Astonishing graphic: how English house prices have shot up


5:03 pm - September 19th 2013

by Sunny Hundal    


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Neal Hudson, a UK housing market analyst for Savills, today made this graphic.

It shows how house prices have risen (from blue to red) as a multiple of income, across the UK.

And this is just from 1997 to 2013, by the way.

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Another graphic here shows how house prices have risen (in £s) over the same period.

Neal Hudson is on Twitter as @resi_analyst

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About the author
Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Reader comments


The graphic isn’t exactly representative of the UK if it omits Scotland and Northern Ireland. I’m sure it would be a similar story but let’s be accurate.

Nice graphic, but it’s not the UK. Seems to be missing N Ireland and Scotland

Thank God we’re not in a bubble.

House prices relative to earnings is an absolete benchmark, due to affordability criteria, duel income buying, lower interest rates and longer term mortgages.

Prices can be maintained at 6-7x times salary for repayment levels at the same proportion of houehold income as 3-4x 20 years ago.

Good! This can only be excellent news for people!

/irony

I have thought for 20 years, that the cost of a roof over your head is inflation, not profit…

7. Paul peter Smith

This graphic compares median income to house prices, wouldnt it be more useful to compare modal or even average incomes with regard to most of the population?

So there’s no data for Wales.

Scotland and Northern Ireland don’t even feature on the map.

And Sunny Hundal says that this represents the picture across the UK?

The population has expanded far too fast in that time, ‘helped’ in no small part for the Labour fetish for as much immigration as possible (from exactly the same folk who constantly sloganise about western countries ‘stealing’ other countries’ oil).

And yet you are ‘astonished’ that house prices have rocketed. Evidently you are still struggling with the idea of supply and demand. Go back twenty years and you would have no problem finding people on the left who advocated not growing the population and greatly expanding the pool of available workers. Now they would be tarred as racists.

Too many people appear still to believe that a ballooning population can be sustained in a finite and already densely populated landmass by housing and resources plucked out of the imagination at will. It used to be ravenous tories mostly guilty of that, but now it’s the ostrich, supposedly ‘green’, left.

@ Paul Peter Smith, 7.43am September 20

If it was based on mean wage, the map would go a darker red. On the mode wage, the red would become so dark it becomes black!

As I stated, not profit – inflation.

@ Lamia, 2.34pm September 20

Why the repeated obsession with people who speak or look different to you? This is really about inflation, the map would still go red without immigration.

“Why the repeated obsession with people who speak or look different to you?”

Strawman. This is purely and simply about numbers. Deliberately inflating population growth in an already densely popualted country at a time of declining resources is absolute madness.

And instead of doing the elementary mathematics you play the worn out ‘racist’ card. Predictable and pitiful.

“This is really about inflation”

What drives inflation? Increased demand and/or relative scarcity of the commodity. And what drives increased demand for housing specifically? The number of people wanting housing increasing relative to the available supply.

Prices inflate at a rate that sellers can get a way with. A situation of limited housing resources and rapidly expanding population (whatever the contributory causes of that) is ideal for them.

@ Lamia, 3.02pm September 20

“And instead of doing the elementary mathematics you play the worn out ‘racist’ card. Predictable and pitiful.”

In 2 comments on this thread I used the word ‘inflation’ a number of times, and stated that using the 3 different ways of defining an average would result in a different looking map. I even pointed out that without immigration the map would still go red. At every stage I was really talking numbers, it is you who brought in immigration, as you always do, so who is building out of straw?

And as you build your own straw man, you ignore other questions like for example: Who profits from this bubble, baby boomers, or banks?

It’s not just because of supply of housing (if at all) but cheap money.

The cost of housing and the middle class obsession with making money from houses is a disaster for this country. Enabled initially by the Thatcher sell off of council houses, then mass imigration under the Blair regime, still continuing because of the low interest rates.
The country is now less mobile, more divided both ethnically and regionally and up to its tits in debt.

16. PottyTraining

@ post #13

Correct!

The City and financial classes screw even more out of the ignorant plebs who are deliberately not taught basic ‘financials’ at skool

The bastards take EXPONENTIAL amounts of interest from your post-tax wages to pay for some of the smallest rip-off houses in the World.

Remember, the longer the term, the higher the amount borrowed = banker heaven extracting exponential interest charges.

The only people it benefits are the usury loaners
(plus a tiny percentage who sell their house at top price to rent)

Other ‘financials’ rub their hands with glee cos they can extract higher fees on percentage from higher prices.
Insurance, E.A. ‘CHAINS’, life insurance premiums etc

Only complete dumb-ass twats, in a horrific social experiment gone wrong, wish for a gamble on higher house prices!

All spare dosh is extracted from local economy, by the few, on higher rents too which IDS propaganda machine etc constantly blames on ‘the poor’
ie housing subsidies – don’t forget, past two Govt housing policies was to up social renting costs to local level.

The wankers in Govt then twisted the rising costs back onto the poor!

This whilst most MP’s have huge buy to let property empires!
They also support houses at these high levels whilst pumping in Billions in public money subsidies to banks etc. No wunder there is nothing left for skools, Uni funds, NHS, population forced into extremist, faux austerity measures!

Westminster corruption at highest levels!

Oi Oi

17. PottyTraining

By the way folks

I forgot to mention how they hid your salary/wage theft/depreciation!

The Global elite Cabals did it by conning you with cheap Chinese/foreign tat imports!

@16 Potty

‘The City and financial classes screw even more out of the ignorant plebs who are deliberately not taught basic ‘financials’ at skool’

So who is it that is deliberately not teaching the plebs? Is it the bankers in cahoots with the politicians?

‘The bastards take EXPONENTIAL amounts of interest from your post-tax wages’ & ‘The only people it benefits are the usury loaners’

Interest rates are currently at record low levels. There is fierce competition between the banks. In fact banks have been lending too aggressively – you may have noticed that bank shareholders have suffered since the financial crises? The amount of bonuses paid in the financial sector has also been slashed. Are these ursury loaners making excessive returns? The Co-op bank certainly isn’t.

‘past two Govt housing policies was to up social renting costs to local level.’

I would really like to see evidence for this statement. Don’t social housing rents go up at the rate of inflation?

‘whilst pumping in Billions in public money subsidies to banks’

The billions subsidising the banks are likely to be repaid. Any shortfall will be insignificant co mpared to the debt pile.

19. Robin Levett

@Fungus #18:

‘past two Govt housing policies was to up social renting costs to local level.’

I would really like to see evidence for this statement. Don’t social housing rents go up at the rate of inflation?

No.

Read all about it:

http://www.parliament.uk/briefing-papers/SN01090.pdf

@19 Robin

Thanks for that. I have nort worked in the social housing area for a few years and so was not aware of this change in policy. However I cannot see any reference in the document to ‘housing policies was to up social renting costs to local level.’ (I interpret this statement by Potty to impy social housing rents will be brought up to local private rents).

All it says is that going forward rents will go up by CPI + 1%. Rent convergence will stop. Previously the increase was RPI + 0.5% which is a greater increase.

Per the document many social landlords are actually worried about reduced rental income.

There is a reference to the new intermediate rent tenure which allows for Housing Associations to charge at up to 80% of market rents – the extra money to be used to invest in housing stock. Not the same as saying policy is for all social houring to be rented out at market rates.

I am pleased about the Pay to Stay proposal. It annoyed me that there were some very high earners living in social housing when there are much more needy people on the waiting list. (£145k per annum Bob Crow springs to mind)

21. Robin Levett

@Fungus #20:

There is a reference to the new intermediate rent tenure which allows for Housing Associations to charge at up to 80% of market rents – the extra money to be used to invest in housing stock. Not the same as saying policy is for all social houring to be rented out at market rates.

The effect of policy on funding of new build – directing government funding toward affordable housing, and requiring PRPs to fund any other buildign from their revenue stream; together with the policy pressures toward getting councils out of the housing provision business, leaving it to PRPs – is to force social housing rents up toward market rates.

@21

Social house is and will continue to be well short of private sector rents.

23. Robin Levett

@Fungus #22:

Social house is and will continue to be well short of private sector rents.

I don’t disagree; but the policy and funding pressures are towards getting social housing rents to 80% of market rents.

@ Fungus, 1.24pm September 30

“Interest rates are currently at record low levels”

True, yet if you have to pay an eye-watering £600,000 for a bog standard terraced house in Camberwell Green, record low interest payments will still squeeze you till the pips squeak! (my friend’s landlady just sold one for that absurd price)

Another thing of note is actual interest rates charged are inversely proportional to income. For people on the mode wage, what does it matter if the base rate is less than 1% if you can only get credit for a minimum of 69% APR, let alone so called short term loans at 4,000+%, and never, ever be able to afford such sweet deals you refer to on mortgages, because your credit rating has been bankstered to the floor, which is what Potty Training was on about in that commentator’s unique style!

@24 Dissident,

Potty was claiming that ‘exponential’ interest rates are being charged on mortgages. I am guessing that by exponential he means very high. I pointed out that the actual interest rates are actually very low by historical standards. The interest rates themselves are low and not unreasonable. In fact we know they are not unreasonable because people are very willing to pay these rates.

Obviously the larger a mortgage the more interest that is paid. However the ‘ursory’ loaners as Potty calls them aere not making excessive profits. They have only so much capital to lend – if they are issuing larger mortgagers they must issue fewer of them. The key is the spread they make between the interest they recieve and pay. I see no evidence that this is excessive.

What do pay day loans have to do with a thread on the high cost of housing?

@23 Robin

So you agree then that Potty is incorrect when he claims it is Government policy to set social housing rents at the same levels as in the private sector?

I don’t agree with the assessment that rents are going towards 80% of private rents either. Only a very small portion of social rents are at this level. You can read from the paper you linked to that Housing Associations are worried about not receiving enough rents.

@ Fungus, 1.38pm October 2

“What do pay day loans have to do with a thread on the high cost of housing?”

I was figuring out that Potty probably lumped in all kinds of loans in those colourful statements.

Another thought is the fact that people have to pay so much in rent or mortgages, that their incomes don’t cover other expenses, like food and bills, hence the rise of payday loans in the first place.

The word ‘exponential’ literally does apply to all interest payments, when you consider the actual amount paid back. That is basic maths, with the exception of 0% APR. Although to be pedantic I suppose the only exception in real terms is a loan that’s index linked plus 0%.

@27

I’m fairly sure its not what he meant as his quote in full is a s follows:

“The bastards take EXPONENTIAL amounts of interest from your post-tax wages to pay for some of the smallest rip-off houses in the World.

Remember, the longer the term, the higher the amount borrowed = banker heaven extracting exponential interest charges.”

If people take out such a large mortgage that they need pay day loans to survive then they should not have taken out or been given such a mortgage in the first place. Surprisingly mortgage defaults are not that high at the moment, though this may change.

The phrase exponential is rather meaningless in this context.

@ Fungus, 9.31pm October 2

“If people take out such a large mortgage that they need pay day loans to survive then they should not have taken out or been given such a mortgage in the first place. Surprisingly mortgage defaults are not that high at the moment, though this may change.”

Maybe, the mortgage was taken out on 2 incomes, then one of them is made redundant, or other hostages to fortune. I am surprised there isn’t more defaults too. That statement feeds back into the inflation on house prices, As my comment @ 11.16pm October 1 states, a bog standard London terraced house, sold for the absurd price of £600,000. Its true value is more in the region of at least a third of that, or better yet 1/6th, given the kind of wages we have to live on.

“The phrase exponential is rather meaningless in this context.”

I take it you think we can all interpret in our own ways, and the true meaning is unformed – so to speak!

@28

Yes we can indeed interpret it in our own way. As I said my suspision is Potty believes interest rates are at levels that earn lenders huge incomes.

As someone else asked on another thread, “what is fair value?” Someone is prepared to pay that price.

Here is an article suggesting house prices are set to rise much higher: http://www.telegraph.co.uk/finance/personalfinance/houseprices/10344481/UK-house-prices-to-rise-by-a-quarter-with-London-average-to-hit-500000-by-2018-CEBR.html

On London prices: He added: “Even London’s prodigious house price growth, expected to be 6.9 per cent this year, is being driven by the fundamental fact that people want to live in the capital with its employment and cultural opportunities.”

@ Fungus, 1.46pm October 3

“On London prices: He added: “Even London’s prodigious house price growth, expected to be 6.9 per cent this year, is being driven by the fundamental fact that people want to live in the capital with its employment and cultural opportunities.””

Agreed, which is why I have moved back to London!

On the subject of house prices been as high as they are, there is a severe downside. How on earth can the price of housing be good, when the majority of people have to make do with jobs that pay less than the living wage. That same Landlady who sold her house for £600,000 is having to do so because she only manages to get 1 customer or so per day into her shop. She is in rent arrears etc so is in a desperate position.

That is why she put her own family home up for rental anyway (subsequently for sale) when her children moved out, and the psychological cost of all that stress over the past few years has made her a little bit tetchy at times, as my friend attests.

I know that is just one anecdote, what I wonder is how many other homeowners and businesses in London are in the same boat? Correction, you can clearly see on gumtree, zoopla and other sites the scale of it!

@30 Dissident

Surprised by your claim that the majority of people don’t earn the living wage. Apparently the London living wage is £8.55 per hour which works out to around £17.8k per annum. I read somewhere that the average London wage is £32k. If the majority of people don’t earn the living wage one would have to ask how all these people survive?

That lady you mention is obviously in an unfortunate position, but the underlying propblem is with her business, not high house prices.

As mentioned elsewhere repossessions are quite low (at the moment).

32. PottyTraining

Fungus you disrupt and spread fungal half truths and lies like toxic spores all over these threads for your masters!

The GAP(mind the gap) difference between mortgage interest rates and the bank base rate is at an all time high in the history of banking! Banks borrow at virtually nil interest then take the piss out the population ramping up their lending rates!

I also saw a well explaned post, which I cant repeat, that showed/explaned how finance makes more money at these low base rates because of this. It’s an absolute con by The City on the rest of the population (like pensions)

The only way to fix this perpetual bubble creation system (boom & bust cycles) to change our money system as per the four-pillar plan suggested by Positive Money.

1. Money should only be created through a democratic and transparent body working in the public interest.

2. Money should be created free of debt

3. Money should come into the real (non-financial) economy before it reaches financial markets and property bubbles

4. Banks should not be allowed to create money

34. Paul peter Smith

@33 Veri Tas
Good luck with that, seriously.
You realise that attempting to issue debt free money is almost certainly what got Lincoln killed, probably got Kennedy killed and when Gaddafi mentioned replacing the dollar with a gold based (non fiat) reserve currency he ended up with a broom handle up his arse on UTube.
I should get my affairs in order if I were you.


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