House prices seen as overvalued

stueyhants

lemonjelly wrote: »

Since the turn of the century, house prices have risen well above the rate of inflation & wage inflation. Given that it happened before, what is to say it won't happen again?

Prices have risen on the back of lower interest rates and greater use of dual incomes. Whilst these factors can keep prices from falling I find it difficult to see where the next boost will be to raise prices. IR can't go much lower and once you have dual incomes the what ?

I accept shared equity and people using a greater % of their income to support mortgage payments may underpin small rises. I don't see them having as big as impact as lowering of interest and dual incomes over the past decade.

Graham_Devon

Jonbvn wrote: »

I think "this" may be the reason.

If it was Bias, I would have chosen to start at 1996. End result would have been even lower house prices

IveSeenTheLight

Graham_Devon wrote: »

I
I beg your pardon, but what the frick are you going on about?

It's simple, I asked why you justified 2000 as a good level to start inflation rate increases from.
Why not 2007,2005, 1996, 1970, 1930 or any other year.

I was hoping that by justifying it, it would lead to reasoned discussion.

You justification that you chose 10 years ago as a nice round number is unfortunately not just enough for any reasoned discussion.

Why not choose the last 20 years? Inflation from 1989 - 2008 according to http://www.thisismoney.co.uk/historic-inflation-calculator is 89.42%. This would move the house price from £119,000 to £225,400 (not taking into account the last two years inflation.

If you choose 1996 till 2008, inflation was 35.58% which would take house prices to approx £110k

So you see choosing a year is subjective and therefore further justification is needed, especially as you then can get into a debate on how inflation is measured and what the real rate of inflation is.

Time to drop it Graham unless you can come back with some valued reason for choosing that year instead of a shiny thing syndrome of it being a "nice round decade"

IveSeenTheLight

Graham_Devon wrote: »

If it was Bias, I would have chosen to start at 1996. End result would have been even lower house prices

Which was why I asked why should it be from 2000?
From each year is selective and a better reasoning for choosing 2000 would have been preferential to just because it is a nice 10 year figure.

As this date was still below the long term trend, most likely it's because it is a year in which you can concede a little ground from the ultimate low of 1996 and what would conceivably be a realistic level.

To reiterate again, you need to look at the fundamentals of what sets the market price for a property and if you seriously wish to affect the price of a property, those fundamentals have to change

IveSeenTheLight

stueyhants wrote: »

I find it difficult to see where the next boost will be to raise prices.

Very simply put, if a couple each receive a £1k annual increase, then theoretically using a 4x multiplier, the property they can conceivably achieve can rise by £8k.

That individual salary 4% increase from say £25k to £26k increases the available property for the couple by 8% from £200k to £208k

This is also not including career promotions / progressions and competition for property through lack of supply.

To clarify the competition aspect, there could be 4 identical income couples but each have different spending / saving habits.
It's easily conceivable that the couple with the best deposit through saving / inheritance etc will be able to bid more to secure the property.

stueyhants

That 1k increase in Salary can not be used just for housing. Presumably that increase has been provided as a cost of living increase which must be used to ...... cover cost of living increases.

I think you really making the assumption (which based on historical trend is a fair one) that the costs of non housing related goods/services decreases over time.

Given that competion for goods from emerging countries are already showing the affects on raw material (such as oil) added to the impact of falling exchange rates, this assumption might not be as valid as has been in the past.

Consummer goods fell in price over the last decade due to the emergence of China, what key drivers do you think will do the same over the next decade ?

IveSeenTheLight

stueyhants wrote: »

That 1k increase in Salary can not be used just for housing. Presumably that increase has been provided as a cost of living increase which must be used to ...... cover cost of living increases.

Totally understand your viewpoint, however this is what is used as a basis of ascertaining many mortgage approvals.
They do take into account disposable income as well

Graham_Devon

IveSeenTheLight wrote: »

It's simple, I asked why you justified 2000 as a good level to start inflation rate increases from.
Why not 2007,2005, 1996, 1970, 1930 or any other year.

I was hoping that by justifying it, it would lead to reasoned discussion.

You justification that you chose 10 years ago as a nice round number is unfortunately not just enough for any reasoned discussion.

Why not choose the last 20 years? Inflation from 1989 - 2008 according to http://www.thisismoney.co.uk/historic-inflation-calculator is 89.42%. This would move the house price from £119,000 to £225,400 (not taking into account the last two years inflation.

If you choose 1996 till 2008, inflation was 35.58% which would take house prices to approx £110k

So you see choosing a year is subjective and therefore further justification is needed, especially as you then can get into a debate on how inflation is measured and what the real rate of inflation is.

Time to drop it Graham unless you can come back with some valued reason for choosing that year instead of a shiny thing syndrome of it being a "nice round decade"

I can see what you are saying.

But by god, come on ISTL, talk about going completely overboard on a simple "over a decade" analysis.

You've made your point. I shall concede therefore, that using a 10 year period, instead of a period suggested by yourself was utterly wrong.

By the way, we werent talking about actual inflation. We were talking 3% each year.

Such a fuss over an anecdote!

IveSeenTheLight

Graham_Devon wrote: »

I can see what you are saying.

But by god, come on ISTL, talk about going completely overboard on a simple "over a decade" analysis.

You've made your point. I shall concede therefore, that using a 10 year period, instead of a period suggested by yourself was utterly wrong.

By the way, we werent talking about actual inflation. We were talking 3% each year.

Such a fuss over an anecdote!

Graeme,

I simply asked you to justify why you chose the year 2000 in a hope that it might provide some important point to discuss.

There was no point and it was you who wanted to make a fuss over it.
I simply was highlighting justifications with examples as to how simply picking a year randomy as you did is not justification for why it should follow from that point

No further need to discuss unless you have some relevant points

MrEnglish

brit1234 wrote: »

Hardly, if it wasn't for interest rates they would be a lot lower. People are starting to max out again what they borrow when interest rates are .5%, highly dangerous. Lots of room for falls.

Spot on, its amazing how everyone has forgot the main reason the bubble keeps expanding even more is artificially low base rates.

Everything will change when interest rates correct.

the bubble will BURST!