UK House Prices: No real growth for 20 years!
Вставка
- Опубліковано 12 бер 2024
- House prices are a national obsession and they make up about half of UK wealth. But what if I were to tell you that house prices are where they were 20 years ago? In this video, I will show you why this statement is true. I will also discuss where we are now with house prices both overall and by region and give you my view of where house prices might be headed in the future.
My FlexiSpot XL3 Recliner - bit.ly/3OPV93K
Check out our other sofas - bit.ly/3UOo1x4
#FlexiSpotUK
If you want to learn more about investing then why not become a pensioncraft.com member? To find what we offer and how you can join our friendly community click here www.pensioncraft.com/investor...
What Else PensionCraft Offers:
💡 Book a coaching session with Ramin so he can answer your questions in a one-to-one video call via Zoom: pensioncraft.com/power-hour/
📰 Sign up for our free weekly market roundup to get news and views about what's going on in the stock market and wider economy pensioncraft.com/market-roundup/
📖 Understand investment in more depth with my online courses pensioncraft.com/courses-we-o...
❓ Join PensionCraft on UA-cam and you’ll be supporting me to make more content and I will answer your questions and respond to your comments on UA-cam as a priority ua-cam.com/users/pensioncraft...
🎧Check out our free weekly podcast "Many Happy Returns" on your podcast provider of choice or here many-happy-returns.captivate....
I Use The Following Data Sources To Help Me Create My Videos
(These links provide new users with a special offer and may also provide me with a small commission)
✔️ Stockopedia - New users of Stockopedia get a special 25% discount on any annual plan if they use this link stk.pe/pensioncraft
✔️ Koyfin - New users of Koyfin get 15% off when signing up through this special link koyfin.com/?via=pensioncraft
✔️ Sharepad - sharescope.co.uk/pensioncraftsp 2nd month free for monthly subscribers & Additional free 13th month for annual subscribers
✔️Cbonds - provides you with a high quality and comprehensive source of bond market data and up to 50% off their private investors’ dedicated plans when you use this link bit.ly/47nekIM
Where Else You Can Find Me
🌐 Website - pensioncraft.com/
📱 Twitter - / pensioncraft
👨 Facebook - / pensioncraft
🔗 LinkedIn - / pensioncraft
Take A Look At Some Of My Other Videos & Playlists
📹 Investment Strategies playlist • Investment Strategies
📹 Income Investing playlist • Income Investing
📹 Investing With Vanguard playlist • Investing with Vanguard
📹 Portfolio Building Blocks playlist • Portfolio Building Blocks
DISCLAIMER
All information is given for educational purposes and is not financial advice. Ramin does not provide recommendations and is not responsible for investment actions taken by viewers. Figures that are quoted refer to the past and past performance is not a reliable indicator of future results.
If you need financial advice, Unbiased, the UK’s leading online directory of financial advisers, can connect you to an Independent financial advisor for free. Additionally if you use our link to register with Unbiased, your first consultation with a financial adviser is free. imp.i337888.net/c/4012142/193... (This link provides you with a special offer and we will also earn a small commission)
#HousePrices #PensionCraft
As someone who bought their house in 2006 I am disappointed to see this! So this is why we should not treat our houses as investments!
Owning a home is not an investment but housing is a necessity. Therefore it is advantageous to be in control of your own housing and have diminishing payments in real terms rather than ever increasing rental costs.
@@pedazodetorpedo A good way to look at it :) I was rather hoping to cash in on some of that retirement age downsizing bonanza but I'll settle for not taking a loss.
Are you nonbinary?
Surely for most people a house is just somewhere to live. It would be a lot better if house prices didn't go up so much.
@@fredatlas4396 True enough, tho' I do think that people often don't calculate how much they actually pay for their houses - it's a lot more than the 'ticket' price if you don't pay cash!
The main problem is they don't measure inflation correctly. People get all upset when the price of a can of beans goes up 30p but celebrate when their house goes up £30K in a year. As the most expensive thing most people buy houses should make up a big chunk of the inflation basket.
Looking back twenty years includes the big drop around 2008. To put things in perspective I made next to nothing on the house I bought in 1989 and sold in 1999 and that was in actual £s.
Housing costs were removed from the way inflation was reported by New Labour when they came in to office. That way they could inflate house prices without putting pressure on wages. RPI and CPI are different and CPI was introduced by thatchers government but there was a change by labour and it shows in the house price curve, Ramin mentions the jump in the late 90- mid 2000s. It was also coupled to Labour letting the banks set their own reserve ratios leading to unrestricted lending. This is what drove the “growth” they relied on to “fund” the spending they embarked on. That’s why most people think Labour ran the economy well but when you actually look into it in detail they were very complicit in the 2008 crisis and coupled to the vast amount of PFI funding and other economic problems it’s hardly surprising that the country never really recovered.
@@davideyres955 Yes, the Labour party 'say' one thing for the media & the voting plebs & 'do' another quietly behind the scenes' Blair & Brown were a 'hidden' nightmare for the UK's long-term prospects. The conservatives are not squeaky-clean on that either.
I got a 3% pay increase in 2022 and 5% in 2023. RPI inflation was 8% in April 2022 and 13% in April 2023. Plus since 2009 my yearly pay increases have been mostly 1% and a bit later on 1.5%. The biggest pay increase I had from 2009 up until 2021 was just 2%. The standard used many yrs ago by mortgage lenders was 3x your gross annual salary for a single lender. Under that rule the maximum mortgage i could get now would be just £69000, i don't think that would even buy me a small studio flatb
Yes it's outrageous actually that teachers and nurses on 25-30k can't even afford to buy a grotty studio, let alone a house of any kind.
25k is slightly above min wage hahahah economy is fucked@@Jalleur14325
Because the govt propped up the housing market with H2B instead of letting it fall to a new normal@@Jalleur14325
@@Jalleur14325 For the last 20 years the smart money is in equities and bonds and not in real estate.
Comparing a house today with a house 20 years ago I comparing Apple's and pears.
Consider that the typical house will have had several high cost upgrades. Insulation, heating systems, kitchen and bathroom modernisation, double glazing, extensions, garden structures, garages, double glazing, loft conversions, solar panels, batteries, EV chargers, porches .... so if the average net real return is 1.1% then house holders have made a massive loss.
Add on interest and mortgage fees too.
Yes, the deflationary effect of housing improvements is highly underestimated. But this is also true for your 2024 iphone, tv, car etc. vs your 2000 iphone, tv, car etc. In general inflation is very overestimated because (contrary to myth) we are in fact over time getting more and more value for the same money.
Another reason why equities and bonds are the way to go - they are liquid, low maintenance, and low cost.
@@jauld360don't forget insurance and maintenance. You will get security if you buy your own property. As long as you pay off your mortgage.
Excellent video as usual. I think what this misses is the role of debt though. Depreciation of debt is a powerful weapon.
That's true however that will be balanced out by the maintenance that you have to do on your homes - 1 to 2% a year on average.
You know we in a boom cycle when someone shilling me a recliner
"Rapidly rising wages" bring more people into HRT. No mention either of mushrooming debt (mortgage, household, credit card, student, car etc). Debt compounds at a faster rate than the economic growth required to pay for it and UK GDP per capita is falling. We cannot survive as a country by buying and selling houses.
Unless you are buying in cash the price of the house really includes the interest you pay over the course of the mortgage, and the average pay is presumably before taxation which changes over time...
Not many realise this
But buying a house with your own cash is potentially a bad investment. It is a shame that most people's wealth is tied up in their house, this is not helpful since it is not very liquid and release any of it can be both costly and inconvenient.
I also wondered about whether the house price divided by earnings accounts for tax (is it earnings before tax or after?). Perhaps more importantly, by the time you have paid for tax, housing and food and all other essentials, do we have more disposable purchasing power today or in the past? I believe we have less purchasing power today, primarily because a larger proportion is being spent on tax and housing, but also other essentials. So if houses have not appreciated, where has the money gone...?
@@bvqbvq so it may actually be better to rent a property while in investing your cash?
@@UnimportantAccindeed, it's what I do. I could buy a house but choose to rent. I don't have kids at home and am semi self employed so not tied to any physical location. I could buy a house for 500k. But applying the 4% rule means that takes out 20k of annual income. I can rent a house 'worth' 500k for 1400-1500pm so let's say 18k pa. So I'm already 2k pa better off compared to buying. That's without factoring in home maintenance etc. It gets even better though. Because I have no ties I can easily employ geographic arbitrage. In southern Europe or far east you can rent a nice Airbnb for less than 1000pm, and that includes all bills. It's not for everyone and I won't do it forever.
As per the video I'm hoping that over 5 or more years, the effects of 5 or 6% real growth in stocks compared to 1% growth in house prices will mean I can in effect buy the property I want for a much smaller proportion of my net worth.
Loved the chair add, keep the jokes coming, good to see you have a sense of humour!
Great content as always, thank you
My pleasure! @discostu2
Glad to see someone applying some analytical pragmatism to UK house prices. As other commenters have said, they seem to be a national obsession
100 percent this!!
Thanks @emcdt1461
@@Blackmessa6868 except when the investment is giving you access to much more money than you start with, ie: leverage.
though yes you need to then take into account the interest as a cost of the debt which will impact your investment.
and you need somewhere to live, if you're not buying you're paying rent which is almost as expensive as the mortgage at the moment.
but you do make a good point, it's not the same world it was for our grandparents, and perhaps we're all setting ourselves up for financial ruin, i have been against buying a house for the longest time, but i now need to move from my modest rent studio apartment due to the family expanding, i need a place to live, and rents for homes are ludicrous, at least if i buy i should be in a better position in 5 / 10 years
Great work as usual Ramin. Nowruz Mobarak
I’d mention a few things though. Firstly there is a disparity between the rate of inflation vs wage inflation. This means house prices are rising against wage caps. Secondly, as an investment, property also includes a “dividend”, ie rent. And rental inflation is massive
Rental inflation is just tax though. Noone seems to understand that lol
@@mramg6038 yeah i'm one of them. Would you elaborate please
Growth is what's killing this world. House prices SHOULD be stable compared to wages.
Most politicians are obsessed with growth. Even if that supposed growth leads to lower GDP per capita.
Mass migration's whole purpose is to drive down wages. More people = increased prices of housing. How are you not getting this?
@@timg1246That’s why we have mass immigration in the UK. It’s a political tool to achieve short term growth.
Long term house prices should be stable compared to inflation. An interesting question for the economists.
If everything in the shops was free would people be better off. Some items like TVs almost are free compared to what they cost decades ago. When built this house was the price of twenty five 20" colour TVs.
@@MrDuncl and inflation should be in line with wages. All very interesting stuff to discuss. Planned economies don't work and supply and demand doesn't work. Doesn't appear to be an answer. 😉
Great video! How do you see the BoE benefiting from the introduction of CBDC? Please summarise the pros/cons and impact on controlling inflation.
Like the calm rational explanation of his view wether I agree or disagree , so refreshing to have videos without combatitive tone hysteria or dramatic background music/noise . Feels like a world I want to be in.
Thanks! @Rol-fy3my
@Pensioncraft much appreciated, the world has changed vastly from when I grew up in the 80,s , maybe just getting old ! 😀...
Excellent analysis Ramin. Prices should get a boost from falling interest prices but the price to wage ratio is already so high, that I cant see prices rising strongly again
i used to think that, but look at many cities in the world where price to wage ratio are so extreme, eg Hong kong and many more. i guess it is possible in theory but who am i?
@@lifeofranco You raise a good point in the sense that we don't really know what is the limit of house to pricing ratios. 20 years ago we would have thought current ratios are crazy.
I have to clarify I was really thinking about London. The rest of the uk can certainly go up but London is 9.9x in the video or 14x if you google it. That is top of the world similar to most expensive cities like San Francisco, Prague or New York. HK is a bit of a special case due to land scarcity, although London indeed has some special factors as well.
My wild guess is that could still go up a bit but at some point it has to stop, both for buyers that can't afford , and for buy to let/imvestors, as the yield won't cover the high purchasing cost
@@TonySantolaria agreed it’s getting unsustainable these days. People in London are spending more than half their sallary in rent.
It’s a tricky market right now we just bought a house and had to pay close to asking price to get it. The market might be soft but sellers don’t have to sell as in our case the seller still had a low rate mortgage so they weren’t particularly in a rush to sell. We had to outbid 3 other couples and despite there being more houses on the market many are unsuitable so the main interest is concentrated in a handfull of good properties that have been looked after well. We were shocked how many of the houses we viewed were listed for £1M+ and despite being large brick and mortar desirable houses in desirable locations many of the current occupants (elderly couples) were living in absolute poverty! We are talking interiors not updated for 20-30 years, damp, rotten floors and windows mould everywhere. I wonder how many UK home owners are chuffed with their house returns whilst living in these horrible conditions trying to protect their “investment”.
Congrats on your purchase! May I ask where you bought?
@@paul_k_7351 Thanks! Hampshire.
Love that ad 😁
Useful insights as usual. For example house price rises linked to wages. But I hope the chair was worth it. 😅
Lovely flexispot...
I wonder about the rent and the updates of the house (and other "running" costs). I am not sure of the yearly yield. Like if the graph is alone the prices of the house that not incorporate the rent that people may pay the owner in that property during the time. I suspect that there will be as well update of the property or similar and maybe as well other cost such as insurance or interest rates. In the period of time I suspect people may even change the definition of the house, like increasing rooms, splitting the house and so on. So if I am living in that property and considering a 1% increase I think is not bad as I am probably still saving some money on rent minus interest rates on the mortgage, council taxes and upgrades. So I think the final figure will be sensible larger (let say 3%). I guess if we are just seen the initial and final prices, is like to consider the price of and stock (like SSE) without considering the dividends and the fees of the account we keep it. So I am not sure if those numbers are or not included, I suspect not.
the graph you were showing around 5:30 mark is very intresting. I think this up and down nature over the last 15+ years is a lot to do with the max that people can afford. bank lend money based on income and loan leangth so unless mortgages get longer and longer or incomes grow higher and higher I dont think we have much more room for growth in house prices. it looks like they are trying to go up but then hitting a wall of limitation.
I personaly started thinking about buying back when I got my first real job as a painter and decorator on a full time 40 hour contract back in 2022. my almost £30k slary when I went to 3 different banks for mortgage quotes they were between £90k-£120k so obviusly if the avg price is between £250k-£280k I cant get anywhere. at least if they were under £200k you might have been able to find a run down place and then bargin a lower price if demand wanst too high. but thats not the case.
affordability keeps bringing the prices down but avalibility keeps shooting them back up.
its a death loop at this point. and I fear that by the time my girlfreind gets back into work after being long term sick that even both of up on 30-35k wont even be able to afford somwhere live.
Falls in house prices are factored into the inflation calculation so if house prices rise inflation will also appear to rise. The drop in house prices has allowed real inflation for the average person to be underestimated such that wages won't have kept up with costs. That is one of the reasons why people feel poorer when the graphs say they should be feeling better off on average.
what may not be taken into account when saying "No real growth for 20 years" is the dividends the house payed during that period, either by allowing you to live in or by renting it to others
@pensioncraft thanks for your analysis. Do you really think inflation will come down given all the global issues and possible food shortage? Thanks
The land registry is only reporting on sale prices up to Dec 23 to date and that is showing prices continuing to fall
Great analysis but I think house prices are still overpriced
Would it be fair to say that approximately 1% need to be deducted from the annualised return figure for property maintenance purposes?
Correct, so the picture is actually worse for homeowners.
From investment perspective thats oretty good as your getting rental income PLUS 1-2% appreciation in house price growth yearly. The rental yield deviates i guess but outside london probably can get 12-15% yield on auction sales. Problem is it rewuires more work than sinply investing a lump if money in a stocks and shares account.
Beautiful classic 5 wave elliott pattern in house prices - next stop 50% drop to 4th wave preceding degree
Depends where you bought... My mum bought houses in london in early 2000s, biggest example is one bought for sub 100k and someone has offered over a million for it today.
Great video Ramin. How about do another video factoring in rental income and compare to S&P 500? I would guess the average house worth about £260,000 in 2012 could have produced about £172,800 in rental income. Repairs and insurance would need to come of that, so lets say take off 10%. How would that have stacked up along side S&P500. My own figures put property a little ahead.
Why is 10 percent the maintanance fees for repairs,insurance and estate agent gains?
Just an arbitrary figure. I would think £17,280 would be about right for insurance and basic redecoration costs when a tenant leaves over a 12 year period. Of course it would depend on the property and tenant so could be more or less, but as someone who has been doing this for about 30 years, it fine as a working guide. Many small landlords self manage so I have not included agency fees.
Assumes a perfect world. You might have an empty home, estate agent fees, ground rent. Too many obscure variables and too specific to make an accurate comparison
5.8% seems very high. Is that correct and is the last 2 years of data fair to include?
The region will naturally include flats and houses, which is problematic given that houses in desirable areas will be different to the average. Am looking at few examples where I can see what the house sold for in the last 20 years, suggests they went up in value by 7-9% per year. Even at 5% inflation, real returns are high at 4-5%.
I think the reason why it feels like house prices haven’t gone up in real terms is also driven by taxes (higher rate). I doubt many people are getting 5% growth in wages per year, which puts you at a reduced rate if you go into the higher tax bracket.
house prices are now valued on the joint incomes of a couple, no longer a single wage earning household of the 1970s. They are also becoming based upon the highest wage earners e.g London given limited housing supply. The top 40 highest wage earnings set the price, the price to earnings for them is reasonable. Multiples aren’t going to reduce without very substantial over supply of housing.
Nationwide plots real vs nominal prices back to 1975. The trend line has increased at 2.4% pa over that period. We are currently 25% below this trend line, almost at all time high. Ramin, do you see this mean reverting?
I do not want to find more about your flexispot haha, but interested in the chair
Good for new home buyers, unlike here in Canada where it's like $750k average price across the country and in my city it's like $2m....
It's not like you haven't got the land to build, is it?
@@kw8757 We don't. Canada is effectively a small country.
@@Etaoinshrdlu69 Last time I looked at a globe Canada looked fuckin' enormous.
@@kw8757Most of it is uninhabitable. Vast majority of Canada’s population live close to the US border.
Excellent information and really appreciate going into detail. Hypothetically speaking if you could invest £1 million into a global fund tracker or UK property without mortgage which one would come out on top after stripping out inflation
Dividing by four how many people have £250K to put in a global fund tracker ? How many people get given a £250K mortgage.
Back to the tracker idea | suggest you read up on Endowment Mortgages.
@@MrDunclI have £870,000 in a global tracker. Also £3m in property to act as a hedge
On the first graph...is that Totalpay...the average for all earners, or full time workers, or household income? Because you have to consider the greater number of people per household in work since 1980. Could very well be that for the *average family*, house prices are actually cheaper now than in 1980 when comparing to household income - & it's household that pays mortgage/is used in affordability calcs.
Thanks for your really helpful videos. This is yet another. But you say interest rates peaked at the time of Liz Truss' 'crazy budget'. That doesn't appear to be supported by the chart which shows a gradual rise to a peak in July 2023. The budget was in November where your chart shows a series of mini peaks but these rates were already falling. have I got this wrong?
I feel like I'm the only person who doesn't care about owning a home
Same. Could buy one with cash if I wanted but don’t see much upside and I see a lot of currency risk. I don’t want to buy a house until everyone is shaken out of their complacency of thinking it is an up only market and the boomers have died and that supply of houses is cleared by the market (who are they going to sell them to?)
@@thecount3965 Immigrants, the UK population is set to go above Germany's in 2045!?!
@@thecount3965 Chinese investors
Uk needs 300k new houses per annum Currently. Achieving appro 75k. So next year need 400k new house,s plus the 325000 shortfall from last year and so on ect Add in net migration of 750000 per annum and the demand is simply to high , they are only going up…
@@martinaston1715 True. But rate rises have not actually hit prices yet.
At 2% prices were justified. But at 5%? Nah.
No real growth:
2000 the average £82,563
2010 the average £177,754
2020 the average £252,000.
Whilst owning a property is one thing running it is entirely something else. Gouging utility providers, local council's increasing their charges ( in a pointless attempt to stave off central government induced bankrupty), inflation and cost of living in general combine to make buying and running a home a very considerable undertaking indeed.
I am confused with your video, in London you cannot buy garage for 100K, and let alone as someone who lived there for last 15 year I have seen surge from property being 250K to now being valued 500K without any investment in it. Also not sure do we live in the same country as I have not seen salaries following inflation at all...
I had a friend (he died a few years ago) who bought an end-of-terrace 4-storey (inc. basement) house in Islington in 1982 for £23,000. When he died in 2017 it was worth £2.3 million. That's a rise of a hundred fold over 35 years. Not 100%, but 10,000%. Admittedly it was in a pretty dilapidated condition when he bought it, and in 1982 (it's amazing to think it) much of Islington was a pretty undesirable area. He also did a lot of work on the house over the years, including installing CH: he actually did all that stuff himself. Unfortunately, we British people have gone along with this idea that real estate property is a commodity like any other, to be traded internationally by some of the dirtiest money on the planet. Property should be able to be purchased only by British individuals, not even by UK companies. And real estate property shouldn't ever be an investment: a minimum percentage annual price depreciation should be imposed by law, so that property simply ceases to be a financial investment (a reasonable profit from improvement should be permitted). Any money paid over the depreciated price would simply be taken by the State as an extra tax. This is the great thing about real estate property: ownership can't be concealed, and houses can't be moved: real estate is ripe for draconian State price controls in a way no other property class is.
Apparently in average yes, salaries have followed inflation. But as an average that means that for half of the people this is not true and therefore their purchasing power is lower and a house will be more expensive for them.
Don't fight facts - you will loose.
@@meibing4912 You are reading facts wrongly,
@@fcruz_ Issue with average is that takes in account top 0.1% of earners, who have huge bonuses, but if you take NHS bands salaries from 2010 to 2023 we can see that salaries are far from inflation and living cost expenses, especially rent in London and property prices.
Your house price hasn't gone up - your pound sterling and salary has gone down! At least its stable though unlike the currency.
Have you watched 'Moving home with Charlie' ? He explains in detail why a lot of the housing data cannot be relied on. As a former estate agent, I very much agree with his thinking. I'd be interested to know your thoughts, perhaps you could do the same calculations with a different data set? Keep up the great channel 👍
The key to rising property prices is clearly a factor of supply and demand but the windfall lies in gearing, the debt for equity game. The straight line 'cash' performance of bricks and mortar compared with say gold or performers in the equity market is both revealing and significant. The key is of course that a house represents a roof over our head so the cost of renting a property should be factored into that equation but the facts are often distorted.
Absolutely: Housing does not follow inflation. National house prices follow - over longer timelines - wage earnings of those who are in the housing market. Local housing prices can vary very significantly from this mean due to local demand or lack thereof. In the 1980's housing prices in lots of big cities fell - since around 1995 they have gone up a lot due to the change in demand as big cities became livable once again.
What will pensionercraft be flogging next week? elasticated trousers, stairlifts or mobility scooters😊
During the inflationary period 1971-81 when interest rates rose from 2% to 20%, house prices rose 5x, not down or flat!
First time buyers should have to pay no Tax Stamp Duty. No Vat on furniture or fixtures for first time buyers, a discount on home insurance. There should be reserve of new build housing for first time buyers who have lived in the UK for at least Five years. A ban on Foreign buyers and a Tax on homes owned by existing non domiciles. There should be a ban on second homes or a Tax on them. There should be a national home building not for profit builder which would continue to build homes during a high rate environment, using prefab construction. Taxes such as Stamp duty and the other new taxes mentioned previously should be ring fenced for the building of new homes.
One thing saying to wait to fix, but if your mortgage period is up, your options are limited and sitting on a tracker is going to be a killer. It's like trying to time the market. A bit mad.
You can lock in a product transfer with your bank 6 months in advance so timing the market is not a risk for that long I guess
@@whitewittock Agree that's great, we did this, but it's not quite the problem I'm on about. If your rate is about to end this month coming, you will have fixed something 6 months ago and then at the start of the year, locked in the best rate when it dropped. But you're not going to wait another 6 months from now to fix because you'll have to sit on a follow on rate that will likely cost you a whole lot more than just fixing for 2 years. Waiting to refix beyond your existing end date can be quite painful and not a viable option.
@@jordge92 yes I would definitely do a short fix in that situation. I don't think rates will fall anyway
Yrs ago legitimate lenders😅 like most banks would only lend a single borrower 3x their gross annual salary. And a couple taking out a joint mortgage could borrow both their gross annual salaries put together x2. 5. But some mortgage brokers were turning a blind eye, and borrowers were getting mortgages anything up to 6x their gross annual salaries. Plus estate agents playing games to get buyers to pay more and more for the houses because they get a percentage of the selling price. So I don't think there is a direct link to real average salaries. Otherwise why are so many people struggling to afford to buy their own homes. Also there are more investors buying to let now, which is also helping to fuel the rise in house prices. And they are saying that mortgage payments and rent is, taking up a much bigger percentage of most people's monthly take home salary than ever before. So that doesn't look like average salaries are actually keeping up with house prices or the cost of rent
Years ago there weren't any Mortgage Brokers. In fact it was commonly expected that only the Building Society where you had saved your deposit (thus demonstrating a financial track record) would give you a mortgage.
@@MrDuncl That's not true, in the 1990's there were rules on how much you could borrow as I've stated. But brokers in estate agents etc would get people mortgages that were many more times their gross annual salaries than the rules allowed. They lied and the brokers turned a blind eye i guess, but I'm sure the actual lenders banks etc must have known this was happening and just ignored it. I know of people who borrowed 5 or 6 times their gross annual salary on a mortgage. This helped the estate agents to sell homes at over inflated prices. In 1990's after the crash there were 4 bedrooms detached homes selling for around £85000, 3 bedroom detached for about £73000, and 3 bedroom terraced for around £54000 etc. My salary in early 1990's was about £9000 gross per annum. Roughly thirty yrs later and it's now just £23000. So house prices have gone up a lot more than 2.5 times. How much would that same 4 bed detached house cost now. Under the rules a couple let's say on £50000 each per annum. So that would be 2.5 x £100000 = just £250000 you won't get much for that now. So how high would salaries have to be to afford a lot of these homes now if the lenders were sticking to the rules.
@@fredatlas4396 I was talking about when I bought in 1986. I agree with the rest. Check out "Mortgage Madness" from 2003 (which is here on UA-cam) to see how easy it was to get a 10 x "salary" self certification mortgage.
@@fredatlas4396I think he means before the 70s. Mortgages used to be regulated by the government and banks weren't allowed to lend on housing.
@@Vroomfondle1066 I wasn't talking about before the 1970's
Cant really call this the U.K. house prices , as only nationwide prices
I bought a flat in London in 1998 for £100,000 and sold it in 2022 for £700,000. My experience is very different from this video.
1998 is 26 years ago. Prices were only just starting to recover from the 1990s slump when many people ended up in negative equity. It is quite likely your flat (if built) was £140K in 1989. The developer of Canary Wharf went bust and some colleagues rented a flat there "because it was really really cheap".
I bought a 2 bed flat in 2002 for £180,000. Today it’s worth £210,000. Global stock market has performed better
What area did you buy mate ?
A modern version of the Shackleton high seat chair…you know 😂
*Northern Ireland. Ireland has different housing figures being a different country.
That was fun. My only criticism is that you refer to Northern Ireland as Ireland.
The whole of the island of Ireland is officially Ireland. Tiocfaidh ár lá, sooner than you think. Today Stormont, tomorrow na 32 chontae.
The only solution for the banks is to degrade the general idea of what a mortgage is for. It used to be for a single worker, then it was a couple, then part of a house for a couple. Next up it will be for a room in a house share for a family, can't wait for the lovely profits
What does a house produce? Absolutely nothing. So why would you expect, over the long term, prices to rise by more than inflation? Over shorter time periods supply and demand can get out of whack which may move prices differently but, again, you would expect this to be reversed in the long term.
Houses can produce rent.
In the past families. In the 1970s a schoolfriends lived with his three brothers and sisters in a large house in Bristol. His plumber Father could obviously afford the mortgage. That house is probably worth £600K now
@thomasowen2585 sure, but why should the price go up ?
@@thomasowen2585I think he means the don't produce material goods.
Today's surge in ultra long mortgages is fast becoming the norm and to the extent, that payback is more and more extending well into retirement.
The cause of this is a simple catch22 - sickeningly high house prices, still rising, because there is more and more money handed out in those mortgages. Why? because in order to meet those insane asking prices lenders have gladly...
1) Significantly increased mortgage salary multipliers, and...
2) Significantly increased payback terms
No longer does 21 years at 2.5 x your salary give you enough money to buy a house.
--> THIS IS EXACTLY WHY the UK housing and rental market is COMPLETELY destroyed !!!
--> The ONLY way to reduce house prices is to increase interest rates...once you make these ultra high mortgages unaffordable to the majority, you can rest assure that the majority of sellers will reduce prices. Unfortunately, the BOE won't do this effectively, and certainly not for a long enough time as to be effective. What to do ???
Good to know, but not sure what the take away is from this video. Buying a property will inflation proof you for years to come. Suppose what you're saying is that it's not as good as what everyone thinks. Although having said that, 2% above inflation with 90% leverage does sound appealing.
If it is your main home, price is nice but not a big deal if you have to pay more for your next house, until old ate and used for nursing home. If buy to let, plan to ensure you never sell and rental yield is focus, again house prices are nice but doesn’t matter if dont sell. If you are buying for price appreciation, well the risk return in the gain is up to you. In short, live in your home and dont remortgage, and keep buy to lets forever and leave in will.
I didn't understand this video, trying to say that a house in london today was a bad investment compared to the stock market since 2004?
He has missed the point that getting a mortgage is easier than getting someone to lend you money to put in the stock market.
@@MrDuncl and why does every new rabbit hutch in the sky get bought by a sea of property investment piranhas? They have cash and know what they're doing. Good point I think he's missing a lot of things
Oh jeez. Has Stanna stairlifts been in touch yet?
I disagree on house raises in my region. I can see stock increases and houses sticking that list at peak 2022 prices. If they lower below this peak they actually sell.
So, is the overall picture showing that house prices haven't risen in real terms - but the average person's purchasing power/ability to fund a house purchase has diminished over the period?
You are very likely correct!
What is keeping up.with inflation
Bitcoin
I find that there’s such enthusiasm around buying a property as an investment that it’s difficult to convince people it’s not a great option. But if you want a roof over your head, now that’s a different story!
Agreed
I have done very well out of buying and renting a small flat in London, but now the yield after overheads is at best 3%. (not accounting for inflation).
No longer a good investment.
Where do you want to live On a street ? or maybe give more than half of your wage for a shit 1 bed flat for the landlord mortgage. Thanks for the advice I am glad there are people unaffected
House prices have crashed for me. In real terms given my 10 x wage inflation since leaving university housing has never been so cheap lol. Create your own wage inflation 😂
If you've been frugel like me and my partner we'll likely be mortgage free by time we're 40.
Ruff ruff ruff - Google translate =
Give Teddy the chair!
Teddy wants the chair !
Teddy shall have the chair !
They've had a lot more growth than wages
After 15 years in a flat I bought my first house 18 months ago. 26 year mortgage and 5 x salary...and that was with £150k deposit. Luckily I fixed for 10 years.
I hate when analysts discuss real wage growth. This assumption is based on an accurate cpi figure, which everyone knows is completely bogus.
If you’re renting out property in the U.K. and you have paid off any mortgage by retirement age then the property may only increase by 1 or 2% per year but you do have the added benefit of a 3-4% return per year in rental income on top of that. I still think bricks and mortar is just as safe as an investment as the stock market. Also owning your own home is desirable mainly because the conditions and laws for renters are so dreadful here in the U.K. compared to say much of continental Europe.
Inflation hedging is about maintaining purchasing power. So, yes, houses have done that.
I would have never have expected you of all people to start advertising furniture :(
There is alot of simplistic media hype about house prices that lead to many people making bad decisions. Here in Australia since the late 90s the government has inflamed house prices with policies such as first home owners grants capital gains tax exemptions etc in the name of helping affordabiliy but we got capital house price growth about 4% above inflation and now they sit at about 14x income. The goverment has come to the end of the road with this extravagance , infact the young are becoming hostile (unless their ageing parents benefitted greatly). As much as it is hard to believe it won't continue with all the reports of the current housing crisis the last 25 years may never be repeated here or in the UK.
Still one percent above inflation aint too bad. If you include net rental yield of 3 percent it starts to look as good as return on a 70/30 etf. However once you throw in borrowing costs the return on risk is not great, a place to live though if you actually like what you bought which is an achievement in itself.
Interest rates are not coming down though. BoE will likely leave them again as is this month and all major lenders are increasing their fix rate mortgages.
5% is average over 70 years
Property investment doesn’t always work as suggested here. Most investment property is mortgaged. You put £100k in stocks, you may see 10% pa return on that £100k. You put £100k into a property worth 400k. Last 10 year property growth averaged over 5% pa. This is 5% return is on the full property value of 400k, not the £100k put in. Plus you should see additional return in income for rental profits.
You get 5% on that 100k and the bank gets 5% on the 300k.
@@BlueShadeProductions you pay the bank interest on the loan, not the rise in property value. The home will generate income which is generally used to pay expenses such as the loan, management etc. You may even make a day to day profit in addition to the longer term equity gain despite paying the bank and other expenses. It’s not a difficult concept to grasp.
14 years ago I sold my house and moved into council housing. I have used most of the capital on exotic holidays. Looking to spend what is left on more of the same. As I have nobody to leave it to.
I’ll have it ;)
Arent the first and last parts of this video contradictory? How can the how price to earnings ratio be increasing if the wage growth to house price growth is strongly correlated / similar?
7:10 I hear stannah stairlifts are looking for a new influencer.
...what about population declination and house prices?
decades away though. and immigration is reversing that anyways
Yes but what is this in the universal currency of mars bars.
Get teddy his own chair!
Good because they are well overpriced...hope.for our children
Inflation average at 5.8% over last 20 years?!!
That is COMPLETELY different to typical reported figure.
3% is usually used by financial planners as the working assumption for cash flow forecasting.
Highly concerning if true.
Also doesn’t take account of decline in GBP against USD over same period.
Makes sense because it was like what 12% in 2022? Recent money has a higher value and so that increase at 12% (only for that year) more significantly affected the average change in inflation over 20 years.
@@djayjp I thought RPI inflation rate was 8% in April 2022 and 13% in April 2023
@@djayjp One year of 12% cannot lift entire dataset average 2.8% points. There is something else going on. @Ramin?
What do cryptocurrencies produce?
@@J1M1F Grifters
Thank you, old man😅
Took me 8mins to understand this.
Do medium house price instead
none of this applies to northern Ireland where house prices have rocketed and haven't fallen AND won't fall. different game here
When adjusted to dollar, things look even worse…. The average house price in the UK 2008 was 180 k pound or 350k US dollar… today average house price 270k pound or 320k US dollar 😒😒😒
Teddy is great
You're missing the annual income to house pricing ratio, the housing price correction hasn't even started yet
Put this into context I bought a house in 2017 for £240k I had it valued at 400k last week , if I sold it now I’d walk away with 160k show me a pension or investment that makes that much returns in under 5 years. Cheadle Hulme Stockport 26 most desirable place to live in the uk
I didn't notice any price fall after 2008 in London. I think the problem is not in supply but in wrong demand where foreign investment companies and individual parasites of buy-to-let schemes (I call them buy-to-let scams) are buying out the market. These should be banned for good.
Rubbish lol😂, dumb money causes high prices. Buy to let will only buy a property if numbers stack up, first time buyers buy motivated by emotion.
@@Chris-yr8qo sorry but your comment makes no sense. If I want to buy a property for living, I have to find it, to find time to visit it and guess what, best options don't even go out to the public. They get sold the same moment when they arrive to agents to their friends and constant clients. Funds and trusts don't even care about the price, once the money came from their investors, they need to employ the money, so they are buying whatever price they get and on top of that they are highly leveraged and get credit with much better interest rates and better conditions - they are wholesale customers to banks. A usual home buyer is always late to the party and behind the professionals. It should be illegal to for institutional money to buy residential property and no more than one property per person or family for living only.
@@audriusurbonavicius5428 you said individual buy to let schemes are parasites, funds don't use buy to let, little people do trying to start up or add to their pensions. And yeah I stand by the statement "dumb money causes high prices" yeah I understand if a fund buys a load of houses for any price it can charge what it wants. these big developers and the like thrive of uneducated (financially) and desperate people, for example, people that get conned into buying new build leasehold houses. I rent out houses and believe me I'm not parasite and I'm not rich,I'm far from it
@@Chris-yr8qo I am not trying to insult anybody by calling a parasite. Sorry if you got that way. It's just general description of someone who feeds and doesn't do any good to the environment. And look, once you invest in the property which was already built your money doesn't do any good. They don't add to GDP and if the money is borrowed then it's even worse. If I invest in business, my capital creates new technologies, or food or build new property. But if my money buys the property which is built already for people who need it, I am becoming a middle man who's stealing the supply and offering the same potential buyer to rent it from me. It's not even service in GDP as I am not cutting hair,not cooking in a restaurant, not opening a gym and etc. If there were a few such RE investors they wouldn't be able to move the water but when you have thousands of them they simply soak up any supply and especially good quality supply - best options this makes a huge bubble and a huge problem to real buyers and especially families with kids. And when you need to spend half of your salary for rent you choose not to have kids and spend less on other things so the rest of the real economy suffers.
Is the flexispot chair for real. I am worried about you.
IF inflation normalises above 2%, rates are unlikely to come lower without a resurgence in inflation, so get used to higher interest rates, and also dont be fooled by Rightmove or Zoopla data. Its skewed, prices "increasing" are only because more expensive (overvalued) "asking prices" properties are being listed. Theyre not representational of all house prices
UK needs a house market crash. First time buyers are priced of out of the market, lack of housing stock, not in a good position.