Is the Housing Panic Justified?
As the saying goes - There are lies, damned lies and statistics.
It seems that there are no end of statistics about the housing market, some of which can seem a bit contradictory.
At the moment there is a general assumption that UK House prices are set to fall and are vastly overpriced. However, before you rush out to sell your house, there are a few things worth bearing in mind.
- House prices are not significantly above long term average compared to earning.
Graph of House Price Affordability
- I should point out that this graph finishes in 2005, and since 2005 house prices have increased considerably. Therefore the ratio of house affordability is higher than this graph shows.
- If you had chosen 1995 as the starting point of the graph, of course, things would look a lot different, (in 1995 the affordability of housing was at an all time low) Even since 2003, there has been a considerable increase in the ratio of house prices to earnings. (See ratio of mortgage costs to earnings for first time buyers)
- However, compared to the peak in 1990 house price affordability is not that bad.
Why are House Prices Still Affordable despite House prices doubling in the past 5 years.
There are two factors which determine the cost of buying a house.
- The actual house price
- Interest rates, which will determine the monthly repayments. (more…)
Original post by Tejvan R Pettinger