wages to house prices ratios

brainiac44

i earn 40k in the north west. i thought about buying, but then you dont earn 40k pa if your stupid enough to fall for a pyramid scam. i accept i missed this boat this time.

the next buying cycle is 2009-2015
theres nothing i can do until then but save and rent a deal.

housing is all about timing.

if you buy NOW i will be buying the same house for HALF or a bigger house for the same in 2010. you wont be able to shift your property for the price you paid in the boom, so neg equity will keep you locked into to whatever tiny tin pot property in a sink estate you buy now.

you will be trapped until the next boom.

you will kick yourself as the interest rises again and again eating your wage rises for the next 15 years..

roswell

brainiac44 wrote:

i
the next buying cycle is 2009-2015

can you prove that ?

littlesaint

brainiac44 wrote:

the next buying cycle is 2009-2015
theres nothing i can do until then but save and rent a deal.

I hope for the sake of this generation that you're right.

talksalot81

roswell wrote:

can you prove that ?

If he is wrong then you are going to have an entire generation who do not own homes....

roswell

Id just like some proof if someoen can say 2009 is the next cycle they must have some supporting evidence.

we have heard for the last 6 years that its coming to the end but it hasnt happened yet.

epz_2

talksalot81 wrote:

If he is wrong then you are going to have an entire generation who do not own homes....

i was listening to the radio and they quoted a figure of 40% of new morgages are expected to be buy to let by 2016, i was wondering where all the renters were going to come from lol.

seriously though there is so much you can squeeze out of people for housing before inflation kicks in. we have had low inflation so far as the price of goods kept falling thanks to china etc that allowed interest rates to drop and the cost of living to fall. everyone seems to have gotten used to these low rates as though they are always going to be and borrpwed up to this mark and i cant see them going below 5% for a while now.

roswell

Im in no way saying houseing is affordable but when you look at expendature on NON neccesities (Sp??) there is still room left, conterary to everyones belief you can live with out a IPOD or SKY tv or 2 holidays a year, a new car can last more than the 3 years before it needs a MOT etc.

When the cost of living goes up there wil be those that make the sacrafices to keep the roof over there head and those that choose to stay as they are and let the debt build up till the decisions is taken out of there hands. And so the houseing market will come back to where it should be. What i can say is if this will be in 2009.

Looking at the stock market at the moment the Nikkee is down 1.85% and its been open less than half an hour, if houses were doing this on a daily basis for a week we would be in major trouble, But until perception on proprty changes either by force (Reposession / tighter lending) or public opinion changing the market wont collapse.

pricedout_1

talksalot81 wrote:

If you correct house prices both for Interest rates and also for real earnings, you will get a solid measure of affordability. Surprisingly you will find that the UK as a whole is nowhere near peak (I am a bear on this matter, so it doesnt help my arguements to admit this). However, in some places, this is not actually the case.
.

What was the peak ?

talksalot81 wrote:

If you care to do this for yourself, find the average house prices through the years and calculate the monthly repayments at each interval (obviously needing the IR to calculate). Then calculate this as a function of average earnings through the same period
.

I tried to do this myself.
Historical House prices and Interest Rates are easy enough to get, but I could not find any good data on Average earnings ????

Does anyone know where you can get average wage data over the years and not just the past few years ? (Even better, does anyone know of any source of data that measures the historical % of wages spent on mortgage/property ? i.e. historical affordability measures ?)

talksalot81

hughgallagher wrote:

What was the peak ?

It was the last crash, late 80's, early 90s. I have attached the chart I produced. You can see that we have basically been flat for a long time now. As a fraction of income, we are no less affordable (or so it seems) than 5 years ago. If you calculate the actual monthly cost, we are now roughly equivalent to the crash of the early 90s, but wages have increased so it is not a fair comparison. (rather I would attach it but I can not attach things here - if you are interested, PM my and I will mail it to you)

This comparison is not valid for all areas - NI is showing a very pronounced decrease in affordability over the last year.

hughgallagher wrote:

I tried to do this myself.
Historical House prices and Interest Rates are easy enough to get, but I could not find any good data on Average earnings ????

Does anyone know where you can get average wage data over the years and not just the past few years ? (Even better, does anyone know of any source of data that measures the historical % of wages spent on mortgage/property ? i.e. historical affordability measures ?)

I cannot recall where I got my numbers, but I agree they are not easy to come by!

jaype

The problem with buying now is this - does anyone remember the gameshow 'Play Your Cards Right'? The market is a bit like this, with interest rates equating to the numbers on those cards. At a 7 or 8, they could go higher or lower, so if you could feel okay about the 50% chance your payments will start to fall soon . Unfortunatley if you are looking at a 3 or 4 (as people were 2 years ago when they stretched to 5 or 6 times income in many cases), you can bet the next number will be higher...