can someone please answer this for me...

exil

Salaries are NOT down. Salaries including bonuses rose 1.9 % to March 2010. In fact they've risen about 9% over the last 3 years.

This is of course an average and many people have had pay cuts. But if we're talking about the housing market then it's averages that are important.

hugheskevi

It is important to keep the big picture in perspective and remember that not everyone has a large mortgage.

Looking at all main residences in GB:

32% are not owned by the occupier (rented, or living rent free)
30% are owned outright
38% are owned with a mortgage

Of those 38% owned with a mortgage, a quarter owe less than £35,000, and half owe less than £70,000.

So that is less than 1 in 5 of residences in GB that have an outstanding mortgage of £70,000+.

The picture is complicated by buy-to-let mortgages of course, but overall a lot of property in GB is owned outright or with only a small mortgage.

Source: Wealth in Great Britain, 2006-2008

martinbuckley

Prices will continue to rise as there are not enough properties being built. Also, the low base/mortgage rates are allowing people (both owners and BTL Landlords) to retain their properties.

Once the Base Rate increases (and its got to - we cannot continue penalising the 30 million savers indefinately for the sake of a couple of million reckless borrowers), then more properties will be placed on the market and another "correction" will happen.

As to whether this downwards correction happens after another 5 or 10% increase in prices remains to be seen.

Turnbull2000

martinbuckley wrote: »

Prices will continue to rise as there are not enough properties being built. Also, the low base/mortgage rates are allowing people (both owners and BTL Landlords) to retain their properties.

Once the Base Rate increases (and its got to - we cannot continue penalising the 30 million savers indefinately for the sake of a couple of million reckless borrowers), then more properties will be placed on the market and another "correction" will happen.

As to whether this downwards correction happens after another 5 or 10% increase in prices remains to be seen.

Except base rates won't be rising in a significant manner for a long time yet. A downward shift in asset prices will be foremost in the MPC's considerations.

Linton

The_White_Horse wrote: »

so basically, if no one in the country buys a house except for one person, who buys one house, then if he pays more for that house than it previously sold for, house prices will be rising. Is that correct?

Yes - but it wont happen. Many people sell and buy houses because they have to eg death, moving job, marriage break-up etc. So there will always be some not insignificant turnover of houses.

To answer your original question - house prices are staying up because people can afford them. Looking at FTBers - I guess most will be couples, a double salary helps. Also we are seeing parents helping out. This of course will enable more people to afford a house and will therefore with restricted supply keep prices up.

jonewer

Transactions are well down, the only houses selling are the 'good' houses and these are being sold to people who can afford to pay near the asking price. The 'not-so-good' houses arent selling. They just hang around the market like a fart in a space-suit and dont count at all.

HAMISH_MCTAVISH

jonewer wrote: »

Transactions are well down, the only houses selling are the 'good' houses and these are being sold to people who can afford to pay near the asking price. .

1,000,000 houses a year are selling. That's around 7% of the total owner occupied housing stock selling every year.

Even now, even with all the unemployment, recession, mortgage rationing, etc etc etc, a million houses a year change hands.

That's a huge number of houses. And whilst it is less than in previous years, it's still far in excess of the occasional "good" house.

dktreesea

Housing prices are propped up by the amount and wide availability of the housing benefit, which allows families to rent properties better than what they could afford if there was a cap on the maximum amount you could receive. In Glasgow, for example, over one third of all households receive some housing benefit. In Bristol, it's one quarter of all households.

For example, say a landlord wants a 6% return on a three bedroom property, and the LHA for such a property works out at around £12,000 a year. He can therefore spend £200K on the house or flat, confident that everyone who wants to rent a three bedroom house and has the partner and two children to fill it will be able to "afford" the £1,000 a month rent, regardless of whether they are rich, poor, working or not.

If instead, enough social housing was built to meet demand each year, and housing benefit was capped at whatever the rental is that the council charge for a three bedroom council house, around £350 a month where I live (c.f. the LHA of just over £1,100 a month), then the cost of privately owned housing would nose dive. And not before time.

chucky

HAMISH_MCTAVISH wrote: »

1,000,000 houses a year are selling. That's around 7% of the total owner occupied housing stock selling every year.

that's a hell of a lot of foreign buyers buying property in the UK