OK boomer - House prices have doubled as a proportion of salary since 1970

[robbyn]

@barbarajean63 I don't know what your definition of a "boomer" is.

Is it just an age or more of a stereotype attitude?

(Genuine question, opinions welcome)

 

[resjudicata]

@robbyn Kinda both.

Nowadays everyone is either a boomer or a millennial and no other generations seem to exist.

 

[resjudicata]

@robbyn On Reddit at large (and even here now apparently) it's literally anyone of any age that doesn't believe the housing market outside London (and Bristol and maybe a few other places) is actually that ridiculous compared to average salaries. And you're not allowed to point out that interest rates affect affordability and house prices and that they are historically low. London is its own monster admittedly. Normal people can't buy there and that's sad.

But not everyone who bought for four or five figures in the last half century is evil. And the vast majority probably didn't have as much disposable income as you'd think. The seventies and early nineties saw insane interest rates, high taxes and insecure employment. I graduated in 2008. I get it, we got fucked over. But previous generations had their own shit with 3 day weeks, strikes, 15%+ interest rates, stagflation, high inflation, high unemployment, black Wednesday.

The 1990s were even pretty grim. I just remember it being like a Ken Loach film.

 

[nathan2018]

@resjudicata

The 1990s were even pretty grim

No they weren't, it was a comparative golden age.

 

[shar00on]

@robbyn I think there is a perception that boomers say it is the millennials' own fault they can't afford houses because they spend all their money on Instagram coffee art and avocado toast or whatever. And millennials blame the boomer generation for ruining the housing market.

In my own experience the boomers I know are trying their best to help out their now grown up kids with a deposit. They are fully aware of current house prices compared to when they bought their own homes.

 

[danny7995]

@robbyn As someone who is 60 I find it no better than a petty insult tbh.

Suddenly an entire generations has homgenised into some sort of avaricious property developer. Dare I say it's just ageism in disguise?

Sometimes assigning blame to an entire swathe of people is not entirely benign.

Just sayin'...

 

[pasquale]

@danny7995 Please see how many news articles have blamed millennials for “x”

 

[galworth]

@danny7995 The thing is that "ok boomer" is directed towards a kind of person more specific than the "baby boomers" in general.

In this context it means the kind of person who lived through the massive prosperity of the late 20th and early 21st century (for property owners), reaped the rewards of it, and then have the audacity and lack of self awareness to blame the younger generations and immigrants and poor people for all their supposed problems when they had it so bloody good!

My father is technically a baby boomer, but he is very humble about the amount of money he made in property, doesn't blame the young or immigrants for anything (in fact he actively supports their cause), thinks climate change is real and is ashamed at the lack of action taken by governments he voted for. "ok boomer" wouldn't make much sense to say to him.

 

[2b4gotn]

@danny7995 .

 

[eliximbo]

@robbyn OK boomer.

.

Boomers are born between 1946 and 1964, known for the baby boom post WW2.

 

[okojie]

@barbarajean63 How does that correlate against the proportion of dual-income households?

 

[kenziisabeliever]

@okojie I agree, in the 70s there was typically one earner. Now there's two. As you typically buy a property as a family, it makes sense that the average price of a house has doubled.

 

[uriel_1]

@barbarajean63 Residential property is hyper-local - broad "average UK" measures don't really serve much financial purpose, more of a political one: especially as there is that quite big, obvious, market which might distort things for those not there!

Do you have data on a more regional level - regional salaries and regional prices?

 

[californiachristian234]

@uriel_1 going regional all you are going to have is some places that are better, but some places that are much much worse.

i have found this map which is regional https://www.thisismoney.co.uk/money...ive-homes-near-map-house-prices-vs-wages.html

 

[uriel_1]

@californiachristian234 Indeed - the hyper local aspect of residential property does limit the use of broad brush analyses to determine affordability.

I think the main point is that if you are looking at whether you can afford to live in a place, or want to know how expensive it is, you really really need to narrow it down (or approach it from how much you have and get some local knowledge to help you fill in the gaps)!

 

[resjudicata]

@uriel_1 This is super untrue.

As long as you are measuring average of all housing against average of all salaries this data should be absolutely fine and tells alot. Of course regional salaries and house prices would provide interesting insights as well.

 

[penguinpower]

@resjudicata Cornwall is a good example of how you are out. Low local salaries and high property prices due to holiday homes, but it is fine because Aberdeen has high wages and low house prices, so they average out!

 

[resjudicata]

@penguinpower But this isn't a regional look at things this is a national look at things as I just said.

It would be one thing if average house prices were the same but regional house prices had changed massively however what is described here is that those places you describe as cheap are still a lot more expensive than they were years ago with the average uplift described here.

 

[uriel_1]

@resjudicata

As long as you are measuring average of all housing against average of all salaries this data should be absolutely fine and tells alot.

Perhaps from a pure data and statistics perspective, that is true.

I am speaking from a personal finance perspective (given the sub), where the predominant inquiry people have of this kind of information is: "is where I live going to be affordable for me or not - and how has that changed".

That is where a national average is not useful, because residential property buyers aren't economic actors who will move across the country just because the house price/salary ratio becomes more attractive.

Whether someone can afford a house depends on credit conditions because most houses are bought on credit. Credit conditions are based now on salary (given PRA regulation) - but most people live near where they work. That is why what is important for those readers is, especially for those moving for a job, what the average salary in their region is, compared to house prices there.

At the end of the day it's about your personal budget and disposable, given all the posts we get on this day-in, day-out.

Given the variances across the country in residential property prices and factors (I didn't spell it out but basically compare the London market to the North West - or even the SW1X market to N1 or E8) a national average isn't going to help you with that question.

That's why I question the usefulness of this kind of thing on this sub - and why it's probably best suited for comment elsewhere. Not to want to rubbish the OP's effort though, because there is certainly a point to be made about house pricing and the rate of change of capital values vis-a-vis average earnings!

 

[saranoor]

@barbarajean63 House price is only a part of the housing market

For example in 1979:

Average house price - £20k
Interest rate - 17%
Monthly repayment - £297

If you adjust it all for 2019 by Bank of England inflation calculator

Average house price - £100000
Interest rate - 17%
Monthly repayment - £1430

This is based on a 25 year mortgage with 0% deposit (it is 1979 after all!)

House prices are high, but this is because interest rates are low. At current interest rates (roughly 1.64%) you could get a 100% mortgage on a £375,000 house for the same monthly repayments as your £20,000 in 1979, so based on that you could afford a house nearly 4 times the value of the average house based on 1979 adjusted, which would mean roughly you could afford a house (at today’s average price) of and equivalent value of £1million (x4 average £260k house price)

Edit - added extra context why just going of house price is bullshit