House prices need to drop 40% to be affordable discussion

Caveat_Mortgagor

IveSeenTheLight wrote: »

Why do you think property should be affordable at 4 times an average single income (not mean male which is what the indexes are usually based against)?
It has been discussed before that part time, low income earners are generally not house buyers

People on low incomes might not buy houses, but they still make up part of the average salary just as much as they did in the past.

So, if in the past the average price was 4 times salary and that average salary was influenced by part time and low wage earners, then its natural that those with a vested interest in seeing prices fall will continue compare to the same average, rather than a new figure that suits someone with a vested interest in higher prices.

What you are asking is should we compare apples with apples, or apples with oranges?

As a property bear with a strong VI in seeing prices fall, it amuses me when I see these discussions. FWIW, yes property is overpriced, but the property market is rigged. (edit - I mean distorted by a well meaning but misguided welfare system.)

Anyone starting out studying economics will be familiar with the phrase 'ceteris paribus'. Many bears believe that the thing that changed was lending practices, bulls think that expectations have changed.

There is one majorly important factor that will influence the property market for some time to come that both sides seem to overlook...... Welfare payments. A family with 3 kids with one earner on £25k has a very similar net income to a family with one earner on £45k. The family on average salary gets a shed load of benefits.

And thats why there is no point in trying to buy a home for yourself to live in if it falls in the remit of something someone on £45k could buy. This market is distorted by transfer payments as higher paid buyers are competing with buyers on average salaries.

And this renders redundant any discussion about what multiple of salaries is the norm and what level will this fall to?

ukcarper

Graham_Devon wrote: »

Oh for the love of....

Have a look at Nationwides then!!

Page 3:
http://www.nationwide.co.uk/hpi/historical/Sep_2011.pdf

Then tell me I'm misinterpretating stuff, or again, suggest I'm saying soething I never said, as it's your usual tactic.

No Graham you have a look see what the minimum ratio is on Nationwide then CML and tell me they are using the same earnings figure.

ukcarper

wotsthat wrote: »

You said it was the long term average. As the ratio has never been below 3.7 can you explain how it could be an average?

EDIT: There's a Nobel prize if you can do it.

I don't think he'll ever admit it even if he does see it.

Graham_Devon

wotsthat wrote: »

You said it was the long term average. As the ratio has never been below 3.7 can you explain how it could be an average?

EDIT: There's a Nobel prize if you can do it.

Get some new reading glasses....either that, or stop trying to purposely confuse what was said in order for you to make an argument.

3.7x is just slightly below the long run average.

Graham_Devon

ukcarper wrote: »

No Graham you have a look see what the minimum ratio is on Nationwide then CML and tell me they are using the same earnings figure.

Doesn't matter if they are using the same figures. Why does it matter? Its still Nationwides long term average, just not using YOUR preferred figures.

Are we discounting CML and Nationwide now?

ukcarper

Graham_Devon wrote: »

Get some new reading glasses....either that, or stop trying to purposely confuse what was said in order for you to make an argument.

How can it be 4x if it has never been below it.

Graham_Devon

ukcarper wrote: »

how can it be 4x if it has never been below it.

please look at the nationwide graph!!!!!!

ukcarper

Graham_Devon wrote: »

Doesn't matter if they are using the same figures. Why does it matter? Its still Nationwides long term average, just not using YOUR preferred figures.

Are we discounting CML and Nationwide now?

Nationwide long-term average 4 now 5.2 40% fall 3.12x only time Nationwide has been below that mid 1990s.

ukcarper

Graham_Devon wrote: »

please look at the nationwide graph!!!!!!

The average on the Nationwide is not the average on the CML they are using a different average earnings can you not see that,

Both graphs say the same thing a drop of 40% would put prices back to the cheapest they have been since the before 1970.

Graham_Devon

ukcarper wrote: »

Nationwide long-term average 4 now 5.2 40% fall 3.12x only time Nationwide has been below that mid 1990s.

Nope.

40% fall would not equal 3.12x average income.

You've just subtracted 40% from 5.2