Will House Prices Crash in 10-20 Years?

anotheruser

So all those people who bought houses at rock bottom prices in the 1970's/1980's and 1990's - will they struggle in the future?

There's loads of that generation of people who will come to sell their house, probably around the same time. Do you think house prices will crash down because there will suddenly be loads on the market?
Or are we still not building enough houses / able to fill houses easily / will have many more migrants to fill the houses / more buy to let landlords...

Debate!

Jack_Johnson_the_acorn

anotheruser wrote: »

So all those people who bought houses at rock bottom prices in the 1970's/1980's and 1990's - will they struggle in the future?

There's loads of that generation of people who will come to sell their house, probably around the same time. Do you think house prices will crash down because there will suddenly be loads on the market?
Or are we still not building enough houses / able to fill houses easily / will have many more migrants to fill the houses / more buy to let landlords...

Debate!

Did people only start buying houses in the 70s? People are buying and selling all the time..... Daft question IMO.
As for a future crash, I predict there will be a crash at 2pm on July 24th 2030.

ukcarper

anotheruser wrote: »

So all those people who bought houses at rock bottom prices in the 1970's/1980's and 1990's - will they struggle in the future?

There's loads of that generation of people who will come to sell their house, probably around the same time. Do you think house prices will crash down because there will suddenly be loads on the market?
Or are we still not building enough houses / able to fill houses easily / will have many more migrants to fill the houses / more buy to let landlords...

Debate!

At times in the 70s in relation to earnings prices were quite high much higher tha early 2000s

System

House prices to income ratio in the 1970s was 2. Typical reply from a baby boomer lol. In my day.... 5.5 - 6 was unheard of......I like maths

ukcarper

mrlegend123 wrote: »

House prices to income ratio in the 1970s was 2. Typical reply from a baby boomer lol. In my day.... 5.5 - 6 was unheard of......I like maths

Price to income rational reached almost 5x and is now about 6x that's nationwide figures. The difference is they didn't stay there for long.

System

Provide me with a reference to back up your statement. I believe your getting confused....

BobQ

anotheruser wrote: »

So all those people who bought houses at rock bottom prices in the 1970's/1980's and 1990's - will they struggle in the future?

There's loads of that generation of people who will come to sell their house, probably around the same time. Do you think house prices will crash down because there will suddenly be loads on the market?
Or are we still not building enough houses / able to fill houses easily / will have many more migrants to fill the houses / more buy to let landlords...

Debate!

The generation you refer to will not die in such concentrated numbers that will cause a crash, but what if they do?

Very few people buy a house to live in as an investment too. They buy because they want somewhere to live. They may expect to trade up or down in that market but ultimately they expect to die while living in their home. Some may have to sell in order to enter a retirement home but that is not what they plan for or the norm. But for most they will not bother about the price falls.

The only people who will suffer through a declining market (if you are correct) are those who inherit those houses and they will either get less than they had hoped or benefit by being able to afford to buy themselves.

I do not think the scenario you suggest will happen unless we build lots more houses. What we may also see is the substandard housing that modern builders erected in the last quarter of the last decade, decline in value and be demolished pushing prices up.

ukcarper

mrlegend123 wrote: »

Provide me with a reference to back up your statement. I believe your getting confused....

No I was around then and know how expensive property was. There was a link to pre 1983 nationwide figures on HPC site but it's not there now.

https://grandemotte.files.wordpress.com/2009/11/price_earnings.jpg

lisyloo

Firstly the ageing population will not all act at the same time, some will retire at 55, some 70, some may die or need a bungalow, some may move to the country, some will emigrate to the costas, some will downsize, some will stay put.

Also yes, with increasing population, overseas investors, holiday hom, pied a terres, smaller households there will be enough demand.

Those who bough in the 70s-90s are laughing (unless they mewed excessively).

TheCountofNowhere

mrlegend123 wrote: »

House prices to income ratio in the 1970s was 2

Hahahaha that's given me a good laugh

westernpromise

Count, allow me to tell you a story about historic salary multiples.

Once upon a time, a wife’s earnings were taxed at her husband’s marginal rate. She got no personal tax-free allowance at all. Instead, he got a bigger - married man's - allowance, and he got this whether she worked or not. So a wife's earnings were simply a line item on her husband’s tax return, like a BTL is now. If she overpaid her PAYE by mistake, the refund cheque was sent to her husband.

As a result, a man of the 1970s earning just below Labour's top rate of 83% would find that his wife’s whole earnings would be added to his, then taxed in their entirety at 83%. If she made £30 a week, she’d thus get to keep about £5 of it. By the time she’d paid for her work wardrobe and her commuting expenses, she could very well be net paying to work, rather than earning. At the very least she was getting a pittance for her time. Consequently, many married women rationally left the workforce, because workplaces undervalued their time.

This suited a lot of vested interests. It hid unemployment nicely because all these "just a housewife" wives didn't count in the figures, so the government liked it. Unions liked it because it kept women out of the workforce to the benefit of men. And so on.

When assessing what a working couple could afford in the way of a mortgage, mortgage lenders back then looked at what he had left after tax, and at what she did. They correctly concluded that even if her headline salary was the same as his, it was net a lot less by the time the sexist taxman had finished with it. So if there were two salaries of £5,000 and £2,000 they'd typically lend either 3.5x the main one or 2.5x joint salaries.

This is where these hallowed multiples originally came from. A man's salary could support more lending than his wife's because she was getting mugged for so much tax. So in the above example, they constructively ignored her salary.

This multiple started to change in the 70s. People cohabited without marrying in part at least because they saved so much tax and thus had two full salaries to throw at a mortgage. So then 3.5x + 1x started to become a thing.

Few are aware that it was not until 1988 that Lawson finally got rid of this sexist anachronism.

The crash then happened and is the main thing anyone remembers about the UK property market of that era. But by about 1996 prices were starting to recover and the recovery was fuelled by people starting at last to borrow 3.5x joint salaries at mortgage (not base) rates of 9 or 10%. The still higher multiples we now see are because at base rates of 0.25%, couples can service much higher borrowings at proportionately the same cost.

A London flat I bought in 1988 is back on the market today (https://forums.moneysavingexpert.com/discussion/5475610). While I paid £85k for it back then and it'll sell for probably £450k now, the monthly cost from salary to own it is proportionately little different, eyewatering as the required salary multiple feels.

Unless the tax man starts treating women as chattels again - and GLWT in the polling booth to anyone who proposes it - we won't see 1988/1998 prices again.

This little-remembered bit of tax history does tell you why it’s such a mug’s game to hope that one day, prices in Luton (or wherever) will return to a sensible level of 3.5x one salary in Luton. Not gonna happen.