It's amazing how few people have mentioned this...
And boomers wonder why millennials are bitter towards them..
- Thread starter Scam
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It's amazing how few people have mentioned this...
Soldato
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Economics is about balance.
Low interest rates allow increased borrowing - that's why they're set low.
Increased borrowing results in more expenditure and less saving.
If no savings, investments become the better way to provide for the future.
Property in a small country with a growing population has always been a good investment.
People invested in property.
Particularly in the last decade.
But I don't see how this is the fault of the "boomers".
Low interest rates allow increased borrowing - that's why they're set low.
Increased borrowing results in more expenditure and less saving.
If no savings, investments become the better way to provide for the future.
Property in a small country with a growing population has always been a good investment.
People invested in property.
Particularly in the last decade.
But I don't see how this is the fault of the "boomers".
Soldato
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You could equally argue that wages have stagnated. Is that the fault of boomers as well?
Soldato
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Another simple economics lecture:
If money is saved and not reinvested - i.e. removed from circulation - the economy effectively stalls. Growth is reduced, labour demand falls, wages stagnate or at best match inflation.
The most valuable company in the world pays no dividends. Its cash reserves are terrfiying but there's no way it's worth its capitalisation. That is tied up money. It is removed from the economy. All of the world's most highly capitalised companies are massively over-valued. Again, cheap borrowing drives investment bubbles in such companies. Apple, Alphabet, AirBNB, Uber, Netflix, Tesla. Trillions of dollars of bubble tying up capital that should be driving consumer demand driving manufacturing driving labour demand.
I don't really disagree that the housing market isn't significantly broken but look up and see that it's a symptom not a cause. The global economy is deeply flawed and the knock-on effects are widespread throughout society.
If money is saved and not reinvested - i.e. removed from circulation - the economy effectively stalls. Growth is reduced, labour demand falls, wages stagnate or at best match inflation.
The most valuable company in the world pays no dividends. Its cash reserves are terrfiying but there's no way it's worth its capitalisation. That is tied up money. It is removed from the economy. All of the world's most highly capitalised companies are massively over-valued. Again, cheap borrowing drives investment bubbles in such companies. Apple, Alphabet, AirBNB, Uber, Netflix, Tesla. Trillions of dollars of bubble tying up capital that should be driving consumer demand driving manufacturing driving labour demand.
I don't really disagree that the housing market isn't significantly broken but look up and see that it's a symptom not a cause. The global economy is deeply flawed and the knock-on effects are widespread throughout society.
Agree with this. Except where the people who had it better used their good fortune to enter the BTL market
If they just stuck with whatever housing the required for them and their family I wouldn't blame them at all.
Soldato
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Agree with this. Except where the people who had it better used their good fortune to enter the BTL market
But can you honestly say you wouldn't take advantage of an economic opportunity if presented with it?
That particular economic opportunity? Yes. I also chose not to enter the GPU mining craze or become an eBay scalper, all things that could make me more money.
Not claiming to be a paragon of virtue but there are more important things than money.
This world wants to break you, to make you do things you're not comfortable with for the sake of making money. You don't have to tho.
I enjoy making my money honestly in a job where I can genuinely say I provide both a service and add value. I'm not a leech on other people.
Soldato
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We are heading for a serious problem. House prices have been allowed, perhaps even encouraged to rise way way above inflation year on year. Young people in many areas of the country have literally zero chance of buying a property on the average wage. If average wage earners can't join in in large areas of the country even with 2 wages then the whole system is ******!
I don't think that's the same situation everywhere. I know on my road the value of the houses have been stable for the last 20 years. Most of these houses were originally council houses. But most people except one couple bought their house.
Is there a case to say that people expect to buy their dream house first? Most people had to buy crappy houses at first in order to eventually buy their dream house.
Its also amazing how few people know how interest rates have changed in that time. In 1980, the base rate was around 14%, as opposed to 0.5%. 14% plus the banks 4% or so compounding interest of a 'cheap house' is a hell of a lot to pay before you started to make a dent into repayments each year!
I did some sums a few years ago with my 75y/o uncle who had a very similar career progression to me. We basically worked out that the percentage of our salary going into house payments was the same give or take 5%.
This obviously doesn't apply for people with cash in hand, but the boomers were definitely worse off in that regard on average.
You've completely missed the point.
It's not monthly payments that are unaffordable - monthly rent is usually more expensive than a mortgage for an equivalent property.
The problem he's highlighting is that it's difficult for people to even get a mortgage in the first place, never mind at what interest rate.
His example showed that average house prices in 1980 were around 3.5x average salary, so an average person could quite easily get a mortgage for that amount. Average house prices now are 7.8x salary - there's no chance of getting a mortgage for that amount.
Soldato
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I'm not so sure - why are we taking an average? There's no top on the market (but there is a bottom) so I'm not sure average is a good measure.
My home town (south Lincs) you can have a 2 bed terrace for 100k and there plenty of 20-30k jobs locally. Must be loads of places from the Midlands and up where this is true surely. Heck flats start there at 60k - even a person on their own could get a mortgage for that on quite a low salary.
Lot more people are going to be on the lower end of that salary than the top end - around here it is similar - plenty of 20-30K jobs but a 2 bed terrace realistically starts at 170K (more like 17xK as most are offers over) though there are cheaper places you wouldn't want to live in them :s
Anything less than 100K really are park homes around here and some 1 bedroom flats in not nice areas.
The trick is to buy under average price, in my case with the last house 5 years or so back(after selling up in west Yorkshire) , in need of a garden makeover, orchard and outbuildings sorting, I am sure others could have offered the 100k we did but no, probebly too busy been bitter or just apathy, who knows, but thanks anyway
I'm really not missing the point, most others are. You can't just multiply the house and wages to come to a conclusion. The interest rates and deposit requirements were also different historically.
Now you can get a 4x to 5x salary mortgage. In the 80s this was around 2x. That's all because the interest rates effect on affordability.
There were loads of other effects too. No comparison sites. Cartel-like rate rigging from building societies, no fixed rates, massive arrangement fees etc etc.
Don't forget the widespread selling off of council houses back in the 80s/90s under right to buy schemes.
To be fair if a politician allowed you to buy you're home for a quarter of it's market value you'd obviously take them up in the offer and vote for them.
What we're witnessing just now is the fallout from these policies and high levels of immigration in recent years due to the EU's eastward expansion.
It's a perfect storm to drive up house prices.
To be fair if a politician allowed you to buy you're home for a quarter of it's market value you'd obviously take them up in the offer and vote for them.
What we're witnessing just now is the fallout from these policies and high levels of immigration in recent years due to the EU's eastward expansion.
It's a perfect storm to drive up house prices.
As someone mentioned this doesn't account for interest rates. 1980 interest rates will make that 22.5k seem a lot more than it actually is...maybe making it feel like a 45k house longterm, almost at your 2020 multiplier then.
Also things have changed, itmes like food, tech etc is probably now cheaper
As a few have mentioned, the issue isn't finding the cash for monthly payments, it's getting the deposit together in the first place, which always brings me back to lifestyle choices and the adult decision people have to make - save for a deposit or splash the cash on a lifestyle - as I keep saying it's a hard choice to make but there seems to be a large majority who want to splash the cash but then complain that they can't save for a deposit. Those are the people who always complain loudest and most vehemently about how "unfair" it is whilst the rest just get on with saving money anyway they can, doing without some of the niceties the splash the cash types take for granted.
I'm not sure you can say that finding a massively under-valued property is a "trick"... it's pretty much just good luck.
I'll bet you couldn't find the same under-valued property for £100k with massive garden and orchard if you had to move again. Oh plus outbuildings
Seems you got massively lucky there.