House prices 2017/18

cells

kilby_007 wrote: »

Over the last 15 years in our area the house prices have almost trebled, whilst salaries have only risen by 1.5 times. To put that in perspective, someone in 2001 earning £25K could (just about) afford to buy a £100K 3 bedroom house, but now 15 years later, someone doing the same job and earning £37.5K will not be able to buy the same house, now costing £300K. If the house prices have trebled again in 15 years time, then barely anybody will be able to afford a house and rental prices will be at the mercy of the 5% of people who can still afford to buy.

In my opinion the property market is on a knife edge. If supply is increased by building a lot of new homes very quickly or demand is cut in some way, then the prices will come crashing down, but if both of those factors remain unchanged then we might just see a slow steady increase in prices regardless. There are of course other factors at play - foreign investment is dropping so that could be a fairly big factor at play, and sentiment from the Brexit campaign and the media influence, it could be an interesting couple of years!

5-10 years ago I would be singing the same song as you because I had not realized the scale of gifted and inherited wealth in this country.

But now I realize that especially in expensive areas, wages dont buy homes, inheritances and gifts and wealth do

For example I know two young people one late 20s one 30 and both are modest wage earner renters in London. One will be getting a multi-million pound inheritance and the other ~£1m. Currently houses for them are expensive and un affordable but come the inheritance they will be able to buy a very expensive London home outright.

you may think these people are so few and far between that this handful hardly matter however the scale of it is huge something like 500,000 inheritances are left each year and countless gifts of wealth. My estimate is that in the region of £200 billion is inherited/gifted annually.


so once again, in most the country homes are cheap (most of the north, the midlands, scotland and wales) in the expensive towns or inner London property is expensive v wages but its not so expensive v inheritances/gifts/capital. Something almost no one seems to be aware of or understand or think through

economic

cells wrote: »

5-10 years ago I would be singing the same song as you because I had not realized the scale of gifted and inherited wealth in this country.

But now I realize that especially in expensive areas, wages dont buy homes, inheritances and gifts and wealth do

For example I know two young people one late 20s one 30 and both are modest wage earner renters in London. One will be getting a multi-million pound inheritance and the other ~£1m. Currently houses for them are expensive and un affordable but come the inheritance they will be able to buy a very expensive London home outright.

you may think these people are so few and far between that this handful hardly matter however the scale of it is huge something like 500,000 inheritances are left each year and countless gifts of wealth. My estimate is that in the region of £200 billion is inherited/gifted annually.


so once again, in most the country homes are cheap (most of the north, the midlands, scotland and wales) in the expensive towns or inner London property is expensive v wages but its not so expensive v inheritances/gifts/capital. Something almost no one seems to be aware of or understand or think through

This.

Read my explanation on inequality which basically you have explained a part of it. a large part of this inequality comes from inheritance.

cells

economic wrote: »

why have prices gone up? Simple answer: inequality. It does not matter about average wages. It's irrelevant. What matters is there are enough people who can afford. And whilst prices rise then there must be enough people who can afford as they are pushing prices up. Whilst average wage earner gets more and more priced out. This is inequality rising. Prices correlates very well with inequality.

Look at cities like Mumbai and Yangon. Property prices there are crazy relative to average wages. Same reason as above - inequality. It's just that in Mumbai and Yangon the inequality is a lot more obvious then in London because the problem is a lot worse.

no no no

1: prices are not being pushed up everywhere, only in specific areas. Much of the country is down right cheap, at least half the country its cheaper to buy the average private terrace than to rent socially!

In the locations where prices are quite high its a case of inheritances and gifts buying homes. This will always be true. The nation has a certain number of homes and a certain number of would be households. The stock will be allocated not just on income but on wealth (capital/gifts/inheritances). This is the critical mistake the bears make. The idea of the average person should be able to buy the average house is silly because you completely discount away the existence of the ~£200 billion a year that is received as gifts and inheritances.


Certain towns and areas have boomed in price because the non wage capital is moving in. For example I know one English family from the midlands who made a fortune on starting growing and selling a business. They are in the process of considering if the should abandon the midlands and move to ...... London. They dont even work anymore (late 60s now). They will likely move into z1/2 nice big solid expensive terrace house. These people are driving up prices of very limited nice homes. The difference between now and the mid 1990s when inner London was cheap as that the capitaled up are moving into inner London while in the 1990s they were/had abandoned it!

kilby_007

cells wrote: »

5-10 years ago I would be singing the same song as you because I had not realized the scale of gifted and inherited wealth in this country.

But now I realize that especially in expensive areas, wages dont buy homes, inheritances and gifts and wealth do

For example I know two young people one late 20s one 30 and both are modest wage earner renters in London. One will be getting a multi-million pound inheritance and the other ~£1m. Currently houses for them are expensive and un affordable but come the inheritance they will be able to buy a very expensive London home outright.

you may think these people are so few and far between that this handful hardly matter however the scale of it is huge something like 500,000 inheritances are left each year and countless gifts of wealth. My estimate is that in the region of £200 billion is inherited/gifted annually.


so once again, in most the country homes are cheap (most of the north, the midlands, scotland and wales) in the expensive towns or inner London property is expensive v wages but its not so expensive v inheritances/gifts/capital. Something almost no one seems to be aware of or understand or think through

Ineritance? What is that? I don't know anyone who has inherited that kind of money. My parents inherited a 1/3rd share of a 70K property from my dad's side, and nothing at all from my mum's side. Most of my friends will be lucky to inherit a 25% - 50% share of their parents property, if they pay their mortgage off. You must move in some high circles! I can definitely see inheritance playing a part in house price inflation but not to the exaggerated extent that you have witnessesed.

economic

cells wrote: »

no no no

1: prices are not being pushed up everywhere, only in specific areas. Much of the country is down right cheap, at least half the country its cheaper to buy the average private terrace than to rent socially!

In the locations where prices are quite high its a case of inheritances and gifts buying homes. This will always be true. The nation has a certain number of homes and a certain number of would be households. The stock will be allocated not just on income but on wealth (capital/gifts/inheritances). This is the critical mistake the bears make. The idea of the average person should be able to buy the average house is silly because you completely discount away the existence of the ~£200 billion a year that is received as gifts and inheritances.


Certain towns and areas have boomed in price because the non wage capital is moving in. For example I know one English family from the midlands who made a fortune on starting growing and selling a business. They are in the process of considering if the should abandon the midlands and move to ...... London. They dont even work anymore (late 60s now). They will likely move into z1/2 nice big solid expensive terrace house. These people are driving up prices of very limited nice homes. The difference between now and the mid 1990s when inner London was cheap as that the capitaled up are moving into inner London while in the 1990s they were/had abandoned it!

I never said prices were going up everywhere. It will always be about location. Some locations will do better then others. Key thing is as you say wages are not nearly as important. Inequality is which gifts and Inheritances are a massively contributing factor.

cells

economic wrote: »

This.

Read my explanation on inequality which basically you have explained a part of it. a large part of this inequality comes from inheritance.

generally no I dont think this is correct.

Inheritances get spread out not concentrated. A person has say 2 kids, 4 grand kids, 8 great grand kids, 16 great great grand kids etc etc which means as the generations go by inheritances get spread thin.

Look at goldsmith. Father left something like £1.2B and goldsmith got about 1/4th of that. Goldsmith has 5? kids so his £300m will drop to ~£60m to his kids. So in just 2 generations a £1.2B fortune is spread down to ~£60m a huge difference which will continue spreading thiner and thinner

that is before you even consider divorces, multiple marriages, and those who are less than good in not wasting their inheritances to pass down.


Also even if this 'inequality' was that big a problem what do you propose to do about it? tax inheritances and gifts at 100%. Well thank you v.much but about 5 million households would buy the first ticket out of the UK and those that remained would indeed be a lot more equal....poor but equally poor.

anyway its certainly something worth thinking more about and a topic few have considered at all

economic

kilby_007 wrote: »

Ineritance? What is that? I don't know anyone who has inherited that kind of money. My parents inherited a 1/3rd share of a 70K property from my dad's side, and nothing at all from my mum's side. Most of my friends will be lucky to inherit a 25% - 50% share of their parents property, if they pay their mortgage off. You must move in some high circles! I can definitely see inheritance playing a part in house price inflation but not to the exaggerated extent that you have witnessesed.

You don't get it. It doesn't even matter if the average person has little to no inheritance or have just the average wage. All that matters is there are enough that do that can drive prices up. Welcome to a country with increasing inequality my friend. Where you thought you were doing ok isn't actually so.

CLAPTON

cells wrote: »

no no no

1: prices are not being pushed up everywhere, only in specific areas. Much of the country is down right cheap, at least half the country its cheaper to buy the average private terrace than to rent socially!

In the locations where prices are quite high its a case of inheritances and gifts buying homes. This will always be true. The nation has a certain number of homes and a certain number of would be households. The stock will be allocated not just on income but on wealth (capital/gifts/inheritances). This is the critical mistake the bears make. The idea of the average person should be able to buy the average house is silly because you completely discount away the existence of the ~£200 billion a year that is received as gifts and inheritances.


Certain towns and areas have boomed in price because the non wage capital is moving in. For example I know one English family from the midlands who made a fortune on starting growing and selling a business. They are in the process of considering if the should abandon the midlands and move to ...... London. They dont even work anymore (late 60s now). They will likely move into z1/2 nice big solid expensive terrace house. These people are driving up prices of very limited nice homes. The difference between now and the mid 1990s when inner London was cheap as that the capitaled up are moving into inner London while in the 1990s they were/had abandoned it!

truly awesome how one midlands family can move London house prices but 3 million immigrants make no different at all.

economic

CLAPTON wrote: »

truly awesome how one midlands family can move London house prices but 3 million immigrants make no different at all.

Poor immigrants wouldn't make much difference apart from driving rents higher which means btl makes it more worthwhile. People with money drive prices up in London (good areas at least)

economic

cells wrote: »

generally no I dont think this is correct.

Inheritances get spread out not concentrated. A person has say 2 kids, 4 grand kids, 8 great grand kids, 16 great great grand kids etc etc which means as the generations go by inheritances get spread thin.

Look at goldsmith. Father left something like £1.2B and goldsmith got about 1/4th of that. Goldsmith has 5? kids so his £300m will drop to ~£60m to his kids. So in just 2 generations a £1.2B fortune is spread down to ~£60m a huge difference which will continue spreading thiner and thinner

that is before you even consider divorces, multiple marriages, and those who are less than good in not wasting their inheritances to pass down.


Also even if this 'inequality' was that big a problem what do you propose to do about it? tax inheritances and gifts at 100%. Well thank you v.much but about 5 million households would buy the first ticket out of the UK and those that remained would indeed be a lot more equal....poor but equally poor.

anyway its certainly something worth thinking more about and a topic few have considered at all

End of the day prices in certain areas have gone up a lot to seemingly ridiculous levels not because of wages but because some people have money. A lots of it compared to the average. Whether through inheritance or gifts or money laundering. Who cares. It's money and money buys things and seems to have driven prices up a lot in London. Of course sentiment is the real driver as people need confidence to spend or invest money. But when people are surprised about the prices given wages etc they are just clueless to how the world works. It's all about capital flows and people do have a lot of money. Maybe not the average person however