Houses more affordable than 1970s

AG47

Looking at how much everything has gone up in value since the 1970s, many things have gone up far more than others, but pretty much everything has shown inflation, or shown how the fiat currency devalues as it gets printed and expands in supply.

One thing and only one thing only is cheaper by half now here in 2018, it's half what it was in the 1970s

It's silver. There is nothing else cheaper now than it was in the 1970s

ukcarper

spadoosh wrote: »

I think im a good example for this.

Family 1 (1970).

2 parents, 2 children.

Average household income: £1204 - 1664 (varies a bit, guessing theres some confusion between household and per person.)

Average house price: £4690.

Lets replicate that to 2018.

2 parents 2 children.

Average household income: £32247.

Average house price: £234,000.


In 1970 you required 3.9 times your annual household income to buy the average house. In 2018 you need 7.2 times your annual household income to buy the average house

Lets look a little closer at the household income. If you remove inflation and go back our wages have increase by more than inflation thats really good so current wages are the equivalent to nearly two times what someone in 1970 was earning. Shows more productivity. You do the same with house prices and they wouldve cost £15k back in 1970, so 3 times, not really fitting your argument.

Lets look a little further as to why we're (household) are more productive, i think i know this one too from personal experience. Fair to say the average household in 1970 only had one worker? Probably towards the end of the man of the house era and of course there is always exceptions.

Im not the man of the house. Me and the OH are. In fact shes more of the man being the larger earner. Our joint income is ~£40k (more than double the average 1970s household income) but then we are doing double the work. Our house is worth less than double the equivalent house price in the 1970s.

It doesnt add up. E for effort.

Problem is house prices increased rapidly in early 70s out stripping wage growth. Problem with all these comparisons is that house prices to earning vary and it all depends on the exact times you compare.

AG47

ilovehouses wrote: »

Originally Posted by AG47 View Post
Everything goes from undervalued to overvalued and back again, everying returns to normal eventually.


It's pointless trying to time a property purchase based on this assumption because the cycle is too long.

You missed the mid nineties, you missed 2008 - 2011 - what do you do? Hang on for another 10-15 years?

If the target is home ownership it's quite a contrarian approach compared to the almost surefire method of actually buying a house and chipping away at the mortgage.

Of course, if you can call house prices and know exactly where we are in the undervalued/ overvalued cycle you'll be pondering this from your mansion.

The fact is that its true that everything goes from undervalued to overvalued.

The question is now here in 2018 is property over or undervalued, or about correct value?

I think property is still overvalued, even including the recent falls. It has a long way to fall to get back to fair value, but will over shoot on the correction.

Then property will bottom out obviously undervalued and ne t will go back up to true value and overshoot again until overvalued, then repeat.

This has always happened and always will

The perma prop bulls are wrong. Property will be undervalued again sometime in the future, this is a certainty

chucknorris

AG47 wrote: »

The perma prop bulls are wrong.

Who are the prema bulls? Can you actually name them, please do so. I dare say that you would include me, but I have been saying that property prices fluctuate in economic cycles for years. These people (prema bulls) only exist in your mind, property prices will do what they will do, regardless of what you or I think. As far as I can see, you are not really affected anyway, I just accept that they will do what they do, even though until last year we had £5m invested in property (although that's down to about £3.75m now, as we released £1.25m last year with two sales). It was never about capital growth (property prices and HPI which you bears seem obsessed with, especially Crashy), for me, it was all about yield and income.

What exactly have I got wrong about property, bearing in mind that we have made over £5m from it. It begs the question, what have you done right, and how much did you earn?

GreatApe

spadoosh wrote: »

So how much it costs to borrow is more (edit: sorry wasnt thinking typing less).

OK lets do it your way.

Average house price in 1970 = 4690.

Ill take the higher end interest rates that where seen in the mid 70s as the average for the whole mortgage (vastly over estimating the actual costs). Im using 12% interest rates.

Total cost over the full term (25 years) is £14,815. Or 11.78 times the average household wage in 1970.

And today... Ill err on the side of caution and use the worst case scenario from the 70's and close to the best case scenario from 2018.

Average house price in 2018 = £234,000

Ill use an average of a 3% interest rate. Although i started my mortgage at 5.49% and its currently on 4.49%. Hoping it might drop to about 3% and BofE repeatedly keep saying that they should rise soon. Total cost of mortgage is £332,839. Or 10.3 times.

Damn you where right, houses are more affordable to the household now.
Ill go and tell my OH to quit her job doing 50 hours per week as our house is more affordable than it was in 1970 so clearly no need for her to go to work.

If houses were so affordable in 1970 why was ownership lower than now?

Homes are extremely cheap in the UK they mostly cost £0 because the majority of UK born brits inherit housing or the equivalent in other forms of wealth. You can't get much more affordable than free. In all the talk about income to price ratios the crash cheerleaders miss the dinosaur in the room which is capital gifts and inheritances.

By any reasonable honest metric housing in most the UK is cheap not just affordable but cheap

Do mortgages cost less than social rents? Yes in most the county
Can you buy a house for close to or under new build cost? Yes in most the country
Can a couple working full time on median earnings buy a starter house? Sure yes its easy in most the country

GreatApe

AG47 wrote: »

The fact is that its true that everything goes from undervalued to overvalued.

The question is now here in 2018 is property over or undervalued, or about correct value?

I think property is still overvalued, even including the recent falls. It has a long way to fall to get back to fair value, but will over shoot on the correction.

Then property will bottom out obviously undervalued and ne t will go back up to true value and overshoot again until overvalued, then repeat.

This has always happened and always will

The perma prop bulls are wrong. Property will be undervalued again sometime in the future, this is a certainty

One of the most glaring and interesting facts about the crash cheerleaders is their inability to understand or fathom the fact that there is no one property market yet almost all of them talk as if there is just the one uk property market. In the UK the cheapest region compared to the most expensive region varies in price by a factor of at least 5 times so how can you decide universally that uk property is overvalued or undervalued?

For all the back patting and congratulating of each other about how smart they are the group as a whole is really really dim which is interesting in itself as most people in groups self correct bit I guess not in a confirmation echo chamber

Graham_Devon

AG47 wrote: »

Property is relatively stable in value over the long term, Big Macs computers or any tech like TVs are not stable to measure value over the long term. Fiat currency or any other digital or paper illusions of wealth are not a good measuring stick either.

Or we could just use any of the standard housing affordability indexes out there from the ONS, Halifax, Nationwide or the Land Registry.

But that would all be too simple....

.... and wouldn't show the outcome the OP is trying to convince us (himself) about.

GreatApe

ilovehouses wrote: »

It's pointless trying to time a property purchase based on this assumption because the cycle is too long.

You missed the mid nineties, you missed 2008 - 2011 - what do you do? Hang on for another 10-15 years?

If the target is home ownership it's quite a contrarian approach compared to the almost surefire method of actually buying a house and chipping away at the mortgage.

Of course, if you can call house prices and know exactly where we are in the undervalued/ overvalued cycle you'll be pondering this from your mansion.

Plan A

Get paid a couple thousand pound more in your job. Move company or ask for a promotion or skill up. Maybe 100-1000 hours of work 95% chance of success and it would take less than a year

Plan B

Spend 10+ years on a website 5 hours a day analysing the housing market and patting yourself on the back for spotting a bubble that is about to pop just before Christmas in the hope that a 30%+ crash will happen in a very shirt timeframe so as the overall goal is you spend a couple thousand less on housing costs

Outcome is the same your just a couple thousand a year better off.
Plan A is very likely to pay off rapidly and can progress further and further
Plan B is very very unlikely to pay off and if it doesn't pay off you just have to wait more and become more bitter but even if it does pay off wow you got a house 30% cheaper you're Two k a year better off come let's inform the media about your world beating success story....or not

Anyone waiting for a hpc is a fool
There simply isn't the payback to warrant it
A bit like the idiots with £1000 in the stock market or a particular share spending 20 hours a day reading into it and analysing it. Why its pointless the time value your spending on it is much more valuable than the performance of the investment

HPC cheerleaders sometimes I want to give them a slap and say grow up other times I feel sorry for them.

westernpromise

spadoosh wrote: »

So how much it costs to borrow is more (edit: sorry wasnt thinking typing less).

OK lets do it your way.

Average house price in 1970 = 4690.

Ill take the higher end interest rates that where seen in the mid 70s as the average for the whole mortgage (vastly over estimating the actual costs). Im using 12% interest rates.

Total cost over the full term (25 years) is £14,815. Or 11.78 times the average household wage in 1970.

And today... Ill err on the side of caution and use the worst case scenario from the 70's and close to the best case scenario from 2018.

Average house price in 2018 = £234,000

Ill use an average of a 3% interest rate. Although i started my mortgage at 5.49% and its currently on 4.49%. Hoping it might drop to about 3% and BofE repeatedly keep saying that they should rise soon. Total cost of mortgage is £332,839. Or 10.3 times.

Damn you where right, houses are more affordable to the household now.
Ill go and tell my OH to quit her job doing 50 hours per week as our house is more affordable than it was in 1970 so clearly no need for her to go to work.

Has it occurred to you at all that houses were cheap and home ownership rare in the past because fewer people could get a mortgage?

Many of those bellyaching now about how cheap houses were in 1970 wouldn't have been able to get a loan then.

westernpromise

GreatApe wrote: »

Anyone waiting for a hpc is a fool
There simply isn't the payback to warrant it

.

This.

If I sold up and simultaneously repurchased a house of the same value today I'd lose 10% of the house value in transaction costs. To make money out of doing so I'd have to time both the exit and re-entry perfectly and even then the longer I wait the bigger the crash I need because I've been spending money on the rent in between times.

It can't be done - at least, not by people dumb enough to think they are smart enough to try.

It's like playing the lottery. If you do so in hopes of winning a fortune it means you're stupid. Yes, someone's got to win, but it won't be you.