Monday, September 8, 2008

Party Like Its 1999!

Housing: a Bust to Come?

SORRY if people have seen this before or indeed remember it??? BUT its very interesting how BEARISH the BEEB were once upon a time!! 8 years later and the harsh memories of the last crash have all but DISAPPEARED! or have they??

Posted by hash browne @ 05:48 PM (1846 views)
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10 thoughts on “Party Like Its 1999!

  • little professor says:

    The average cost of a property in the UK is £83,000, up £10,000 on the year according to figures compiled from its lending by the Halifax.

    If the 5% Oct-Dec rise reported by the Halifax is an accurate reflection of the general market, the cost of the average UK property will pass £100,000 when the Land Registry publishes its next three monthly figures.

    With average UK earnings of £23,000, this will make the average home 4.3 times more than average earnings. This is approaching the house price-to-earnings ratio of five hit briefly before the bubble burst in 1989.

    The situation in London is even more extreme. The average salary is £28,000, the average property price is 5.5 times that.

    Even joint buyers – say a nurse and a teacher with a combined income of £45,000 – now find it difficult to buy more than a small flat unless they find a mortgage company willing to stretch the standard lending criteria of 2.5 times joint salary.

    Ha ha, how quaint. Good find.

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  • There’s also a link on the right to another article named ‘bust like the old days’.

    Its hilarious reading. Just listen to how the RICS explain why we weren’t in another ‘Boom-bust’ cycle:

    “The Royal Institution of Chartered Surveyors says a variety of factors are different now:

    the abolition of double mortgage relief brought a frenetic market to a halt last time
    100% mortgages were easy to get in the 1980s
    now lenders rarely offer more than three or four times a salary – less than before
    the house price-to-earnings ratio is relatively low now, making property still affordable. In the 1980s, the ratio was five-to-one”

    Now that all of the above has come true again – how can they NOT admit we’re in a bubble??

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  • Correct me if I’m wrong but the average UK salary is not much greater than 23K almost 10 years later!

    Shows what damage low interest rates and lax lending do in the long term.

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  • enuii @ 3 :-
    “Correct me if I’m wrong but the average UK salary is not much greater than 23K almost 10 years later!”

    True………and……… taxation is higher………. 23K then is not 23K now. Therefore the true ratios are much higher now. and 8 or 10 times salary is not unusual. If anything we have created an even bigger bubble which has burst but someone keeps repairing the puncture hoping it will hold,in a manner of speaking.

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  • Eeee I remember when the standard lending criteria was 2.5 times joint salary….. those were the days, when we started off as youngsters in our first home with a matress on the floor, used deck chairs for watching the 18 inch telly (rented off Radio Rentals) and had upturned packing crates as coffee tables – because we’d used up all our hard earned savings on the 10% deposit…sigh.

    Wouldn’t do any harm to bring those times back IMHO… friend of mine recently istalled her mid 20’s son and girlfriend in their first house, and bought all the electrical aappliances for them – including plasma TV!!! She said to me “well that’s what they expect mum and dad to do these days!!!”

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  • But the frightening thing is that, even then we would have been forgiven for selling up and renting – but would have missed out on another near doubling of prices… I recall someone who did just that – don’t know if he ever bought back in.

    It confirms my view that, even allowing for a bit of general inflation, prices are headed south of 2000 values…

    Bring it on..!

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  • Sold My Soul To The Never Never Never says:

    Average UK salary at 23K in early 2000

    And another BBC article stating that the average wage according to the ONS in November 2007 was £457 a week – according to my calculator that amounts to £23,764 a year!

    My word the Great British Public have been well and truly conned.

    By the way – NHS wages have almost doubled in this period. I should know – I have worked for them.

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  • First comment here, but I’ve been reading for a while. I’m fascinated by what counts as “average earnings”, so after a little effort with Google, I found the ONS site:

    It’s rather hard to judge how the BBC arrives at its figures! But, earnings have certainly gone up from 1999 to 2007. If we look at “all”, then in 1999 it was (median, which seems fairer) £15080 a year; in 07 is was £19495. But that doesn’t correlate with the BBC figures at all! The closest I can get it to look at the mean, male, full time figure, which is £23577; in 07 it was £31517 (which is a bigger increase). But these are gross, and as others said, tax is up, along with fuel, food etc.

    Going with the Halifax figure of £174178, and the median, all employees figure, we’re now at (roughly, as I’m using last years earnings) it’s about 7.4 times! In 1999 it was (again, Halifax figure) 83000, so that’s 5.5. So, 1999 wasn’t all roses, but I still won’t be buying soon…

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  • [email protected]: depends which average you look at. Halifax is currently using (so they say) the arithmetic average (mean) of male full-time employees. That gives them, I think after applying a three-month smoothing to the data, a multiple of 5.13. Actually, I think they’re still using an unsupported figure – the Annual Survey of Hours and Earnings gives mean gross pay of £33,736, while even dividing this month’s average house price figure by the reported multiple gives £33,952.

    That rules out the female half of the population completely, and any men working part time, and those not paid on an annual basis. In fact, it includes only 9m people, less than 40% of people earning according to the survey. There are also many people of working age not earning at all, who still have to be housed.

    The mean is the figure you get by adding up everyone’s earnings and dividing by the number of people. It’s badly skewed by people at the top end of the scale earning disproportionately more. The Survey also includes percentiles, figures at which a given percentage of the people surveyed earned less than this amount. The weekly value of Halifax’s chosen measure, which is £648.77, is greater than the weekly earnings of 80% of those earning, when comparing against weekly pay for all employee jobs. The median weekly pay, where 50% of earners earn less and 50% earn more, is £374.90, about £19,500 per annum.

    Looking back at the 1999 Survey, it seems that Halifax are at least consistent, even if the measure they use is ridiculous. The mean earnings of male full-time employees was £23,997. The median earnings for all employees was £290. Comparing, you see that mean male full-time employees’ earnings have gone up 40%, while the median of all earners has gone up only 29%.

    The honest price/earnings ratio would be the median house price – I think Halifax use the mean – divided by median earnings of all employees. Dividing Halifax’s headline ‘average’ figure by median earnings gives a price/earnings ratio of 8.93.

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  • @enuii, plato,

    I think you’ll find average incomes have increased noticeably since 2000. The following graph from National Statistics shows growth in average weekly earnings:

    Reading roughly off the graph, the growth rate has been about 4% per annum for the last decade. If 2007 was £457/wk then in 2000 it was £361/wk. The compound increase is approximately 30%.

    For more information on wages or just some light bedtime reading, try the Office of National Statistics 2007 Annual Survey of Hours and Earnings [PDF].
    For the tax year ending 5 April 2007, the UK median gross annual earnings for full-time workers was £24,000. The mean was £30,000. Those figures cover the UK as a whole; for London (source of the loudest complaints about house prices), median is £31,000 and mean is almost £45,000. You could make yourself feel even worse by splitting the figures on gender lines: for men working full-time in London, the median gross annual pay is £34,000 and the mean is a whopping £52,800.

    For all these figures and more, the survey’s index page has links to a lot more data. Excel is required to view the detailed tables.

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