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Tuesday, August 13, 2013

on house prices
12 August 2013 10:38am

A sad but true story...with many suffering in same way.
I did some calculations recently to see what was the real cost of buying a 3 bed semi inside M25 - at various points in the past - versus total life time net wages. Assuming national average wage throughout life and 85% Repayment Mortgage.
A 1970 purchase cost 8% - 1990 24% - and today 40% of net lifetime wage.
Apart from increasing HPs from £5000 in 1970 - £100,000 in 1990 - and £300,000 today - the biggest factor was falling real wages.
In the 1970s - annual wage growth was 17% pa - 9%pa in 1980s - 5% pa in 1990s and now 2.5 % pa.
Wages doubled every 4 years during 70s, and pro rata every 8 years in 80s - thus massively reducing the value of any debt - especially mortgage debt.
Funding the equivalent of a 2/3rds final salary pension is likely to cost a further 40% of lifetime net earnings.

sketched by dweller at 9:12 pm
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11 August 2013 8:15am

Because we afford banks the extraordinary privilege of creating the overwhelming majority of our means of exchange as bank credit (debt) - they get to decide what that credit can be spent on.
For many decades now the banks have poured VAST amounts of bank credit into the housing market, reasoning (correctly) that if they blew up a large enough bubble that the tax payer would have to bail it out when it went pop.
This has the effect of raising house prices and rents - so your inflated mortgage payments and rents are their profits.
As long as you are prepared to hand over ever increasing amounts of your income to banks - they will gladly accept your money.
IIf you want to understand and change this dynamic then start here
Otherwise look upon your decreased standard of living as a bank tax on your wilful apathy, ignorance and stupidity of their activities.

sketched by dweller at 8:43 pm
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