Radio5 - houses to rise 40% in 4 years.

bandraoi

Average House Price = 11 times Average income.

Most houses (these days) are bought between two people who are earning.
Average House price = 5.5*2*Average Income

The lower end of the income scale, ie those on considerably less than the average income, have never been able to afford to purchase houses on the open market.

Ergo average house prices are what the banks are willing to lend the average house buyer.

Generali

bandraoi wrote: »

Average House Price = 11 times Average income.

Most houses (these days) are bought between two people who are earning.
Average House price = 5.5*2*Average Income

The lower end of the income scale, ie those on considerably less than the average income, have never been able to afford to purchase houses on the open market.

Ergo average house prices are what the banks are willing to lend the average house buyer.

Prices are set at the margin in a market, not by the average. Comparing average house prices with average incomes is not correct.

The trick is to compare what is being bought with who is buying it. Something that is trickier to do (CML figures can help you here).

Alan_M_2

andipandi wrote: »

rents go up in line with property price rises so therefore most rents are unaffordable also.

Rents are not connected to property prices, they are connected solely to affordability and market forces. Unlike mortgages, they cannot be skewed or rehashed by longer terms/lower rates etc as they are simply a rental fee.

In fact in my locality (stockbroker belt Surrey) rents here have been pretty static for the last 5 years and in certain types of property are actually dropping slightly due to oversupply.

This is what makes rental prices such a good indicator of the state of the market, they are one of the few things largely unaffected by sentiment.

andipandi_2

supply and demand,people cannot afford to buy so they look to renting,there is a shortage of family homes to rent(in my area at least) so rents go up,perhaps someone can define what an affordable rent would be?

Generali

andipandi wrote: »

supply and demand,people cannot afford to buy so they look to renting,there is a shortage of family homes to rent(in my area at least) so rents go up,

In my area (prime bit of Kent commuterland) there is an oversupply of family homes to rent. I looked at 5 or 6 when I picked my place and all were empty. I offered on 2 places at about 30% below the asking rent. Both came back and said yes.

andipandi wrote: »

perhaps someone can define what an affordable rent would be?

Rule of thumb is meant to be 33% of total outgoings. Mine is less than that as my income has risen since Mrs Generali negotiated on my current place.

Running_Horse

Note to self; bump this thread in 4 years time to see what actually happened. Oxford Forecasting Group? Sounds very impressive.

I remember an 80s newspaper article saying houses would cost £750,000 by the end of the century. Ho hum.

pickles110564

Running_Horse wrote: »

I remember an 80s newspaper article saying houses would cost £750,000 by the end of the century. Ho hum.

I know of several

Lavendyr

What a rubbish study.

From the BBC report:

"The National Housing Federation (NHF) warned prices were now almost 11 times the average wage and may rise by 40% as supplies fall further behind demand."

So it's the NHF backing the study, and the key word here is "may". Good start.

"In the 10 years since Labour came to power house prices have surged by 156% while wages have risen by just 35%, research for the NHF carried out by Oxford Economics found. If such trends continue..."

Key word = if.

And what is the speculation based on? Seemingly nothing more than trends up until now, with no consideration for rising interest rates, rising inflation, increase in reposessions, increase in debt...

Seems like total propaganda to me.

[Deleted User]

If anything I believe house prices will drop by 40% over the next 4 years, have i bought at he peak? yes probably, will interest rates be up? yes probably, Can I still afford my house if interest rates are up at 15%? yes, So do I care about what property house prices will do? doesnt matter to me one way or the next.

Whats on TV tonight?

Generali

It ludicrous. Perhaps they don't teach economists compound interest these days. Eg. Wages increase at 35% every 10 years, house prices by 156%:

Yr.........Wage.......HP
00.........£10k........£30k
10.........£13k........£77k
20.........£18k.......£197k
30.........£25k.......£504k
40.........£33k.......£1.3mio
50.........£45k.......£3.3mio

Etc.

So after 50 years, average house price = 73 x average income.