House Price Increases-what for?

HAMISH_MCTAVISH

Really2 wrote: »

But it seems the average wage vs the average house seems to be 4-5X

But in the real world you average first time buyer earns over the average wage but buys a property under the average cost around 2.5X - 3X income.

So it looks fairly self governing throughout recent history.

Indeed.

By the way, the average house cost around 4 times the average full time male (mean) wage in the early 1950's. It costs around 4.3 times that wage today.

Really2

Graham_Devon wrote: »

True, the LTV is somewhate distorted at the moment due to the large deposits FTB's seem to be bringing to the market, thanks to mum and dad, who, it appears, only got rich through HPI in a majority of cases.

These FTB's could simply not buy otherwise. 80% of FTB's with cash from mum and dad is a huge percentage. But that doesn't mean their actual LTV's are lower, just means they wouldnt even have an LTV without mum and dad.

I know, I'm arguing for the sake of it. But hey, least it's backed up with something

I would not say that is entirely true, I would say that as been the case for a long time. Look at that york AC data again.
http://www.york.ac.uk/inst/chp/hfrtable/up02040ab.PDF
it seems 15-20% deposit is fairly historically normal for FTB's. I would say the recent 5% deposits helped more to afford to buy than ever before though,

Cleaver

HAMISH_MCTAVISH wrote: »

By the way, the average house cost around 4 times the average full time male (mean) wage in the early 1950's. It costs around 4.3 times that wage today.

Yes, but they had better haircuts back then and a Suez Crisis to worry about. Both factors that I think you've failed to include in your stats.

HAMISH_MCTAVISH

Cleaver wrote: »

Yes, but they had better haircuts back then and a Suez Crisis to worry about. Both factors that I think you've failed to include in your stats.

Very true Cleaver, and they also had a wife waiting by the door for them when they got home with some comfy slippers and a Martini.

But at least it took away all the stress from that hard day at the office using their slide rule and protractor, designing important British things like..... erm...... well like the.... ummm..... no, that wasn't us.... ah yes, like the first motorway service station.:D

Anyway, back to the point.

After a hard day slaving away in the kitchen, trying to make a meal out of the wartime rations which were of course still in effect, and hand washing clothes in the bathtub, scrubbing away on the washboard, whilst longing to have frivolous and horribly expensive extravagances like a refrigerator or a washing machine that would have cost 6 months salary or more, the wife would then cater for her hard working husbands every need. In fact, it's a wonder those poor women ever found the time to develop an interest in working outside the house at all!!!!!

So whilst houses were in fact marginally cheaper by comparison to income, at 4 times salary versus 4.3 times salary today, the costs of filling those houses with everything else were horrifically more expensive, and the quality of life for most people was significantly worse.

Yes, I can see why the bears want to return us to those times....:rolleyes:

tara747

bumpoowee wrote: »

Oh right so you didn't mean what you said then? I can never tell on these forums!

And yes I did think my username through, it's based on a true story.

Yes, I was just jesting, your username made me laugh!!

Do tell the story.

LydiaJ

tara747 wrote: »

If there was no HPI, nobody would buy a house with a mortgage because it wouldn’t be worth paying interest. Everyone would just save up as close as possible to 100% of the value and buy outright, without worrying that house prices would rise too fast and become unaffordable. Why would you pay 2-3x the price of your house in interest if you didn’t have to???

Sorry if someone’s already said this, haven’t read the rest of the thread yet.

As bumpoowee has already said, even without HPI there could still be reasons to buy a house with a mortgage.

It depends on how interest rates compare with rents. If interest rates are high and rents are low then you tend to be better off renting and saving. If interest rates are low and rents are high then you tend to be better off buying and mortgaging.

Even if the financial considerations were mildly in favour of renting, you might still buy if you were influenced by things like being able to do what you wanted with the property (decorate, make alterations, keep pets etc) or wanting the security of not being turfed out with 2 months' notice when the landlord happens to feel like it, or other reasons of that kind.

the_ash_and_the_oak

London is interesting because interest rates are low(ish) and rents are (comparatively) low

tara747

LydiaJ wrote: »

As bumpoowee has already said, even without HPI there could still be reasons to buy a house with a mortgage.

It depends on how interest rates compare with rents. If interest rates are high and rents are low then you tend to be better off renting and saving. If interest rates are low and rents are high then you tend to be better off buying and mortgaging.

Even if the financial considerations were mildly in favour of renting, you might still buy if you were influenced by things like being able to do what you wanted with the property (decorate, make alterations, keep pets etc) or wanting the security of not being turfed out with 2 months' notice when the landlord happens to feel like it, or other reasons of that kind.

Fair point. Although I think that the insecurity of renting is a bit overdone on these threads... I have never ever been turfed out by a LL, it's always been my choice to move. I've also been able to make minor alterations and my LL is more than happy to put up hooks on the wall. And there is the peace of mind of knowing that there'll be no repair bill if anything major happens... and the sheer flexibility of being able to move whenever you want. Renting really does bestow a marvellous feeling of freedom that even I probably don't truly appreciate (and won't until I buy my first place ).