Is property in a bubble?

westernpromise

ukcarper wrote: »

To buy that £500k property with 10% deposit you would need a joint income of £110k

Only if you have no equity. In fact the average homeowner has about 45% equity so the mortgage required by the average buyer isn't £450k, but £275k. This requires a joint income of about £80k. The median income might be £27k or whatever but that is a median that includes part-time and non-workers. Among those who do work and who buy £80k is probably two median wages.

There's a reason why prices are where they are. Prices are mostly about right or too cheap, but transaction volumes are down. I reckon stamp duty, a tax on transactions, is the bigger issue. If I were to upgrade to what I'd like it would cost me £150k in stamp duty, which is unacceptable.

ukcarper

westernpromise wrote: »

Only if you have no equity. In fact the average homeowner has about 45% equity so the mortgage required by the average buyer isn't £450k, but £275k. This requires a joint income of about £80k. The median income might be £27k or whatever but that is a median that includes part-time and non-workers. Among those who do work and who buy £80k is probably two median wages.

There's a reason why prices are where they are. Prices are mostly about right or too cheap, but transaction volumes are down. I reckon stamp duty, a tax on transactions, is the bigger issue. If I were to upgrade to what I'd like it would cost me £150k in stamp duty, which is unacceptable.

So there is no problem people on median earnings are buying property in London and South East easily. £80k is over twice median earnings, median household income in London in 2013 was £29,100 bit higher now probably.

ukcarper

Let's take Woking a two bed terrace, typically FTB property in past, will cost £300k median full time eanings in Woking £25k

economic

ukcarper wrote: »

So there is no problem people on median earnings are buying property in London and South East easily. £80k is over twice median earnings, median household income in London in 2013 was £29,100 bit higher now probably.

In your median wage why are you including:

People who don!!!8217;t want/need to buy
People who are recent immigrants from poor countries
People who are young (<28 years old)
People who work parttime

Also why do you exclude these in terms of affordability:

People who have existing wealth/savings/investments
People who inherit/gifted wealth
People who are paid in stock options
People who are contractors
People who have equity in own businesses

London has many of the above. Many wealthy young and old people in London you would be surprised.

economic

The property I sold in Kilburn was sold to a wealthy businessman for his son to live in. The family is from outside of SE. Many wealthy people buy in London even from around the country not just internationally.

ukcarper

economic wrote: »

In your median wage why are you including:

People who don!!!8217;t want/need to buy
People who are recent immigrants from poor countries
People who are young (<28 years old)
People who work parttime

Also why do you exclude these in terms of affordability:

People who have existing wealth/savings/investments
People who inherit/gifted wealth
People who are paid in stock options
People who are contractors
People who have equity in own businesses

London has many of the above. Many wealthy young and old people in London you would be surprised.

There will always be people who will able to buy but that is irrelevant. In the past it has been possible for people working full time with out access to other funds to be able to buy if they were prepared put in the effort now in many places this is not the case. Property prices to earnings are at an all time high so it is obvious fewer people will be able to buy.

economic

ukcarper wrote: »

There will always be people who will able to buy but that is irrelevant. In the past it has been possible for people working full time with out access to other funds to be able to buy if they were prepared put in the effort now in many places this is not the case. Property prices to earnings are at an all time high so it is obvious fewer people will be able to buy.

This is because in the past human capital/labour was valued more. With technology, human capital is valued a lot less. But to offset this (actually more then offset this) we got a lot richer due to technological innovation. Which means people have a lot more wealth so earnings become less relevant and wealth becomes more relevant.

But there's nothing wrong with that. Those with parents born in the UK many will have a lot of wealth and gifts given to their offspring. Unless the parents squandered it which is more of a mental problem.

ukcarper

economic wrote: »

This is because in the past human capital/labour was valued more. With technology, human capital is valued a lot less. But to offset this (actually more then offset this) we got a lot richer due to technological innovation. Which means people have a lot more wealth so earnings become less relevant and wealth becomes more relevant.

But there's nothing wrong with that. Those with parents born in the UK many will have a lot of wealth and gifts given to their offspring. Unless the parents squandered it which is more of a mental problem.

I think you need to open your eyes the majority of people's wealth is in their property and is tied up until they die or downsize. You are GreatApe live in your own world and are blind to the problems facing many young people.

I have my own property and in time it will go to my children but they are already in their late 30s and early 40s.

GreatApe

ukcarper wrote: »

So there is no problem people on median earnings are buying property in London and South East easily. £80k is over twice median earnings, median household income in London in 2013 was £29,100 bit higher now probably.

Just pretend inherited and gifted wealth doesn't exist?

Just pretend the £600 billion a year made from non job income doesn't exist?

Just pretend the £12 trillion or so in net wealth doesn't exist and can't flow into housing?

Just pretend the 24% of social Homes in London doesn't exist?


If we do a lot of ignoring of the facts then I agree things look unsustainable.

ukcarper

GreatApe wrote: »

Just pretend inherited and gifted wealth doesn't exist?

Just pretend the £600 billion a year made from non job income doesn't exist?

Just pretend the £12 trillion or so in net wealth doesn't exist and can't flow into housing?

Just pretend the 24% of social Homes in London doesn't exist?


If we do a lot of ignoring of the facts then I agree things look unsustainable.

I'm not but it's not a cure to the problem of high house prices in certain areas.

You can ignore all the figures about house prices in relation to earning if you want but for the majority their earnings are the limiting factor.

Just to make things clear I don't think prices are in a bubble in fact I don't see London prices falling significantly if at all and I don't see anything practical that can be done to alter the situation. Although it might be possible to improve things outside London but to be honest I don't see enough being done.