House prices correlated to inflation?

Michelle-Matched-Bettor

Thrugelmir wrote: »

A lot has changed in 50 years.

Often forgotten that one reason house prices have risen. Is that a lot of money has been invested in improving them. Let alone maintaining them.

There's a high possibility that your house wouldn't of even had a bathroom. Certainly not double glazing, central heating (twice), fitted kitchens and minimal carpets.

So your expenditure in the intervening period would have been quite high.

Good point, but I think if you were to all of a sudden inherit such a house that has been stood for 50 years you would have to do something extremely wrong not to be able to profit from it. One of the biggest factors in house prices is land ownership.

the_flying_pig

Michelle

I'm not sure if your question is just of an casual/academic nature, to help you to make some kind of decision, or something else. Whichever it is I daresay you weren't hoping for the usual gaggle of under-employed estate agents to drivel out the same old reasons as to why there's never been a better time to buy a house.

Basically the level of wages is an excellent, excellent predictor of house prices. The price of many other things you might buy [to take some fairly diverse examples I'll list a new car, a bunch of bananas, a week's holiday in spain, a tank of petrol, enough electricity to boil a kettle full of water, etc etc] fluctuates hugely relative to wages because, basically, of supply shocks. But the supply of houses is more or less fixed, meaning that prices are determined in the same old way - people obtaining mortgage offers and bidding against each other to buy. So the relationship between wages and house prices has never been as out of kilter as it was in 2007, and quite possibly never will be again, but even then the ratio of prices and wages wasn't as high as double the absolute lowest that it's ever been in modern times.

geneer

:rotfl: And so the spin begins. And by spin I mean wriggling.

HAMISH_MCTAVISH wrote: »

Mortgage rates of 5% are hardly at "emergency" levels.

They are based on base rates of 0.5% Spamish. Have you forgotten.

Base rates have been a good bit higher than or just under 5% for the majority of the last 15 years.

In otherwords your talking bollox.

HAMISH_MCTAVISH wrote: »

In fact, given the likely trajectory for growth in the UK, and the yields on long term gilts, you'd have to be pretty idiotic to assume that the average mortgage rate for the next 25 years would be more than 5%.

:rotfl:Oh dear. Best of luck with that Spamish.

HAMISH_MCTAVISH wrote: »

What, rents that as you pointed out the other day are just 3% higher than they were in 2007......:rotfl:

In edinburgh.
Thought we were talking UK averages.
Whats the matter Hamish, can help slipping into your embittered fallback position when the going gets tough?

HAMISH_MCTAVISH wrote: »

For the buyer, sure..... But not for someone that delayed purchase and gambled on a crash. They're already in the hole to the tune of tens of thousands, and it's getting worse every month that passes.



Indeed it is.

Yet both your example and my own show that its the wannabe FTB who saves money. You crazy aberdoomian!

HAMISH_MCTAVISH wrote: »

"geneer's folly" can't be excused away through using made up numbers......

Embittered fallback position it is then. :rotfl:
Yet even your derisible made up numbers can't win the day for you.
Ho hum.

HAMISH_MCTAVISH wrote: »

As we can clearly see from the real world example, using real world numbers, it's a pretty spectacular error in judgement.

I think we're all aware that you and the real world very rarely meet champ..

Thrugelmir

Michelle-Matched-Bettor wrote: »

Good point, but I think if you were to all of a sudden inherit such a house that has been stood for 50 years you would have to do something extremely wrong not to be able to profit from it. One of the biggest factors in house prices is land ownership.

Land is a different issue.

My grandparents lived in 2 bed terrace back to back in Wandsworth with outside toilet less than 50 years ago. A lot has changed. Not least disposable income. Needless to say their house was demolished to make way for a concrete jungle of an estate.

HAMISH_MCTAVISH

geneer wrote: »

Yet both your example and my own show that its the wannabe FTB who saves money. You crazy aberdoomian!
.

I've highlighted the relevant part below.....

The difference between the two is £52,614, including capital.

Based on the current national average rent of £700 a month, that gets you slightly over 6 years of rent, with a 20% crash.

But of course, if you failed to take advantage of those 20% falls, and instead waited for prices to return to the current average of just 10% below peak, that's only 3 years rent.

So you're into losing territory already, now that we're 4 years in.

And if you'd been waiting for a crash since, say, 2005..... You'd be absolutely stuffed.

And that's before we get into the fact buyers have been able to take advantage of the last few years of record low rates, better mortgage deals pre-2008, etc etc etc.

Thrugelmir

Anyone tried correlating house prices to outstanding mortgage debt?

Or factored in growth rates of 1 -2% for the next 10 years, as opposed to 2-4% for the last 30?

Inflation will have a lower and lower bearing. As the UK's dependence on imported products can only grow,

michaels

No one objected when it was stated as fact that the share if income spent on food has fallen from 20% to 9%. This would seem to me to leave an extra 11% of income that could be spent on other things - like housing? Thus stating that there will be a long term relationship between house prices and incomes also implies that the share of income spent on housing will remain constant which is obviously not necessarily true.

(

the_flying_pig wrote: »

Michelle

I'm not sure if your question is just of an casual/academic nature, to help you to make some kind of decision, or something else. Whichever it is I daresay you weren't hoping for the usual gaggle of under-employed estate agents to drivel out the same old reasons as to why there's never been a better time to buy a house.

Basically the level of wages is an excellent, excellent predictor of house prices. The price of many other things you might buy [to take some fairly diverse examples I'll list a new car, a bunch of bananas, a week's holiday in spain, a tank of petrol, enough electricity to boil a kettle full of water, etc etc] fluctuates hugely relative to wages because, basically, of supply shocks. But the supply of houses is more or less fixed, meaning that prices are determined in the same old way - people obtaining mortgage offers and bidding against each other to buy. So the relationship between wages and

geneer

HAMISH_MCTAVISH wrote: »

I've highlighted the relevant part below.....

if you failed to take advantage of those 20% falls, and instead waited for prices to return to the current average of just 10% below peak, that's only 3 years rent.

So you're into losing territory already, now that we're 4 years in.

And if you'd been waiting for a crash since, say, 2005..... You'd be absolutely stuffed.

Oh look. The "relevant part" is yet another itteration of your embittered little personal attacks on what you think is the personal position of a single individual voicing opinions on the UK housing market. Gosh. Who could have seen that coming.

Lets just work on the basis that you really don't know what you're talking about shall we?

Of course, Its not as if you have any history of dealing with inconvenient facts when you can ignore them.

Naturally it is logical to take your lack of response on the truly relevant issues as an indication that you have no credible response. Thus throwing significant doubt on the credibility of your own "arguments".

HAMISH_MCTAVISH

Wow, the "geneer random sentence generator" is going into overdrive today.

No matter how much you do the squirmy wormy flip-flop dance on this one, the facts remain that for most people, in most places, it would now have been cheaper to buy in 2007 than rent since.

That has been clearly illustrated to you in worked examples. You can't answer, so choose to divert the argument.

It's what you do.... Hence the utter lack of credibility. Whilst showing a stunning lack of self-awareness and accusing others of doing what you're legendary for.

"Geneers folly" is famous for a reason.....

Jegersmart

House prices and wages have probably only increased at a higher rate than inflation due to increased amounts of debt that we have been using (or encouraged to use) over that period to "inflate" the values. Obviously you have to decide for yourself whether RPI is the "best" measure for inflation.

Think of credit or debt as a tool for making it more palatable for the tax-payer to spend a larger portion of their post-tax income on a basic necessity such as a home - amongst other things.

I am not going to go down the path of debating again as to whether it is better to rent or own - it changes at certain times and in certain areas and depends on the individuals profile and requirements. For the record I have owned property in the past and will almost certainly do so again in the future but currently I have no exposure to property price movement.

imho, dyor.