Absolutely unwilling to think outside your narrow blame the outsider box to understand the wider causes. You're having it spelled out for you in many different ways but you don't want to believe it. Your version where it is Vlad the Eastern European's fault is so much better for your conservative world views, so that's the one you'll choose to believee. 

No they did  not increase in line with historical norms. In areas where there was a huge influx they shot up - see RICS report which is oft quoted here.

You are having it spelled out to you in the simplest of terms but you do not want to believe it and do not seem to understand the basic law of supply and demand.  

I used to live in Hounslow which had a massive influx of EU migrants - rents went through the roof - so did prices of property as buyers flocked to buy investment properties.

You know nothing at all about me so the conservative world view comment is very childish and moronic.  As for blaming the outsider my own wife is German, she does however speak perfect English and is a surgeon so she can afford to buy a house not rent. 

As it happens I have never ever voted Tory but if you think that voting labour who espouse mass uncontrolled immigration from the EU is going to make house prices more affordable and enable you to buy good luck, I do not mind it is not my problem.

I will not read any more of your posts, I cannot be bothered,  just carry on whining and behaving like a turkey voting for Christmas.  

 

Share this post


Link to post
Share on other sites
3 minutes ago, cashinmattress said:

Cut benefits and you'll have to incarcerate a lot more people for petty crime, mostly for stealing food and basic life necessities at great expense mind you, greater than the 'benefit' expense.  Glad you don't make those policy decisions.

 

 

Japan spends half of Sweden does on benefits but does not have more crime, I don't think the case has been proved that lower benefits = higher crime.

http://www.nationmaster.com/country-info/stats/Economy/Social-welfare-spending/>-%-of-GDP/Excluding-education

(The UK is not on this list for some reason).

Share this post


Link to post
Share on other sites
15 minutes ago, cashinmattress said:

Cut benefits and you'll have to incarcerate a lot more people for petty crime, mostly for stealing food and basic life necessities at great expense mind you, greater than the 'benefit' expense.  Glad you don't make those policy decisions.

And competition for houses... what is with you people? There aren't multiple millions of homeless here. So what, people rent. Big deal.

Houses and housing really aren't an issue in a leading first world country like the UK.

Bigger problem is the revenue stream for pensions and medical care for boomer pensioners.. as in, where is this money going to come from? Even if oldies start selling off houses to fund retirements & health care it's only going to support them for perhaps a few years with current rules. Its going to break the western economies. Brexit isn't going to improve anything either.

Some of you lot are like Homer Simpson when he became the Sanitation Commissioner for naivety.

 

So why don't we remove the money from the equation and just give them "Energy cards" and "Food Cards" that allow them to buy Tesco value goods and pay their energy costs directly. Remove all the money from the equation, you know, so they don't spend it on the latest iPhone. and WHY do unemployed people need to be housed in London?

Nobody can ever explain to me why unemployed people need to be housed in the most expensive most densely populated city in the UK?

Pensions account for 110million / year . Benefits account for 150Million. The data is all available on the ONS and gov.uk websites.

I don't know where you got your figures but the cost of paying for the scroungers is costing MORE then paying the pensions of people who have contributed to this country for 50 years. This is unacceptable.

The whole liberal mantra is a lie.

They import people with no savings and no qualifications then claim there is wealth and income inequality.

They import more people a year then bedrooms they build - and then blame the rental market. No, there isn't millions of homeless, instead there's millions of studio flats that used to be 2 bedroom flats and millions of British Children with British parents who find themselves having to compete with more and more people so big business can have more customers to sell their crap to.

Economic Nationalism is the only way out of this mess. But the liberal mantra is that we can save the whole damn world -

"I'm sorry - we're full."

Share this post


Link to post
Share on other sites
13 minutes ago, TryingToWin said:

Pensions account for 110million / year . Benefits account for 150Million. The data is all available on the ONS and gov.uk websites.

 

Pensions + health care. Health care costs are not easy to calculate either... but core residential care is over £30k a year, per person... google says £31.2-ish. Where's that money going to come from? Extras add up really fast. Selling your house will get you a few years maybe, and perhaps some pensions will part or fully support medical care... private pensions that require being topped up by whom?

Over in Yankee land you have 10k boomers retiring each day, or thereabouts. Not sure what our own UK figures are. Perhaps you can find it on ONS somewhere? I believe that we're about 20% of the population 65 or greater.

Of course not everyone will be needing care, yet... but if we look at some possibilities.. the figures are huge...

In fact, for every 1% of that boomer generation that needs residential care we're £4 billion a year.

Say 10% of that elderly generation needs to be in residential care... that £40 billion a year.

Who's paying for this?

Forget millions in benefits.. that's chump change.

HMRC's own data shows tax receipts for at £593,249 million for 2017-2018. Imagine a case where you have  big health care to fund now... plus all the others... and that loss of income by so many folk going into retirement?

Share this post


Link to post
Share on other sites
2 hours ago, TryingToWin said:

The British barely have replacement birth rates.

If Britain contained only British for the last 50 years every 2 parents would leave an average of 2 children their inheritance.

Wealth inequality would not be a thing. House prices would remain stable or even decrease as the population stayed the same but houses continued to be built.

-----------------------------------------------------------------------------------------

https://www.bbc.co.uk/news/uk-politics-eu-referendum-36271390

The official net migration figures are over 2million every 5 years. The houses built are less than 700,000 every 5 years. an extra 1.3million people competing for housing every 5 years.

The unofficial NI numbers add an extra 1.2million NI numbers every 5 years.

3.3million People competing for 700,000 Houses .. EVERY 5 Years

Since the financial crash 6.6million extra people competing for 1.4million homes.

---------------------------------------------------------------------------------------------

https://www.theguardian.com/housing-network/2016/jun/22/housing-benefit-cost-claimants-single-mothers

5million people on housing benefit receiving an average of £500 per MONTH. Over 50% SINGLE MOTHERS.

150 BILLION total spent on benefits - 50% of the population on some sort of state benefit - An average of £5000 per citizen per YEAR.

---------------------------------------------------------------------------------------------

Our own wages are subsidizing the same people we are competing with for housing to the tune of £500 a month and people think interest rates increasing the mortgage costs by £50 is gunna change anything. How naïve.

stop the immigration of people with no savings. stop the housing benefit. It all goes away within a generation.

That was interesting reading. I had no idea it was that severe.

Share this post


Link to post
Share on other sites

i bet they would do something if 2 million educated, young brits signed a decleration to move to a new country where they could once again live without being a landlords slave. i bet many countries would offer them land for homes etc free of charge. 

 

in other words and i know im veering off topic, the young need to unionise themselves and use their strengths just like others have exploited their weaknesses. 

Share this post


Link to post
Share on other sites
7 hours ago, dugsbody said:

Go and calculate the mortgage payment with a 20% deposit on a property of your choice in London and compare it with the rent you'd pay on the same property. Remarkably similar. Affordability to pay the mortgage hasn't changed (much). Affordability to actually save the deposit has changed. Affordability to ever complete paying for that property before the 30 -> 35 -> 40 -> 45 year mortgage is up has changed.

Previously, higher interest rates, shorter terms, similar monthly payments, much cheaper property prices. Then wage inflation, falling interest rates = paid off expensive house in your 40s or 50s. Never going to happen for todays generations. No wage inflation, rates not going any lower.

Biggest transfer of wealth in generations, but you know, keep blaming the immigrants. That usually works.

Lots of truth in what you say.....some avoid at all costs hearing the truth.😉

Share this post


Link to post
Share on other sites
6 minutes ago, winkie said:

Lots of truth in what you say.....some avoid at all costs hearing the truth.😉

It is not true in 2001, my mortgage was a lot cheaper than the equivalent rent and I didn't have a 20% deposit.

Share this post


Link to post
Share on other sites
17 minutes ago, iamnumerate said:

It is not true in 2001, my mortgage was a lot cheaper than the equivalent rent and I didn't have a 20% deposit.

There is a lot of truth.....20% of £100,000 is far less than 20% of £300,000....... mortgage repayments on £100,000 @ 5% is a lot less than mortgage repayments of £300,000 @ 2%.😉

Edited by winkie
More should be less

Share this post


Link to post
Share on other sites
1 minute ago, winkie said:

There is a lot of truth.....20% of £100,000 is far more than 20% of £300,000....... mortgage repayments on £100,000 @ 5% is a lot less than mortgage repayments of £300,000 @ 2%.😉

Obviously that is true

However this

Quote

Go and calculate the mortgage payment with a 20% deposit on a property of your choice in London and compare it with the rent you'd pay on the same property. Remarkably similar. Affordability to pay the mortgage hasn't changed (much).

In 2001 the rent was a lot more than the mortgage

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 261 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.