Why were house prices cheaper in the 1970s than they are in the C21st?

ess0two

Graham_Devon wrote: »

LOL, sorry, but wow. Can see you had it immensley hard in your day!

But todays generation expect 4 beds, fitted
kitchen/bathroom/wardrobe,and the garden turfed with patio laid also.

marklv

nearlynew wrote: »

What?

You mean like person A in my example?

Person A has £150k doesn't he?

ukcarper

nearlynew wrote: »

Forget the arguments and inter-generational warfare, let's look at a simple example of two people born just 3 years apart with similar incomes and plan.

Person A born 1977
Person B born 1980

Both start work aged 20 and both plan to buy a house at the age of 30

Fast forward to 2007 person A is 30 has no savings and buys a 150k house with no deposit

Fast forward to 2010 person B is 30 has 30k savings and is unable to buy a 150k house even with 20% deposit

Now HPI cheerleaders would say person A situation is "normal" and if only we could get back to normal person B could do the same and everything would be OK

Whereas I say person B situation is normal and if the same conditions existed 3 years earlier person A would not have been able to "buy" their house


This simple example using 2 people of the same generation illustrates that something has gone wrong.

If the current lending practices had been in place over the past decade we wouldn't be in this mess.

Lets go back to 1946 person decides to buy at 25 1971 saves 10% deposit £500 buys.
Another person 1948 decides to buy at 25 1973 saves 10% deposit house prices almost double 1971 price can’t buy. No change in lending practices.

Mind you I do agree the lax lending practices leading up to 2007 were not good.

LilacPixie

Were houses actually cheaper in the 70's?? If so why did many not buy? The whole home ownership thing seemed to only really take off in the 80's with the whole right to buy your council property.

In Nearly new's examply somewhere between A and B should be 'normal'. I think its bizzare that someone with a 20% deposit is unable to buy a home as long as income multiples are reasonable, and their credit history.

I bought at a time of 125% mortgages but I had a 10% deposit plus fees so only needed a 90% mortgage, Those FTB's in that position today will struggle for a mortgage.

nearlynew

marklv wrote: »

Person A has £150k doesn't he?

Person A buys a 150k house with a 100% mortgage

That is, with no deposit

ash28

Generali wrote: »

Oh absolutely right. If you could get a mortgage* then paying it off wouldn't have been that tough unless you hit hard times as lending criteria were very risk averse.









*AIUI, to get a mortgage in the 1960s and 1970s you had to save every week or month (depending on your pay period) the full repayment amount of the mortgage for a year. On top of that it was expected that you would have been a member of the building society for some time before and that you were the 'right sort', generally a man in a steady job.

yes - you had to be a member of the building society, have saved with them usually over a number of years. You had to be interviewed by the building society manager.

Getting a mortgage through most of the 1970s could be pretty difficult for most people - what people on here either don't know or don't realise is that the economic situation was very volatile throughout the 1970s - you had rampant inflation, strikes, oil price shock etc, you also had large interest rate fluctuations that we didn't see again until the late 1980s/early 1990s.

Interest rates were volatile too, if you managed to get a mortgage at all you were on on the svr - building societies didn't do fixed rate, they used to recoup the interest paid to savers from the mortgage holders - all mortgage holders.

The rates were set by the building societies themselves who met once a month to agree them - both for savers and borrowers. If external interest rates were higher than the savings rate offered by the building society (which happened quite often in the 1970s) people took their money elsewhere. Result - less money to lend. There was no competitive mortgage market.

People used to wait for the societies monthly figures - on the news - the figures gave the receipts and the interest rate change - if any.

There were times during the 1970s when the inflow of funds to the building societies was negative - which meant the only money the societies had lend was interest credited to investors accounts and receipts from mortgage repayments - not enough to sustain a normal housing market. A couple of times during the 1970s the government had to step in and make money available for the building societies to lend - I think they did it in tranches of £100 million a time - otherwise the mortgage rationing that was common would have been a mortgage famine.

Contrary to what people seem to think on here - getting a mortgage was difficult and paying for the mortgage could be difficult too - peoples' incomes were often restricted due to prices and incomes policies.

It wasn't easy to service a mortgage for most people - quite a number on here will remember paying their mortgages during the 1980s and early 1990s - it was similar - it could be crippling.

HAMISH_MCTAVISH

ash28 wrote: »

It wasn't easy to service a mortgage for most people - quite a number on here will remember paying their mortgages during the 1980s and early 1990s - it was similar - it could be crippling.

Absolutely.

The percentage of income used to pay the mortgage was FAR higher in the 70's 80's and early 90's than it is today.

Houses are significantly more affordable today..... If you can get the mortgage.

Graham_Devon

ess0two wrote: »

But todays generation expect 4 beds, fitted
kitchen/bathroom/wardrobe,and the garden turfed with patio laid also.

If there was even an ounce of truth in this, rather than it being a completely flippant, non thinking, ignorant line, the bottom would have fallen out of the flat / 2 bed and terraced market.

As it is, terraced are selling in the biggest numbers.

carolt

Generali wrote: »

There will be no other poll options.

Which makes it hard to answer seriously.

As an attempt to spur argument, it is somewhat too extreme - I don't know of anyone who claims that baby boomers are the sole cause of cheap house prices in the70s, relative to now.

Indeed, the poll seems to make 2 separate statements, without providing the options to vote on them; firstly that house prices were cheaper in the 70s (something that is commonsense to most, but apparently still a matter of great debate to Hamish) and secondly, that there were only 2 possible causes, one of which you go out of your way to point out as ridiculous.

Re the first, implicit statement, that house prices were 'cheaper' (by which I assume you mean more affordable, cheaper in real terms), I hereby 'vote' to agree.

Re the second point, the reasons for this are very inedequately covered in your poll. I'd say the reasons are many, undeniably including the limiting of mortgage finance but whilst a factor, it is not a sufficient explanation on its own.

I fail to see how 'babyboomers' can be a cause of anything - babyboomers mere existence is not a cause; their actions might be, but you have not specified what this might be.

Was it late when you put this poll together? Or too early? Or were you trying to point out the foolishness of an opposing position that no-one that I am aware of actually holds?

HAMISH_MCTAVISH

carolt wrote: »

house prices were cheaper in the 70s (something that is commonsense to most, but apparently still a matter of great debate to Hamish) ?

House prices were cheaper in the 70's.

The percentage of income required to buy a house, including mortgage interest, was higher in the 70's.

It was less affordable to buy a house in the 70's than today.

So simple, surely even Mrs T can understand it.