Womens wages have increased house prices

westernpromise

RHemmings wrote:

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.

There's nothing mysterious about this, is there? They boomed in the 1980s because more people were allowed to buy houses and because Lawson in effect joined the ERM without consulting anybody. At a time when he shoud have raised interest rates, he cut them, to maintain the value of the DMark against the pound.

When inflation duly and predictably got out of control, rates went to 12% and then 15%, which put loads of people out of work and killed the market. It obly recovered when we left the ERM and were able to reduce rates to 5%, in about 1993, where they have stayed ever since. This simultaneously revived the jobs market and made houses look cheap again.

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.

That doesn't follow; the trough price levels of 1990 were far above peak prices in 1970 (or even in 1987, funnily enough; as with the stock market crashes of 1929 and 1987, what got wiped off was the top 30% or so, which had all happened in the very last months).

Markets tend to overcorrect anyway. The 1989 house price peak was too high, the 1994 trough was too low. There have however been loads of crashes in the UK market, it's just that we haven't always noticed them. House prices collapsed by 90% in 1911, for instance, and in the 1970s we had 27% general inflation and 10% house price inflation, meaning 17% net house price depreciation. If a £200k house were to decline in value by £35k in a year today we'd all notice, but if went up by £20k while everything went up by £54k a lot of people would probably still think their house had made them money.

RHemmings

westernpromise wrote:

There's nothing mysterious about this, is there? They boomed in the 1980s because more people were allowed to buy houses and because Lawson in effect joined the ERM without consulting anybody. At a time when he shoud have raised interest rates, he cut them, to maintain the value of the DMark against the pound.

Yes, as in a lot of markets, certain factors start bubbles inflating. The problem occurs when the values of commodities go past fair value and keep on going. Which markets tend to do, becoming cyclical. The property market is a good example of a cyclical market.

When inflation duly and predictably got out of control, rates went to 12% and then 15%, which put loads of people out of work and killed the market. It obly recovered when we left the ERM and were able to reduce rates to 5%, in about 1993, where they have stayed ever since. This simultaneously revived the jobs market and made houses look cheap again.

But it took quite a bit of time for the housing market to get going again after rates dropped. Clearly there are other factors involved. And rates rose from 3.75% to 4.75% just a few years ago. That's a 26% increase. If interest rates were the major controlling factor, then we'd have expected prices to fall then. But they didn't. Factors such as interest rates are common across the whole country. But house prices in some regions are going up, while in other regions they're going down. Similar for the boom. Some parts of the country boomed quite early, while others are only booming now. Something else was a major factor in house price inflation, not just rates.

That doesn't follow; the trough price levels of 1990 were far above peak prices in 1970 (or even in 1987, funnily enough; as with the stock market crashes of 1929 and 1987, what got wiped off was the top 30% or so, which had all happened in the very last months).

1990 wasn' the trough. Prices kept on going down into the mid 90s. Well after interest rates had fallen again. Something else changed.

Markets tend to overcorrect anyway. The 1989 house price peak was too high, the 1994 trough was too low. There have however been loads of crashes in the UK market, it's just that we haven't always noticed them. House prices collapsed by 90% in 1911, for instance, and in the 1970s we had 27% general inflation and 10% house price inflation, meaning 17% net house price depreciation. If a £200k house were to decline in value by £35k in a year today we'd all notice, but if went up by £20k while everything went up by £54k a lot of people would probably still think their house had made them money.

I'm aware of the 1911 crash. That was massive, and seemingly forgotten by far too many people. Same for real house price crashes without nominal falls. But if markets overcorrect, what will happen this time since real house prices have gone up higher than any time in recent history?

shakerbaby

Joe_Bloggs wrote:

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.

The question is for how long as I believe they tried this trick just before the last crash? Also if it takes 4 FTBers to purchase 1 property then thats 3 less FTBers on the market looking to buy 3 individual homes so expect the supply of FTBers to quickly dry up.

And anyway you would have to be crazy to purchase with 3 other friends/strangers which the advert inadvertantly points out that they all have different tastes/lifestyles.

Hereward

RHemmings wrote:

Yes, as in a lot of markets, certain factors start bubbles inflating. The problem occurs when the values of commodities go past fair value and keep on going. Which markets tend to do, becoming cyclical. The property market is a good example of a cyclical market.

But it took quite a bit of time for the housing market to get going again after rates dropped. Clearly there are other factors involved. And rates rose from 3.75% to 4.75% just a few years ago. That's a 26% increase. If interest rates were the major controlling factor, then we'd have expected prices to fall then. But they didn't. Factors such as interest rates are common across the whole country. But house prices in some regions are going up, while in other regions they're going down. Similar for the boom. Some parts of the country boomed quite early, while others are only booming now. Something else was a major factor in house price inflation, not just rates.

Who sets the fair value though? What might be fair for you might not be fair to someone else. When interest rates rose from 3.75% to 4.75%, this did not trigger a panic in industry; therefore, people were not made redundant on any significant scale. This lack of panic enabled property owners some breathing space to adapt their lifestyles to continue to afford their property (or buy a new one). Most economies suffer from local problems in growth; it is not unique to the property market, or the UK.

paint

westernpromise wrote:

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.

We were discussing house prices since the nineteen sixties in the UK, as per the original post. Therefore my comments pertain to that period and geographical region. In the correct context, the remark does stand up to scrutiny.

Jake'sGran

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.

Well thank you for that! I couldn't believe the original post. Where do people get these crazy opinions from? I was married in 1958. First child born one year later, second two years after that. I have always worked and my children were always well fed, well clothed and had happy holidays. We had a rented house (19shillings & 1penny) but we needed another bedroom with a female and male child so we got a mortgage. House paid for after approx 22 years. What some people don't seem to appreciate is that many women actually like going out to work. I did, and in the end became the higher income provider. I can't believe that there is a consensus amongst economists that the reason house prices have risen so much is because women went out to work instead of staying at home looking after the kiddies and baking. In the 70s I took advantage of the Equal Pay Act and took my case to tribunal and won.

Someone, tell me, what kind of world would it be now if only men worked? I simply can't imagine it. Whether you like it not, in those circumstances, women would still be considered inferior. We've moved on. It was bound to happen that women would become more equal. Our becoming more equal has not resulted in the excessive prices of houses! It's a ludicrous notion.

RHemmings

Hereward wrote:

Who sets the fair value though? What might be fair for you might not be fair to someone else. When interest rates rose from 3.75% to 4.75%, this did not trigger a panic in industry; therefore, people were not made redundant on any significant scale. This lack of panic enabled property owners some breathing space to adapt their lifestyles to continue to afford their property (or buy a new one). Most economies suffer from local problems in growth; it is not unique to the property market, or the UK.

The traditional return on a BTL property to make it "worth while" is about 8% gross rental yield. At present people are prepared to accept much smaller returns because they expect house prices to keep inflating. But when houses stop inflating in value, and they will at some time, the amount they need to drop back to get 8% yields again is a long, long, way.

I'd say that 8% yields compared to rent are a "fair value" for houses.

givememoney

paint wrote:

Which is fair enough, but to blame equal pay is absolute nonsense; as per my previous post.

Sorry but when did I ever blame equal pay. I never mentioned it. Added to which I wouldn't anyway because if you are doing an equal job you should get equal pay.

Perhaps you are confusing me with someone else who has posted.

moomin-mama_2

In 1997 my property was 'worth' £60000 affordable on my single salary of £20000 and this in the south of england. Now, that same house is 'worth' £160000 but my salary in the same job is now £26000. Clearly something is going on as I would not be able to afford my own house if I were starting out today. AFAIK, women have been working more than the last 9 years! (they've always worked but thats another thread)

Partly its low interest rates and the creation of a debt culture. If interest rates had remained at the average of 7% how many people would be able to sustain their current mortgage?

Low interest rates, low inflation leading to small wage increases, student debt, buy to let (and rent to people who cant afford to or don't want to buy), and our reliance on credit will at some point lead to problems. The economic system we have depends on the circulation of more goods, services and money so it was inevitable more women went into paid work. Whether or not that has led to the current house prices is a far more complex question.

Gorgeous_George

I do not have a problem with equal pay for men and women doing the same job. I never said that I had.

Before EO, women were paid less than men. Assuming employers have a finite amount of cash to spend on wages and in order for women to earn the same as men, men's wages must have decreased to some degree.

BTW, tThis thread has been hijacked by the likes of RHemmings and turned into yet another house price thread.

The OP put a sensible case forward and one that I fully support but Mrs GG earns a similar salary to me and we do very well.




GG