Why house prices falling is a good thing 🏠📉 ✍️ It is intolerable for young people in regular, reasonably well-paid jobs not being able to save enough to buy their first home 📨 Read HamishMcRae5's newsletter
Where will all of this settle? As far as the UK is concerned, there has been a long-standing relationship between house prices and average earnings. From 1950 to 2000, prices were around four times earnings, actually a little lower than that in 1997. Now, according to the Office for National Statistics, house prices are nine times average earnings.If you are trying to work out how far house prices might fall, you do have to take into account the relationship with earnings.
So, my intuitive judgement is that we will not get back to that four-to-one ratio between prices and earnings. Homes will remain less affordable than they were in the second half of the last century. But they will come down relative to earnings quite a bit.for young people in regular, reasonably well-paid jobs not being able to save enough to buy their first home
For example, there is a powerful case for making sure people don’t need to sell just because interest rates have risen. No lender should want to foreclose on a mortgage; much better financially and socially to find a way of keeping the owners in place.
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