Are Uk House Prices Based On Affordability Or Fantasy Economics?

[Truthteller88]

My local Estate Agent has told me that my house is worth £360,000.
I bought it 15 years ago for £120,000. During that period of time, my salary has increased by ten percent which seems to be consistent with most other people.
So I don't understand how someone in my income bracket will be able to afford to pay 3 times what I paid 15 years ago.
I earn about £37,000 a year before taxes.
By my reckoning, the buyer of my house will need to be earning at least £100,000 a year.
I don't know anyone in my area who makes that kind of money.
So is this valuation just pure fantasy?

[Ellipsis]

I bought my first house in 1989 for £65000, got stuck in negative equity and sold it in 1995 for £44000, having saved and borrowed the difference to get me out and let me move on. Lots of people of my generation suffered the same fate.

After that bad start I've done very well buying and selling houses. For the most part, over the longer term house prices have gone up dramatically and if you don't buy at a really bad time you should do OK when it comes to sell.

Of course, if you are selling in order to buy something more expensive, it's likely that the new place will have gone up even more than yours in the period you have owned yours, so in that way you have "lost" out.

> So is this valuation just pure fantasy?

To answer your question - no, it's not pure fantasy.

[Peter Pedant]

// If someone pays the full asking price of £360k, they are paying at least 200k more than the property is worth.//

haha o god listen to that ! - "my main asset is over-valued." and truth teller calls us - naive and apathetic

.// When this crazy market finally stabilises, //
and what makes you think they will stabilise ?


//the losses that current buyers will endure will be catastrophic. - // - then the prices wont be stable will they ? They will have fallen. You cant have stable prices which fall. - - call me naive - I call that logic

I'm finding many of the answers on this thread to be dangerously naive and apathetic.

House prices have fallen once in the last 100 years
They didnt even fall during the war ( but might have dipped in 1940 when it looked as tho Germany might win )

No one seems to remember that over eighteen months in 1973 - house prices tripled -and that was when the Arabs tripled the price of oil. It dose seem surprising that the prices should be that closely tied to oil

My own feeling is that prices are linked to demand ( see above ) and also land prices- which may well be independent

and yes tripling over 20 y is about right

rents are of course different - they are more inelastic ( vary less according to time area and size) - altho the idea of a room in central - ish london for £1000 / mo does make my eyes water.....

I am too apathetic to write any more

[Peter Pedant]

affordability....

like - oh look at this wonderful 6 carat diamond ring
it is about £1000 / carat and the rest - let us say £20,000 ?

erm fifty quid is all I can afford .....

oh great - affordability is the key to diamond prices - so just give me £50 and the ring is yours

the person who thinks prices are tied to affordability can only be described as ..... naive and apathetic
( OK unthinking then)

[Peter Pedant]

// I bought my first house in 1989 for £65000, got stuck in negative equity and sold it in 1995 for £44000,//

eek ! very important to sit it out ( and then you are sitting on a 'paper loss' ) those who were forced to sell got absolutely screwed

(my father died in 1992 and one us said - time for my money! and forced a sale .... oh well it is worth £1.8m now)

[Ellipsis]

> very important to sit it out

Couldn't sit it out, the place was tiny, life demanded we move on if possible. Lots of people were in a similar position ... sometimes keys were handed back to mortgage companies in the (vain) hopes this would solve the problem.

[Truthteller88]

Aah, the old historical arguments.
Never gonna happen.
But people, it did happen in 2008. The market crashed by 60%....
Oops. No it didn't. The government intervened and printed £350bn, to artificially support the market.
These fairy-tale valuations only exist because of a tax-payer funded bail-out.
That's never happened before. So all these attempts to justify these prices based on historical perspectives, just doesn't wash.
We have an ARTIFICIAL, DISHONEST market.

[woofgang]

So if you have the answer, why ask the question?