Wages compared to house prices graph

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Graham_Devon wrote: »

What happened before 1970 though. Why does the graph start there?

I don't think Graham there any meaningful statistics before this time, hence the graph starts in the '70's, I've also read somewhere I'm sure that there was no boom and bust in prices before this time, I stand to be corrected though.

chucknorris

Graham_Devon wrote: »

The graph is certainly interesting, and shows the correlation between wages and house prices doesn't really get bucked.....apart from the start or 2000, where it went insane.

There will be many people telling others this cannot be reversed, history cannot repeat itself. Most of them will have vested interests. Either landlords, or people strangled by high mortgages as they went after the bigger homes and rode the boom.

What happened before 1970 though. Why does the graph start there?

The problem we will have this time around, is the massive drop that prices will have to achieve to get back to those levels. That may be impossible.

Look at this graph, it shows that there is NO long term correlation between earnings and HP, other than that there is a cyclical relationship

http://www.housepricecrash.co.uk/graphs-average-house-price-to-earnings-ratio.php

ukcarper

When 3x main + 1x second income was the norm the average house price was a lot more than 3x plus deposit

StevieJ

According to the Halifax, long term average is 4X we are currently at 4.4X Factor in the extra low interest rates now and previous and it doesn't look that much out of kilter.

chopperharris

How I read that graph

From even before 2001 the hp have more than outstripped wages , to balance off it HP woudl need to be as close to wages as possible or have dipped slightly under it around then.... so its not the wages that are the problem but the price increases themselves.

What fuelled the increase in hp , was it the larger multiples of wages , or reduced ability of stock?

This adjustment will be harshest to those that bought after 2001 , if trying to sell now they need to follow the wages line for a correlation of a true sellable value relative to wages....they may not realise a sale at the current values for a decade to catch it up or experiencing this really hard landing we keep hearing about.

I think the driving force behind the inflated hp , going by the chart , is a result of multiples deviating from the norm of 3.5 x wages and 100 percent mortgages on the belief of equity would redeem the difference.If we could find out from 2001 if these rose in the same rate as hp then it would most likely prove it.

If home building had not been so restrictive in the period 98 to now then supply - demand would have taken care of it naturally....perhaps the answer lies there.

As long as builders are so harshly regulated in where they can build then supply is knobbled and thus keeping the prices higher.Denying builders , even self builders , the ability to build rurally on grounds of protecting the countryside etc is a joke when the same area is perhaps used for another runway for an airport a couple of years later.

Builders are now forced to only use brown sites and with limited plot sizes making more taxes per sq ft , creating more adverse effects like congestion and pollution in towns/cities.The best option would be to actually ALLOW rural building of eco towns and starting them being built NOW , rather than just to talk about them.Have them close enough to trainlines to citiies and towns , part self sufficient in wind/solar power and on site bio sewerage treatment on LARGER plots than currently legislated today.

KimYeovil

It's not the multiple that's the issue. Previously, poorer people who had no access to social housing (or who did not wish to mix with such types) chose to spend their money on buying a house but accepted that they would spend their income on the house and food. They did not have holidays, loans, new cars, central heating and so on to pay for.

How many of those currently losing their homes would be losing their homes if they were paying for a 95% mortgage and food from their income? Almost none, I wager.