7% is about the average long term returns in most markets. You have to be careful o be sufficiently diverse in investments and hope you don't have to cash out in a recession though. People like to talk about the 30% gains they made but they don't like to talk about those 25-30% losses they made just previously!
Are earnings too low / living costs getting too high??
- Thread starter Buffman
- Start date
7% is about the average long term returns in most markets. You have to be careful o be sufficiently diverse in investments and hope you don't have to cash out in a recession though. People like to talk about the 30% gains they made but they don't like to talk about those 25-30% losses they made just previously!
Long term overall I was making about 9% (over a spread of savings/investments) until interest rates reduced my ISAs to practically nothing - don't have enough invested in stuff that has done better to offset that overall.
Soldato
The point was to Foxeye that you can get decent returns that are relatively safe, 7% annual return adjusted for inflation over 90 years is pretty safe. It wasn't a dick waving excercise for what great returns it was supposed to be.
Associate
You ain't making 30% without taking on a lot of risk. Proper squeaky bum time..
7-10% is the norm I would say.
7-10% is the norm I would say.
I agree with you, why I repeated 7% long term is expected returns. Just giving the caveats that it needs to be diverse and if you withdraw at a recession you might not see 7% average.
If its high risk then the lows might see you loose all your money. You can't ride out highs and lows with a non-diverse high-risk investment. 30% returns is not what people should be expecting to get unless they don;t mind loosing all their investment. Considering the best investment bankers rarely do better than the long term average of 7%plus 1-2% overall you can not depend on anything like 30%.
You mean fund managers not investment bankers - investment bankers do something rather different. Yup, plenty of them will fail to beat the relevant index and you're often better off with a tracker fund. They are however rather constrained in what they can do and they're managing rather large sums - no reason why a retail investor can't outperform the index, you could probably do so by picking a couple of dozen stocks at random tbh...
This is where part of the problem lies IMO. People earning average wages, should arguably not expect to be able to afford nice things or a decent size house, they should be able to afford average things.
I frequently hear, or more often read online from people complaining about how they can't afford XYZ - housing is a common one - yet they have flashy technology coming out of their ears: smartphone this, iPad that, TV the size of a cinema screen etc. Not to mention designer threads, shoes, makeup etc, nights out on the town, meals out etc. I earn a lot more than them yet have worse things, except for a house.
I think kind of the point of the thread is though that increasingly someone that is say earning an average wage is struggling more and more to afford what most would call an average lifestyle with housing being a big factor in that. People on an average wage, with a bit of effort, should be able to afford what most would consider an average house and with a bit more frugality in other areas something a bit nicer - increasingly people are having to downgrade their expectations below what is generally considered an average house even if they do live frugally never mind saving to afford something nicer than average.
Caveat that this will be a bit different over different areas of the country - seems to be hitting the South West and certain parts of the South East more at the moment than many other areas but I suspect other areas will start to feel it more soon - especially as more and more houses are being sold for their rent potential.
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I think the below summarises the main points, but I understand where you're coming from. A couple both earning the average wage with no kids i assume is a fair bit higher than the average household income (I haven't really checked)?
Agreed, well summarised.
Caporegime
The point I've made several times is that I personally earn in the eightysomethingth percentile yet when it comes to houses my purchasing power extends to about the fourth percentile. That's the problem.
Soldato
I have looked at price increases in my area...
house prices have went up by around 116k avg over the last 5 years... which is pretty scary to say the least!
with my new job which I'm starting in may I'll be able to save a decent amount(1k or so) every month but I wonder if even that is going to be enough to keep up with price increases..
both me and my gf are already earning above average.
house prices have went up by around 116k avg over the last 5 years... which is pretty scary to say the least!
with my new job which I'm starting in may I'll be able to save a decent amount(1k or so) every month but I wonder if even that is going to be enough to keep up with price increases..
both me and my gf are already earning above average.
Anyone seeing similarities with Japan's house price crash?
Excerpt from an article by Allister Heath written 2 August 2006 on Japan's house price crash.
UK stocks are at record highs, interest rates have been at records lows for nearly a decade, government has injected billions of pounds into the economy, property is climbing year on year not matched by wages, household debt is reaching 2008 levels again. All echoing the events of Japan's bubble.
Excerpt from an article by Allister Heath written 2 August 2006 on Japan's house price crash.
UK stocks are at record highs, interest rates have been at records lows for nearly a decade, government has injected billions of pounds into the economy, property is climbing year on year not matched by wages, household debt is reaching 2008 levels again. All echoing the events of Japan's bubble.
Caporegime
Yep, my partner and I have a household income in the top 95% of the country, which still only affords us an upper mortgage limit of around £230k.
Given the average price for just a semi-detached in the South-East is £375k, that's a hell of a deposit we would need to save up.
People are having to drop their expectations but I think that is perhaps a case of expectations having been set 'too high' by historical positions when property was cheaper relative to earnings. People seem to want to get an average property at a young age when typically both their earnings and savings will be lower than later in life - so even if they have average earnings they might not have average buying power if they have not amassed suitable capital. Affordability at that stage of life used to be different i.e. during my teenage years the ratio of house prices to earnings was only around 3-3.5x, but I don't think that was a sustainable position with an expanding population. Youngsters with decent income nowadays are perhaps struggling to build up big deposits partly because they've often got all the latest tech/cars/holidays/fashion etc. Buying things on finance seems to be the norm rather than the exception these days.
I just think if the average man on the street could easily afford what they wanted that in itself would imply the market isn't at equilibrium and there would be upward pressure on prices for finite resources. Look at it this way, if the population was increasing faster than the rate of accommodation growth, then that means that house prices should be increasing (all else being equal), even if earnings per capita were unchanged. In 2015 the population grew by over 500k against fewer than 150k new properties built, yet average household size is only ~2.3 people per household and presumably some property also left the market during that time due to demolition etc.
I guess it depends on what viewpoint you take, some would say people had it far too easy back in the day, others might feel the current position is harsher than it should be. Either way, I still think people on average incomes are still spending too much on luxuries (if home ownership is their goal). I'd be really interested to see stats on how much people spend on luxury/unnecessary goods compared to back in the day but of course it is the type of stat that is very difficult to articulate.
Soldato
I think most people tend to view that last stat as the rise in unsecured debt, but that's very much a generalisation and likely to be unrepresentative.
Just as an experiment I flicked through the forum to find a 'random' person having a little moan about how they have high earnings but are irritated at what they have to sacrifice. I shan't single them out by name as I'm really not looking to point the finger at any individual and consider them a good poster, but I looked to see what I could quickly dig up purely by looking at threads they had created. In recent history, they have discussed getting:
-A gaming PC costing well in excess of a grand
-A current games console
-Fibre broadband
-Home extension costing nearly £30k
-Holidays
I totally get that finances are a struggle for some people - but equally for many people who I see complain about finances it is really not difficult even as a complete stranger to using nothing but their public posting history to identify potential areas where they could tighten their belts.
-A gaming PC costing well in excess of a grand
-A current games console
-Fibre broadband
-Home extension costing nearly £30k
-Holidays
I totally get that finances are a struggle for some people - but equally for many people who I see complain about finances it is really not difficult even as a complete stranger to using nothing but their public posting history to identify potential areas where they could tighten their belts.
A bit of both - my dad probably had it a bit easy when it came to affordability of housing (though not by much) while someone in his position today has it quite hard - my dad bought a fairly nice house - definitely commensurate with his wage while bringing up 5 children and we didn't want for much (I think the only real concession was we had more holidays in the UK than abroad) - someone in his position now couldn't even dream of buying similar property if they had 1-2 kids let alone 5.
Soldato
But you are on £50k now?????