Is inflation starting to hit the housing market?

wotsthat

N1AK wrote: »

Now you might think a £120 pay rise is unrealistically small but that's 1% for someone earning £12k so it genuinely is representative for the kind of people who would be struggling in the first place.

It's probably unrealistic to assume that someone earning £12k has to worry about paying a mortgage. In fact it's worse for them as you can add rent to their outgoings subject to inflation. What you've done is demonstrated that poor people are affected by inflation more than better-off people.

Assume a frugal homeowner earning a wage representative of someone who has a realistic choice between buying and renting and it doesn't look so bleak.

Graham_Devon

wotsthat wrote: »

It's probably unrealistic to assume that someone earning £12k has to worry about paying a mortgage. In fact it's worse for them as you can add rent to their outgoings subject to inflation. What you've done is demonstrated that poor people are affected by inflation more than better-off people.

Assume a frugal homeowner earning a wage representative of someone who has a realistic choice between buying and renting and it doesn't look so bleak.

It's not particularly wise to try and write off individuals at the lower end of the wage spectrum though when it comes to discussing these things.

Afterall, you are on other threads blaming lenders for not lending. Therefore wanting lenders to lend to people on the lower end of the wage spectrum.

Cause and effects.

IveSeenTheLight

Graham_Devon wrote: »

Why do some of the pro house price people struggle to understand the basic of wages rising less than all other costs?

LOL,
We are aware, arguably more aware than some "anti house price people" who struggle to understand that by securing the costs of housing, it lowers the risk to disposable income going forward

Let's take a simple example.

Year 1
Wages £25,000
Mortgage interest £1,000 per month
Rent = £1,000 per month
Utililities £100 per month.

Year 5
Wages £28,137 (3% per year)
Mortgage interest = £1,000 (I'm showing a worst case interest only, not capital repayment option)
Rent = £1,103 (Only 2.5% inflation)
Utilities = £146.41 (10% yearly increase)

Year 10
Wages £28,137 (3% per year)
Mortgage interest = £1,000 (I'm still showing a worst case interest only, not capital repayment option)
Rent = £1,248 (Still only 2.5% inflation)
Utilities = £235.79 (10% yearly increase)

Can you see now that by buying, even only on interest only is securing disposable income, despite rental increases being below inflation and below wage inflation?

Of course, if you are repaying capital on the mortgaged property, you are increasing the gap between buying and renting further whilst also increasing the available disposable income.

Maybe now you can realise the benefits of securing housing costs in an increasing inflation environment.

Graham_Devon wrote: »

Just because your wages rise, it does not mean your mortgage payment is easier to pay.

It's easier than if you didn't buy and saw your housing costs increase through rental

Graham_Devon wrote: »

To do that, your wage rise has to outstrip your increasing outgoings, which for the majority, isn't happening at the moment.

Your looking for wage increases to outstrip total inflation and instead looking at the largest inflationary costs, are concentrating on the property despite us trying to articulate that by buying, this is zero inflationary of indeed negative inflationary on the disposale income expenditure.

Graham_Devon wrote: »

May be alright for a few well off people. But thats about it.

Maybe your correct here, buyers who have had the foresight to secure their own homes and sucre the cost of debt associated with owning are the ones who are benefiting against those who have not secured this debt.

Let me ask you this.
If you could "own" your utility costs and ensure that these remained the same / reduced over a 10 year / 25 year period, would you go for it?
Or would you prefer to moan that this is not the way to go as the inflation of the price of cheese in inflationary higher?

wotsthat

Graham_Devon wrote: »

That;s OK when you have your house, especially when you paid a much lower price compared to todays prices...probably on a decent mortgage rate that no one else starting out could get.

Try doing it when you don't and are still trying to achieve what you currently have.

I would try doing it with higher house prices and a higher interest rates*

It's when times are tough that even greater efforts are required to reduce outgoings/ increase income/ reduce personal inflation.

What's the alternative? Do nothing and just see where the cards fall? Keep kidding myself that better-off people are just lucky?



* I bet people starting out now would be horrified with my average mortgage rate.

wotsthat

Graham_Devon wrote: »

It's not particularly wise to try and write off individuals at the lower end of the wage spectrum though when it comes to discussing these things.

Strawman I'm afraid. I've not written off anyone. The thread is about inflation starting to hit the housing market. Someone on £12k isn't relevant to the thread as they aren't in a position to defer a purchase because of inflation worries.

Graham_Devon wrote: »

After all, you are on other threads blaming lenders for not lending. Therefore wanting lenders to lend to people on the lower end of the wage spectrum.

...and another. Just because I think lenders should lend more doesn't mean I want struggling poor people to be given mortgages.

N1AK

wotsthat wrote: »

It's probably unrealistic to assume that someone earning £12k has to worry about paying a mortgage. In fact it's worse for them as you can add rent to their outgoings subject to inflation. What you've done is demonstrated that poor people are affected by inflation more than better-off people.

Assume a frugal homeowner earning a wage representative of someone who has a realistic choice between buying and renting and it doesn't look so bleak.

I'm not sure I agree at all. Although someone earning that money now would struggle to buy in many areas many people who bought back in mid-90s could have done so very easily in similar jobs.

Plenty of places offer partial ownership schemes and in some areas of the country that isn't even required to get a property for ~£50-70k which is eminently doable on that kind of wage given time. Surely exactly what you should want them to be doing as buying should make sense for them.

Even taking into account people on better wages; say £18k the equivalent of a 1% pay increase would still leave them worse off in those circumstances and generally as wages increase spending on goods that are measured in inflation increases as well.

Graham_Devon

IveSeenTheLight wrote: »

LOL,

Indeed.

You've ONLY added inflation to utilities. And even then you have started them at a massively low level fo £100.

If we were playing "create the math" you'd win first prize.

Graham_Devon

On another note, it's becoming increasingly obvious to me that those with the means and ability to buy 1, 2, 3+ houses struggle to understand the concept of how others live.

Every single person trying to explain costs to me doesn't appear to have any understanding of the struggles people have and the bills they have to pay. Everything seems to revolve around someone earning far higher than average wage and living in a house they bought 10+ years ago. Inflation isn't something they suffer from, it's an opportunity. Deposits are not a problem, people just need to cut out things they don't even have to start with. Pensioners shouldn't moan about savings, they should switch to long term bonds and investments. Time after time, it seems people struggle to understand what others are talking about.

Every single person who is pro house prices appears to have (or say they have) more than one house. Wotsthat a holiday home in Cornwall. ISTL several houses apparently. Hamish 2 houses, and ready to buy more and it's the best time to buy but he won't buy.

It's a bit like those secret millionaire programmes, or back to the floor programmes, where suddenly, the privileged see stuff they didn't even know existed before. They struggle to buy a pint of milk, something which wouldn't have even crossed their minds before.

Only then can people have a realistic view of the world. I'm not saying mine is realistic. However, I do feel I understand a little more about the cost pressures younger people with a young family are under. Some may disagree.

It reminds me of a GP who was once flumoxed that the people they employed could live once she found out they didn't have investments bringing in other income. She was just dumfounded as to how they got by. She literally assumed everyone there was there for a top up to their investment income and something to do. Another's finance problems was the company who cleaned the pool in the villa in Spain had gone bust and now they had to pay more. Theres little understanding.

IveSeenTheLight

Graham_Devon wrote: »

Indeed.

You've ONLY added inflation to utilities. And even then you have started them at a massively low level fo £100.

If we were playing "create the math" you'd win first prize.

Graham,
You need to use this site far better.
The monthly rents / interest and utililities I used was a very simple MONTHLY calculation.

http://www.moneysavingexpert.com/utilities/you-switch-gas-electricity

Typical users on a standard dual fuel tariff will spend, on average, £1,400 a year after hikes. But the same on the very cheapest pay £1,140.

I could have used £116.66 (£1400/12) or £95 (£1,140/12), but kept simple to a rounded figure.
Is my rounded £100 for example sake "massively low"?

Ok, I only used utilities and have never argued there were other costs, but as I said, this was a simple calculation which it seems that even in this simplistic form you have not been able to grasp the point of the post.

The point which you either have not grasped or are unwilling to admit is that securing the property costs makes financial sences and if it is possible to do with other costs you would do similarly

Graham_Devon

IveSeenTheLight wrote: »

Graham,
You need to use this site far better.

I have.

Therefore I know theres quite a few extra costs to my outgoings each month, other thn mortgage and electric / gas.

Sorry. But your calculations are massively let down by only including one single outgoing from family budgets.

Just compare average housing costs (excluding mortgage) to average mortgage costs. Don't take a very large mortgage cost and compare it against one single outgoing. That's plainly stupid.

I'm not backward enough to take your calculations and not question them.