Here we go again, teachers striking again...

Bear said:
What's more likely happened is that to meet targets, teachers have stopped educating and started teaching to pass exams.
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Oh yes, that absolutely happens, in some schools more than others. This is one of the main reasons why the students get to university and struggle with the content. The exam style is very different in university, but the school exams are slowly shifting to try to match it more closely.

The problem is that whatever happens to the education system over the next few years, the next government will want to change it again.
 
robskinner said:
lol

its a trend not a perfect mathematical equation.

I picked 10 yearly points but when you look at the data there is a noticable leap in house prices late 40s,maybe after the war effect?
Which corrects a bit follow that in the early 50s
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It still looks largely static, with the spike in the last decade, one that may be indicative of further increases or may simply be the same anomaly as seen in 1950........the average over the total period appears to be around a 3-1 ratio, which given the longterm nature of property investment seems to a reasonable ratio.

The problem is not the average ratio though, but the regional variation and various other factors. As far as the House price to earnings ratio goes the long term trend has always been 3-4x, with 4x being the magic number as far as economists and the housing market is concerned, the issue is that since 2001 the ratio has gradually shifted so that now it is 5-6.5x and thus for a revaluation to that magic 4x ratio would mean either a major upward shift in average earnings and/or a major downturn in House prices.....neither of which seem likely or would be sustainable in our current economic climate.

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Therefore while I don't necessarily disagree that house prices are artificially high, I don't think the figures you have given really help you illustrate that.
 
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Bear said:
What's more likely happened is that to meet targets, teachers have stopped educating and started teaching to pass exams.
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Thats nothing new, some of my teachers did that 30 years ago.

For most professional qualifications places like BPP have run last minute revision courses that basically cram the most common, easiest to remember ways to get exam marks. Generic answers that can be used to answer a range of questions with a little customisation etc. very clever stuff when you think about it from a companies view, but also a con when you think about it from a examinees/professional bodies view, as they will teach nothing to someone who really knows their subject.
 
Castiel said:
It still looks largely static, with the spike in the last decade, one that may be indicative of further increases or may simply be the same anomaly as seen in 1950........the average over the total period appears to be around a 3-1 ratio, which given the longterm nature of property investment seems to a reasonable ratio.

The problem is not the average ratio though, but the regional variation and various other factors. As far as the House price to earnings ratio goes the long term trend has always been 3-4x, with 4x being the magic number as far as economists and the housing market is concerned, the issue is that since 2001 the ratio has gradually shifted so that now it is 6.5x and thus for a revaluation to that magic 4x ratio would mean either a major upward shift in average earnings and/or a major downturn in House prices.....neither of which seem likely or would be sustainable in our current economic climate.

Therefore while I don't necessarily disagree that house prices are artificially high, I don't think the figures you have given really help you illustrate that.
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Well I guess one of the main reasons I see a trend there is Ive been doing that sort of thing for 20 years, there is a trend, its imperfect but its there. Its a slight upwards trend from 1940 to 2000. If its the true long term trend I don't know.

Personally 4x seems pretty reasonable, much higher is unsustainable and much lower "feels" too low. So 4x "feels" a pretty good average and as you say thats taken as a gnerally good long term measurement.

Many things will have affected points along the trend, unemployment, etc
Funny but I disagree on regional variations, I suspect there has pretty much always been fairly strong regional variations, but they will change over time as we change in expectations, 2nd houses etc have pushed up regions such as Cornwall where the affluent now hold second properties but historically they were just locals eg fishermen in small remote (relatively) villages
The amount of houses being built, owner occupation, why people are not buying, the quality and size of the average house. E.g I bet the average house now is quite different to the average house in 1940

I cannot see any chance of the average wage being able to match a 3x or even 4x multiplier to house price without destroying the competitiveness of the UK economy. Equally without virtual armageddon I cannot see the house prices dropping to match 4x current wages. Maybe there will be some correction over time and they will fall back a bit, maybe

My original point is that qwerk seems to imply its almost a given, I cannot see it happening without a trigger and to my mind it would need to be such a massively significant thing to cause that kind of marked change we cannot see what else would be impacted at the same time. If we did suddenly get to an average of 2x everyone would go woooot I can get this house now its sooo much better than what I could afford before... or would they stick to the same "spec" house and **** the rest of their income up against the wall they would have spent on the mortgage?

I suspect the increase in multiplier has also come with an fairly large increase in general housing standards, indoor toilets, proper bathrooms, more rooms in general, better insulation and double glazing, better electrics, etc etc
 
robskinner said:
Right so your saying that supply of capital being restricted would drop the prices of houses? So like the 70s then when capital was basically rationed?

I still don't see how you think the above would have any material affect on house prices, please explain how even if that were true it would actually happen?

If the capital was withdrawn from the system lots more things would happen than just house prices falling, companies would be unable to borrow, massive amounts of profitable but debt encumbered businesses would be unable to pay staff and creditors and would therefore fold. Potentially the government would be unable to borrow to pay wages and benefits at times due to tax take being far from smooth (thats ignoring the current national debt)

Or are you saying that someone is going to restrict the supply of money to just the housing market and leave all the rest of the borrowers able to access funds without any issues?
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The debt laden pretenders would be weeded out and the people with low or zero debt and real wealth instead of leveraged wealth would take over. If a company was profitable it would be bought for what it is actually worth, perhaps 25% of it's current inflated valuation. Same for houses. There would still be capital just a realistic amount of it, backed by actual resources instead of vague promises.
 
robskinner said:
Thats nothing new, some of my teachers did that 30 years ago.

For most professional qualifications places like BPP have run last minute revision courses that basically cram the most common, easiest to remember ways to get exam marks. Generic answers that can be used to answer a range of questions with a little customisation etc. very clever stuff when you think about it from a companies view, but also a con when you think about it from a examinees/professional bodies view, as they will teach nothing to someone who really knows their subject.
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I think tests are terrible at assessing ability, when a couple of weeks revision can mean the difference between failure and a+. Just means the kids who have their revision and coursework stratergies down to a tee, always get the best marks. A few weeks later they forget it all.

I think jobs should be assigned by doing work you would actually being doing in that job.
 
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robskinner said:
Difficult to find decent data but here are links to claimed average house prices and average wages. If true : to nearest 0.5x
1940 wage £270 house £0.5k, 2x
1950 wage £496 house £1.9k, 4x
1960 wage £949 house £2.5k, 2.5x
1970 wage £1.8k house £4.9k, 3x
1980 wage £7.5k house £23.5k, 3x
1990 wage £17.5k house £59.7k, 3.5x
2000 wage £27.6k house £101.5k, 4x

Shows a steady increase in the multiple of wages to house price. I think you would be brave to suggest the trend reverse back to the start of that period is "correct"
I think it shows the long term trend wasn't followed in more recent years and that some correction is due, but to suggest it would fall back to 1940 type multiples could be a little "brave". Its not even that its not been high before, eg 1950, but there is a trend there for sure of slowly increasing multiples

Sources
http://www.wwwk.co.uk/culture/housing/index.htm
http://uk.answers.yahoo.com/question/index?qid=20100315071014AA4sFWm
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How about pre 1940s, which is still very recent in the grand scheme of things. Even going back to the 1800s would be pretty useful to give a real indication of house prices through time, rather than just a short modern view. Obviously the data would be sparse and less reliable but I think it would give a much better idea of real average house price to salary

EDIT: Interesting article here (from 1999) about house prices in 1900

http://www.guardian.co.uk/money/1999/dec/18/mortgages.property1

Especially interesting is the end which suggest that just doing house price/salary division doesn't really work due to the extra "disposable"* income we now have.

*Disposable in this instance means not spent on necessary food.
 
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Amp34 said:
Especially interesting is the end which suggest that just doing house price/salary division doesn't really work due to the extra "disposable"* income we now have.

*Disposable in this instance means not spent on necessary food.
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Everything I have read also states that house price to earnings comparisons are a flawed metric partially due to disposable income and also because the levels of home ownership are so different. There is also greater incidence of multiple earners in a single household, and the cost of renting v buying is also different historically.......

To get a more accurate picture you would have to look at household incomes to house price ratios, and this is difficult to do without detailed statistics, although I suspect we would see a levelling of the trend that Rob has given....
 
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Used to be you could buy a house on 1 salary, working at a factory. My dad bought a house in London for 14k in the 70s, worth 2 million today.
 
You don't need to be clever to be a nice guy...

In fact, I know a lot of "educated" people that could rot in a pit for all I cared...
 
Always nice when the wealthy fail, the commoners pick up the bill.

Is it a nuisance that they strike? Yeah. Is it necessary? I believe so.
 
Amp34 said:
How about pre 1940s, which is still very recent in the grand scheme of things. Even going back to the 1800s would be pretty useful to give a real indication of house prices through time, rather than just a short modern view. Obviously the data would be sparse and less reliable but I think it would give a much better idea of real average house price to salary

EDIT: Interesting article here (from 1999) about house prices in 1900

http://www.guardian.co.uk/money/1999/dec/18/mortgages.property1

Especially interesting is the end which suggest that just doing house price/salary division doesn't really work due to the extra "disposable"* income we now have.

*Disposable in this instance means not spent on necessary food.
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I don't think the 1800s would really give you a true picture as that time for the vast majority of us was not like it is today.
Maybe 1900 around the first world war but anything before that is so far from the par now that I cant see a relationship. I mean workers cottages etc were fairly normal at those times, where I used to live there were some rows of workers cottages for the docks that were circa 1880s

What about land and land value, its got a fairly limited supply ;) and more people want a share of it, should it be expected that it cannot gain value in real terms? The more limited something is the higher the scope for it to value at an ever increasing rate. Take the gold rush recently, its seen as safe so the limited supply has forced prices up.

Interesting point on disposable income vs gross income, I guess its based on gross income as its a more stable measure? I mean for starters disposable, do you include rent or mortgages, hard to use something as a measure thats already influenced by the very items you trying to compare it against.
Disposable pre housing maybe? It starts to get harder and harder to measure accurately.

If you look at takehome pay even its already affected by tax rates and will fluctuate based on tax regimes, eg in 10 years we may look back and consider 2010s as high tax years just like we consider the labour years of the 70s
 
kwerk said:
The debt laden pretenders would be weeded out and the people with low or zero debt and real wealth instead of leveraged wealth would take over. If a company was profitable it would be bought for what it is actually worth, perhaps 25% of it's current inflated valuation. Same for houses. There would still be capital just a realistic amount of it, backed by actual resources instead of vague promises.
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Ok so just about every working person would be weeded out then, as what are they other than debt laden pretenders. Ie anyone with borrowings exceeding their debts.

The very people who hold the wealth now would still hold it, they do not go out and leverage their money typically someone else does.

So your talking the collapse of society as we know it now. Everyone who isnt a net assets holder will start with nothing? Thats ignoring the fact that those people could still be taken to the courts for what they owe, or are you suggesting those same laws are repealed. I can't see anything happening here but a total breakdown of civil order.

Then what assets are we talking about that constitute wealth, if the majority could be moved elsewhere whats to stop those same people leaving the UK. Land is tricky to take with you, but if its in non land and property wealth and it really got that bad in the UK why the hell wouldnt they take their wealth elsewhere? Would you restrict capital movements out of the country to stop that.

Who is going to invest in the UK if its in a state of chaos. The majority of the population with no where to live because they were debt laden pretenders, making out they were able to support a lifestyle that they couldnt, living in houses by borrowing someone elses wealth.

The only way you will see a significant reduction in housing costs is a large building program to increase the housing stock, and that has to be at an affordable price. The house builders have large land banks and aren't building, why? because they are waiting on the good times to roll again. Why build now and make say 10% profit due to restricted market when they can wait 10 years and make 40% profit. They employ limited workers (subcontract a lot) and that land is in limited supply once they use it, it gets harder and harder to replace with new land for their next building phase. They have NO reason to build so the supply of housing vs the demand remains a broken model.

I dont think you have really thought this through, its as if you think everything would carry on as is, apart from cheap houses.
 
robskinner said:
Ok so just about every working person would be weeded out then, as what are they other than debt laden pretenders. Ie anyone with borrowings exceeding their debts.
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I don't know how it works in the UK but here you just declare bankruptcy and everything is wiped out except for student loans. You have bad credit for 7 years then you can start over again. I know it's harder there to dump a house, here you can literally walk away and it's the bank's problem.

If you're living in house you can't really afford, it would be repossessed, someone with real assets would buy it for 30% or whatever, then rent it out to the renewed "renting class".

I've seen it happen here. I bought my house as a bank repo for close to half the price of the previous buyer.

Asset deflation. Houses, pensions everything. People have an unrealistic lifestyle expectation which has been subsidized by leverage and third world slave labour. It needs to get reset. That means allowing the markets to work out the real values with real money backed by actual productive assets instead of imaginary dreams and circle jerks. The reset is going to happen either way it's just a matter of how sharp it will be. The longer the government postpones it the harder it will be when it happens.

If you're living in a 500k house paying 2 mortgages with your dog grooming business patronized largely by public sector workers. Well you'll be renting a small flat soon.

If you're a farmer with your farm and house paid off and a few mil stashed away from the stock market. Well you could be a proud owner of several new rental properties soon. Unless the government simply hyperinflates away your savings of course, in which case you are ALL screwed.
 
Here's where your collapse might happen. All those dog groomers, teachers, travel agents, council workers, hairdresser, etc are now unemployed. There will be a period of time before investors realize there's a pool of unemployed labour and the time they can build something to exploit that labour. That's when a collapse could happen. But the government should at least be able to provide them with 3 meals and a bed to sleep in. Look at Argentina or anywhere else similar things happened. Life goes on as usual pretty much, the middle class shrinks dramatically, crime goes up, quality of life drops, but it's not an apocalypse. It's just the process of paying the piper.
 
robskinner said:
I don't think the 1800s would really give you a true picture as that time for the vast majority of us was not like it is today.
Maybe 1900 around the first world war but anything before that is so far from the par now that I cant see a relationship. I mean workers cottages etc were fairly normal at those times, where I used to live there were some rows of workers cottages for the docks that were circa 1880s
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Perhaps, but it would give us an understanding of what is going on long term. The 60ish years you are looking at at the moment just doesn't give enough time to do a proper correlation. For example the housing market was massively affected by the second world war. Basically you can't say the last 5 or so years are different to history if you are only comparing it to a few years before!

You have to question why workers cottages (and renting in its various forms) were so common, because people couldn't afford to buy or build their own house?

robskinner said:
What about land and land value, its got a fairly limited supply ;) and more people want a share of it, should it be expected that it cannot gain value in real terms? The more limited something is the higher the scope for it to value at an ever increasing rate. Take the gold rush recently, its seen as safe so the limited supply has forced prices up.
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I'm not in any way suggesting that house prices have not gone up relative to income, just that the short term you're looking at really can't give a true representation through time.

As for land, just because there was more land may not mean it was for sale. Large landowners may not have been wanting to sell, causing prices to be artificially high? What is interesting though is the massive disparity in house prices in London compared to that of the rest of the country. Even in 1900 there was little difference in house prices, that was after the main rush to the cities.

robskinner said:
Interesting point on disposable income vs gross income, I guess its based on gross income as its a more stable measure? I mean for starters disposable, do you include rent or mortgages, hard to use something as a measure thats already influenced by the very items you trying to compare it against.
Disposable pre housing maybe? It starts to get harder and harder to measure accurately.

If you look at takehome pay even its already affected by tax rates and will fluctuate based on tax regimes, eg in 10 years we may look back and consider 2010s as high tax years just like we consider the labour years of the 70s
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Gross income would certainly be the easiest measure, but is it really relevant? I thought it may have been until I read that article and realised that it has little to do with it. As I said in the other post, I classed disposable income as that after food costs were taken out (absolute essentials). Does the average family spend more than 20% or so of their money on food now? It used to be 60% apparently. Then there is the issue, as Castiel said, of joint income.

If you have two average wage people who spend 20% of their money on food they are going to have significantly more spending power than a single income family spending 60% of their money on food! That's before tax comes in to it.
 
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