Housing Affordability has peaked, now decreasing

HAMISH_MCTAVISH

The affordability of UK property market has been falling since the middle of 2009, according to exclusive new research produced for The Sunday Telegraph by Lombard Street Research (LSR).

The survey shows that house prices have once again started outpacing the increase in the average family's disposable income, meaning that the best opportunities for good value property have passed.

The findings would have seemed highly unlikely at the beginning of 2009, when house prices were tumbling and past experience suggested that it would take some years for the property market to find its feet again.

However, the combination of record low interest rates and a series of Government programmes to support homeowners have helped prices to turn around far quicker than expected.


In a study to be published on Monday, the Centre for Economics and Business Research is expected to predict that house price growth will continue next year – albeit at a slower pace than in 2009, with property prices finishing the year between 2pc and 4pc higher than today. It will also predict that by the end of 2012, house prices will be around 15pc higher than today.

LSR's housing affordability index, in which 100 points represents the average affordability level since the early 1960s and a lower figure means prices are more overvalued, dropped from 118.2 points to 117.9 in the third quarter of the year.

The fall is the first since the beginning of the housing correction in mid-2007, at which point the affordability index was at a nadir of 82.7.

According to experts, this suggests that the high point for affordability has now been and gone. The peak, in the second quarter of 2009, was not far shy of the 118.9 reached after the early 1990s property crash.
LSR economist Melissa Kidd said: "Affordability has now peaked. The major effect driving that is that house prices have risen quite quickly. Disposable income is up as well, while mortgage rates are low."

LSR's affordability index is different from other attempts to gauge the value of housing in comparison to people's ability to pay for it.
Whereas others simply compare mortgage costs or gross incomes with prices, LSR's index compares prices with definitive household disposable income and the monthly mortgage burden. The comparison is key to working out whether homes are of an accessible price or not, since fast-rising incomes can make property more affordable.

Nationwide and Halifax will next month confirm that house prices rose during 2009, turning around major falls to end the year higher than they began it.

http://www.telegraph.co.uk/finance/economics/6890962/Buyers-priced-out-of-the-UK-housing-market.html

Interesting.

Housing still much more affordable than at peak, and indeed still much more affordable than the long term average.

But at the trough affordability was at a point not seen since the mid 90's, and affordability has now peaked, and is decreasing.

Prices forecast to rise up to 4% next year, and 15% by 2012.

You'd have to be very brave, very mad, or likely both to continue delaying purchase, particularly when rent costs are factored in.

Still, those gambling on further falls do keep us entertained!!!!!:D

Emy1501

HAMISH_MCTAVISH wrote: »

http://www.telegraph.co.uk/finance/economics/6890962/Buyers-priced-out-of-the-UK-housing-market.html

Interesting.

Housing still much more affordable than at peak, and indeed still much more affordable than the long term average.

But at the trough affordability was at a point not seen since the mid 90's, and affordability has now peaked, and is decreasing.

Prices forecast to rise up to 4% next year, and 15% by 2012.

You'd have to be very brave, very mad, or likely both to continue delaying purchase, particularly when rent costs are factored in.

Still, those gambling on further falls do keep us entertained!!!!!

You really do sound like a desperate estate agent. Buy now or you will never be able to afford blah, blah,blah.:D Of course your piece is simply more opinion on prices no different to the others that predicting falls which you trash. Why are you so bothered and worried about people who have not bought Hamish? I'm sure mosts can take care of themselves without your desperate concerns. Of course there are those areas of the country and type of property that are still falling and people are better off waiting. Remember not everyone is buying the average house in the average area Hamish

Davesnave

If this article is correct, we bought at the time when, houses were at their most affordable. No doubt fear about the market played its part, but the overwhelming reason why we got a good deal was because we had the funds in place and could meet the vendor's tight timetable. If we'd not been in rented, we wouldn't be here.

Since then, there seems to have been precious little about that would have interested us, because supply has been poor. Until more vendors come into the market, those who have the funds may be sitting on the sidelines watching, but not necessarily worrying too much about shifts of a few percent here or there.

As Emy has pointed-out, most buyers are not looking in the average place for a bog-standard house, so the big picture hides many a more complex situation. We could have paid another £50k+ if we'd needed to, and if this place hadn't come along, in all probability, we'd have done so.

However, we wouldn't have settled for something unsuitable, simply because prices might rise a bit, especially as they might fall a bit too!

Spartacus_Mills

Emy1501 wrote: »

You really do sound like a desperate estate agent. Buy now or you will never be able to afford blah, blah,blah.:D Of course your piece is simply more opinion on prices no different to the others that predicting falls which you trash. Why are you so bothered and worried about people who have not bought Hamish? I'm sure mosts can take care of themselves without your desperate concerns. Of course there are those areas of the country and type of property that are still falling and people are better off waiting. Remember not everyone is buying the average house in the average area Hamish

On Moneybox yesterday we had the following predictions.

Melanie Bien, Savills Private Finance 6.6% down

Simon Rubinsohn, Chief Economist, Royal Institution of Chartered Surveyors 1-2% higher

Martin Roberts, Presenter: Homes Under the Hammer 0% change

Henry Pryor, independent property consultant. 10-15% down

Simon Rubinsohn stated for many people renting was a better option than buying. I would sooner listen to him over a little troll like Hamish who is no financial adviser, certainly.

What did surprise me was all of these are VI's and usually bullish yet they were all quite bearish. Interesting programme.

Like all things these predictions are a bit of fun and nothing more.

breadlinebetty

Davesnave wrote: »

If this article is correct, we bought at the time when, houses were at their most affordable. No doubt fear about the market played its part, but the overwhelming reason why we got a good deal was because we had the funds in place and could meet the vendor's tight timetable. If we'd not been in rented, we wouldn't be here.

Since then, there seems to have been precious little about that would have interested us, because supply has been poor. Until more vendors come into the market, those who have the funds may be sitting on the sidelines watching, but not necessarily worrying too much about shifts of a few percent here or there.

As Emy has pointed-out, most buyers are not looking in the average place for a bog-standard house, so the big picture hides many a more complex situation. We could have paid another £50k+ if we'd needed to, and if this place hadn't come along, in all probability, we'd have done so.

However, we wouldn't have settled for something unsuitable, simply because prices might rise a bit, especially as they might fall a bit too!

But they're predicted to rise by 15% in just 24 months. And 15% of, say, £500K, is £75,000! That's a whole lot more thsan 'a bit'!!!:rotfl:

Generali

breadlinebetty wrote: »

But they're predicted to rise by 15% in just 24 months. And 15% of, say, £500K, is £75,000! That's a whole lot more thsan 'a bit'!!!:rotfl:

36 months. The end of 2012 is 36 months away.

Spartacus_Mills

breadlinebetty wrote: »

But they're predicted to rise by 15% in just 24 months. And 15% of, say, £500K, is £75,000! That's a whole lot more thsan 'a bit'!!!:rotfl:

As Generali has pointed out to you it is 36 months to the end of 2012.

Maths isn't your strong suit is it.

Dah, I see Generali beat me to it by seconds !!!!!!

breadlinebetty

Generali wrote: »

36 months. The end of 2012 is 36 months away.

The report didn't say the end of 2012 - it said 2012! D'oh!

breadlinebetty

Spartacus_Mills wrote: »

As Generali has pointed out to you it is 36 months to the end of 2012.

Maths isn't your strong suit is it.

Dah, I see Generali beat me to it by seconds !!!!!!

Another sour puss I see!:D Sorry this has spoilt your Christmas!

chucky

HAMISH_MCTAVISH wrote: »

Housing still much more affordable than at peak, and indeed still much more affordable than the long term average.

But at the trough affordability was at a point not seen since the mid 90's, and affordability has now peaked, and is decreasing.

you're right Hamish affordability is at it's best - but for how long?
do you think that a reduction in disposable income will help FTB's?
those with property will probably be fine - those that want to get into property will find it even harder, not that it will affect house prices mind you. only those like Davesaveve who took the 'risk' will be the ones who will know they have done well.

come on Emy - not even debating the facts but yet another attack on Hamish.

Emy1501 wrote: »

You really do sound like a desperate estate agent. Buy now or you will never be able to afford blah, blah,blah.:D Of course your piece is simply more opinion on prices no different to the others that predicting falls which you trash. Why are you so bothered and worried about people who have not bought Hamish? I'm sure mosts can take care of themselves without your desperate concerns. Of course there are those areas of the country and type of property that are still falling and people are better off waiting. Remember not everyone is buying the average house in the average area Hamish

what this man said Emy >>>>

breadlinebetty wrote: »

Another sour puss I see!:D Sorry this has spoilt your Christmas!

mystic_trev

breadlinebetty wrote: »

The report didn't say the end of 2012 - it said 2012! D'oh!

It will also predict that by the end of 2012, house prices will be around 15pc higher than today.

Perhaps your braille version is different!