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Debate House Prices
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House Prices, Interest Rates and Affordability
Comments
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I like these MoneyWeek charts...Long live the faces of t'wunty.0
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Houses in my street have double since 1999 and that is in actual terms not taking into account inflation which I think is typical0
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!!!!!!_face wrote: »
That's a pretty drawing.0 -
Long live the faces of t'wunty.0
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I am in my 20s but I feel many people of a similar age have developed an "entitled to" attitude, they are entitled to a good job a nice house and an expensive lifestyle. In the past people would have saved and worked hard to afford a house, now young people want it immediately and complain that they can't afford it immediately.
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So what do you say to the fact that my wife and I have been saving for over 4 years, have a deposit that is 2 times my salary, yet I still cannot afford the home my parents bought when they first got married (after saving for 1 year)? We have been saving 80% of takehome by the way.
When you consider my father was not earning a realative income anywhere near mine, my mother stayed at home to bring us up and we are planning to get a mortgage on 2 incomes (nice to be able to actually HAVE kids, never mind, I will leave that to the chavette scum), its easy to see you are talking complete and utter hoop.0 -
I all depends when they bought you only have to look at twunk_faces first graph to see that.0
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Do you think the same applies to the graph posted above which is based on average mortgage payments against average wages?
What is an average mortgage payment?
Someone buying 11 years and has resided in the same property since. Will have paid 50% of the purchase price of someone else did 5 years later.
There are differing levels within this average. Unfortunately a high % of more recent borrowers are far far above the average. This is weighting the average higher than in reality it should be. As the amount of credit in the system is unsustainable (around £500 billion currently). Until capital debt is repaid and as a nation we earn the money in the future to fill this void. Then the average mortgage repayment will slowly drop.
As for future wage growth that's an interesting topic for another thread. As the boom years for disposable income created by the importation of cheaper products from the Far East are drawing to a close.0 -
I am in my 20s but I feel many people of a similar age have developed an "entitled to" attitude, they are entitled to a good job a nice house and an expensive lifestyle. In the past people would have saved and worked hard to afford a house, now young people want it immediately and complain that they can't afford it immediately.Whenever interest rates are low and we aren't in a recession house prices will stay high and continue to rise. It doesn't make them unaffordable though. That's how I see it anyway. I would genuinely like someone to explain the fundamental flaw in my logic, as I currently feel like I am in a tiny minority that see it this way.
Yes, they are pricing in the strong possibility of 25% drop in prices... they're happy to risk your money, not theirs.
Affordability is highly subjective. For example, house prices could be allowed to go up forever if only there were 30, 40, 50 year mortgages, etc... on top of 10x, 15x, 20x salaries, etc... and increasingly negative real interest rates, etc...
But this is the hook: the UK has deviated so far from the norm that corrective action shall occur, and in fact BEGAN to occur only to be apparently curtailed due to heavy-handed government intervention and inordinate low volumes of property changing hands.
@marc-h, you may want to consider what was published today on ThisIsMoney regarding affordability:Andrew_Oxlade wrote:A crude survey by property website Zoopla earlier this month concluded that, based on the fact that rates are low and have made repayments dirt cheap, property affordability is at its best level since 2003. So surely prices will rise? Quite possibly, but remember that the survey doesn't consider that low rates are largely only being enjoyed by those with large amounts of equity in their homes.
The second, far more important point is that when rates rise, that affordability pendulum will swing in an instant. A rise to just 3% would send mortgage costs soaring. A rise to 5% would precipitate an outright collapse.Long live the faces of t'wunty.0 -
Lets look at 2007 again shall we?
£180,000 average price.
£26,000 average wage.
For a single wage, the multiple would be nearly 7x annual salary.
Take home pay would be approx £1650.
Mortage payment (@4%) £960 per month (repayment) £600 interest only.
Perspective, it's a wonderful thing.
Looking at the average wage/house-price ratio is a bit out-dated IMO. Its a very simplistic algorithm that ignores other real-world factors.
We of course know what the average wage and house-price is, but what about the average overall income of that average household? I.e what if the average priced house typically has 2 people in it paying the mortgage?
I personally don't think a single person on average wage should be able to afford the average house. They would be lower down the ladder than that.
the avergae house to me is a 3-bed semi. It's not a 6-bed mansion but not a 2-bed terrace or one bed flat either.
The average 3-bed semi will be a family household accomodating more than one adult paying the mortgage.
All if's, but's and maybe's but most assumption are.0 -
!!!!!!_face wrote: »A rise to 5% would precipitate an outright collapse.
A rise to the normal rate which was being serviced before?0
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