Cheapest Houses since 1999

hallmark

hallmark wrote: »

Are you kidding? Prices are about 3x what they were 12 years ago. My friends bought their house for £140k 11 years ago & the same model (it's one of a bunch on a development) just sold for £450k.

I bought mine 13 years ago & it's now worth 3x as much.

(Both houses in Essex)

The only thing cheap about housing at the moment is the cost of servicing the debt & that's a highly false economy, since the capital is not being repaid. In an era of low/no wage inflation, that's a huge consideration that will be biting homebuyers in the bum for years to come. Living it large on a 0.nothingmuch% interest-only mortgage might be fun for them now but when IRs go up, even if that didn't happen for 10 years, those people will be screwed.

julieq

Hate to say this, but Graham almost has it right here.

Let's circle back over the stats. 300% increase in the price of houses since 1999 someone said, and someone else pointed out that average mortgages had gone up 200% in the same period. I've not checked these, but let's assume they're right.

That tells you that if you're inside the market you have net equity on average and you're not paying a mortgage for the full amount of the value of your house. Which is fairly obvious really. Affordability of your housing costs improves over time on average, unaffected by HPI more or less, as wages rise. Affordability for those with a mortgage is currently excellent because of rate decreases.

But if you're outside the market, you have an increasing barrier to entry which is essentially purchase price and the reduction of finance availability, and that looks set to increase over the next few years. Until you pass that barrier, affordability taking reductions in interest rates into account isn't even an issue.

Once you can buy, like for like, affordability in terms of housing cost as a proportion of income is currently extremely good. That doesn't need to mean purchase prices need to decrease, it just means that like for like you get more for your unit of salary. That may change if rates increase, but the current position and outlook for a few years is one of excellent affordability.

But if you can't get in, that's irrelevant. And pointing it out is really nothing more than a taunt to those on the outside. There are people I don't mind taunting, but not hard working average couples who have to put their lives on hold while paying increasing rents and trying to save ridiculous levels of deposit to bolt a stable door after the horses have bolted, when the stable was in a different country and there was a different situation entirely. Lend to people who can't pay back secured on the basis of valueless homes and you have risk. Lend to people who can pay back in a place where homes are at a premium and there is virtually no risk.

I've said repeatedly that the solution to high prices in this country is to build more homes. The answer certainly is not mortgage rationing, which doesn't decrease risk of default to any great degree and penalises young people disproportionately. What we can say for sure is that we're currently in a period of great theoretical affordabilty - 10 year fix sub 4% - if you have equity or a deposit. Outside that happy group and you're screwed.

julieq

hallmark wrote: »

The only thing cheap about housing at the moment is the cost of servicing the debt & that's a highly false economy, since the capital is not being repaid. In an era of low/no wage inflation, that's a huge consideration that will be biting homebuyers in the bum for years to come. Living it large on a 0.nothingmuch% interest-only mortgage might be fun for them now but when IRs go up, even if that didn't happen for 10 years, those people will be screwed.

Nice theory but net debt is being repaid, so doesn't really work, does it?

hallmark

julieq wrote: »

Nice theory but net debt is being repaid, so doesn't really work, does it?

If someone has an interest-only mortgage how is net debt being repaid?

JonnyBravo

hallmark wrote: »

If someone has an interest-only mortgage how is net debt being repaid?

We're not talking about an individual though are we?
We're talking in general.
Not everyone is on interest only and some of those who are (eg me) ARE paying off the capital.

Clearly if someone has an interest only and isn't making any form of investment to pay-off the capital they're not. Bit obvious. No, VERY obvious. But I guess it doesn't fit your agenda. Inconvenient for you.

hallmark

Haha, you stupid dunce, why do you assume I have an agenda, is it because you can't conceive of anything else. How sad you are.

Please don't presume to think you understand me, your feeble ickle brain ain't up to it mate.

Graham_Devon

julieq wrote: »

Hate to say this, but Graham almost has it right here.
.

As I said, it's not rocket science, and Hamish won't touch what I said with a bargepole, which indicates he's stuffed.

But he'll carry on saying what he says regardless.

Scully38

HAMISH_MCTAVISH wrote: »

1) The OP is dealing with averages, it is possible for any individual's circumstances to be different.

2) A wage of £21,000 in 1999 would be slightly over £30,000 today if it had just kept up with average wage increases since then. Even for a person with zero career advancement.

3) In 1999 the average mortgage interest rate was 6.5%, today it is 3.5%.

4) IN 1999 the average house price was around £90,000. Today it's around £165,000.

Hence, the cost of buying a house is now at it's lowest since 1999, on average.

Sorry Hamish, wrong on several counts, I was earning over £30k today because of three promotions, my staff who have not been promoted a lot of them still do not earn 21k, they are on 13k per year. So would not be able to afford the house I bought in '99.

Secondly house prices (if you check) have gone up by avg 10-20% each year since 1999 (check land registry if you don't believe me). Given that inflation doesn't even come close to those figures, how can you then state that it's cheaper. Taxes haven't reduced by that each year, wages haven't increased by that each year, interest rates haven't reduced by that each year. Get my drift?

Click the link below

Comparison of house prices from the land registry

So as you can see, it's not nearly the same, even if you put inflation onto earnings they don't even compete with the inflation on house prices and each year the house prices increased up to 26%. When has inflation on wages ever reached that level? And you can check a variety of areas and you'll find the same level of inflation on house prices. So I ask you when did you ever get a 25% wage increase per year to match the inflation rate of house prices?

Also in maths we learned that 90k does not equal 165k

Thrugelmir

JonnyBravo wrote: »

Not everyone is on interest only and some of those who are (eg me) ARE paying off the capital.

At the peak of the market a high proportion were. NR for example had 18% of the new lending market at that time.

Now that majority of lenders require a repayment vehicle in place. The demand for mortgages has fallen. As affordability is an issue at current price levels. There's not a huge difference between the cost of mortgages in 2007 and now for the majority of new borrowers.

robmatic

hallmark wrote: »

Are you kidding? Prices are about 3x what they were 12 years ago. My friends bought their house for £140k 11 years ago & the same model (it's one of a bunch on a development) just sold for £450k.

I bought mine 13 years ago & it's now worth 3x as much.

(Both houses in Essex)

Well, that's a really robust set of statistics.

According to the Land Registry, prices have just about doubled over the last 11 years. Meanwhile, if prices had increased in line with RPI they would have increased by a factor of about 1.5, so it's only an increase of about 30% in real terms.