The UK House Price Boom Is Over
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- Опубликовано: 8 фев 2024
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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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This is the first video of yours that I've watched and thought this is complete nonsense. I am a mortgage adviser and can see first hand just how difficult it is to get a property. If you are on £30K basic salary and purchasing a house for £170K you needed a deposit of £35K, That same house is now worth £280K and the deposit required has increased by £110K. Also the interest rates are 250% higher. This is a real-case scenario of the property that my sister purchased in 2017.
Spot on just looking at wages vs house prices is not the whole picture. The cost of living is massively higher than in 2007/08 meaning that money left after rent, bills and food is much lower. Also as you say the deposit factor is massive. The first video I have seen of Sasha's that I wasn't completely on board with.
He spouts complete nonsense on most videos, but relies on the ignorance of his audience to not get called out
Glad to see you in the comments
Why has your deposit required suddenly increased from 21% (35/170) to 52% (145/280)?
affordability criteria hasn't changed @@aaronpcjb
@@aaronpcjb The now finished help-to-buy equity loan effectively lowered the loan to value ratio for first time buyers, id imagine that a part of it.
Not only is this tone deaf. It is also demonstrably wrong. In 1995 the uk ftb house price earning ratio was 2.5. When Sasha bought in 2007 it was 4. Today it is around 6. It is the bottom rung of houses that have accelerated! Not all houses. Mansions have not gone up as much as there is not so much competition. Sasha utterly missed this and is why his hot take on houses being easier to buy today is so out of touch. So thanks for the video boomer.
He has his SE English middle class echo chamber to feel smug in pouring over superficial statistical data
I'm gob smacked that someone would think it's easier to buy. Wages have stagnated for 20 years and house prices have rocketed.
What Shasa is trying to say is that we are overpaying for our houses at current value and we won’t get a lot of ROI like how people use to get in the 1900s.
That’s what he means when he says that last 10 year CAGR has only been 2.5 %.
@@bushmonster1702 he showed you the data that this is not the case
Sasha with your argument that its as affordable to buy today as it was over a decade ago did you factor in the overall increase in cost of living (food, heating, transport etc) I Genuinely cant believe that people have higher or similar disposable income/ purchasing power as they have had for the last 20 years
Most people's wages have gone down, especially after massive cost of living. The super rich have taken so much they push up the average.
@@margaretrobinson8067Financially troubled households start growing things to meet debt obligations. Before you know it everyone's living in Jamaica ...
he's saying it was tough ten years ago (and more) too.
@@margaretrobinson8067weird. Here wages have gone up insanely. 13% isnt even crazy.
@@lloydmeadows347110 years ago i easily could afford my current house. Now with my current salary i could not get a mortgage for it. So... Ye not really.
You're talking through your arse! I bought my first house, a 3 bedroom semi in 1998 for just under £59,000, my wage at that time in a decent job was £28,000 per annum. The mortgage offer was 4x my annual wage. The same house sold 4 years ago for £285,000....the current average UK wage is now apparently just under £28K (not taking into account the real population on zero hour contracts), so there's no chance new homebuyer's can get their first home without either a huge deposit or a sizeable contribution from parents or wealthy relatives.
Exactly. He also doesn’t mention one of the biggest factors of the huge explosion in house prices - BTL mortgages which started in 1996. Between 1996 and 2007 house prices exploded. Since 2008 he’s right that house prices haven’t increased much further against wages - but neither have they corrected. Wages until recently stagnated. Hence why home ownership is falling. By 2031 it may well go below 50%.
I saw a chart recently which showed House price increases , but adjusted for currency devaluation and it was pretty shocking. In summary, your property may have gone up in value, but in real terms it's not as good as investing in the stock market with the diversified portfolio.
@@AH-wr1irYes, but how do you get the money to invest in the stock market? You have to rent a house that is not nearly as good as the one you could buy with a mortgage.
All depends on the area really .. there's still plenty of starter homes around for £80-150K which are very affordable .. just outside of the main cities .. we live in Cheshire (arguably one of the most expensive areas in the north west ) and there are houses here for £80K - £150K ..
You sort of answered your own critique, your salary was high compared to the average in 96 you had the same wage as 2023 average ! . I was in the same boat in 94 bought for 52k on a salary of 26k, however due to the loss of a lot of industry in the area I live house prices are more suppressed a hose in the same street just sold for 195k
This is laughable, especially when you consider that the UK has seen over 15 years of real wage stagnation, or even consider any other factors in terms of an actual affordability analysis, ridiculous.
Kind of a shallow analysis, affordability includes far more than earnings to house price ratios, interest rates, rents, general cost of living, fiscal drag and other factors all contribute to affordability. Also averages are misleading since they collapse any complexity in the data. Even taking that lack of complexity into accout the median age in the UK is 41, at that age they would have benefitted from the boom in their early career as the UK economy was doing well at the time. Possibly this is why the median wealth is relitively high because it is not accounting for the distribution.
It was simplistic because that's what all his content is now. It's just clickbait. We know that affordability is about monthly repayments and the fact is that a £270,000 mortgage at 2.5% costs the same as a £200,000 one at 5%. House prices are not going to lose 25% of their value but even if they did, the monthly repayment would be the same as it would have been a few years ago.
Yep. Sasha usually goes deeper than this
They need to cut the cloth accordingly but people wouldn’t comprise. They think so entitled to an easy life .
Best comment. I was thinking the same but you articulated it much better. Great intervention
65% of people do NOT "own" their own home. The bank owns it and they own the debt.
This. The country would be a better place if we started calling a spade a spade. If you have a mortgage on your only home, you are not a homeowner. The bank is.
Ver well put…
Absolutely correct and even if they "own" their own home unencumbered by a mortgage, just try not paying the Rates / Council tax etc... And we'll soon see who owns that house and its not they / them / you. Nobody owns anything. You still have to pay for the privilege of living in "your own house" You still have to pay for the privilege of driving your own car. This logic holds up for everything. Try telling people who "own" their own home they don't "own" it. Ooofff they get upset.
That would only apply to the 30% of properties on a mortgage, remember the increase in the house price is the total value and not just what you put down…
They DO own their own home. They also have a mortgage.
I bought my current house in 2010 for 260k spent about 20k for new kitchen and central heating boiler ect, Similar houses in my street are now selling for over 600k. I will be 60 in a couple of years and im gonna cash out and go live in Thailand with 500k of my money going in to a world index fund that includes the S&P 500.
Brilliant idea
Renting over the long term can not be a good thing... when they are older they will feel cheated and possibly homeless. Houses built on sand and all that!
That assumes there's not going to be another housing market correction in the next 50 years. I reckon there'll be several. We (the species) are too greedy for there not to be.
@@Carl-hs420a The value of the mortgages that are in issue i cant see that happening ..but who knows.. it looks perilous to me.... I not sure what jobs are going to sustain all this debt for best part of 25-30 years. Long term renting... even worse...
I think you're missing the point here, which is if you rent and invest in the stock market, you will do better than buying your own home
@@AH-wr1ir I'm lost, that sounds like someone saying, i bought bitcoin and its going up 10x next year... then i will buy my home.... good luck with that one....
@@Carl-hs420a the rich are one step ahead no house correction coming thats what the new migrants are for if you dont want to live the dream and pay stupid prices the ones fresh of the boat will
Wages have not risen faster than house prices.
I paid off my mortgage when I was 51. This has given me huge peace of mind Sasha and means that I will pay nothing in rent or mortgage for the rest of my life and it doesn't matter what life throws at me, I will always have a roof over my head. A huge relief.
People should be encouraged to pay off their mortgage first and pay it off as early as possible, because the piece of mind of being that secure in your place would make a huge difference mentally and spiritually.
Sorry mate, council tax is going up by 15% year on year as councils are going bankrupt. Soon the council tax will be like a secondary mortgage. And you can forget about your pension, as they keep moving the goal posts. Probably need to be 90 by the time you are allowed your money back. Well done though, you did good.
@@AsterothPrime 5% in most of the hundreds of councils, 10% in 3 special cases. Nowhere is 15% year on year.
It still sucks, though.
Idid you not think about remerging to buy a second house?
I cleared my mortgage at 39. (and can confirm how nice it feels)
at 41 I remortgaged and bought a second home, just as the interest rates started to climb so I got lucky as I was going to use the money for multiple down payments.
instead I just bought 1 house out right. so now I own one house and have a mortgage on another.
*for those that are going question the interest rates. I remortgaged at 1.8% with in a few weeks that went up to 3% so I got lucky.
My mortgage renews in 3 months, but I have got enough saved to mean I will need to remortgage for 30-£40,000 roughly. so the payments will be low.
But by doing this I have a new income from rental, this tops up my pension (I retired from the military with a pension paying out exit) and I am employed. so it means I have multiple sources of income and plenty of security.
im not suggesting this is for every one but I can tell you its working very well for myself.
@@AsterothPrime Council tax is the same regardless of whether you own or rent. Most CT is only going up 5%.
Most of us couldn't afford a house even if it was £5000
Not all of us are lucky enough to have a decent job and a better advantage in life
Basically the middle class of south east England is still sheltered from the rot in the rest of the island
Saying house prices are more "affordable" but taking no other affordability measures into consideration. Not looking at taxes(Income, council, NI, Capital Gains etc) and inflation into account. Houses are definitely not more "affordable". They may have appreciated at a slower rate than wages, that does not equate to becoming more affordable.
Yep. He also talks about the average wage for a graduate being higher at 27,000 but doesn’t take into account the student debt and that you automatically start paying that back when you earn more than 25k. 🤔🤷 Plus he’s also not taking population growth and house building into account. In 2007 around 219,000 new houses were built. In 2023 only around 204,000 new houses were built. Less houses were built but not a huge difference….then you look at population data. Population in 2007? 61.32 million people. In 2023? 67.73 million. That’s an increase of well over 6 million people, and only about half that in houses being built.
@@arghjayem many of these doom doom videos being totally incorrect. Im selling my 5 bedroom family house. And there are so many people wanting it its insane. House prices will not collapse any time soon lol.
I don't really know anyone choosing not to buy a house but do I know a lot of people "too old" to still be in shared accomodation, paying more rent than their monthly mortgage would be on that property for a single bedroom, even after the recent intrest rate hikes.
The cost of rent might be affecting the affordability of buying a home more than the increase in home prices.
I think 2.3% yoy still beats inflation when the house is bought with ~4/5x leverage, as the debt is "inflated away" by pay increases over time? correct me if my logic is flawed here, though kind of irrelevant if it's your home.
either way the investment in a home in the UK is not the house itself but the investment in not paying crazy rent prices.
Total bollocks Sasha. Average house price is irrrelevant - young people need homes near to their jobs - the rate in price increase of these is higher. Money pay for those homes isn't only a product of income - you need to account for changes in taxes (UP), student loans (UP), cost of living (inc. rent) (UP), transportation (UP - you won't believe how much insurance costs these days. Also, young people today wait longer to join the workforce, as so many years must be invested in higher education to access most higher paying jobs.
You raise an interesting point. If companies want workers to come back to the office, they will need people who can commute. Companies will need to lobby government to put home building on the agenda. But look how that's turned out the last 10 years.
Commuting has become a dumpster fire. So not sure which way this is going with poop in every direction and no thought put into planning
I wonder if it's something that can be practical for one to find work nearer to where it is affordable...
To find something within 15 miles I can expect to spend a minimum of 300k, 40 miles away I can find something 200k... So now I have to factor in whether the fuel and car cost will make up for the price.
The best thing about buying a house is that at some stage in the future you own it ie no more mortgage payments…..whereas with rent you pay until you die simples
Yes, home ownership can be the difference between a early comfortable retirement or working till you drop paying rent.
That's why they don't want average people owning their own homes!
Fact. Gen z...rent gen facing 1k rent from 1k pension....riots in the street, pension not designed for these costs.....there is a storm brewing ...🎉
Yes. Then you can sell and live off the proceeds
And if your kids can't afford a house...?...why bother having kids if they are doomed to a shit life...just saying...
Try saving for a deposit when you're paying a high rent. Just another youtuber that lives in cuckooland.
You've missed a crucial point:
Overseas buyers.
Disconnected from UK salaries yet inflate house prices for Brits regardless.
If renting was a much cheaper option than paying a mortgage, I would agree with you, but they are pretty much the same in terms of money out of my pocket. In this case why would I give my money to someone else for an asset that is not mine while I could pay for a mortgage and at least in 30 years I would have something I could sell to pay my "retirement home", while if I rented my whole life I would not have this possibility.
I think you're missing a critical point here. Sure, the difference from 10 years ago to now is similar in wages vs house prices. But look at how much everything else has gone up: education, bills, food, cars, and the big one... rent. People can no longer save for a deposit for a house because the rent is so much higher. You even showed it in your graph. The only way you can save for a house these days is by living with your parents or in a house share.
Agree, anyone that thinks he can still make money by investing his whole net worth in a house in the UK...I have some bad news for you..
Pay your landlord like a good boy. Lol
At 5% interest, pay down the mortgage as quick as you can, live mortgage free then invest
@@RonanOBrienZatori That's not wise from an investment point if view. Maybe it's for 95% of the average home buyer in the UK, including you. Burying half a mil in a falling asset vs trying to reduce your income taxes through pension contributions and making other clever investments...it's a no brainer for someone like me.
@@SycAamore, come on mate? A falling asset? Have you been watching Charlie again? Lol
@@RonanOBrienZatori Historically the money supply increases at roughly 7% per year (devaluing each monetary unit by same). So even at 5% interest, you end up paying back less than you've borrowed (even after interest). This means that you're actually better off getting into as much debt as possible and paying it off as slowly as you can.
Also remember that UK has one of the worst housing in Europe. Do young people really want to spend their whole lifes paying for a damp shoebox costing half a mill?
You saying we should all just move to somewhere affordable, like Italy instead? Having no savings and no assets, by late age, is far worse. Which is what the average person would get if they rented their whole life instead.
Exactly and then putting up with high crime rates in this country especially in the areas where most people can realistically afford. That along with a few cultural reasons is why at the age of 31 I'm planning on emmigrating to europe this year, possibly permanently. The quality of life compared with how much work you put in in this country is simply not worth it.
@@Hession0Drasha If the S&P500 goes up 4x faster than housing then it is better to live somewhere cheaper and put the money you saved into the stock market. So instead of your net worth growing at the rate of housing it averages a bit higher.
@@4ndyr0g3r50n That's very wise to do. This will make you happier...and wealthier. But unfortunately many young people will follow along like sheep anf will buy a hugely overpriced house in the UK. Lifes wasted in quiet desperation, as one wise man said long time ago...
You sound like someone who funds a landlords lifestyle mate 🤣
They can’t buy one because you cannot get a mortgage without having £50k deposits your missing the point completely
Wow …In one single video you have managed to undo all the credence I had in your opinions.
There are statistics...and then there are Sasha statistics. You can prove anything to be true with Sasha statistics.
Mate inflation erodes debt 😂
And it always will, otherwise the UK government is in deep 💩 with the national debt it's run up. Assuming the all-powerful central/global bankers don't say FU and turn up the interest rates, making everyone insolvent ("The Great Taking")
Now plot the value of houses against gold - there's very little change. It's not the value of houses that has gone up but the value of the pound has gone down.
Now if only there was an asset that was both scarcer than gold and housing but also more liquid, divisible, untaxable and in a digital form...
house prices are vastly over priced......have been for years.
They aren't overpriced...they're selling. Compared to 1890s they're more affordable, it all depends on what you're measuring against.
@@spokes1018 In some parts of the country the average house is overpriced simply because the average family could not afford to buy it. However, in other areas of the county, such as Hull, house prices are very affordable.
A mortgage free house is far better for your mental health than renting. Fit a log burner, the living flame soothes your soul.
With renting you are paying the landlords mortgage plus a bit besides. If you're paying someone's mortgage it might as well be your own.
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 house you live in is NOT AN INVESTMENT. You can’t generate money living there.
Do you understand that for most people their house is over 80% or even more of their net worth? Then you know why they view it as an "investment". Fortunately I'm not one of them...
Are growth stocks not an investment because they don’t produce income?
UMPTEENTH HOUSING BUBBLE POPS AGAIN 🙄🙄🇬🇧🇬🇧🇬🇧
Well, in many respects it is an investment if you are looking for tax free capital growth and a wonderful place to spend your life. My preference has been to direct more of my money into my home because it is something my family and I enjoy every day during our lives, rather than squirrelling it away in a dealing account or a SIPP. That’s not to say that I don’t have a SIPP or a dealing account, just that it’s important to live life rather than saving up a large pile of cash for when you die.
But you can build generational wealth.
There are always pro's and con's. Owning your own home ties you to a single location; you cannot just up and leave because you need to find a new job, or the area is depressed and you cannot sell, or they decide to build a hydrogen farm at the end of your road, etc.
On the other hand, when you finish paying off a mortgage you instantly have more cash in hand because you are not paying the bank or landlord half your salary every month.
Two very different freedom's, folks need to make up their own minds which is more important to them.
Quite right! It all depends on your goals and what you want to do in life. But to be fair, Sasha is very clear about that. If you have no kids, school to worry about etc, and you are focused on getting the maximum amount of money then yes renting allows for that for sure. I know people who have benefited a lot from property with low interest rates etc but now is a different time. If you have cash and find a good deal it's still possible, I am not saying it's not but for an average Joe the game is over. Sasha is right.
I am of an age where we bought our first house in the late 70s, so will have a biased view, and we also have as part of our investments bought and rented houses. My point is that the thought of being in rented accommodation where you do not know if the landlord is going to decide to sell up or simply require you to move through no fault of your own would be a constant worry. Owning your own place, you control those decisions which is where most folk would prefer to be I suspect.
Especially if you have kids at a local school. Great point.
I just sold my house in London. Am now regretting letting it go quickly (read; at a fair price) because i don't see the fall happening anytime soon - (though managing tenants is not passive income, despite what they tell you - i won't miss that bit). I do think we'll sit on a lengthy period of stagnation as they're are no viable policies to alter the demand/supply issue in either direction and no private investment in major house building is happenning, nor any political will or incentive to let it happen. While inflation is high, assets are just going to move sideways between boomers. The crash will come when the boomers are all living in their 'final homes' so to speak.
Do you know what boomers call the young? Renters! LOL!
everytime you turn on the tv and some country is being destabilized by the usa and uk government thats another group of rich people about to buy in london for safety reasons.
you wont be fast enough to grab what the boomers have for sell
I already see the falls happening everywhere
I see new houses going on the market every day now and some are asking silly prices only to reduce a month later. There are also an increasing number of more sensibly priced houses coming on now.
This means that if you look at a £400k price bracket in my area, you are starting to see decent 4 bed family houses and also run down pokey 3-bed ex-council houses in dodgy areas. Given the choice, which would you buy?
Don't believe the stats... the metrics are all in place for a crash and if you read between the lines, you can start to see it already.
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.
You forget to mention house prices are decreasingly dependent on your and my ability to get a mortgage. Rather, the rich and asset owners are hoovering up as they have the most excess income probably in history and pay the least tax. There is a seismic shift going on squeezing out the middle class. We have an increasingly oligarchical financial system.
It’s quite sad really, my grandma has all her wealth tied in her house and that tied her down. I’ve got some money invested in the S&P but I don’t think I will ever bring my self to use it as a deposit. I rather uses it to kick start my retirement. It allows me to technically invest £200 every month until I’m 70 and have £50000 to retire on every year by drawing down 3% on my S&P investment (I uses the figures from your previous video). Do you really think investing is better then putting money in equity?
Looks like someone has been corrupted and told tell people everything is ok. House prices are way more expensive now than ever
I dunno, things feel a bit more expensive now compared to 2007! And in 2007 it was much much easier to get a mortgage! Now the banks want seriously hefty deposits! Even if you can get a 10% mortgage that is still 30k you need to save (or borrow) to put down on a 300k house, if you need more then it becomes a big task for a mid twenties first time buyer! That said maybe first time you’re buying a below average house!
Also, the first house I bought for £160k in 2002 is now worth £450k. In the south east it’s become much harder… or at least it feels like it has.
I had money to burn in the mid 00s. Rent was expensive then as well. Better wages, cost of living was far cheaper. Good Times.
@@kinggeoffrey3801 indeed - the good old days 🤣 my mortgage is currently 3.2k… I’m moving to Spain. Fuck this shit. 🤷♂️
@@aktolman I hope you have an EU passport then!
@@jakemorgan9275 no need, I am moving office to Spain to cover Spanish clients, and applying for beckham law 24% tax!! :)
Buy your home,
Pay off mortgages as soon as possible
Only use debt for investments.
Choose 'time' over consumerism.
Debt for investments is more expensive than mortgage debt. I agree pay off the mortgage but then invest liquid cash that results from not having a mortgage
@@RonanOBrienZatori that's a fine strategy also , My debt for investments is mortgage debt as I own buy to let's .
i know no rich person that willing pays off his mortgage even when he is loaded with cash are you telling me them billionaires i know are stupid?
@@sko1beer I would say the chances of you knowing multiple billionaires is around zero. :)
"Just be rich bro" 😂 FFS ..... This is why you don't see the anger and social unrest building under the hood
When you discuss the difference between the wage-house price ratio in 2007 compared to now, have you considered the current cost of living? I would guess the other things young people have to pay for are comparatively more expensive now than they were back then. Meaning a deposit is more difficult to save for. I could be wrong though.
There is also a trend to move back into cities in the last 10years... not driven by affordability, but work and culture... this is also why rent has increased... impart this is not because of affordability, but because there is just less houses / flats to purchase in cities at affordable prices..
When you say the situation is the same, you aren't taking into account the ability to save, which is the very first issue when buying a house.
Great video Sasha, with an interesting take on things (as one would expect).
Another reason why young people aren’t buying is because they are much more mobile, moving from city to city, indeed country to country, as their careers take them
i can not see that as a sensible way to look at it? When your young yes ok, the world is your oyster and all that, but later in life? I assume while all this renting and being mobile and moving from city to city that buying a home is on the cards at some point?
Big missing factor in your analysis is children and schools.
You don't pay rent on a house for life - you pay rent until the landlord decides to do something else with the property, then you have to up sticks and find somewhere else.
When you don't have kids that's no big deal, but having to move kids between schools because a landlord gets bored of being a landlord is heart breaking.
Lots of small, hobbyist landlords around and they can be fickle. Tenants are at the mercy of their investment decisions.
He forgot the simple solution of having two houses. One to live in and one to rent out. Best of both worlds.
The problem with renting a house out is that you're essentially becoming a slave owner - your hapless slave, unable to get a mortgage themselves, spends their life paying your mortgage off instead. It just doesn't sit right.
A great final 2 minutes Sasha
We are a good example. My wife and I sold our home for £2m lucky I know. Invested the money in REITs, a commercial property and ISAs etc etc. this produces £135k pa which after tax more than pays the £3k a month house we now rent. So we are part of the shift.
That 6.75% u cant guarantee that return. Nothing is certain regarding ROI. Your 135K probably fluctuates heavily. And what about inflation knocking on your door ... And your rent will probably rise a lot in the future. Expenses go up. Your investment returns could plummet. Its not a watertight plan. And your 2 Mill wont grow. Because u need part of the return to live on.
@@HermanWillems Hi Herman
The net income from the investments is £101k and our rent is £36k. So our investment fund is actually growing every year by £70k at the moment. The commercial property we own is very stable and has a 10 year lease. Owning an expensive house makes no financial sense (to me). We have also started giving away these assets to our children to avoid IHT. It’s win win win.
House prices are the same now as they were in 1975 priced in gold it’s the currency devaluation through printing so inflating the circulation pushing up asset prices, the pound has lost 98% of its spending power since the 1930s
quick follow-up question because I don't know the answer on "houses are more affordable if you compare it to earnings". What about if you compare it to disposable income instead?
You know when I first bought, one thing I kept hearing from older people was "I couldn't afford my house now" A decade on I feel the same way. I certainly don't believe it's just as easy.
This has been a bigger problem since at least 1996. Prices at 10.5x earnings was unaffordable 10 years ago and unaffordable now.
Trying to buy a house now is a nightmare. You need a house for a family. And at least by the end of it, I own somewhere I can call home
Don't think I believe that wage data... Where is it from, what exactly is it showing? No one's wages have gone up by as much as inflation over last couple years, only recently has that been seen, and mostly in the private sector
It's hard to judge the average across the country based on anecdotal data about a very small sample of people you know. Wages are 100% growing in the UK and it is very noticeable.
The apartment right next to mine is currently on sale for ca. 230.000 €, i.e. including the extra expenses ca. 250.000 €. But the condition is that it's basically a building shell without utilities. You'd need to spend at least another 30.000 € to make it useable. With 3 % interest and 30 years to pay back, the total sum would amount to ca. 50 years of rent, considering that rents rise as they did in the past (which, due to demographics in Germany, is most unlikely in the far future). The calculation gets worse when you're also considering that you need to make updates and repairs to the house and the utilities over the next 50 years, most probably.
In summary, even if I had the money, I'd put it into the MSCI World and just rent the place. Demografics will change a lot for the stock market as well, but at least I can move where I want.
in my country migrants is what is proping up property prices thats why politicians like them because they are also real estate investors, if we were going by demograhic my country is one of the oldest in europe and most already moved to the cities/coast decades ago and we are never attractive compared to germany until 3 years ago when they made deal with ´every´ poor country.
Ordinary people absolutely could invest in the stock market in the 1960s and 70s but it was usually through a Unit Trust or life insurance policy.
Boomers generation has been lucky. But the realty is this is now an "asset generation" and without assets there is little future.
Looking at home value appreciation in terms of home prices is an oversimplification. Even when home price growth is zero, if rents are going up the value of the home in terms of its utility to the owners is actually going up. Home prices may not be growing as fast but rent growth is probably justifying that difference.
Agree - uncharacteristically oversimplified video; my house in the suburbs of Bristol has doubled in 10 years (I know, loads of factors and averages blah blah blah, but still....). I imagine the mix in type/location of house plays very heavily on that 25% figure.
1990 the average £59,987
2000 the average £82,563
2010 the average £177,754
2020 the average £252,000 (three years later in 2023 = £291,000).
Up nearly 40K in three years 💪
And? Using those figures, that’s 4.9% per year. Half of what the stock market returns.
@@SashaYanshin, we're up nearly 40K in the space of three years.
@@SashaYanshin, for the stock market you have to invest 100% of your own capital. Property is all about leveraging debt. 10% of your own money buys an asset worth 100K and inflation erodes the debt Leverage.
@@SashaYanshin, investors 30% with the benefits of capital appreciation and also recurring passive income produced by the rental income. All about leverage.
@@RabJ208 His logic in this this is absolute bollocks!
Respect.
The rational choice of eschewing home ownership
Nothing feels better than the last mortgage payment.
We are in our early 40s have over payed, lived on the cheap, had second jobs, not holidayed aboard etc and it was worth it, we now invest what we paid for our mortgage, having no rent or mortgage literally pays dividends!
Until the divorce..!
It's the best strategy. Me and the wife are doing just that now.
But you're still cheap
The key metric is “Affordability” … house price/salary.
This has gone up from 3.5 in 1998 to 8.25 in 2022 (down from high of 9 in 2021) and likely fell in 2023 as wages increased.
My point is that literally shows how house prices have outstripped wages by about x2.5
The Nasdaq has seen about 10x and the Dow 5.5x increases - but, you can borrow to invest (so you don’t get the leverage effect) and you still have to pay rent - which has gone up even more.
In summary, to quote Euler : “Not even Wrong”
I’ve bought (ok…am buying, slowly over 25 years) my house so I have somewhere to LIVE in AND as an investment in the sense that I’m prepaying my retirement accommodation costs. But I’ll only overpay my mortgage IF the interest rate on the debt exceeds my (expected) post-tax medium term investment return, which it hasn’t done for as long as I can recall- maybe in the first couple of years of my mortgage
This video forgets about the leverage of a mortgage. Most investment property purchases only involve a 25% deposit. This means your returns are 4x what the house price growth would suggest. Oh, and you get paid rent on top of that. If you are just buying for yourself to live in, you need an even smaller deposit e.g. 10%. So if house prices go up 2%, you make 20% return on your investment. Plus you have somewhere to live....
You hit the nail on the head. Plus inflation erodes debt over the long term.
Completely missing the point that it is now virtually impossible to save a deposit when paying substantial amounts in rent, just to have a decent roof over one’s head. Not everyone is living with their parents, which can clearly be seen by the huge increase in renters. Try saving £200,000 cash for the deposit on a small house in London, when already paying over 40% of one’s salary on rent.
Did you account for the amount of square meters that one was able to get for the price then vs now?
🙄
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..
It’s hilarious how banks replace the term loan with mortgage & all of a sudden people think they are successful homeowners when in reality, they are £300k+ in debt before that home is actually theirs
Absolutely! Almost all "growth" since the year 2000 has been debt. We are way more indebted than ever before - no coincidence that the the gap between the rich and the rest of us is also bigger than ever too!
I really don't understand this idea that renting is better than having a mortgage. In both cases you pay out for years and years but in the case of a mortgage then appart from household maintenance you stop paying. And whilst I don't consider a house to be an investment, owning a home means you can get away with a smaller pension.
As long as I earn high interest, I can offset my rent with my interest earnings.
@@SilverWong-yo5iu to do that you would have to pay rent and put money in investments. I don't have the surplus income to do both.
The biggest issue with renting is that if you reach retirement age and are still renting, the rent values will be so high if trends continue at current rates.
This will be a huge epidemic in future as all people's retirement funds will purely go towards paying their landlord. Nobody will have any spare funds if they need to pay for care.
Nice analysis and a very nice presentation, glad you are on youtube take care
Thank you!
Yep, ignore all the muppets on here Sasha
great video as ever bud, keep up the great work
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.
People who bought our house in 2012 paid 130k, similar house now in 2024 is 250k, ok, take it back a couple of years so it's an even 10 year period and that the price then was 230k. It's a 100k increase Sasha, in 10 years.
£130k to £250k is +92% in 12 years.
1.92 ^ (1/12) -1 = 5.6% per year.
Good for the owners that this specific house went up ahead of the average… assuming the “similar” house is identical. Nothing particularly exceptional though. 👍
Agreed, the 250 house is actually in a bit less nice area though this could just be a matter of perspective.
The monthly mortgage price difference from that time (2% and 130k mortgage for 25 years) compared to today's say 4.5% of the 230k for 25 years is massive, £550 compared to ~£1300 now. Maybe I have too smooth of a brain but 12 years ago, I would have been able to afford the mortgage on my own working a minimum wage job @ £6.50 an hour, today however, having an above average paying job, I could just about do the same so I just don't understand how it's more affordable today. Please, by all means correct me, I'm not one to argue for the sake of it lol
If you look at home ownership as an investment then it is leveraged so gains are based on the whole house price and not you 5-10% initial investment. 5% deposit and 5% house price increase is actually 100% return on your investment (ignoring buying and selling costs!). If someone saves up say £20k for a house deposit for a few years, it is a much safer "investment" to buy a house and save rent payments than it would be to continue paying rent and buy another leveraged investment such as CFD's. Buying also fixes outgoings so you are not at the mercy of a landlord who might want "the going rate" for renting you a property. There are obviously many other reasons to buy other than pure investment.
Not your best video Sasha. Working with gross salaries doesn’t show the real affordability of the housing. I earn in £65k a year before tax and at present prices can’t sensibly afford a mortgage that I am able to pay off in max 15 years. Additionally with today’s rates for a decent house I would need to pay nearly £2k a month in mortgage. I’d rather pay rent at £1400 and invest the £600. Also we live in high tax rates period which dramatically decreases the potential of our wages.
Owning a house with by putting a deposit down gives you much more leverage though. It’d be more accurate to present the levered returns (net of fees and interest paid) for the house vs the stock market in order to compare apples and apples
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?
Great video. I think the best thing for young people is to save/invest money while living with their parents and start renting a small appartement or share a house if you know nice people. Just avoid spending money. You don’t need much to survive.
Renting a property is about the most wasteful use of money you could ever make. There is only ONE instance where you should rent, and that is if the alternative is living rough. Beyond that, NEVER rent. Dead money.
@@bobjames6622 I cant agree more... Its foolish... but it seems everyone wants it... bizarre....
@@rfxtuber When the boob tube/comics (aka "newspapers") were telling people to take a certain "thing" three years ago the majority also queued up for that. Notice how those who fell in line with the narrative have now all gone VERY quiet about that.
Same thing with renting. Only total mugs would take the "certain thing", or rent a home.
@@bobjames6622 I am thinking that it costs less to rent an appartment vs pay a mortgage not sure if that is correct. This way you have more money/time to do better investments. I have never rented anything myself
If you buy a house to live in its a liability not an asset.
Nonsense
....said the person living rough on the streets.......NEVER!
Council tax sees to that
If you buy a house it is an asset. If you rent a house it is liability. However if it is your only property, especially if it is no more than what you need, then it is a necessity.
@@4ndyr0g3r50n I'm basing it on Robert Kiyosaki definition of an asset is something that generates you money and a liability is something that costs you money. If you buy a house and live in it, it only costs you, even if it appreciates in value that amount is offset by the money you put in to it each month. If you buy a house and some one else lives in it then it generates money, someone else pays down the mortgage and you benefit from any appreciation. The former is a liability and the latter is an asset.
Great, so I'll be able to buy a 5 bedroom detached house in Wiltshire for £100,000? No? Oh just business as usual then.
(Bit morbid sorry ) But with the baby boom generation starting to die, will there be a point at which the supply of housing going into the market drives prices downward?
owning a house gives some sort of feeling that the biggest cost that you have you won't have it anymore when you retire. it is yet to been seen if investment and renting when you retire is enough.
At the wages we have, the minimum in the economy, everyone will end up homeless, only the rich can afford a house😢😢😢
I'm quite fortunate that from the bank of mum and dad I managed to purchase my first home for 92k in 2013 freehold too. Sasha ain't wrong about the sheer benefits and gains within the last 10 years people have gotten for owning property outright!
The "average" wage is not the *median* wage and for that reason claiming "houses are more affordable" is simply untrue. Rising taxes and interest rates just add to that. Wage income is the same, the average is not the median, the rich are getting richer and everyone else poorer. The market is propped up by professional landlord and agency chains that charge enormous rents that ensure anyone wanting to escape the property owning trap cannot and anyone who tries to live in a van or caravan is prevented by a maze of restrictive regulations. This situation didn't come about by accident, the crisis is deliberate (and that's before you even factor in the ever growing shortage of supply caused by immigration policy). You can't "choose to rent"! They already blocked that exit!
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.
Very informative, thanks.
Good analysis, where to get the annual pay gross - excel (link) please.
10:53 So the percentage of people owning a home is down 6.5% yet the number of people renting is up 8%? And something else to consider….the average age of a first time buyer in the U.K. has gone from 31 in 2007, to 34 in 2023.
Renting is generally more expensive than a mortgage when comparing like for like properties. I think you make some good points with your assessment but I think it just leads me to the conclusion that you should still buy BUT on an interest only mortgage. Invest the difference throughout and then in 30 years time the principal will have inflated away to the point that you can easily pay it off with a fraction of your stock market investments at that stage.
Where can I find the graph at 6:58 ?
House prices don't go up, it's the land underneath it that does, land value tax would fix this.
oh yes, let's have more tax.
@@squoblat Not at all. We need far less taxes, LVT can and should replace most other taxes, starting most obviously with the current property taxes which are highly regressive and distortive.
Do some research, LVT has been advocated by many economists left and right including, and since well before, Adam Smith.
@@schumanhuman misinterpreted your original comment as an additional rather than replacement tax, fair point.
@@squoblat No worries, goes with the territory, just another day in the life of an LVT stan...😄
And…. The record low interest rate from ‘08 to Covid has allowed that 10x salary multiple from that time to continue. BUT …. now that’s gone, that 10x multiple will reduce. And it needs to.
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.
There's a smaller gap between owning and renting. That's because owning means you have to pay to maintain the property yourself.
3:20 this is not possible, wages aren't that higher.
So why do you own a home?
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) 😅.