Non - House prices

It is hard to make a lot of comparisons.
Just out of interest I had a look and back in 1982 (25 years old) I was on about £5,000 p.a.
Out of that my personal tax allowance was £1,500, the rest I was charged basic income tax at 30% !!!!!!! (Thatcher had just reduced basic tax rate from 33%), We also paid National insurance at 9%. I ended up with take home pay of £3600 p.a. or £300 per month.
My then girlfriend was on a bit more money than me so we probably had about £650 cash per month between us. We had a £24K mortgage on a £28K property and paid about 10% mortgage interest so about £200 p.m. plus endowment policies (£50) to repay the capital. This left us with about £400 per month for utility bills, rates, food, car costs, petrol, socialising etc. £50 per week for all that - seems a bit weird seeing such a low amount to fund everything but thats inflation etc for you.
I do know we had all second hand furniture, refurbished TV, no washing machine, old wreck of a car. The thing that improved our situation was inflation/mortgage rate coming down (no change there then) and generally climbing the ladder at work etc.
The big thing was to get that deposit and mortgage agreed and I can see that the numbers are more difficult now particularly in this part of the world.
I think if I had the modern distractions outlined in above posts I would have been distracted !!!!
 
So on one hand you have posters saying that in the old days their parents lived on bread and water and never left the house, that all these new ways of spending money is the issue, avacado on toast etc etc. Its all about choice. Then you get the other side consistently pointing out with facts and charts that house prices are several times the average wage compared to just 25 years ago.

I am sure its "hard to make comparisons"...but all the "back in my day" comments are fluff when the facts are clear as day.

I am fortunate to earn a fair bit above average. If I was starting out on this wage now looking to buy a house in Bournemouth I would be lucky to get a flat . I dont eat avacado on toast...
 
There's no doubt us silver generation have had a lot of advantages - house price boom, free university education, health care that worked.

It is true we were able to save for a deposit by not spending on lots of things. And (probably) that it seems to be the norm for 20s / 30s nowadays to spend much more on phones cars holidays gyms entertainment - but still could not build a deposit even if they didn't spend on these things.

Out of all the complicated interlocking factors, there are two self-evident things that need to be done: build more homes, and develop a secure long-term rented sector like other countries have.
 
To your last point, yes completely agree. When I used to live in Berlin and was considering buying a place, everyone was confused with me because hardly anyone tries or needs to buy property.

JohnHold said:
There's no doubt us silver generation have had a lot of advantages - house price boom, free university education, health care that worked.

It is true we were able to save for a deposit by not spending on lots of things. And (probably) that it seems to be the norm for 20s / 30s nowadays to spend much more on phones cars holidays gyms entertainment - but still could not build a deposit even if they didn't spend on these things.

Out of all the complicated interlocking factors, there are two self-evident things that need to be done: build more homes, and develop a secure long-term rented sector like other countries have.
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The growth in house prices always fascinates me because I think we tend to overestimate it. Here's why I say that, and happy to be proven that my math is wrong (I know, "maths" to you folks).

We bought our current house 25 years ago. Price has quintupled over the period. Scale that back to quadruple for significant renos which enhance the potential sales value.

Using the rule of 72, the house has doubled twice in the period. So, taking the half life of 12 years ............ 12 x 6 = 72. Then do it again for the 24 years.

So, basically, my thinking is that we made about 6% per year on the value of the house over the period. Tax-free here, as there is no tax on a principle residence. Ignoring estate fees and commissions. Not bad, but certainly not exhorbitant.

Anyone see a flaw in my calcs??
 
Toronto John said:
The growth in house prices always fascinates me because I think we tend to overestimate it. Here's why I say that, and happy to be proven that my math is wrong (I know, "maths" to you folks).

We bought our current house 25 years ago. Price has quintupled over the period. Scale that back to quadruple for significant renos which enhance the potential sales value.

Using the rule of 72, the house has doubled twice in the period. So, taking the half life of 12 years ............ 12 x 6 = 72. Then do it again for the 24 years.

So, basically, my thinking is that we made about 6% per year on the value of the house over the period. Tax-free here, as there is no tax on a principle residence. Ignoring estate fees and commissions. Not bad, but certainly not exhorbitant.

Anyone see a flaw in my calcs??
Click to expand...

I think you're missing the cost of not owning. If you take the money invested in a mortgage and put it somewhere else, you still need to pay to rent somewhere. So owning the house is a bill you have to pay anyway that also happens to be a growing investment for those that can afford to buy.

I'd also not underestimate the whole capital gains aspect if you invested in another product.
 
Chart is interesting as we bought our house in the period where the US had declining house prices from about 2008 to 2010. The government was even handing out cash to new homebuyers which we took advantage of. Only needed 5k down as the loan was government backed. Then they gave us 9k in cash. We got lucky
 
kirsikka said:
I think you're missing the cost of not owning. If you take the money invested in a mortgage and put it somewhere else, you still need to pay to rent somewhere. So owning the house is a bill you have to pay anyway that also happens to be a growing investment for those that can afford to buy.

I'd also not underestimate the whole capital gains aspect if you invested in another product.
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Agree, there are opportunity costs and we also don't measure the costs of utilities, property taxes, maintenance etc.

My point at its simpleist is that when people get all-in on house prices, they typically see it in short-term optics, when quick fluctuations create headline stories. But over the long-haul, again 6%/year is well above CPI over the 25 years mentioned, but it's not a massive windfall.
 
kirsikka said:
I think you're missing the cost of not owning. If you take the money invested in a mortgage and put it somewhere else, you still need to pay to rent somewhere. So owning the house is a bill you have to pay anyway that also happens to be a growing investment for those that can afford to buy.

I'd also not underestimate the whole capital gains aspect if you invested in another product.
Click to expand...


Theres always much in it at times from what I've read over the years, from various sources. Past decade rates have been low, but if you're borrowing a few hundred k and paying interest on that and having to maintain it, something you don;t need to if renting... plus funds remain somewhat liquid, when not invested in property.

Obviously in many countries you have security of owning your own place versus renting which counts for a lot, but it's not always the guaranteed home run I expect many perceive it to be if looking at it from a pure financial, investment perspective.
 
MB1980 said:
Theres always much in it at times from what I've read over the years, from various sources. Past decade rates have been low, but if you're borrowing a few hundred k and paying interest on that and having to maintain it, something you don;t need to if renting... plus funds remain somewhat liquid, when not invested in property.

Obviously in many countries you have security of owning your own place versus renting which counts for a lot, but it's not always the guaranteed home run I expect many perceive it to be if looking at it from a pure financial, investment perspective.
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It is if, as he says, you take into account the fact that you can't avoid the cost of the alternative, i.e. renting. You have to pay either the mortgage or rental costs whatever happens.
 
Def_II_Royalz said:
To your last point, yes completely agree. When I used to live in Berlin and was considering buying a place, everyone was confused with me because hardly anyone tries or needs to buy property.
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The same in Denmark, Housing organisations every where. You sign up and are then offered an apartment. Rents are cheap and you even get the state to pay someof it , if your income is small.
My freind pays £500 per month for his 70sqm apartment all heating included but the apartment is so well insulated he hardly turns the heating on, the only thing on top is his electric use.
Because he is on a pension the state pay half his rent.
 
JohnHold said:
There's no doubt us silver generation have had a lot of advantages - house price boom, free university education, health care that worked.

It is true we were able to save for a deposit by not spending on lots of things. And (probably) that it seems to be the norm for 20s / 30s nowadays to spend much more on phones cars holidays gyms entertainment - but still could not build a deposit even if they didn't spend on these things.

Out of all the complicated interlocking factors, there are two self-evident things that need to be done: build more homes, and develop a secure long-term rented sector like other countries have.
Click to expand...
Unfortunately the government is doing all they can to drive landlords out of the market.

As for house prices, the answer is simple. Build more. There's a lot of house building going on in the town where I live, in Lancashire as you might imagine, and a newbuild 4-bedroom semi goes for about £250k. An older 4-bedroom detached with a gym/playroom lower floor was on the market at £140k and couldn't sell. Because (for no good reason) there aren't that many people want to live here.

If there are too many people in a given area, they need to build more houses. QED. We can waffle round it all we like, but the reason house prices are rising stupidly like they are, is because ultimately too many people are chasing too few houses.
 
SlowDownDerek said:
It is if, as he says, you take into account the fact that you can't avoid the cost of the alternative, i.e. renting. You have to pay either the mortgage or rental costs whatever happens.
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You're missing my point. Depending on cost of rental, there have been points where you'd have been better off (financially), by renting and investing your money elsewhere versus buying at that point in time, and the extra costs/overheads that come with owning your home.
 
MB1980 said:
You're missing my point. Depending on cost of rental, there have been points where you'd have been better off (financially), by renting and investing your money elsewhere versus buying at that point in time, and the extra costs/overheads that come with owning your home.
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I get your point but I don't think this is true if you consider the medium to long term. People have to do what you suggest anyway because they need a large deposit if they want to buy but they invariably buy a property when they can afford it rather than continue to rent and invest.
 
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