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Is it me? Or has anyone noticed that we are in the largest bubble of all time?
Comments
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What bubble?0
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Neil_in_Bristol wrote: »I think you're right. In most areas, though, it's because people can't afford the mortgage payments. !
Nonsense.
In 80% of the UK, rent is more expensive than mortgage interest at 5%.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
The trouble with bubbles is that it is delusional to believe that they will remain inflated. Yet people do.
The trouble with bubbles is that some delusional people believe any rise in prices must mean we're in one.
Ridiculous, I know, yet some people do.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
This thread seems to have descended into a renting versus buying argument. The OP was that we were in a 'bubble', the implication being that houses were overpriced, the bubble would burst, and prices would come tumbling down and a 4 bed detached in Surrey would end up costing 20p. This is why I think it will not happen.
Whenever economists discuss house prices they always refer to average house price being x times average salary and therefore unaffordable. They use this as proof that house prices will have to drop.
The point is that in the vast majority of families these days, both partners work, and both partners contribute towards the mortgage. I have rounded the following figures slightly up or down to make it easier to calculate
Average salary is in the order of £25000 (source ONS)
Average house price is in the order of £162500 (source Halifax price index)
Therefore it would seem that the average house is 6.5 x salary and therefore unaffordable
However average joint income is £50000
Therefore average house is just over 3 x joint salary and therefore not only affordable, but still has room to rise further.
Olias0 -
You seem to be getting a bit emotional about things that haven't quite been said.
Not at all. I wasn't talking about any of your posts.I believe that given a choice people would own rather than rent.
Agreed.There seem to be many FTB'rs on here that are kidding themselves that renting is the sensible option whilst they wait for a fall that may or may not happen, personally I think that's all a bit of a nonsense.
That's pretty much what I said in my first post on this thread. But I also disagree with those people who think that owning a house is the only way to save for retirement, and that renters don't have the discipline to regularly save money.0 -
HAMISH_MCTAVISH wrote: »Nonsense.
In 80% of the UK, rent is more expensive than mortgage interest at 5%.
Yes. But we were talking about repayment mortgages. After 25 years of interest-only payments, you don't own the house any more than if you were renting it.0 -
However average joint income is £50000
Therefore average house is just over 3 x joint salary and therefore not only affordable, but still has room to rise further.
Olias
Very true.
And that's only one of many factors.
For example, the long term average house price is 4 times male (mean) full time salary. The average house price today is 4.5 times male (mean) full time salary.
But as you point out, more people now buy with a joint mortgage, the number of HMO's is rising, pushing up rental yields and drawing in investment capital, etc...
And of course, we currently add 400,000 people a year, add 250,000 new households, and build only around 100,000 houses.
When you only build half the houses you need, only the top earning half of households need to be able to afford them....“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
Neil I know we're agreeing with each other but the whole savings from renters thing is a bit of a red herring as whilst, they could be feathering their nest the reality is most aren't, wheareas most people that have been sensible in owning property are.0
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Neil_in_Bristol wrote: »Yes. But we were talking about repayment mortgages. After 25 years of interest-only payments, you don't own the house any more than if you were renting it.
True.
But the following applies.....
1. Even with an interest only mortgage, the cost to pay it off later is far less in real terms than the cost to pay it off today. My parents bought a house in 1967 for £3700. A fortune at the time. Had they maintained an interest only mortgage until today, paying it off would be no problem. And their entire interest payment last year would have been just £185...
2. Renters still have to pay rent and also save towards a deposit. Paying mortgage interest and then paying off the capital is the same thing, if rents and mortgage interest are the same. However when rents are more than mortgage interest, the renter is seriously disadvantaged. As is the case today in 80% of the UK.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
What the OP means is they weren't in a position to buy a property when they were more affordable, and now they are more expensive, they are out of their reach they are jealous and want something to happen to make them cheaper so they can afford one. They don't care what financial harm this may cause to those who own property, as long as they drop enough in price that they can buy.
Of course once they own, they will want prices to rise and will be patting themselves on the back when they do.
Olias
I think jealous is the wrong word to use dont you, Im not jealous of most of the people who i know who are hanging onto their homes by the skin of their teeth all due to the BUBBLE.
Why would anyone who needs and wants to buy their own HOME want house prices to stay high just so people who own property dont come to any financial harm? I couldnt care less if every BTL owner lost their investments tomorrow, a house should be to live in and not to profit from.
Im currently sitting on a decent enough deposit for a home in the area i want to live in but i will not buy a property till prices come down drastically and when i do buy at a reasonable price i pray to god that another house price boom doesnt kick in ever because when i want to move up to the next rung of the housing ladder i will have to have saved a lot more money or get a mortgage for a lot more money to do this, i really dont want to give the banks any more of my hard earned money than i have to.
By the way you are right that some people were not in a position to buy a home when prices were normal, when prices were normal i was earning 60 pounds a week serving my apprentiship and attending college so wasnt really in a position to buy a home, Its taken a long time saving and waiting but now i am in a position to buy a home i choose not to due to the ridiculous price levels, i just hope at some point ill be able to buy a home and not have to worry about having a massive mortgage hanging round my neck for a very long part of my life like most of the people i know are currently doing.0
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