If anyone ever tells you house prices double every 10 years they are a liar

nearlynew

It is THE greatest scam of all time.


(and religion takes some beating)

Davesnave

With billions in other countries achieving a higher standard of living, and resources being finite, food and fuel will surely swallow an increasing proportion of people's incomes in the future, just as they have in the past few years. This is money unavailable for sustaining house prices.

So, if house prices/rents are to remain at their current level of affordability, or increase, what will Britons give up in order to keep a roof over their heads?

nearlynew

resources/population/time - something has got to give*







* clue: it's not gonna be resources

Procrastinator333

HAMISH_MCTAVISH wrote: »

1970 £4,378
1980 £22,677
1990 £59,587
2000 £77,698 (disappointing decade)
2010 £162,887
2020 £235,000 (disappointing decade)
2030 £450,000

2040 £1m
2050 £2m
2060 £4m
2070 £8m
2080 £16m
2090 £32m
2100 £64m
2110 £128m
2120 £256m
2130 £512m
2140 £1.024bn

And if that carries on a £1tn pound average house by 2240.

Sibley

I've always said I'm happy with average price to be around £175,000. I think that's fair to everyone. I wouldn't turn my nose up at any extra money but personally £175k would give me my retirement fund.

Generali

@OP - You are ignoring inflation. Prices rose 3.6x in the 1970s for example.

With the help of the Bank of England's inflation calculator, I have adjusted the prices into 2009 money.

1970 £50,487.77
1980 £72,494.16 44% 3.7%
1990 £100,968.52 39% 3.3%
2000 £97,498.38 -3% -0.4%
2010 £155,130.47 59% 4.7%

The percentage figures on the right are the percentage return over the decade followed by the return on the investment per year required to generate that return.

Over the 40 year period you look at, houses have earned an inflation adjusted capital growth of 207%. The average capital growth is 2.85% (=3.07^(1/40)).

That's not bad, not exactly doubling every decade though.

Of course we ignore 2 things here. Rents and the magic power of leverage. Perhaps we can go over those on another thread.

PasturesNew

Pimperne1 wrote: »

Unless they say "Well almost":

House Prices since 1970 (average)

1970 £4378
1980 £22677
1990 £59587
2000 £77698 (disappointing decade)
2010 £162887

Middle Tab, UK house prices since 1952

http://www.nationwid.../historical.htm

Think of it, invest your 10% deposit of £5k in 1970 and today its worth more than £150k (and your mortgage for most of that period has been negligible - although £30 a month seemed a lot in 1970).

My dad bought in 1970, at £4600. Deposit down, only one wage on the mortgage, 3x wages, he was aged 40.

Sold at close to the bottom of the last crash (96/97) for about £90k, last identical house (except they had a few mod cons, like DG, central heating, a modern kitchen/bathroom and a conservatory) to sell in that row went for just shy of £300k in 2007.

Generali

PasturesNew wrote: »

My dad bought in 1970, at £4600. Deposit down, only one wage on the mortgage, 3x wages, he was aged 40.

Sold at close to the bottom of the last crash (96/97) for about £90k, last identical house (except they had a few mod cons, like DG, central heating, a modern kitchen/bathroom and a conservatory) to sell in that row went for just shy of £300k in 2007.

In 2007 money.

Dad bought for £51,285.90 and sold for £121,762.94 (1996).

House appreciated by 137% or 3.4% per year in real terms.

Pimperne1

Generali wrote: »

@OP - You are ignoring inflation. Prices rose 3.6x in the 1970s for example.

With the help of the Bank of England's inflation calculator, I have adjusted the prices into 2009 money.

1970 £50,487.77
1980 £72,494.16 44% 3.7%
1990 £100,968.52 39% 3.3%
2000 £97,498.38 -3% -0.4%
2010 £155,130.47 59% 4.7%

The percentage figures on the right are the percentage return over the decade followed by the return on the investment per year required to generate that return.

Over the 40 year period you look at, houses have earned an inflation adjusted capital growth of 207%. The average capital growth is 2.85% (=3.07^(1/40)).

That's not bad, not exactly doubling every decade though.

Of course we ignore 2 things here. Rents and the magic power of leverage. Perhaps we can go over those on another thread.

Glad you mentioned leverage (as you should only really have been increasing the deposit by inflation not the price of the house). Great investment.

Generali

Pimperne1 wrote: »

Glad you mentioned leverage (as you should only really have been increasing the deposit by inflation not the price of the house). Great investment.

Leverage is great on any investment where you are making a capital gain.

Take your example where you buy a house in 1970 and sell in 2010 at the average prices shown.

If you put down a 25% deposit for example, you are ponying up £12,700 or thereabouts and borrowing about £38,000.

If you then sell for £155,130 and repay the £38,000 you end up with £117,000 which is a profit of about £104,000 or 870% or 5.8% pa after inflation.

Obviously that ignores the cost of servicing the mortgage and the rental income but it makes a point. It also ignores the extra risk you take on through having to service debt.