House price increases. Is everyone absolutely loaded?

zagfles

Ditzy_Mitzy said:

jimbog said:

zagfles said:

Ditzy_Mitzy said:

jimbog said:

zagfles said:

MobileSaver said:

zagfles said:

MobileSaver said:

My comment was of course tongue in cheek although there is no reason why those who feel strongly enough couldn't leave specific instructions for when they have no further use for their home (e.g. death or care home.)

You really don't get it. Why doesn't that surprise me.

It's no use to my kids if my house in particular sells for 20% less. It's of great benefit to them (and all FTBers) if houses in general are 20% cheaper.

I totally understand what you are saying, I just disagree with your viewpoint.

If enough people think the same as you and you all sell your properties to FTBers with big discounts then that will help the younger generation. It won't help your kids specifically but that wasn't what the discussion was about.

zagfles said:

So I would welcome any policy which would result in a general reduction in house prices.

Most people would be better off with lower or at least stable house prices.

You are moving the goal posts here; the discussion was about lowering house prices but you have now introduced "stable" house prices into the mix. I simply don't believe that artificially lower house prices is good for most people.

• How are most of the 20 million existing homeowners better off in a general reduction in house prices?
• How are most house builders better off if house prices are going down while staff and material costs are going up?
• How are FTBers better off if lenders want bigger deposits and charge higher rates because house prices are falling?
• How are most lenders better off if the main asset their loans are secured on is going down in value?

I simply don't believe that artificially lower house prices is "better" for most people. We live in a market economy so let the market do its stuff and let supply and demand dictate the price.

Anyway, at least prices are now lower in real terms than in 2007, even after the recent rises. 

Do you have a link to this? 

It doesn't sound right.  

• Full-time annual salary in the UK 2020 | Statista

• Average house price in the UK 2007-2021 | Statista

Average salary in 2007 (FTE) was £24,043 and in 2020 was £31,461, an increase of 30.85%

Average house price in 2007 was £188,691 and in 2020 was £256,405, an increase of 35.86%

Net difference, therefore, is 5.01%. 

Choosing 2007 as a base year is also slightly naughty, as it was the high point pre credit crash.  Running the same for January 2009 produces the following:

Average salary in 2009 (FTE) was £25,806 and in 2020 was £31,461, an increase of 21.91%

Average house price in 2009 was £157,234 and in 2020 was £256,405, an increase of 63.07%

Look up what "real terms" means. Hint - it's nothing to do with FTE earnings.

https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/chaw/mm23

RPI index May 2021 (latest) is 301.9, RPI index May 2007, 206.2, an increase of 46.4%. Compared with HPI of 35.86%. So over 7% real terms fall.

Here's a graph which shows real term house prices although it's a bit out of date, doesn't show the recent rises in the last 12 months, but you can see the trends (prices in 2020 terms): https://www.allagents.co.uk/house-prices-adjusted/

Real terms prices didn't really change much between the mid 70s and mid 90s, but of course there was high inflation in that time which made it look like they had. The big real terms rises were 1997-2007. Since then they've fallen and bobbled around a bit. But doesn't stop people thinking prices only rise...

Thanks for this. Not sure why some believe we're in a 'bubble'

Would 'real terms' not be better if it included wages and other variables?

That's the problem.  It's all well and good to talk of inflation adjusted 'real terms', but they don't really hold much sway with the man on the Clapham omnibus as he cannot adjust his own wages in a similar manner.  All he has, at any given point in time whether in 2007 or in 2020, is the money in his pocket.  The money has specific purchasing power at that point in time only, ergo real world affordability is most effectively calculated by comparing 2007 wages to 2007 house prices, and similar for 2020.  

The 'real terms' price adjustments give an average house price of £257,798 in 2007.  That's a 38.08% uplift on that year's real average price.  For the sake of fairness, one should apply the same multiplier to the 2007 average salary.  That gives £33,198.60, which is higher than the real average salary in 2020.  The average house price in 2020 is about the same as the adjusted 2007 price, ergo a real individual in 2020 has less buying power than a real individual in 2007.  

So you assume that FTE wages are the only measure of affordability? Really? What if the "man on the Clapham omnibus" now works different hours? Or his partner does? Or he's come into an inheritance? Or he's lost his job? Or he's managed to save a fortune during the pandemic because he's not had to fork out for the Omnibus to go places where he usually spends most of his FTE wage? Or his ISA, invested in a bog standard global equity tracker fund, has doubled in value over the last 5 years so he's got a nice big deposit? Or he's now working at home so wants a house with a garden instead of a poky flat in Clapham?

Or that in 2007 the BoE base rate was 5.5% and it's now 0.1%. Mortgage rates well under half now what they were then.

Loads of things affect affordability over the population. And also what people want changes. The old fashioned simplistic earnings/house price ratio doesn't work anymore. If it did, average price would be around £100k.

jimbog

zagfles said:

Ditzy_Mitzy said:

jimbog said:

zagfles said:

Ditzy_Mitzy said:

jimbog said:

zagfles said:

MobileSaver said:

zagfles said:

MobileSaver said:

My comment was of course tongue in cheek although there is no reason why those who feel strongly enough couldn't leave specific instructions for when they have no further use for their home (e.g. death or care home.)

You really don't get it. Why doesn't that surprise me.

It's no use to my kids if my house in particular sells for 20% less. It's of great benefit to them (and all FTBers) if houses in general are 20% cheaper.

I totally understand what you are saying, I just disagree with your viewpoint.

If enough people think the same as you and you all sell your properties to FTBers with big discounts then that will help the younger generation. It won't help your kids specifically but that wasn't what the discussion was about.

zagfles said:

So I would welcome any policy which would result in a general reduction in house prices.

Most people would be better off with lower or at least stable house prices.

You are moving the goal posts here; the discussion was about lowering house prices but you have now introduced "stable" house prices into the mix. I simply don't believe that artificially lower house prices is good for most people.

• How are most of the 20 million existing homeowners better off in a general reduction in house prices?
• How are most house builders better off if house prices are going down while staff and material costs are going up?
• How are FTBers better off if lenders want bigger deposits and charge higher rates because house prices are falling?
• How are most lenders better off if the main asset their loans are secured on is going down in value?

I simply don't believe that artificially lower house prices is "better" for most people. We live in a market economy so let the market do its stuff and let supply and demand dictate the price.

Anyway, at least prices are now lower in real terms than in 2007, even after the recent rises. 

Do you have a link to this? 

It doesn't sound right.  

• Full-time annual salary in the UK 2020 | Statista

• Average house price in the UK 2007-2021 | Statista

Average salary in 2007 (FTE) was £24,043 and in 2020 was £31,461, an increase of 30.85%

Average house price in 2007 was £188,691 and in 2020 was £256,405, an increase of 35.86%

Net difference, therefore, is 5.01%. 

Choosing 2007 as a base year is also slightly naughty, as it was the high point pre credit crash.  Running the same for January 2009 produces the following:

Average salary in 2009 (FTE) was £25,806 and in 2020 was £31,461, an increase of 21.91%

Average house price in 2009 was £157,234 and in 2020 was £256,405, an increase of 63.07%

Look up what "real terms" means. Hint - it's nothing to do with FTE earnings.

https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/chaw/mm23

RPI index May 2021 (latest) is 301.9, RPI index May 2007, 206.2, an increase of 46.4%. Compared with HPI of 35.86%. So over 7% real terms fall.

Here's a graph which shows real term house prices although it's a bit out of date, doesn't show the recent rises in the last 12 months, but you can see the trends (prices in 2020 terms): https://www.allagents.co.uk/house-prices-adjusted/

Real terms prices didn't really change much between the mid 70s and mid 90s, but of course there was high inflation in that time which made it look like they had. The big real terms rises were 1997-2007. Since then they've fallen and bobbled around a bit. But doesn't stop people thinking prices only rise...

Thanks for this. Not sure why some believe we're in a 'bubble'

Would 'real terms' not be better if it included wages and other variables?

That's the problem.  It's all well and good to talk of inflation adjusted 'real terms', but they don't really hold much sway with the man on the Clapham omnibus as he cannot adjust his own wages in a similar manner.  All he has, at any given point in time whether in 2007 or in 2020, is the money in his pocket.  The money has specific purchasing power at that point in time only, ergo real world affordability is most effectively calculated by comparing 2007 wages to 2007 house prices, and similar for 2020.  

The 'real terms' price adjustments give an average house price of £257,798 in 2007.  That's a 38.08% uplift on that year's real average price.  For the sake of fairness, one should apply the same multiplier to the 2007 average salary.  That gives £33,198.60, which is higher than the real average salary in 2020.  The average house price in 2020 is about the same as the adjusted 2007 price, ergo a real individual in 2020 has less buying power than a real individual in 2007.  

So you assume that FTE wages are the only measure of affordability? Really? What if the "man on the Clapham omnibus" now works different hours? Or his partner does? Or he's come into an inheritance? Or he's lost his job? Or he's managed to save a fortune during the pandemic because he's not had to fork out for the Omnibus to go places where he usually spends most of his FTE wage? Or his ISA, invested in a bog standard global equity tracker fund, has doubled in value over the last 5 years so he's got a nice big deposit? Or he's now working at home so wants a house with a garden instead of a poky flat in Clapham?

Or that in 2007 the BoE base rate was 5.5% and it's now 0.1%. Mortgage rates well under half now what they were then.

Whoa! Relax. Ditzy never said that  

zagfles

jimbog said:

zagfles said:

Ditzy_Mitzy said:

jimbog said:

zagfles said:

Ditzy_Mitzy said:

jimbog said:

zagfles said:

MobileSaver said:

zagfles said:

MobileSaver said:

My comment was of course tongue in cheek although there is no reason why those who feel strongly enough couldn't leave specific instructions for when they have no further use for their home (e.g. death or care home.)

You really don't get it. Why doesn't that surprise me.

It's no use to my kids if my house in particular sells for 20% less. It's of great benefit to them (and all FTBers) if houses in general are 20% cheaper.

I totally understand what you are saying, I just disagree with your viewpoint.

If enough people think the same as you and you all sell your properties to FTBers with big discounts then that will help the younger generation. It won't help your kids specifically but that wasn't what the discussion was about.

zagfles said:

So I would welcome any policy which would result in a general reduction in house prices.

Most people would be better off with lower or at least stable house prices.

You are moving the goal posts here; the discussion was about lowering house prices but you have now introduced "stable" house prices into the mix. I simply don't believe that artificially lower house prices is good for most people.

• How are most of the 20 million existing homeowners better off in a general reduction in house prices?
• How are most house builders better off if house prices are going down while staff and material costs are going up?
• How are FTBers better off if lenders want bigger deposits and charge higher rates because house prices are falling?
• How are most lenders better off if the main asset their loans are secured on is going down in value?

I simply don't believe that artificially lower house prices is "better" for most people. We live in a market economy so let the market do its stuff and let supply and demand dictate the price.

Anyway, at least prices are now lower in real terms than in 2007, even after the recent rises. 

Do you have a link to this? 

It doesn't sound right.  

• Full-time annual salary in the UK 2020 | Statista

• Average house price in the UK 2007-2021 | Statista

Average salary in 2007 (FTE) was £24,043 and in 2020 was £31,461, an increase of 30.85%

Average house price in 2007 was £188,691 and in 2020 was £256,405, an increase of 35.86%

Net difference, therefore, is 5.01%. 

Choosing 2007 as a base year is also slightly naughty, as it was the high point pre credit crash.  Running the same for January 2009 produces the following:

Average salary in 2009 (FTE) was £25,806 and in 2020 was £31,461, an increase of 21.91%

Average house price in 2009 was £157,234 and in 2020 was £256,405, an increase of 63.07%

Look up what "real terms" means. Hint - it's nothing to do with FTE earnings.

https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/chaw/mm23

RPI index May 2021 (latest) is 301.9, RPI index May 2007, 206.2, an increase of 46.4%. Compared with HPI of 35.86%. So over 7% real terms fall.

Here's a graph which shows real term house prices although it's a bit out of date, doesn't show the recent rises in the last 12 months, but you can see the trends (prices in 2020 terms): https://www.allagents.co.uk/house-prices-adjusted/

Real terms prices didn't really change much between the mid 70s and mid 90s, but of course there was high inflation in that time which made it look like they had. The big real terms rises were 1997-2007. Since then they've fallen and bobbled around a bit. But doesn't stop people thinking prices only rise...

Thanks for this. Not sure why some believe we're in a 'bubble'

Would 'real terms' not be better if it included wages and other variables?

That's the problem.  It's all well and good to talk of inflation adjusted 'real terms', but they don't really hold much sway with the man on the Clapham omnibus as he cannot adjust his own wages in a similar manner.  All he has, at any given point in time whether in 2007 or in 2020, is the money in his pocket.  The money has specific purchasing power at that point in time only, ergo real world affordability is most effectively calculated by comparing 2007 wages to 2007 house prices, and similar for 2020.  

The 'real terms' price adjustments give an average house price of £257,798 in 2007.  That's a 38.08% uplift on that year's real average price.  For the sake of fairness, one should apply the same multiplier to the 2007 average salary.  That gives £33,198.60, which is higher than the real average salary in 2020.  The average house price in 2020 is about the same as the adjusted 2007 price, ergo a real individual in 2020 has less buying power than a real individual in 2007.  

So you assume that FTE wages are the only measure of affordability? Really? What if the "man on the Clapham omnibus" now works different hours? Or his partner does? Or he's come into an inheritance? Or he's lost his job? Or he's managed to save a fortune during the pandemic because he's not had to fork out for the Omnibus to go places where he usually spends most of his FTE wage? Or his ISA, invested in a bog standard global equity tracker fund, has doubled in value over the last 5 years so he's got a nice big deposit? Or he's now working at home so wants a house with a garden instead of a poky flat in Clapham?

Or that in 2007 the BoE base rate was 5.5% and it's now 0.1%. Mortgage rates well under half now what they were then.

Whoa! Relax. Ditzy never said that  

"ergo real world affordability is most effectively calculated by comparing 2007 wages to 2007 house prices, and similar for 2020. "

"ergo a real individual in 2020 has less buying power than a real individual in 2007. " Yeah cos mortgage rates halving has less effect on affordability than a slight drop in earnings relative to house prices

What do you think?

jimbog

zagfles said:

jimbog said:

zagfles said:

Ditzy_Mitzy said:

jimbog said:

zagfles said:

Ditzy_Mitzy said:

jimbog said:

zagfles said:

MobileSaver said:

zagfles said:

MobileSaver said:

My comment was of course tongue in cheek although there is no reason why those who feel strongly enough couldn't leave specific instructions for when they have no further use for their home (e.g. death or care home.)

You really don't get it. Why doesn't that surprise me.

It's no use to my kids if my house in particular sells for 20% less. It's of great benefit to them (and all FTBers) if houses in general are 20% cheaper.

I totally understand what you are saying, I just disagree with your viewpoint.

If enough people think the same as you and you all sell your properties to FTBers with big discounts then that will help the younger generation. It won't help your kids specifically but that wasn't what the discussion was about.

zagfles said:

So I would welcome any policy which would result in a general reduction in house prices.

Most people would be better off with lower or at least stable house prices.

You are moving the goal posts here; the discussion was about lowering house prices but you have now introduced "stable" house prices into the mix. I simply don't believe that artificially lower house prices is good for most people.

• How are most of the 20 million existing homeowners better off in a general reduction in house prices?
• How are most house builders better off if house prices are going down while staff and material costs are going up?
• How are FTBers better off if lenders want bigger deposits and charge higher rates because house prices are falling?
• How are most lenders better off if the main asset their loans are secured on is going down in value?

I simply don't believe that artificially lower house prices is "better" for most people. We live in a market economy so let the market do its stuff and let supply and demand dictate the price.

Anyway, at least prices are now lower in real terms than in 2007, even after the recent rises. 

Do you have a link to this? 

It doesn't sound right.  

• Full-time annual salary in the UK 2020 | Statista

• Average house price in the UK 2007-2021 | Statista

Average salary in 2007 (FTE) was £24,043 and in 2020 was £31,461, an increase of 30.85%

Average house price in 2007 was £188,691 and in 2020 was £256,405, an increase of 35.86%

Net difference, therefore, is 5.01%. 

Choosing 2007 as a base year is also slightly naughty, as it was the high point pre credit crash.  Running the same for January 2009 produces the following:

Average salary in 2009 (FTE) was £25,806 and in 2020 was £31,461, an increase of 21.91%

Average house price in 2009 was £157,234 and in 2020 was £256,405, an increase of 63.07%

Look up what "real terms" means. Hint - it's nothing to do with FTE earnings.

https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/chaw/mm23

RPI index May 2021 (latest) is 301.9, RPI index May 2007, 206.2, an increase of 46.4%. Compared with HPI of 35.86%. So over 7% real terms fall.

Here's a graph which shows real term house prices although it's a bit out of date, doesn't show the recent rises in the last 12 months, but you can see the trends (prices in 2020 terms): https://www.allagents.co.uk/house-prices-adjusted/

Real terms prices didn't really change much between the mid 70s and mid 90s, but of course there was high inflation in that time which made it look like they had. The big real terms rises were 1997-2007. Since then they've fallen and bobbled around a bit. But doesn't stop people thinking prices only rise...

Thanks for this. Not sure why some believe we're in a 'bubble'

Would 'real terms' not be better if it included wages and other variables?

That's the problem.  It's all well and good to talk of inflation adjusted 'real terms', but they don't really hold much sway with the man on the Clapham omnibus as he cannot adjust his own wages in a similar manner.  All he has, at any given point in time whether in 2007 or in 2020, is the money in his pocket.  The money has specific purchasing power at that point in time only, ergo real world affordability is most effectively calculated by comparing 2007 wages to 2007 house prices, and similar for 2020.  

The 'real terms' price adjustments give an average house price of £257,798 in 2007.  That's a 38.08% uplift on that year's real average price.  For the sake of fairness, one should apply the same multiplier to the 2007 average salary.  That gives £33,198.60, which is higher than the real average salary in 2020.  The average house price in 2020 is about the same as the adjusted 2007 price, ergo a real individual in 2020 has less buying power than a real individual in 2007.  

So you assume that FTE wages are the only measure of affordability? Really? What if the "man on the Clapham omnibus" now works different hours? Or his partner does? Or he's come into an inheritance? Or he's lost his job? Or he's managed to save a fortune during the pandemic because he's not had to fork out for the Omnibus to go places where he usually spends most of his FTE wage? Or his ISA, invested in a bog standard global equity tracker fund, has doubled in value over the last 5 years so he's got a nice big deposit? Or he's now working at home so wants a house with a garden instead of a poky flat in Clapham?

Or that in 2007 the BoE base rate was 5.5% and it's now 0.1%. Mortgage rates well under half now what they were then.

Whoa! Relax. Ditzy never said that  

"ergo real world affordability is most effectively calculated by comparing 2007 wages to 2007 house prices, and similar for 2020. "

"ergo a real individual in 2020 has less buying power than a real individual in 2007. " Yeah cos mortgage rates halving has less effect on affordability than a slight drop in earnings relative to house prices

What do you think?

Read all of her post again. Carefully 

BikingBud

zagfles said:

Ditzy_Mitzy said:

That's the problem.  It's all well and good to talk of inflation adjusted 'real terms', but they don't really hold much sway with the man on the Clapham omnibus as he cannot adjust his own wages in a similar manner.  All he has, at any given point in time whether in 2007 or in 2020, is the money in his pocket.  The money has specific purchasing power at that point in time only, ergo real world affordability is most effectively calculated by comparing 2007 wages to 2007 house prices, and similar for 2020.  

The 'real terms' price adjustments give an average house price of £257,798 in 2007.  That's a 38.08% uplift on that year's real average price.  For the sake of fairness, one should apply the same multiplier to the 2007 average salary.  That gives £33,198.60, which is higher than the real average salary in 2020.  The average house price in 2020 is about the same as the adjusted 2007 price, ergo a real individual in 2020 has less buying power than a real individual in 2007.  

So you assume that FTE wages are the only measure of affordability? Really? What if the "man on the Clapham omnibus" now works different hours? Or his partner does? Or he's come into an inheritance? Or he's lost his job? Or he's managed to save a fortune during the pandemic because he's not had to fork out for the Omnibus to go places where he usually spends most of his FTE wage? Or his ISA, invested in a bog standard global equity tracker fund, has doubled in value over the last 5 years so he's got a nice big deposit? Or he's now working at home so wants a house with a garden instead of a poky flat in Clapham?

Or that in 2007 the BoE base rate was 5.5% and it's now 0.1%. Mortgage rates well under half now what they were then.

Loads of things affect affordability over the population. And also what people want changes. The old fashioned simplistic earnings/house price ratio doesn't work anymore. If it did, average price would be around £100k.

All of those what ifs remove him from sharing the bus with the proles and make him an outlier 

Or did you imagine he could have a fleet of high performance cars and a number of holidays homes throughout Europe following his success on the stock market and still retain that median man status?

zagfles

BikingBud said:

zagfles said:

Ditzy_Mitzy said:

That's the problem.  It's all well and good to talk of inflation adjusted 'real terms', but they don't really hold much sway with the man on the Clapham omnibus as he cannot adjust his own wages in a similar manner.  All he has, at any given point in time whether in 2007 or in 2020, is the money in his pocket.  The money has specific purchasing power at that point in time only, ergo real world affordability is most effectively calculated by comparing 2007 wages to 2007 house prices, and similar for 2020.  

The 'real terms' price adjustments give an average house price of £257,798 in 2007.  That's a 38.08% uplift on that year's real average price.  For the sake of fairness, one should apply the same multiplier to the 2007 average salary.  That gives £33,198.60, which is higher than the real average salary in 2020.  The average house price in 2020 is about the same as the adjusted 2007 price, ergo a real individual in 2020 has less buying power than a real individual in 2007.  

So you assume that FTE wages are the only measure of affordability? Really? What if the "man on the Clapham omnibus" now works different hours? Or his partner does? Or he's come into an inheritance? Or he's lost his job? Or he's managed to save a fortune during the pandemic because he's not had to fork out for the Omnibus to go places where he usually spends most of his FTE wage? Or his ISA, invested in a bog standard global equity tracker fund, has doubled in value over the last 5 years so he's got a nice big deposit? Or he's now working at home so wants a house with a garden instead of a poky flat in Clapham?

Or that in 2007 the BoE base rate was 5.5% and it's now 0.1%. Mortgage rates well under half now what they were then.

Loads of things affect affordability over the population. And also what people want changes. The old fashioned simplistic earnings/house price ratio doesn't work anymore. If it did, average price would be around £100k.

All of those what ifs remove him from sharing the bus with the proles and make him an outlier 

Or did you imagine he could have a fleet of high performance cars and a number of holidays homes throughout Europe following his success on the stock market and still retain that median man status?

Oh I see, you think any of those things makes him an outlier do you? You note the "or" between them right? So someone who's now working at home, or has managed to save a bit in the pandemic, or has an ISA etc etc, is an outlier then? OK right...so we have a lot of "outliers" then.

Do you also think someone whose mortgage rate has halved since 2007 is an outlier too then? Does that fit the narrative?

zagfles

jimbog said:

zagfles said:

jimbog said:

zagfles said:

Ditzy_Mitzy said:

jimbog said:

zagfles said:

Ditzy_Mitzy said:

jimbog said:

zagfles said:

MobileSaver said:

zagfles said:

MobileSaver said:

My comment was of course tongue in cheek although there is no reason why those who feel strongly enough couldn't leave specific instructions for when they have no further use for their home (e.g. death or care home.)

You really don't get it. Why doesn't that surprise me.

It's no use to my kids if my house in particular sells for 20% less. It's of great benefit to them (and all FTBers) if houses in general are 20% cheaper.

I totally understand what you are saying, I just disagree with your viewpoint.

If enough people think the same as you and you all sell your properties to FTBers with big discounts then that will help the younger generation. It won't help your kids specifically but that wasn't what the discussion was about.

zagfles said:

So I would welcome any policy which would result in a general reduction in house prices.

Most people would be better off with lower or at least stable house prices.

You are moving the goal posts here; the discussion was about lowering house prices but you have now introduced "stable" house prices into the mix. I simply don't believe that artificially lower house prices is good for most people.

• How are most of the 20 million existing homeowners better off in a general reduction in house prices?
• How are most house builders better off if house prices are going down while staff and material costs are going up?
• How are FTBers better off if lenders want bigger deposits and charge higher rates because house prices are falling?
• How are most lenders better off if the main asset their loans are secured on is going down in value?

I simply don't believe that artificially lower house prices is "better" for most people. We live in a market economy so let the market do its stuff and let supply and demand dictate the price.

Anyway, at least prices are now lower in real terms than in 2007, even after the recent rises. 

Do you have a link to this? 

It doesn't sound right.  

• Full-time annual salary in the UK 2020 | Statista

• Average house price in the UK 2007-2021 | Statista

Average salary in 2007 (FTE) was £24,043 and in 2020 was £31,461, an increase of 30.85%

Average house price in 2007 was £188,691 and in 2020 was £256,405, an increase of 35.86%

Net difference, therefore, is 5.01%. 

Choosing 2007 as a base year is also slightly naughty, as it was the high point pre credit crash.  Running the same for January 2009 produces the following:

Average salary in 2009 (FTE) was £25,806 and in 2020 was £31,461, an increase of 21.91%

Average house price in 2009 was £157,234 and in 2020 was £256,405, an increase of 63.07%

Look up what "real terms" means. Hint - it's nothing to do with FTE earnings.

https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/chaw/mm23

RPI index May 2021 (latest) is 301.9, RPI index May 2007, 206.2, an increase of 46.4%. Compared with HPI of 35.86%. So over 7% real terms fall.

Here's a graph which shows real term house prices although it's a bit out of date, doesn't show the recent rises in the last 12 months, but you can see the trends (prices in 2020 terms): https://www.allagents.co.uk/house-prices-adjusted/

Real terms prices didn't really change much between the mid 70s and mid 90s, but of course there was high inflation in that time which made it look like they had. The big real terms rises were 1997-2007. Since then they've fallen and bobbled around a bit. But doesn't stop people thinking prices only rise...

Thanks for this. Not sure why some believe we're in a 'bubble'

Would 'real terms' not be better if it included wages and other variables?

That's the problem.  It's all well and good to talk of inflation adjusted 'real terms', but they don't really hold much sway with the man on the Clapham omnibus as he cannot adjust his own wages in a similar manner.  All he has, at any given point in time whether in 2007 or in 2020, is the money in his pocket.  The money has specific purchasing power at that point in time only, ergo real world affordability is most effectively calculated by comparing 2007 wages to 2007 house prices, and similar for 2020.  

The 'real terms' price adjustments give an average house price of £257,798 in 2007.  That's a 38.08% uplift on that year's real average price.  For the sake of fairness, one should apply the same multiplier to the 2007 average salary.  That gives £33,198.60, which is higher than the real average salary in 2020.  The average house price in 2020 is about the same as the adjusted 2007 price, ergo a real individual in 2020 has less buying power than a real individual in 2007.  

So you assume that FTE wages are the only measure of affordability? Really? What if the "man on the Clapham omnibus" now works different hours? Or his partner does? Or he's come into an inheritance? Or he's lost his job? Or he's managed to save a fortune during the pandemic because he's not had to fork out for the Omnibus to go places where he usually spends most of his FTE wage? Or his ISA, invested in a bog standard global equity tracker fund, has doubled in value over the last 5 years so he's got a nice big deposit? Or he's now working at home so wants a house with a garden instead of a poky flat in Clapham?

Or that in 2007 the BoE base rate was 5.5% and it's now 0.1%. Mortgage rates well under half now what they were then.

Whoa! Relax. Ditzy never said that  

"ergo real world affordability is most effectively calculated by comparing 2007 wages to 2007 house prices, and similar for 2020. "

"ergo a real individual in 2020 has less buying power than a real individual in 2007. " Yeah cos mortgage rates halving has less effect on affordability than a slight drop in earnings relative to house prices

What do you think?

Read all of her post again. Carefully 

She seems to think affordability is linked more to FTE earnings rather than inflation, without accounting for other changes, like the massive fall in interest rates since 2007.

Perhaps you can explain if I've missed something.