Cost of living squeeze in 2022
Discussion
The figures are here from Nationwide:
https://www.nationwidehousepriceindex.co.uk/report...
I've extracted the period under discussion:
i.e. the average price has increased each month for March, April and May.
https://www.nationwidehousepriceindex.co.uk/report...
I've extracted the period under discussion:
i.e. the average price has increased each month for March, April and May.
snuffy said:
i.e. the average price has increased each month for March, April and May.
Is this the price of the average transaction, or the price of a notional "average" house, or what exactly?There's a relevant discussion at https://www.ft.com/content/58af95c6-f95e-4be2-b82d... for those who have access to it about the US which is seeing average transaction prices rising but a dramatic fall in lower value transactions.
Deep Thought said:
tannhauser said:
I don’t care whatever any of you say. Proper prices are way out of whack and artificially inflated based on funny money. There has to be redress.
Why has there to be?So you can get the house you want? Maybe look at improving your own outlook rather than wishing for a housing market collapse which isnt going to happen.
"The average house price is 65 times higher than in 1970 but average wages are only 36 times higher."
"https://www.ons.gov.uk/peoplepopulationandcommunity/housing/datasets/ratioofhousepricetoworkplacebasedearningslowerquartileandmedian"
1997 ratio earnings to value 3-4 for all regions, 2021 up to 6-10
"In 2021, we estimate that full-time employees could typically expect to spend around 9.1 times their workplace-based annual earnings on purchasing a home in England. This is a statistically significant increase compared with 2020, when it was 7.9 times their workplace-based annual earnings"
If this continues then the lines diverge more and more and the affordability reduces. Paradoxically the seemingly relentless widening does create a demand in itself as it creates a "time is of the essence" feeling as to delay will just makes things worse. Should this have been managed better by the governments over the last 40 years, or is the economic benefit we've had worth it and has no consequences?
If a school teacher (etc) in the 80's could own a home and support a family (with mum perhaps not working or part time working, and now they have no chance of this, we aren't better/richer for it are we? Add in the student loan system (and constant worsening interest revisions of it) and then the current cost of living hike and it makes it even more severe?
Our country's wealth depends a lot on the price of real estate and so it will be protected/managed as much as possible but it's hard to square the circle for the younger people coming through I think, rock and hard place?
Throttlebody said:
Ntv said:
Ok, I'm going to explain the concept by way of example (as an aside, did you enjoy algebra as much as I did?)
Consider a case where something (anything you like) costs £1000 and then we look at the price change of that something through subsequent equal periods of time ...
End of ...
Period 1: 1000
Period 2: 1007
Period 3: 1015
Period 4: 1021
Period 5: 1024
Period 6: 1025
It's a beautiful series of numbers isn't it?
Now, we see at first an increasing rate of growth up to end of period 3. However we then see the rate of increase slowing, and continuing to slow all the way to the end of period 6. But at no time does the cost of this "something" fall
An important concept that is well worth understanding at any age.
The cost can ‘fall’ relatively though, ie from period to period. Brings down the average. Also well worth understanding. Consider a case where something (anything you like) costs £1000 and then we look at the price change of that something through subsequent equal periods of time ...
End of ...
Period 1: 1000
Period 2: 1007
Period 3: 1015
Period 4: 1021
Period 5: 1024
Period 6: 1025
It's a beautiful series of numbers isn't it?
Now, we see at first an increasing rate of growth up to end of period 3. However we then see the rate of increase slowing, and continuing to slow all the way to the end of period 6. But at no time does the cost of this "something" fall
An important concept that is well worth understanding at any age.
And do things only "fall" or can they "increase" or do they just increase
This thread is the best one going on PH right now!
Throttlebody said:
Biggy Stardust said:
Throttlebody said:
The cost can ‘fall’ relatively though, ie from period to period. Brings down the average. Also well worth understanding.
Please stop.Nationwide Jun data is out soon. Should be interesting.
Ntv said:
Throttlebody said:
Biggy Stardust said:
Throttlebody said:
The cost can ‘fall’ relatively though, ie from period to period. Brings down the average. Also well worth understanding.
Please stop.Nationwide Jun data is out soon. Should be interesting.
Scootersp said:
Some google research
"The average house price is 65 times higher than in 1970 but average wages are only 36 times higher."
"https://www.ons.gov.uk/peoplepopulationandcommunity/housing/datasets/ratioofhousepricetoworkplacebasedearningslowerquartileandmedian"
1997 ratio earnings to value 3-4 for all regions, 2021 up to 6-10
"In 2021, we estimate that full-time employees could typically expect to spend around 9.1 times their workplace-based annual earnings on purchasing a home in England. This is a statistically significant increase compared with 2020, when it was 7.9 times their workplace-based annual earnings"
If this continues then the lines diverge more and more and the affordability reduces. Paradoxically the seemingly relentless widening does create a demand in itself as it creates a "time is of the essence" feeling as to delay will just makes things worse. Should this have been managed better by the governments over the last 40 years, or is the economic benefit we've had worth it and has no consequences?
If a school teacher (etc) in the 80's could own a home and support a family (with mum perhaps not working or part time working, and now they have no chance of this, we aren't better/richer for it are we? Add in the student loan system (and constant worsening interest revisions of it) and then the current cost of living hike and it makes it even more severe?
Our country's wealth depends a lot on the price of real estate and so it will be protected/managed as much as possible but it's hard to square the circle for the younger people coming through I think, rock and hard place?
It is really rather simple. Many voted for "the free market" believing it would make their children's lives better and more prosperous. The reverse is true."The average house price is 65 times higher than in 1970 but average wages are only 36 times higher."
"https://www.ons.gov.uk/peoplepopulationandcommunity/housing/datasets/ratioofhousepricetoworkplacebasedearningslowerquartileandmedian"
1997 ratio earnings to value 3-4 for all regions, 2021 up to 6-10
"In 2021, we estimate that full-time employees could typically expect to spend around 9.1 times their workplace-based annual earnings on purchasing a home in England. This is a statistically significant increase compared with 2020, when it was 7.9 times their workplace-based annual earnings"
If this continues then the lines diverge more and more and the affordability reduces. Paradoxically the seemingly relentless widening does create a demand in itself as it creates a "time is of the essence" feeling as to delay will just makes things worse. Should this have been managed better by the governments over the last 40 years, or is the economic benefit we've had worth it and has no consequences?
If a school teacher (etc) in the 80's could own a home and support a family (with mum perhaps not working or part time working, and now they have no chance of this, we aren't better/richer for it are we? Add in the student loan system (and constant worsening interest revisions of it) and then the current cost of living hike and it makes it even more severe?
Our country's wealth depends a lot on the price of real estate and so it will be protected/managed as much as possible but it's hard to square the circle for the younger people coming through I think, rock and hard place?
Those with any understanding of economics were saying this decades ago. They were shouted down.
We're really in a very bad place. The housing market is, at essence, now a ponzi scheme, and carries with it significant handcuffs for Government / BoE policy-making (as in we can't do some things we might like to do for fear of their effects on the housing market).
It is hard to see how it can now be unpicked. But in time, Brexit + an ageing population will start to resolve things a little.
Three men went into a shop and bought a TV for £30, £10 each. After they had left, the manager said to the salesman, "They paid too much, take this £5 and pay them back"
Unfortunately the salesman wasn't very good at maths but he managed to track the men down gave each of them £1 back and kept £2 for himself. So now they've each paid £9 and the salesman has £2.
3 x £9 + £2 = £29
Where has the other pound gone?!?
Unfortunately the salesman wasn't very good at maths but he managed to track the men down gave each of them £1 back and kept £2 for himself. So now they've each paid £9 and the salesman has £2.
3 x £9 + £2 = £29
Where has the other pound gone?!?
frisbee said:
Three men went into a shop and bought a TV for £30, £10 each. After they had left, the manager said to the salesman, "They paid too much, take this £5 and pay them back"
Unfortunately the salesman wasn't very good at maths but he managed to track the men down gave each of them £1 back and kept £2 for himself. So now they've each paid £9 and the salesman has £2.
3 x £9 + £2 = £29
Where has the other pound gone?!?
The misdirection there is right up there with what Throttlebody uses. Unfortunately the salesman wasn't very good at maths but he managed to track the men down gave each of them £1 back and kept £2 for himself. So now they've each paid £9 and the salesman has £2.
3 x £9 + £2 = £29
Where has the other pound gone?!?
frisbee said:
Three men went into a shop and bought a TV for £30, £10 each. After they had left, the manager said to the salesman, "They paid too much, take this £5 and pay them back"
Unfortunately the salesman wasn't very good at maths but he managed to track the men down gave each of them £1 back and kept £2 for himself. So now they've each paid £9 and the salesman has £2.
3 x £9 + £2 = £29
Where has the other pound gone?!?
That's very clever, took me a while to work that out. Of course, the 3 men don't have £9 each in their pocket, they just have a nice shiny pound instead.Unfortunately the salesman wasn't very good at maths but he managed to track the men down gave each of them £1 back and kept £2 for himself. So now they've each paid £9 and the salesman has £2.
3 x £9 + £2 = £29
Where has the other pound gone?!?
snuffy said:
frisbee said:
Three men went into a shop and bought a TV for £30, £10 each. After they had left, the manager said to the salesman, "They paid too much, take this £5 and pay them back"
Unfortunately the salesman wasn't very good at maths but he managed to track the men down gave each of them £1 back and kept £2 for himself. So now they've each paid £9 and the salesman has £2.
3 x £9 + £2 = £29
Where has the other pound gone?!?
That's very clever, took me a while to work that out. Of course, the 3 men don't have £9 each in their pocket, they just have a nice shiny pound instead.Unfortunately the salesman wasn't very good at maths but he managed to track the men down gave each of them £1 back and kept £2 for himself. So now they've each paid £9 and the salesman has £2.
3 x £9 + £2 = £29
Where has the other pound gone?!?
Scootersp said:
Some google research
"The average house price is 65 times higher than in 1970 but average wages are only 36 times higher."
Compared to the 70s, we now don't expect the lady of the household to stop at home (depending on who you ask, this is a positive step in female empowerment, or a detriment to familial life) - so the household income is now (yes, simple fag packet maths) 72 times higher compared to houses being 65 times higher... "The average house price is 65 times higher than in 1970 but average wages are only 36 times higher."
Sway said:
Scootersp said:
Some google research
"The average house price is 65 times higher than in 1970 but average wages are only 36 times higher."
Compared to the 70s, we now don't expect the lady of the household to stop at home (depending on who you ask, this is a positive step in female empowerment, or a detriment to familial life) - so the household income is now (yes, simple fag packet maths) 72 times higher compared to houses being 65 times higher... "The average house price is 65 times higher than in 1970 but average wages are only 36 times higher."
I just think we're close to maxing out the upward shift?
It's gradually been more people working
Largely benign economic conditions, low interest rates and inflation rates
Less restrictive lending
First step on the ladder incentives, shared ownership, help to buy etc
Regardless of what side you are on and what you want personally, what's left to help the continued increase?
It's gradually been more people working
Largely benign economic conditions, low interest rates and inflation rates
Less restrictive lending
First step on the ladder incentives, shared ownership, help to buy etc
Regardless of what side you are on and what you want personally, what's left to help the continued increase?
Scootersp said:
I just think we're close to maxing out the upward shift?
It's gradually been more people working
Largely benign economic conditions, low interest rates and inflation rates
Less restrictive lending
First step on the ladder incentives, shared ownership, help to buy etc
Regardless of what side you are on and what you want personally, what's left to help the continued increase?
As someone mentioned above, it's all about free market.It's gradually been more people working
Largely benign economic conditions, low interest rates and inflation rates
Less restrictive lending
First step on the ladder incentives, shared ownership, help to buy etc
Regardless of what side you are on and what you want personally, what's left to help the continued increase?
Dual income family has doubled the spending power so house prices have gone up twice the rate compared to income levels.
Or in another example someone else mentioned above: If house prices fell by 50% immediately, there would be a whole load of money still in the market (i.e. house prices drop by half but spending money in the market is still the same). Suddenly there would be a whole load of increased demand to buy houses. However, the poorest may be in negative equity and lose out. The rich get to nab their house at rocket bottom price. End result, rich gets richer, poor gets poorer.
Government intervention - help to buy. Give the first time buyer for starter homes an extra £5k. Housebuilder puts all starter prices up by £5k. First time buyer is no better off but bosses of housebuilder get £100 million bonus paid for by taxpayer for a wonderful year of business.
xeny said:
Isn't this rather more calculus than algebra?
Yes, the rate of the increase is declining. That doesn’t map to a decrease, however you average it. Now if the rate of increase is declining, you may be about to reach an inflection point, but that depends on the function you are analysing. Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff