Womens wages have increased house prices

RHemmings

Pennywise wrote:

Prices will always go up if people can afford it and will always reach a plateau at the pain threshold.

When have prices ever plateaued before? Clue: never.

Hereward

Pennywise wrote:

I have nothing against wives working. However, when their wages were first taken into account many years ago, the multiples should have been changed so that it was, say 4 times earnings of the main earner, or 2 times joint earnings - i.e. by all means take into account the wages of all earners in the household, but divide it by the number of earners. Such a policy would have kept a lid on house prices and we'd all be better off now.

Erm, wasn't this the policy of most lending institution until very recently (3x a single income or 2 - 2.5x a joint income). IIRC, this didn't stop the property boom of the 1980s.

RHemmings

Hereward wrote:

I don’t think there is a speculative bubble in property. There may be a few isolated cases of people purchasing property to try to realise some gains in the rising prices of property, but I do not feel that these people are in the majority just yet. It is my opinion that the recent rises in the value of property can be linked to the lifestyle choices of those that are buying the property: that is, people want to live in “decent” areas that match their ideals. These rises should also be linked to the government’s policy of regenerating areas of poverty, which increases people’s expectations of an area and removes low value property from the market.

But like previous postings on this thread, your description of the reasons for house prices rising don't match reality.

What we have is that prices went up in the late 80s to pop in the early 90s. They then declined throughout the early to mid 90s, starting to recover significantly the later mid 90s. Then they boomed like never before. Any explanation of why house prices boomed has to explain why things happened they way they did. Or the explanation is wrong.

I'd advise people to look through many of the threads trying to explain why houses boomed, and then think "does this explanation explain house prices dropping from 1990 all the way through the early 90s?" and "does this explanation explain why house prices went up across the whole country and for all types of housing?" The answers you get will frequently be "no" and "no".

On this thread we've had people saying that prices have rised due to additional household income due to women working. If that was the case then the previous crash and trough would never have happened. Other people say that the rise in prices is because we're not building enough houses for the increase in population. But the prices have risen just as much in parts of the UK, and there are many, where the population is static or falling.

In the case of your explanation, you seem to be saying that prices have risen because people are targetting better housing, and because of government regeneration. If that was the case then prices wouldn't have risen in places where the quality of housing or the environment hasn't changed. In fact, for the less desirable areas, the prices should have dropped. But this isn't what happened.

Many experts who study the housing market come to the conclusion that housing in the UK is considerably overvalued and is bound to correct by some mechanism at some point. The papers of Andrew Farlow are a good place to start in understanding what has happened in the UK, and what is likely to happen. Look down in the following pages until you find "The UK Economy, Housing, Banking".

westernpromise

paint wrote:

:rotfl: Do you think that equal opportunites are wrong?

How about we pay people with ginger hair 15% more than brunettes; and pay people who stand over, say five foot eight 50% less than everyone else. And don't allow their salaries to be taken into account in mortgage calculations.

That'll sort it !

No more ridiculous than having the same pay policies and lending criteria applied to women as a group.

George didn't say equal opportunities were 'wrong', or any of the other stuff that you refute so eloquently. He just pointed out an obvious and fundamental economic consequence of women working, about which there is absolutely no disagreement whatsoever among economists.

Nobody intelligent can seriously believe otherwise.

Women working are undoubtedly one of the structural factors that have altered household economics, and hence the property market. Another is the emergence of a newly-affluent working class, who were allowed for the first time in the 1980s to buy their rented council homes; this altered the percentage of owner-occupiers from about 50% to about 70%. Another was the deregulation of the mortgage market, which allowed people to borrow whatever they thought they could afford to repay, rather than what some civil servant thought they should be allowed to borrow. Another was the lifting of exchange controls, which made it more attractive for foreign investors to spend capital in the UK.

At present, there are a bunch of structural factors pushing the market back down again in an equally long-term way, or so I personally suspect. We won't know for sure whether 'this time it's different' for 20 years or so.

One such is low interest rates, which mean that people actually have to pay their mortgages back, rather than seeing them eroded to nex to nothing by inflation. Longer-term, this will tend to force prices down, as people notice that they make houses more rather than less expensive to acquire.

Another is the crippling level of debt experienced by graduates, which means that a large tranche of FTBs can't afford to buy any more.

Yet a third is that fact that Brown's pensions raid means that saving for a pension is now £5 billion a year more costly than it used to be, which has to come out of other spending.

The decline in the quality of state education, visible in the record number of children at independent schools, means that more and more parents are paying inflation-busting school fees - which removes yet more income that would previously have been available to spend on housing.

Offhand, it's hard to think of anything happening right now that is long-term beneficial for housing - the amount of immigration going on is probably good for slum landlords, renting out one room at a time in the @rse end of town, but it's not going to do much for anyone else.

RHemmings

gizmoleeds wrote:

That's probably a factor too - like I said, pretty much everything that could increase house prices has happened or is happening.

Yes, but some factors are a major influence on house prices, some minor. And some factors only apply in some parts of the country, not all of it.

MortgageMamma

Hereward wrote:

I don’t think there is a speculative bubble in property. There may be a few isolated cases of people purchasing property to try to realise some gains in the rising prices of property, but I do not feel that these people are in the majority just yet. It is my opinion that the recent rises in the value of property can be linked to the lifestyle choices of those that are buying the property: that is, people want to live in “decent” areas that match their ideals. These rises should also be linked to the government’s policy of regenerating areas of poverty, which increases people’s expectations of an area and removes low value property from the market.

I don't agree with your statement that there is no speculative bubble. I deal with mortgages all day every day and I can honestly say that practically every purchaser I deal with asks me if I think they will make money out of a property. People have become obsessed with rising house prices to the point where they will take risks to get on the property ladder in order to realise some of this "gain" - it does sadden me sometimes that people get more excited and anxious about this potential gain than the fact they are buying a home!

Mrs_pbradley936

Well great minds think alike, I started a thread on just this subject a few weeks ago called "Can someone please explain?"

The overall conclusion was that the money supply is to blame for house prices, but we all have different opinions on why that is.

westernpromise

paint wrote:

We now live in a much more enlightened and tolerant society than the sixties and seventies, where individuals are legally protected from discrimination on the grounds of gender, sexuality, disability and race.

This sort of remark seems to be a commonplace of people's conversation these days, but it doesn't stand up to a moment's scrutiny.

There has never been a time in human history when people considered themselves to be utterly benighted and amoral savages compared to previous generations. Every generation of every civilisation there has ever been thought it was "much more enlightened and tolerant", to use your phrase, than its predecessors. You can be absolutely sure that the Witchfinder-General thought he was very enlightened indeed as he burnt all those old ladies at the stake. Previous, unenlightened generations would have just let them die, and then they'd have burned in Hell forever! How backward! Thank God his generation has witchfinders, to burn them in an enlightened and tolerant way and send their souls to heaven!

You have only to look around you to see that intolerance is everywhere, and is as persistent as DNA.

In your post above you listed gender, sexuality, disability and race as factors which should not fuel discrimination. Just looking at the last of those, about three-quarters of the planet would disagree with you. The idea that race is an invalid basis on which to form views of people is limited to western Europe and north America.

Thus, the Japanese prime minister thinks American society is violent because it has too many blacks, Hong Kong newspapers feature job ads for which only Chinese applicants need apply, India has a caste system in which the lowest tier are actually called "Untouchables", all the wars going on Africa are about race or tribe - need I go on? To assume that all those other races have it wrong about race is a racist assumption in itself. I subscribe to it too, but that's just because I originate in the same culture as you do.

To fix this conceit that we are the smartest people who ever lived, we do actually need more graduates in philosophy IMHO, because a philosophy degree is essentially about the history of thought.

If we understood more of this we'd realise that environmentalism is a religion and not a science, for example, and that we are not a lot more civilised or tolerant than the Aztecs (we don't rip virgins' hearts out, for instance, but we do abort a lot more babies than they ever did. What's the difference?)

We might then be better equipped to understand which of our views are reasonable and which we hold because they make us feel good.

Joe_Bloggs

I'm sure I saw an advert last night in which four friends could take out a mortgage together with one of the workds biggest banks. I bet this measure props up house prices.
J_B.

westernpromise

Hereward wrote:

What you need to remember about RPI, and other measures of inflation, is that the only measure the average change in price for the commodities being measured; therefore, some things will rise faster in price, whilst other will rise slowly, or in deed fall, in price.

IIRC, RPI does not measure the price of houses but the cost of the mortgage on them. The housing component of RPI therefore rose between 1989 and 1991 - the exact opposite of what house prices did, but consistent with what interest rates did.