Property prices (again)

**VectraMan** · 27 April 2007, 13:16

Am I alone in not understanding hocus-pocus economics? How can houses, some of which are being acquired on mortgages of six times the buyer's salary, keep increasing in price at a rate of more than twice income growth?

He may have a point.

**Francko** · 27 April 2007, 13:22

Originally posted by ratewhore

Love this quote from the telegraph:

and from the comments:

Full article here

If you think about it, the average income for a family is around 50-60k. Therefore 200k isn't a massive price for a flat/house. The average in Central London might be 500k but then again the average income of people living in Central London is around 100-120k if not more. Am I being too optimistic?

**threaded** · 27 April 2007, 13:23

Originally posted by ratewhore

Love this quote from the telegraph:

and from the comments:

Full article here

Burn the heretic, house prices can keep increasing forever!

**VectraMan** · 27 April 2007, 13:29

Originally posted by Francko

If you think about it, the average income for a family is around 50-60k. Therefore 200k isn't a massive price for a flat/house. The average in Central London might be 500k but then again the average income of people living in Central London is around 100-120k if not more. Am I being too optimistic?

£50-£60K is a bit optimistic surely. I'd have thought more like £40K, and only then if both work full time.

I do think these interest rate rises won't do much. If you're completely convinced about house price growth you're not going to be put off by finding an extra couple of hundred a year to pay for a 1/4% increase in rates. It'll only affect people who are borderline insolvent anyway.

**AlfredJPruffock** · 27 April 2007, 13:40

Aye RW

Interesting.

One pundits comments from the Spannish meltdown ...

Those of us dealing down here have been warning of a meltdown for over a year and even the banks were talking of a bloodbath months ago. It is reckoned that over 30% of the mortgages taken out are in arrears and rental prices are about a third of last years levels.

On another theme, the Spanish security services have revealed that Al Quaeda have cells operating here now and their aim is to reclaim Andalucia for the Muslims, as a consequence security is to be visibly stepped up here. Can you imagine the effect a bomb at Malaga airport would have.

I always feel that the price of golf shares here is a good measure of the market. The shares in the course over which I look were trading at 28,000 Euro 24 months ago. I bought one in November last year for 3,000. Enough said."

**wendigo100** · 27 April 2007, 13:40

Originally posted by VectraMan

£50-£60K is a bit optimistic surely. I'd have thought more like £40K, and only then if both work full time.

I do think these interest rate rises won't do much. If you're completely convinced about house price growth you're not going to be put off by finding an extra couple of hundred a year to pay for a 1/4% increase in rates. It'll only affect people who are borderline insolvent anyway.

I'd agree that £50K sounds optimistic, although average wages are pushing £25K now.

Regarding the borderline insolvent, I'm willing to bet there are a lot of those as people borrow to the limit to chase house prices.

**Captain Dispensable** · 27 April 2007, 14:30

Not forgetting credit card debt with people juggling between 0 percent interest deals.

Then there's people remortaging their homes to release equity from house price increases purely to buy tat or pay off other debt.

Then there's those on interest only fixed rate mortgages that are due to end soon.

Plenty of people I know are in these situations. All of them have their heads in the sand to some extent. I'm so smug being debt free

**AtW** · 27 April 2007, 14:38

Originally posted by Francko

If you think about it, the average income for a family is around 50-60k.

**sasguru** · 27 April 2007, 14:40

House prices will keep rising for now as

Supply < Demand

As supply will not change in the medium term, demand has to fall off.
This will only happen if
(1) Interest rates rise massively
(2) Unemployment increases massively

As both these are unlikely to happen in a 2-3 year time span, I predict continuing house price rises.

Property prices (again)