Social consequences of house price boom

[Upwind]

comment at the guardian.co.uk [click]

One of my pet subjects but I have not seen this in the mainstream media before:

"If food or energy prices were rising at 8% per year, let alone at 20% there would be outrage. There would certainly be alarm that such price rises were not sustainable and that increasing numbers of people were unable to afford a basic commodity.
Academics at the university of Aberdeen are currently running a project on this, and other, changes in society and believe that "when the implications of these developments are taken together, they hold the potential to produce profound and, as yet, largely unanticipated social consequences for this age cohort, as well as for UK society as a whole".
Astronomical prices mean that couples who cannot afford to buy, or move to larger properties, or lose half a joint income, are having children later in life when their fertility rates are lower. You do not have to own a home before you have children but many people desire at least some stability before they do so. "

That's interesting. I can't think of an example of a price from 1983 in inner London. We did nearly buy a flat in Acton which I think was going to be the same price as the house we bought further out..not that doesn't work - 2 bed flat in Action £152k so still "cheapish". Perhaps you need to get into Chelsea etc before you see the massive rises where the City bonuses etc have gone. Luton I've always thought was a reasonable place to live and doesn't cost the earth. Our old nanny moved to Milton Keynes which I don't think is that pricy either if you choose carefully.

I think also Outer London used to be more fashionable than it is now. Many of the posher areas in Outer London have been abandoned by wealthy people in favour of smarter more central areas that previously would have been no go areas.

So the example of Harrow might merely suggest that Harrow used to be a v desirable place when you bought, that has now gone downhill with respect to surrounding areas. Fashions come and go.

There are London boroughs, like the one I live in, which would have once been very nice. They would have once been v expensive compared to surrounding cheaper areas, but actually now are not.

The fact is that even in these areas prices have more than trebled over a short space of time. People who didn't buy in time have seen their options dwindle from something crap to nothing at all.

It really annoys me when people add up the salaries do the multiples and then find a property at that price somewhere in the sticks and go there you are!Whether the person in questions likes it or indeed whether it is suitable is irrelevant as long as they get on the imaginary ladder

Trouble is with palces where the housing is cheap anyway, the salaries tend to match.

there are houses here still (although too small for us) at prices that look OK_ until you relaise that if he was working here, DH would have to take a pay cut of 30% becaue thats all the jobs are prepared to pay. Suddenly the houses drift out of reach again....

Our joint income is irrelevant- I bring in several thousand but it is mostly grant / loan- the rest is a tiny part time job (4 months a year at £25 a week) and DS1's DLA.
So although its there to spend on rent, there's no hope of using it as part of a mortgage deal 9even if we wanted to), and as DH earns a whopping !19500 a year, you're not gonna get a 3 bed on that.

Most couples have two average incomes when they buy though.
As for areas going up and down our house here went up quite a bit so I don't think the area is that undesirable. You have to compromise and it's still possible to buy near London and commute in or work locally and loads of people manage it. Often that's easier than moving to some remote bit of the country where there's no work, no money and people are buying holiday homes.

Two years ago we sold a lower ground floor 2 bed flat in Earls Court for £425K. At the same time there was another two bed lower ground flat in the same building of about the same size which went for slightly less than ours.

This flat is now on the market for £675K !!!! It has been updated but BLOODY HELL in two years some one has valued it at about £250K more.

This is madness, sanity has left london house prices.

But what you have to go on is sites like nethouseprices.com and type in the postcode and then you see what the houses go for. There's one been for sale at £2.3m on our road for about 4 years and no one has bought it, obviously. Stupid price.

I know Xenia - but even assuming that the estate agents have over valued it by £75K which is very likely knowing S Ken estate agents - that is an insane uplift.

For this area, DH is on an average, or even above average income. And as everyone knows the concept of average income is distorted somewhat, with many, many people on the bottom rungs, and very few in the top echelons earning amounts that are indeed so vast they change the face of the average. As I am sure we allr ealise, if you have 20 poeple on £250 a week, and one on £2000 that creates an average income of £333- so something needing an income of £320 should in theory be 'affordable', but in relaity is only attainable to one.

If that makes sense.

(Which it may not- I am in the midst of an essay on the Buddhist concept of existence LOL)

It's just I thought it was going to be hugely ghard if not impossible for my children to buy their first place compared with me 24 years ago and I see it will be virtually identical as long as they have a husband, sister or friend to buy with rather than try to buy alone.

So is it harder for two nurses or two teachers in 2007 to buy a house or flat in Harrow than it was in 1983 and I don't think it is. But it has never been and never will be easy for those on very low incomes to buy anywhere and most people have always been and always will be priced out of the middle of London.

I think waiting for the market to drop never really works very well. My brother has been waiting for 5 years and I don't think it's really benefited his family that that was so and I'm gad they seem to have found somewhere, if it happens (very stressful time trying to buy).

Well I must admit Xenia I find your assertion that it is only as hard now as it has ever been somewhat hard to believe, as you are the only person I have ever heard say it.

All the supposed 'experts' suggest that it is harder than ever to get on the housing ladder, but they are obviously wrong.

The number of first time buyers is lower than tha recorded since 1980. In 2005 there were 320,000 first time buyers. In 2002 that figure was 532,000.(Source - Halifax National House Price Index Report 2006). The average age of a first time buyer is now 33.

Obviously these deluded people think they can't afford a property, but Xenia knows better. Someone grab a megaphone - good news is here.

Just on the basis of those calculations. I'm not sure about prices all round the country. In fact today's news on property is that prices are steady or dropping. We always have ups and down.

but xenia - even by your own calculations it's harder now to buy than it was when you bought.

I do agree that there is an element of spoilt-ness about some claims of poverty. People do expect to be able to buy much more these days after paying the mortgage/rent. "I can't afford to buy a house because then I couldn't eat out 3 nights a week" is not the same as "I can't afford to buy a house". but that only applies to a small number of people, almost all of them without children. It is harder to buy these days. Just look at the avergae wage / average house price.

The ease of house buying relative to another period is not measured in the trade by looking at income/house prices but by looking at affordability.

Affordability factors in increases in interest rates and the absolute cost of servicing a mortgage on a property.

Based on affordability there is viewed as being very little change over the past 20 years or so. Whilst house prices have increased, inflation and interest rates have come down. If you measure the purchasing power of the residual income after the real cost of servicing mortgage debt, then what you can buy with the residual income after morgage payments is pretty much the same as you were always able to afford.

Of course what has happened in society as a whole, is that we have become used to purchasing much more stuff out of that residual - we spend much more on interior decoration, eating out, general entertainment, tvs, computers, games consules, birthday parties for children and so on and on and on - that 20 or 40 years ago - so the residual feels like less than we need to survive. In reality though our parents and their parents before them did not have such a consumerist habit to fund!

I certainly remember the era of 15% interest rates - that made mortgages roughly 3 times more expensive than they are currently - and meant that disposable incomes for many home owners were risable.

So imho Xenia isn't making it all up - you are just talking about slightly different measures

I'm sorry soapbox, but I don't think you are wholly correct there.

You may be right about affordability per se because of interest rates etc. I will certainly consider your point.

But what evidence do any of you have that young people expect to be able to buy everything they want as well as a house? I know so many people who are pinned to the breadline, and they don't have expensive cars, holidays or goods. Their kids wear hand me downs just like we did, and they live very modestly.

It is in fact the older generation, whose houses cost them very little in mortgage payments now that interest rates are low, that have all this disposable income to spend on goods. Or people who are re-mortgaging to release equity.

Young people are paying off huge student debts, they are renting. They don't have pensions. They may have an ipod costing 100 pounds, but this in no way compares to the massive cost of buying a house.

Cloudhopper - this may just be that you are observing different patterns of behaviour than typical of the economy as a whole. The fact is that the amount of money spent in the retail economy has mushroomed over the past 20 years - so people are spending a lot more money on goods on average.

I am not disagreeing with the premise that the consumer spending is larger than it ever has been, nor the. Yes we are a nation of spendaholics.

However, I am disagreeing with your assertion that it is young people who are spending this money rather than get on the housing ladder.

In fact most of the growth that has happened in consumer spending is attributed by economists to the "feelgood" factor generated by the rise in home values of homeowners. People withdrawing equity from their homes is almost enough to account for this growth.

YOu are right about consumer spending, but what I disagree with is the assertion that it is young non-homeowners doing this spending.

My computer is playing up hence the garbage below, but I'm sure you get the gist

The withdrawing of equity to buy luxury goods is a relatively new thing.If you couldn't afford holidays big tvs etc in the past you either saved or did without.It is not just servicing the mortgage but these extra add ons that accounted for a huge percentage of mortgages taken out last year alone.On top of that most households use credit cards aswell.Very few people have an overall household debt now that is 3x their income more like 6.This will all have an effect if rates keep rising and payments can't be met

Couldhopper - that would be because I never said it was young non-home owners in the first place

I said that what had happened in 'society as a whole'...

Nevertheless, I do think that much of this spending is by the young - not sure if they are home owners or not- certainly much of the products are aimed at the younger market and stories abound of credit card debt for these age groups being out of control.

But that doesn't matter to the point I was making which is that on the measure of how affordable home ownership is now versus 20 years ago - not much has really changed.

Noddy I agree - if interest rates rise significantly, based on the total levels of household debt, then as a society we would be in huge difficulties!

when I was growing up i people like us didnt even thing about owing houses. It was something that only the rich had. I have a house - I am not a chattering class- guess how I got it - I worked four jobs at one point. we didnt have new cars, we didnt have anything we had to take credit out for apart from our sofas. we went on holiday when we did last minute cheapest price possible. we lived in a smaller house and took out a 15 year mortgage. all our friends thought we were mad. we now have a huge mortgage ( 200% at the time of purchase - only wat we could afford to buy the house we have now) paid for by working 60 - 80 hours a week for about 5 years. some friends were understanding somewere not about our commitment to work. now we have our family house we have every tom dick and harry looking at what they think we can afford before charging us for work on it not what is actually a fair price for that work. we have people who try to burgle it because they want what they think we have ( ooh playstation 1 - bought after 2 came out) we have, and with have the government threatening to tax us out of it? OOooh we are sooooo lucky to have made choices and sacrifices, arent we. Our house is our pension fund we have put everying thing into it given the recent pension fund mismanagement. very long winded way of saying years ago people like me didnt think they would every be able to afford to buy a home, and yet we have with no help from anyone - but have had to take 200% mortgage to do it. we have no hp if we can buy it we dont. the so called value of our house or how much money we may or may not make on it is to some extent irrelevent until we are at a point to realise it. except it will never be for us - there will be no pension, no health care or services for us if we are lucky enought to make it to old age. we will need a roof over our head and the rest of the equity will hopefully allow us to have a basic standard of living / care until we both are dead.

you are right magic it is no point having equity unless you realise it!But we are led to believe it is our money and there is a bit of a 'go on treat yourself'culture.I do think prices are about to stop rising and even fall

I hope you are right Noddy

magic is right that most people didn't previously expect ever to own a house. So I suppose the fact many are now priced out the market doesn't change things very much.

Yes now it may be a bit harder to buy the £220k house we bought at a cheaper price in 1983 but not that much harder. To buy it we only ever had in it very second hand furniture put together from family members; bought most of the children's clothes at charity shops, never ate out. We didn't buy orange juice for example for them to drink because it was too expensive so they have water or squash...I'm very good at reminding my student children of all this. One now for example she makes her lunch every day as buying a sandwich which some people take for granted costs so much.

I suppose what I'm saying is that in 1961 when my parents really struggled to buy adn 1983 when we did we and they were putting our all into buying the house but there was a zero budget for anything else, doing it up etc although we bought some paint.

What is different for some people now is they are inheriting so in a sense are better off and interest rates are so much lower and it's easier to borrow too. It's not all negative. Actually I could have done without any price rises since 1997 as that was the principal reason my husband got so much cash on our divorce - house price rises - a benefit to him but not me.