Monday, August 25, 2014

But I’m sure it will be OK as average earnings will be £500,000 pa

Child born today will pay £3.4million for their first home if house prices continue to increase at their current rate of 8.6% a year

Inevitable conclusion (apparently) is 8.4% pa growth forever.......

Posted by pokercola @ 07:59 AM (5410 views)
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6 thoughts on “But I’m sure it will be OK as average earnings will be £500,000 pa

  • The Daily Moron. This rubbish was the rage in 2007. May as well say a loaf of bread will be £1000 if such and such a rate of inflation continues for so many years.

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  • “Buy now before it’s too late” from online real estate agent, who provided the “research” for this article via their blog.

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  • I remember in 2007, my Dad saying that he’d read that starter homes would be £500k by 2015 if the growth of the early noughties continued. I said prices would crash before then and he agreed that £500k average FTB purchases were impossible. Not sure if that was just London or the wider UK (or E&W) but the crash happened and nevertheless the sort of flats the average FTB was buying in 2007 now cost about £500k in London. It’s just that the average FTB isn’t able to afford them, even though the average FTB is higher up the income deciles than they were back then.

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  • The whole thing is a UK government manufactured charade. Wish more people would realise that.

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  • hpw – it’s surprising how much negative reaction is generated when people start opening up the debate on house prices and the possibility of falling as opposed to rising prices (it’s deemed a prickly subject and my Wife regularly tells me to “get off my high horse”)

    One of the most difficult things to face in life is the truth !

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  • A personal anecdotal, based on one property… so I know it is dodgy ground!

    I don’t think this article is too far from the truth to be honest, maybe the rate is a tad high at 8.6%

    I have personal experience of a terraced property in the North West experiencing 5.7% HPI from 1904 to 1999.
    This period includes the two World Wars and the Great Depression.

    I was lucky enough to have access to a file with all the conveyancing deeds going back to the day the house was constructed.
    So I realised that the 21% growth rates between 1999 and 2007 were abnormal and I cashed out in 2004 with a healthy profit.
    I moved abroad and rented, It will take the poor sod that bought the house off me until 2016 to get out of negative equity.
    To be fair at the time there was a certain hysteria, and these crazy rates of growth did continue for another three years.
    The price paid seemed like fair market value in a crazy market. I hadn’t discovered the HPC website at that stage and was not as well informed as I am now. I also confess did use the Northern Rock 125% Together mortgage, so I also had a narrow escape by cashing out when I did.

    HPI @ 5.7% Actual
    1904 275 275 Sold price
    1914 479 500 Sold price
    1955 4,647 4,600 Sold price
    1981 19,638 20,000 Sold price
    1988 28,949 29,000 Sold price
    1999 53,267 53,500 Sold price
    2014 122,344 122,500 Estimated Value today.

    If this represents HPI of 5.7% in a relatively poor part of the North West, I imagine that the average for the whole of the UK might be a few basis points higher.

    I do think it is becoming unsustainable though. We seem to be hitting the really steep and slippery bit of the exponential curve now.
    Part of me wonders whether the HPI over the last 110 years is a symptom, or a cause of the ever present search for growth in GDP and Monetary Supply? If any of you have some answers I would love to hear them.

    I have since bought again in the UK, although I still rent abroad. In 2011, a combination of the post 2008 fall in house prices, the weak pound and the poor return on savings convinced me that it would be a good time to buy again. I could be wrong, the market does seem to be taking a downturn. My faith is in the long term. I have seen, in other countries, the lengths to which governments will go to to support HPI.

    The UK has a long way to go to catch up with the likes of Switzerland:
    * 50 year mortgages that you can pass on to your kids.
    * A form of MIRAS tax relief – for hardworking families.
    * Limiting supply of new houses (Oh the UK does that too).
    * Using your pension fund as a deposit (Naughty George has just cottoned on to this one)
    * Astronomically high rents. (Average rents are not going to fall)

    The UK has already started down the same path. I think that there is still room for house prices in the UK to double over the next 10 years.

    So I will end by predicting a 6.5% Average HPI over 10 years for the UK, rather than the 8.6% in the report.

    Best regards


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