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The UK is obsessed with house prices, but over the last 10-20 years, they have been going up slower than the rate of inflation.
While monthly mortgage payments have increased because of the high interest rates, the price of houses relative to wages has actually been flat.
Is this the end for houses being treated as investments in the UK?
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Hey guys it’s Sasha in April 1968 the average house price in the UK was £ 3,595 today it’s $284,950 which is an increase of around 8,000% or 8.3% per year in the latest available data from the office of national statistics which is from 2020 the average UK household net worth was
£32,500 and I found some other data that says that the net property wealth for people who own their home was £24,000 on average in 2020 and 65% of people in the UK own their own home so if you do the math multiply those numbers together that means that 44% of
The total wealth of the average household out of everything that the average household owns is tied up in their house so you can understand why people in UK are so obsessed with house prices but here is an interesting chart this is the year-on-year increase or decrease increase in the house prices
Since 1968 and you can see a pattern first there is a boom and bus cycle in house prices prices go up and then they stop going up growth goes to 0% or even goes below 0% like in 2008 but this graph shows something a lot more interesting the average rate of growth
Of house prices is declining the Peaks and the average on this graph is trending down in fact since January 2015 house prices have only gone up 23.9% which is 2.3% per year on average this is actually significantly below the rate of inflation so if you see your house as
An investment over the last decade your investment is actually losing your money in real terms because inflation is eating away at it if you compare it to the stock market and by the stock market I don’t mean the London Stock Exchange I mean the real stock market like the
S&p500 you can see that house prices in the UK didn’t quite make the same return as investing in US stocks and you too can invest in US Stocks using an investing platform like Weeble who are the sponsors of today’s video Weeble is the super popular investing app from the
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You more detailed Market data go and check Weeble out the link is in the description or in a pin comment one strange thing is that while house prices have risen below inflation rent prices have gone up a lot more in the last 10 years in fact rent prices have grown
Twice as fast as house prices and here is what wages have done in the same time period so this is really interesting because while house prices have grown wages have grown faster than house prices which means that on average and I know I know everyone has their own
Feelings you live in London you have your own particular circumstances whatever I get it on average houses are more affordable today than they were 10 years ago not less affordable houses are more affordable if you compare it to how much people earn but here is a perverse
Bit of logic for you now this one sounds simple on the surface but it kind of messes with your brain or at least it messes with my brain now buying a house might lose money to inflation and to the stock market and whatever and I know that there is this Army of Finance
Experts on YouTube who will tell you you should never buy a house it’s financially apparently a really bad decision because they show you some basic numbers you know back of the envelope calculations and they try to prove with numbers that is actually financially better to rent well the best
Thing about buying a house is not the fact that house prices grow over time the best bit about buying a house is that you don’t have to pay rent actually maybe that’s not the best bit there’s lots of good things but that’s an important factor because for most of us
Who don’t own a house outright we have a choice in life you either pay rent or you pay a mortgage or you live with your parents either way if you want to live somewhere other than a cardboard box you have to pay some money to someone in
General every month and if you’ve owned a house in the last 10 years then not only has your house gone up just 23.9% in value but the rent that you are not paying has gone up over 50% at the same time so you’re kind of benefiting from
Both in a way the slight problem with this is the fact that the interest rates have gone up massively in the last two years from 0% to 5.25% in the UK and this means that right now if you have a mortgage when your fixed term runs out
On that mortgage and you have to remortgage again your monthly payments will be going up a lot in some cases those payments are going up 50 to 100% depends on your specific circumstances my mortgage for example is going up by 30% next month but let’s talk about the
Real problem here a lot of people think of their house as an investment for most people their house is their biggest investment and the problem here is the reason you buy a house is so that you can live in it that is why people buy a house because you have to have somewhere
To live and you can either buy a house or you can rent you get to make that choice if you take a step back what is the point of having most of your wealth tied up in your house what exactly are you going to do with that wealth
You can’t really do very much if you want to access that wealth you will have to sell your house which comes with a load of additional costs and you’ll need a new place to live and have to pay for that somehow and so on now sure you
Might be able to remortgage maybe pull some Equity out of your house but either you have to pay thousands and penalty fees or you’ll have to wait 2 or three years until your fixed period runs out to do it and even then you are going to be jumping through massive Hoops wasting
Huge amounts of time trying to explain to the bank why you want to pull Equity back out of the house your house is a very liquid asset some people will move into a retirement home when they’re older and that house that you’ve been investing in for your whole life get
Sold off just to pay for that retirement home what exactly are you investing in in that case I know there’s a whole older generation that might get very offended by this but we’re seeing a seismic shift in the way that people think about this in the way that people
Allocate their capital in September 2007 just before the financial crash the average house price in EK was 9,032 so in the last 16 or 17 years the average house price was only going up 2.7% a year including the crash and then the massive rebound after and over the
Last 10 out of those years that growth rate has gone down from 2.7% to 2.3% the popular narrative is that young people can no longer afford to buy a house poor young people it’s so hard on them they’ve never had it this bad it’s the worst it’s ever been but look at the
Data the median salary for Post University age young people in the UK today is £ 27,600 it’s a bit lower than the mean because a few people go on to get very highly paid jobs in London and that skews the average so the average house price is 285,000 the average wage is
£27,000 that’s a 10.5 times multiple nobody’s going to give you a mortgage for that but if you’re buying a cheaper house not just the average if you are earning maybe a bit more maybe you have a second income it is possible anyway here is the same data from 2007 which is
When I bought my first house the median wage for young people was 8,152 and the average house price was £190,000 and that is also a 10.5 times multiple so the truth is when it comes to affordability the situation is pretty much exactly the same today as it was
Back then 17 years ago I know there was the financial crash and whatever and property price have gone up but this metric has remained relatively flat and the reason it’s been flat is because house prices are ultimately going to be constrained by what people can get in
Terms of mortgages and how much they are able to pay per month for that mortgage and that ultimately is going to be constrained by their salary mortgages are constrained by how much people earn before the ’90s this was a bit different when Boomers were buying their houses in
The 1970s the average salary was1 ,200 and the average house was £ 4,700 so the multiple back then wasn’t 10 something it was less than four and of course this older generation that bought their houses on the cheap and did not have to save up for a decade to get
Their deposit is the generation that has benefited the most from house prices going up because house prices went up like crazy in the 70s and ‘ 80s and suddenly out of nowhere that entire generation of people have a house that is suddenly a very expensive asset and
So it’s very natural that this older generation is obsessed with house prices for young people buying their first homes today the situation is somewhat different there will be ups and downs but affordability has been the limiting factor in house price growth over the last 20 years which is why over those
Last 20 years house prices have grown less than the rate of inflation and this is a good thing it is indicating that despite the sensationalist headlines in the media despite everyone being obsessed with this the property Market in the UK is proving proving to be efficient and I know that when you’re
Young and in your first job it’s trendy to blame the world on everything blame everybody else for the fact that you can’t afford to buy a house straight away but the truth is this has been the case for a while and it was exactly the same pretty much 20 years ago having
Said that in 2001 69% of people own their home with a mortgage or without in 2011 just 64% of people own their home and in 2021 in the latest census that number is down to 62.5% so around 7% less people own their home compared to 20 years ago pretty big
Shift and the number of people who rent went up from 12% back in 2001 to 20% in 2021 so that’s an 8% increase you can see that people are shifting from owning homes to renting and it’s a pretty big shift it seems counterintuitive in the way though right house prices are going
Up slower than in inflation slower than wages why is it that less people are choosing to buy a house well maybe the answer is the opposite of what the politicians and the media say maybe it isn’t quiet as it seems maybe the answer is lying hidden in plain sight right
There in the very question we live in a time that is very different to 50 years ago when Boomers were buying those houses for 4 grand travel is a lot more accessible there’s way more things that you can do more people work and the careers of the people people that work
Are longer people get married and have children much later in life than they used to technology has moved on to a point where there are a lot more things that people choose to spend their money on especially when those people are young we also now have investing apps
And a record number of young people are contributing to those which is great but back in the 1970s there was no real way for a regular person with a small amount of money to invest their money well in anything except for a home this has
Changed in a big way and we are now seeing the shift in numbers so if you’re a young person you can choose to rent have none of the hassle of spending years saving for a deposit putting all your money into this one dream saving for the legal fees saving for the stamp
Duty saving for the mortgage fees you don’t have to worry about maintenance all the other cost insurance whatever of owning a house incidentally here’s a funny way to look at it a lot more young people are now living at home in their homes that their Boomer parents bought back in the day for
£4,000 but if you are a young person and you have this choice to buy to rent or to live at home you can kind of see the logic in choosing not to make it some kind of a life goal an ambition to pug most of your money in a house to work
For years to save money just so that maybe you’ll have enough for a deposit for a house that you can just about afford that appreciates below the rate of inflation and Orders of magnet treats lower than well things like the stock market owning a home used to be this
Massive status symbol people were absolutely nutty about it something that people aspired to and many older people still see it that way some young people do not and that’s actually a good thing
49 Comments
Funny that, prices have gone up again. Where you getting your info from..
He forgot the simple solution of having two houses. One to live in and one to rent out. Best of both worlds.
now the richest people can buy all the houses and split them up into bedsits for the ton of rent that they will earn from one building (be it benefits or working wages).. just like they did in the 80's when i was renting
The best thing about owning my flat is that I know exactly what I will pay each month… for the rest of my life if I want. Rents can go through the roof and I am insulated against it; and as my income (hopefully) increases, my mortgage payment remains the same. I have some additional liability in terms of maintenance, taxes, etc., but when you're renting you pay for these things indirectly anyway, plus I'm slowly building up equity in my property, instead of helping someone else to do that.
A true investment is something that pays you to own it so your own home doesn't generally doesn't count. It's more of a liability that can save money against renting ect.
The value of a house hasn't changed. The currency has been inflated and has lost 97% of it value. It simply takes far more currency to buy a house. In 1914 a Gold Sovereign (£1 coin) could be bought for £1 bank note. It now takes £400.
A mortgage free house is far better for your mental health than renting. Fit a log burner, the living flame soothes your soul.
Yes the s&p beats the UK house price appreciation. However, house purchases are bought with leverage so the gains are substantially more than the unleveraged equivalent of a house deposit invested in the stock market.
You are right we do 'invest' in our homes to live but there is more than one way to skin a cat. We buy our homes that we can see value in and scope for increasing the value of. Once this is achieved we sell and buy another with an even larger deposit. Then down the line you shrink your deposit size borrow more and invest the surplus.
But that's just me (plus a few others) 😅.
You've overly abstracted the data to form an argument that is missing many of the negative externalities.
For example, living with your parents is significantly cheaper. Obviously! However, the average person likely has to sacrifice some personal freedom(s) for that. Dating would be more difficult, finding the energy to do your laundry when your Mum might do it for you, etc. We may have a stunted generation as a result. As an adult your parents can just be annoying to live with, assuming you even have a say (parents are more than entitled to tell their adult children to get out).
I own a mortgaged property and the only aspect of this video that resonates as remotely good advice is that, with buying a property, the money you spend is on your mortgage. You are building equity in *something*. Yes, most of it is on interest but at least you're building towards *something*. Rent isn't cheap enough to be worth the utility of not owning anything. The fact that rent and mortgage payments are so close now is another matter…
To anyone who's read this far (thanks!) and isn't sure, please don't listen to this video. Buy yourself a property, even if the market is down when you want to sell your property, the price of the property you'd be buying would also be down. The market broadly moves in sync.
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It's all the banks that have put the prices up if they can lend more money they can make more money if interest rates are low!
Rent = money gone
Mortgage = money stored (despite inflation)
Rent always > mortgage
No brainer.
You've missed a crucial point:
Overseas buyers.
Disconnected from UK salaries yet inflate house prices for Brits regardless.
Dont see this in real terms honestly. I have £40k deposit, my salary is £45k per annum and I cannot afford a house in Greater Manchester in a safe area, or even in Midlands. The average price for houses is above £250k and banks can only lend me approx 4 times my salary (my credit rating is very good). So unless I go overemployed I dont see how I can save another £20k to add to my deposit in the current terms.
P.S: I am looking at freehold properties which are either terraced or semi-detached with 2 bedrooms as a minimum. Am I doing something wrong?
I love all the salty comments on this video 😂 Keep it up Sasha! I like hearing unique different takes on all things finance!
Does anybody actually still believe any data or figures meant for your consumption? Just look at the cost of living and inflation figures, I rest my case.
I do like most of your videos, but this one I'd take it down if I were you. It's schoolboy economics. That said, I get your message and I agree with your point in that you are saying you are better off investing in a real stock market (not the joke LSE) than using a house as a pension as many seem to do. All my investment accounts have out performed by house growth over the last 15 years. My house growth is about 7% on average but my investments have been about 11% on average across all accounts. But that 7% house growth doesn't take into account interest payments and maintenance on my house. My stock accounts do not require me to maintain them, I just sit back and watch the money come in.
Your mmissing the point. The best thing about owning a house, IS ITs YOURS you can buy a new kitchen do what ever you want.
Bro hasn't rented in London recently hahaha missed the mark a bit on this video. Interesting to see house price related to inflation but too many other factors here. Cost of living and rent prices being hiked every year so its hard to stay in an affordable rental agreement for over 1 year. The security of a house shouldn't be understated. Also after the rental what do you have to show, you can't really invest all on s&p500 because your pay check is going towards high rent, high bills and high food costs. So you other investments after paying phone and internet bill are going to be minimal even if you 100x them over 30 years. Also then your are "saving" anyway to put money into investments. People renting I believe want to own one day and wont just rent forever, I guess today they will likely inherit later in life and buy a house then after long period of renting. But yeah I think the increase of renters is due to less affordable quality houses (because of cost of living increases), important to note a lot of new builds aren't at the same quality of a lot of older built houses. And also covid and people moving around during lockdowns and the increase of remote work post covid. But ye
Looks like someone has been corrupted and told tell people everything is ok. House prices are way more expensive now than ever
Too short this one. Feels like there was an agenda to point people into investing in your platform as you did not share the whole story and seemed to imply that stocks were a better investment than a property. I do not agree that for young people not buying is a choice.
Hey young chaps, If you stop buying coffee from Nero, one day you can buy your own house
do you yhink theyll go diwn in nominal terms
Surely you have to take into consideration that the capital appreciation of your property is on its whole value. Eg; Your deposit and the leveraged amount (Mortgage). Rather than invest your deposit amount in the S&P and expect 10% return annually, even if you only make 2.5% a year appreciation on your property, the amount of equity you earn out performs the markets, Or have I got that wrong?
House prices have gone up again for the last 3 months.
We are importing 700.000 immigrants each year. Houses are always going to be in demand! Banks will never let excess houses as banks wants prices high! Rents are flying up! Due to migrants!
Very informative, thanks.
Absolutely rubbish analysis. Real term wages have been going backwards since 2008 with affordability falling for nearly two decades now.
The fact that house price growth is falling is exactly because people can no longer afford to purchase or to move. More people retiring means more people stay put. But that doesn't help the young people today.
You have done no analysis on the mortgage affordability. With mortgage rates going up, house purchases are now less affordable than they were 3 years ago.
Sorry Sasha, but this was a terrible video.
If I've understood this, the house price boom is over as young people aren't interested in owing a home and therefore there will be less demand?
Even if salaries are higher, it doesn't matter, because you end up paying a higher percentage of your income in taxes due to wage inflation. So, young people do have a harder time saving and buying for a house. That's probably the reason the house prices didn't rise as much.
Joker
None of the young people I know who are renting particularly appreciate the flexibility of above inflation rent rises or the convenience of constantly living in fear of eviction. They aren't renting because they prefer it, they simply don't have any other options. The fact that the massive price spikes occurred 20 years ago and the average person couldn't afford a house in 2007 either doesn't make the situation any less shitty. If anything all it does is highlight how long it has been since home ownership has been an achievable goal for most people earning an average wage.
Interestingly, house prices haven't really increased since the 1970s when priced in gold. Also 8%/year corresponds pretty well with the increase in money supply suggesting that the value of houses isn't actually changing much – it's more the devaluation of the pound, the thing we're trying (and failing) to measure value with.
Yet another so-called expert making a forecast. Don't these guys realise that forecasting is a mugs game? No-one can foretell the future. So why set yourself up to possibly make a fool of yourself.
Right, but my home is hugely leveraged – it's gone up £60k in 2yrs, but I don't have 400k to put into stocks, I have like 5k so no, I'm not putting my money into stocks even though the growth % is higher. Also I have to pay x to live somewhere so that growth is not at the expense of anything else. I had to pay it anyway.
This disproved the bullshit that help2buy pushed house prices up. That scheme was amazing for young people and they totally didn’t understand it. I got 4 bed first house I’ll never need to sell. My 4th room isn’t even used. I’ve made about 100k equity just sitting in it and all I did was put 5% deposit in. I even managed to pay off the equity loan and due to a friendly rics surveyor got it at a great market value 😂 instant profit
It seems like you're analyzing this by only looking at the financing payment and not the cost of carry for a house versus a rental. With a rental your cost to carry is included in the rental price but it is fairly typical for unsophisticated people to analyze a house without fracturing repairs insurance property taxes roof replacement lawn care plumbing etc all of which are cash flow negative to your investment. Come talk to me when you do the full cash flow
🙄
The reason people aren't buying homes, even though house prices are going down relative to the cost of living (including rent), isn't because "young people" are different today..
It's because the cost of living is higher making it harder to save and, house prices in all areas of the UK, relative to the annual mean wage of those areas are many multiples higher than they were in the mid to late 1900's..
It doesn't matter how slow housing prices growth is in recent years relative to wage growth if you were already priced out of the market decades ago..
That's without taking the increase in cost of living into account..
Who knew that rent was tethered to wages and not house prices..
This has been a bigger problem since at least 1996. Prices at 10.5x earnings was unaffordable 10 years ago and unaffordable now.
Wages mean nothing when nobody is granted disposable income
Nonsens 280k medium price wtf u talk about
Wow, this was a swing and a miss.
I've watched quite a few of his videos, this was a poor one and poorly educated.
Why are you posting such hateful content?
People have bought their "dream" two bedroom terraced houses with a cheap B&Q kitchen for £300k and once they repaint the walls and put a £9.99 canvas from Ikea on the wall it will be worth £450k.
Dont hate maaaan 😂
I think Gary Stevenson would
disagree. Houses will keep going up and be acquired by Rishi and friends. Affordability for Gen Z doesn’t come in to it
'you have to have somewhere to live' – rise and grind gen z youtubers living from their cars: bet
Good
Don't forget that many kids today have student loans to repay on top of trying to save a deposit. My generation and older got grants for university so we left education with an overdraft, mine was around £3k when I left. My daughter is £50k in debt after uni…. Will be significantly harder and longer for her to get on the ladder
This is generation rent!!
Nonsense. Property is still and most likely will be the safest investment.