I've been making the same points for a decade. The Bank of England was given the task of keeping inflation low, and their means of doing this was interest rates. When inflation was getting close to the acceptable ceiling, they increased interest rates.
Technically we had an inflation rate below 3%, but only because house prices were excluded from the inflation figures. Mortgage payments were probably most working people's single biggest payment, yet the huge rises in those costs (as house prices increased) didn't go into the inflation figures. If they had, then inflation would have been well above 3% and interest rates would have had to rise, dampening the housing market. I can't help but believe that governments were happy to exploit the electorate's belief that they were doing well financially, when in fact it was an illusion.
House prices will have to fall by about 50% (the figures for the UK look pretty similar to that USAToday presentation). People were prepared to take on ridiculous loans when the bubble was being inflated, because they thought they would be unable to afford property if they waited.
In fact, the situation in the UK sounds like it might have been worse than in the US. There were significant numbers of 110% mortgages available in the UK until a couple of years ago.
The BBC did an expose in 2003 showing that major banks were encouraging customers to lie about their income in order to be able to buy property. Yet this expose has been buried, never to be mentioned. The government and the financial regulators did not want to know.
The median salary for a graduate in London is £24,000; the median price for property is £335,000.
I have friends who came from working-class families who were still able to buy houses when they were students back in the 1970s.
I agree wholeheartedly. I remember when I started college I did a quick calculation of how much money I'd have to make for the lifestyle I wanted, and support my potentially future family - which is basically on par with what my parents offered me.
It surprised me how much more I'd have to make compared to my parents in order to afford the same things... almost double really. Most of the difference came due to the fact that the house is now worth three times as much as when they bought it 15 years ago. Housing in general is ridiculously out of whack with reality, and in a selfish way I hope the recession-style home pricing stays for good, it'll allow a lot more young people to buy in and actually afford to live in their own place within their lifetimes.
I don't think house prices in the UK are going to fall 50%. Unlike other countries that had a house price bubble the UK did not have a house building bubble, and it didn't have a house building bubble because there is not enough land to build on.
The UK has a population density of over 250 people per square km whereas the US has a population density of 34.
I agree with the other points you make though. Indebtedness in the UK is much worse than in the US or almost anywhere else.
Real estate in the UK and especially in London is very complex and unfair. Properties are usually on leasehold for a period within 120 years. It's one of the most unfair systems in the world. Families can't keep their full investment across generations.
In the US we exclude energy costs as well, so the giant inflation in gas prices was completely excluded from the inflation numbers of the last 10 years.
Technically we had an inflation rate below 3%, but only because house prices were excluded from the inflation figures. Mortgage payments were probably most working people's single biggest payment, yet the huge rises in those costs (as house prices increased) didn't go into the inflation figures. If they had, then inflation would have been well above 3% and interest rates would have had to rise, dampening the housing market. I can't help but believe that governments were happy to exploit the electorate's belief that they were doing well financially, when in fact it was an illusion.
House prices will have to fall by about 50% (the figures for the UK look pretty similar to that USAToday presentation). People were prepared to take on ridiculous loans when the bubble was being inflated, because they thought they would be unable to afford property if they waited.
In fact, the situation in the UK sounds like it might have been worse than in the US. There were significant numbers of 110% mortgages available in the UK until a couple of years ago.
The BBC did an expose in 2003 showing that major banks were encouraging customers to lie about their income in order to be able to buy property. Yet this expose has been buried, never to be mentioned. The government and the financial regulators did not want to know.
The median salary for a graduate in London is £24,000; the median price for property is £335,000.
I have friends who came from working-class families who were still able to buy houses when they were students back in the 1970s.