Why is property unaffordable for even the relatively well-off among the population?

chucky

GDB2222 wrote: »

The thing is that during the 70's there was a limited amount of mortgage money to go around, and when that was gone people had to wait until the next month.

I have no doubt that that sort of thing kept a lid on house prices and helped direct finance into commerce. It also led to the growth of mortgage brokers/ IFAs who had good connections with the local branch of the building society and could get you a mortgage when you needed it. Small price to pay if you had to take out an endowment policy at the same time.

i'm not so sure that was the case and had any impact on HPI.

HPI in the 1970s was above 10% YoY at times and even over 20%.

Q1 1971 8%
Q1 1972 27%
Q1 1973 40%
Q1 1974 18%
Q1 1975 5%
Q1 1976 11%
Q1 1977 8%
Q1 1978 11%
Q1 1979 29%

and the 1980s weren't much different either

Q1 1980 27%
Q1 1981 5%
Q1 1982 2%
Q1 1983 9%
Q1 1984 13%
Q1 1985 12%
Q1 1986 7%
Q1 1987 15%
Q1 1988 10%
Q1 1989 32%

ukcarper

According to this site http://www.wwwk.co.uk/culture/housing/index.htm average house price 1971 was £5.6k and in 1973 was £9.9k. Not sure how accurate information is.

shortchanged_2

ukcarper wrote: »

According to this site http://www.wwwk.co.uk/culture/housing/index.htm average house price 1971 was £5.6k and in 1973 was £9.9k. Not sure how accurate information is.

Would that have anything to do with decimalisation?

ukcarper

shortchanged wrote: »

Would that have anything to do with decimalisation?

I know there was a lot of rounding up but not that much.

shortchanged_2

ukcarper wrote: »

I know there was a lot of rounding up but not that much.

:rotfl:

To be honest I know diddly about pre decimal currency, very confusing stuff.:eek:

I just thought that a pre decimal pound was worth a lot more than post decimal or then again maybe not. Who does actually know? Can I phone a friend?

ukcarper

shortchanged wrote: »

:rotfl:

To be honest I know diddly about pre decimal currency, very confusing stuff.:eek:

I just thought that a pre decimal pound was worth a lot more than post decimal or then again maybe not. Who does actually know? Can I phone a friend?

Post decimal pound same as pre decimal pound, new penny worth 2.4 old pennies.

HAMISH_MCTAVISH

chucky wrote: »

HPI in the 1970s was above 10% YoY at times and even over 20%.

Q1 1971 8%
Q1 1972 27%
Q1 1973 40%
Q1 1974 18%
Q1 1975 5%
Q1 1976 11%
Q1 1977 8%
Q1 1978 11%
Q1 1979 29%

and the 1980s weren't much different either

Q1 1980 27%
Q1 1981 5%
Q1 1982 2%
Q1 1983 9%
Q1 1984 13%
Q1 1985 12%
Q1 1986 7%
Q1 1987 15%
Q1 1988 10%
Q1 1989 32%

Jesus wept..... 40% HPI in one year in 1973. Well above general inflation and massively higher than wage inflation.

Can you imagine the online drama there would have been if these "debate house prices" boards had been around at the time?

I can just see the thread titles......

"Generation of hippies priced out forever"

"Not even Elvis can afford a house in Britain"

"Poor young baby boomers can't afford to buy because of Greedy generation before"

:rotfl:

Of course, they just got on with it and bought anyway. The internet has a lot to answer for.

GDB2222

But the mid-70s were a time of massive inflation. 12% in 73, 20% in 74 and 23% in 75. Earnings were going up a lot faster than that.

33% increase in wages in 1974. So, compare that to a 40% increase in house prices in 1973 and it's not so ridiculous. Also, the 40% was overdone and followed by several years of falls in house prices relative to wages and prices.

For example Q1 1975 HPI was 5% whereas earnings rose 30%.

There's no point looking at HPI on its own, without looking at inflation generally.

Lillie_Munchkin

When buying a house in 1986 my husband and I had below the average income (which was £349 pw for a man according to the ONS). My husband was earning approx £11000 and I was earning just under £9000. We were ALLOWED to borrow 2.5 times his salary, plus 1 x mine. We borrowed a total of £34,500 and with the £15,000 equity on our flat bought our average house we still live in for £49,500. By the way, this seemed like a lot of money at the time AND interest rates were just about to rise to 15.5%. That same house has recently been valued at between £420,000 and £450,000. Lucky us, but that's not my point. An average couple in 2010 with a similar (below) average income would not be able to purchase the same property.

Applying the same rules, the average man (earning £27,612) and woman (earning £22,152 2009 - ONS) would be able to borrow a total of £91,182. Adding on a similar slice of equity equal to that in 1986 would give you approx. £132,000.

I suppose I'm illustrating the point well made above, that linking house prices to average earnings and borrowings is a good indicator as to what average people can afford to buy, or not, as the case may be. Rest assured, we would NOT be able to afford to buy this house today and we are lucky enough to earn above average salaries.

House prices are over inflated and with a bit of luck they will drop significantly over the next few years.

ukcarper

Can you give link showing average wage was £349 a week £18k a year in 1986 because I don’t think it was.