Wednesday, 8 December 2010

Doubling the price of houses

Thirty years ago the price of a house was about three years wages. Now it's six. It seems more likely to be exponential than linear growth which means it will be twelve years wages by 2040 and twenty-four years' wages by 2070. By 2100, you'd need most of your income for most of your working life to afford a house, and that's if you don't eat, clothe yourself or have a family. If you expect a working spouse to help, you should also expect that advantage to disappear by 2130, when most of their wage will be required too. In 2160, your children will inherit your house debt. In 2190, their children will inherit yours and their parents' too. Long before then, something will change.

Mokalus of Borg

PS - It has to, because it's unsustainable that way.
PPS - One change might be a property price crash.


Pstonie said...

Hey man, long time.

I agree. Something's gotta give.

John said...

It does, but what could it be? I've seen people working on lowering building costs through various means, but when the main cost is land, we either need more land (increase supply), fewer people (decrease demand) or better ways to pack more people into less space (lower demand per unit of supply).

Pstonie said...

I don't think the problem is that there's not enough space, not in most areas outside China, anyway. The problem is a massive housing speculation bubble that was started after the partial bursting of the dot com bubble, by lowering interest rates. As a result many people got into house flipping and (until 2008) owned more than one house. The americans and pretty much everyone else have been playing extend and pretend since the nudge of reality the markets got in 2008, but nobody (except Iceland) have addressed the underlying issues. As a result we've got at least two bubble hangovers waiting in the wings. Not to mention a looming food crisis from escalating weather anomalies.

John said...

Besides the property boom and bust, there has still been a steady increase in housing prices over the decades, when compared to average salaries. It may trend up and down, but overall, it's going up. The population is increasing exponentially, and everyone needs shelter. So far, yes, there is enough space, but a lot of people want to live close to cities, which does create supply and demand pressure.

Pstonie said...

Indeed. I don't know the statistics of the house prices pre-bubble, but I would guess that they've been increasing with fuel prices and some other good ways of measuring true inflation. Wages have not kept up as you say and once again, something's gotta give.

I don't think that the population numbers are the problem though, rather the way the population is behaving, and I'm definitely not talking about what the taxers call global warming. We're living at odds with our environment and have done so for a very long time. Most people can't even imagine how far off the mark we are. Our environment appears to be fixing that right now, though our schooling has barely begun.