How low will property go?

ukcarper

p1212 wrote: »

According to Nationwide it is 10x in London and its been around 4x-5x for a very long time.

Most of the speculative money obviously goes to London and to the bigger cities, the fact that in other areas the prices hasn't gone up since 2008 is the proof itself that it is only speculative money, there is no real growth.

It's alway been higher in London I couldn't afford to buy there in the 70s. The problem with London is to many people not enough property.

System

The Government should be offering incentives for businesses to move away from London and head north. London is over rated.

cells

p1212 wrote: »

I am talking about London and SE and the bigger citites, like Manchester of course.

House price to earnings ratio has been historically around 4.5 for the last 60 years even in London, apart from the last ten-fifteen years, now it is above 10. Nominal prices increased 200%.

Also in the same period the average mortgage value shooted up with around 150%, wages went up only something like 40%.

Now I don't really believe these changes would be totally unrelated and it seems to me that most of the increase comes from the amount of mortgage given out, not from the wage increase.

You don't have to call it bubble, but it is definitely different from anything else before.

Only London is abnormally high (and there are good reasons for that)

Most the rest of the country is fine even very affordable.

You say Manchester: The average terrace costs £138.8k and the average male full time wage is £29.9k. With a 10% deposit that works out to 4.18 x single man wage so its within your 4.5x

But of course most people buy as couples its not realistic that everyone lives 1 person to a house. In which case the 4.18 x single income falls towards 2.5 x joint income. That is very affordable.

Add to the mix mortgages of 2% and homes are very affordable

System

Homes are currently affordable (subject to region) because of central bankers manipulation of the housing market.

cells

ukcarper wrote: »

According to nationwide long term average is about 4.3 and is now about 6x the historical figures have always been based on Full Time Male.

Problem with the nationwide graph is that its average is skewed by the 1990s which was a period of not normal but abnormally cheap prices

Think of it this way, in a lot of the country you simply could not build a new house for 4.3 x male wage. In manchester that would be £29.9 x 4.3 = £128.5k or about £1,600 per sqm

That is too low a price to make it viable. High quality refurbs run at more than £1.6k per sqm, home extensions run at more than £1.6k per sqm and these dont have much of the costs of a new build (planning, land, utilities, S106s, CILs etc)

cells

p1212 wrote: »

According to Nationwide it is 10x in London and its been around 4x-5x for a very long time.

Most of the speculative money obviously goes to London and to the bigger cities, the fact that in other areas the prices hasn't gone up since 2008 is the proof itself that it is only speculative money, there is no real growth.

London, more so than the rest of the country, was far far too cheap in the 1990s which distorts the picture

The reason London was so cheap was because the councils over built social homes (inner east London a huge area is still 60% council homes even after 25 years of right to buy) and there was a population crash from WW2 to about the late 80s in London. So decades of fewer people going hand in hand with councils overbuilding resulted in very cheap properties in London.

ukcarper

cells wrote: »

Problem with the nationwide graph is that its average is skewed by the 1990s which was a period of not normal but abnormally cheap prices

Think of it this way, in a lot of the country you simply could not build a new house for 4.3 x male wage. In manchester that would be £29.9 x 4.3 = £128.5k or about £1,600 per sqm

That is too low a price to make it viable. High quality refurbs run at more than £1.6k per sqm, home extensions run at more than £1.6k per sqm and these dont have much of the costs of a new build (planning, land, utilities, S106s, CILs etc)

I think you could quite easily argue that prices over the last decade skews it the other way.

cells

ukcarper wrote: »

I think you could quite easily argue that prices over the last decade skews it the other way.

That is not the only argument, build costs is another.

You simply cant build a new home for £1.1k per sqm (which is the rough price 3x male income, where prices were in the 90s would imply)

That implies homes should cost less to buy than to build. That is not a sustainable situation unless you are in a dire economic position.

ukcarper

cells wrote: »

That is not the only argument, build costs is another.

You simply cant build a new home for £1.1k per sqm (which is the rough price 3x male income, where prices were in the 90s would imply)

That implies homes should cost less to buy than to build. That is not a sustainable situation unless you are in a dire economic position.

I'm not discussing whether price are high just that at the moment they are at the most 40% above the longterm average which in my opinion is not great but it's nowhere near as bad as some people make out.

System

Ukcarper your a baby boomer..... Sorry I know it's not your fault but it is alot harder for the younger generation as they are saddled with more debt. I do not directly blame baby boomers but past central bankers and governments.