The Affordability scam explained

LizzieS_2

1984ReturnsForReal wrote: »

I disagree.






Its 3 celebrities at most.

???? disagree what, there's loads of posts here.

LydiaJ

LizzieS, I think 1984 is disagreeing with the OP's sig.

LizzieS_2

LydiaJ wrote: »

LizzieS, I think 1984 is disagreeing with the OP's sig.

Cheers, I was lost there.

Generali

HAMISH_MCTAVISH wrote: »

Wage inflation nowhere near kept up with general inflation, as wage increases LAG other price rises. People were permanently skint because of that.

This is the point people often miss about moderately high inflation - prices and wages don't go up at the same time. Prices go up day-by-day and wages rise once a year, usually.

If inflation is running at 10% then your buying power has been seriously erroded by the end of the year.

I wonder how many of the already stretched households could afford a 10% drop in the buying power of their wages and benefits?

HAMISH_MCTAVISH

Generali wrote: »

This is the point people often miss about moderately high inflation - prices and wages don't go up at the same time. Prices go up day-by-day and wages rise once a year, usually.

If inflation is running at 10% then your buying power has been seriously erroded by the end of the year.

Absolutely correct.

As someone that went through it, I am amazed at the ignorance of people that post on here about wage rises in high inflation times negating the impact of high rates.

They don't. It's still bl00dy expensive, and people are still skint, cause your'e always a year behind inflation.

As the graph in the affordability thread ably demonstrates.

70% of income then, versus 39% of income now.

I wonder how many of the already stretched households could afford a 10% drop in the buying power of their wages and benefits?

But thats the whole point. Households are far less stretched now than then.

70% of disposable income then, only 39% now.

Turnbull2000

HAMISH_MCTAVISH wrote: »

Absolutely correct.

As someone that went through it, I am amazed at the ignorance of people that post on here about wage rises in high inflation times negating the impact of high rates.

They don't. It's still bl00dy expensive, and people are still skint, cause your'e always a year behind inflation.

As the graph in the affordability thread ably demonstrates.

70% of income then, versus 39% of income now.



But thats the whole point. Households are far less stretched now than then.

70% of disposable income then, only 39% now.

You scream out that 70% figure as if it was over very long period, whereas it's clearly a temporary blip. Although your salary will be playing catchup each year, your largest single outgoing (mortgage) will be eroded rapidly. I wonder how much one offset the other?

You in your mid 40's MCTAVISH?

HAMISH_MCTAVISH

Turnbull2000 wrote: »

You scream out that 70% figure as if it was over very long period, whereas it's clearly a temporary blip.

Although your salary will be playing catchup each year, your largest single outgoing (mortgage) will be eroded rapidly.

But it's always playing catchup a year behind. You remain skint anyway, as inflation also drives up everything else. High inflation sucks, no matter how you cut it.

I wonder how much one offset the other?

Not a lot.

You in your mid 40's MCTAVISH?

Just about to turn 40.

Bought young the first time around (at 19) and paid it off in 18 years. But not through inflation. Through rapid career progression and the associated pay rises.

Which is still the case today.

Our income has gone up by nearly 20% since 2007....

Thrugelmir

HAMISH_MCTAVISH wrote: »

As someone that went through it, I am amazed at the ignorance of people that post on here about wage rises in high inflation times negating the impact of high rates.

You say your around 40 in age. Therefore you were born in 1969, possibly not starting work until 1990. So.......

As someone that went through it

this doesn't stack up ? With your comments of living through the peak times. :rolleyes:

High inflation eroded the capital value of debt. Low inflation as now doesn't.

High interest rates , may increase the cost of servicing a debt, this is something that people adjust to. As the outstanding the capital balance falls so do the interest charges.

SingleSue

Not quite so, I am 39, born in 1970 and started work in full time work in 1986, so it is possible the same story for Hamish.

LydiaJ

I am interested in Hamish's figure of 70% home ownership. Does anyone know where we can find some reliable data about:

(a) how the percentages for owning, private renting and social renting have changed over time

(b) how the distribution of home owners by age has changed over time?

My impression is that 20 or 30 years ago people only bought if they were in a comparatively privileged socio-economic class, but the people in the home-owning class bought fairly young, so that home owners were fairly evenly distributed across all ages above 25 or so. Whereas now, the spread of socio-economic class is much wider, but the age distribution is heavily biased towards those over about 35, and getting older all the time. But that's a guess, and I would like to know if it's accurate or not. If it is accurate, then I think the situation is a lot more complicated than just "70% is a big proportion, therefore houses are affordable".

The article in the OP has some things to say about this kind of issue:

Of course, whilst many existing owners feel that they have earned their wealth, the winners in this sort of market are defined almost exclusively by timing. Those who due to their date of birth were able to buy before the boom benefit the most. Others able to buy in the early part of the “boom” are also able to benefit, albeit to a lesser degree. It is important to note that these winners feel rich not just because house prices have a large price tag, but that they are expensive relative to earnings. It is by this crucial measure that owners judge their wealth.

The apparent ease by which wealth is generated through housing rather than through working ensures that the housing market becomes ever more attractive to new entrants. However, the very thing that makes existing owners feel rich and attracts new entrants to the market - the high price compared to earnings – is the very thing that makes it difficult to enter the market, and even more difficult to profit from it. House prices cannot forever rise faster than earnings without significant social and economic implications.