Why are house prices still so high?

Zxcv_Bnm

GreatApe wrote: »

In the most expensive parts, ie London its more to do with limited land and the fact that you probably need to buy 300 expensive old flats, knock them down, then rebuild 700 flats in its place. The result is very expensive very slow

Of those 700 flats probably 100 would have to be sold below market value as 'affordable' meaning all the others have to become less 'affordable' to cross subsidise

your wider point is very good though, why would a house builder put up a house using £50k of materials in Uttoxeter and sell it for £150k when he could build the same house in Kent and sell it for £650k

Zxcv_Bnm

chucknorris wrote: »

You've been saying that since June 2016, how come it didn't happen last February? Their announcement date is 1st February, so we only have to wait less than 2 weeks.

2 weeks have gone by and as of this afternoon the worlds financial system was still there

andrewf75

Zxcv_Bnm wrote: »

Average salary is not a good guide to much.

First off it includes everyone including those who historically never bought back when 30% or so of houses were council houses, hence you need to look at the average salary among those who actually buy

Second most homeowners have something like 40 to 50% equity so if the asking price is 500k they are only borrowing ~half that

Third 3.5 x household income now means two salaries not one

Fourth mortgage rates have been cheap for 10 years and fixable for another 10 years so 5.5x costs less than 3.5x used to.

So the London house for £500k is not being bought by one person on 27k, it's being bought by 2 who are probably on 40k each and they're borrowing 250k to do so fixed for 5 years at 1.8%

By the time the 5 years are up they'll only need a 200k mortgage and will probably be earning more

Painful as it seems, the best time to buy is usually now, and then you just get on with paying it off

This doesn't mean that some nows aren't better than others, they are, but speculating / trying to time it are mugs games.

also a lot of young people who buy get help from boomer generation parents

this is one of the most unfair aspects, parental wealth is at least as important as salary and this reinforces the class divide

David_Evans

andrewf75 wrote: »

also a lot of young people who buy get help from boomer generation parents

this is one of the most unfair aspects, parental wealth is at least as important as salary and this reinforces the class divide

The value of assets has risen more than the price of labour.

David_Evans

I think it's a very complicated situation...

QE and ZIRP has devalued the currency. Look at UK house prices priced in USD or gold oz over the last 40 years.

There's not really such a thing as 'UK house prices' though. There are completely different prices in different parts of the UK. What's the average once you remove London and SE England from the figures?

David_Evans

Zxcv_Bnm wrote: »

Interest rates aren't too low. We have basically 0% inflation so rates are about right

I reckon the next move in base rates will be down and so will the next moves in mortgage rates

Whose figures are you believing about inflation? The govt figures are completely rigged (hedonic adjustment for smart phone gimmicks, not including house prices and rents, etc, etc).

I think you're probably right about the next base rate move being down. But the moves are so small now, it's pretty meaningless. QE is the Beast at the door.

Bottom line is the UK govt wants to trash the GBP and will create whatever inflation figures it wants.

David_Evans

andrewf75 wrote: »

also a lot of young people who buy get help from boomer generation parents

this is one of the most unfair aspects, parental wealth is at least as important as salary and this reinforces the class divide

But notice how the UK MSM insist that the wealth gap is ''generational'' ie middle aged rich, young poor.

This implies that wealth is spread 'horizontally' in the UK.
Which is complete nonsense.

Wealth is held by families and is 'vertical'. ie your wealth depends on that of your parents and their parents. Nothing to do with how old you are.

Always remember that the MSM have their own agenda.

phillw

David_Evans wrote: »

Wealth is held by families and is 'vertical'. ie your wealth depends on that of your parents and their parents. Nothing to do with how old you are.

Lots of older people bought houses without inheriting anything or being given deposits by their parents. Now it seems you need help from your parents, but not every boomer has the money to give.

If you lived in London and were able to afford somewhere on a normal wage then I'd argue that property was probably undervalued at the time.

David_Evans

phillw wrote: »

Lots of older people bought houses without inheriting anything or being given deposits by their parents.

If you lived in London and were able to afford somewhere on a normal wage then I'd argue that property was probably undervalued at the time.

You are correct.

Post WW2 labour was valued higher than assets (relative to today).

Mortgages were restricted. A wife's income was not included in affordability.

There was a larger supply of social housing and it was a more desired option, so demand to buy was less.
Private landlords were not as common. Secure tenancies were the norm. BTL did not really exist.

The USD was still pegged to gold.
There was less currency production.

Inner London was much less desired up until the 1970s. Many people who could afford to moved out.

The UK was still more industrialised, so cities in the North and Midlands were much closer to London / SEE in terms of demand and hence values.

The City of London and Chelsea etc have always been desirable. But they represented a smaller effect pre 1980s.

andrewf75

David_Evans wrote: »

Always remember that the MSM have their own agenda.

and always remember that the non-mainstream media has even more of an agenda!

Very scepitcal of anyone using the phrase MSM, to be honest.