Cost of living crisis.

[leicsmac]

2 hours ago, dsr-burnley said:

Build more houses.

 

At present the population is increasing faster than the housing stock, which makes it inevitable that prices will rise. The government is making it harder and more expensive to be a landlord, and that will drive up prices as well. If they accepted that we need to build a lot more homes and make it easier to be a landlord, then rents would fall. (I'm not advocating the return of Rackman, just that they should take away the artificial discouragements to small landlords like the mortgage restrictions, the stamp duty surcharge, and the environmental grade C rating.)

If the government are going to intervene enough to build a lot more houses (which they absolutely should), they may as well just incentivise people owning their own house (if they want to) rather than making it easier to be an exploitative landlord (yes, #NotAllLandlords, but a fair few and the first option is better all round anyhow).

[ozleicester]

[foxes1988]

On 20/05/2023 at 18:13, dsr-burnley said:

Does Mr Micawber count as definitive proof?  The first sentence to me is self evident.  People are short of money because they are spending more than they have available; if they spent less they wouldn't be short of money.  

 

Where it gets complicated is when we drill down to the reasons.  I'm not necessarily making any judgement as to why they are spending more than they have got.  Maybe commitments from brought forward debts, maybe desire that their children shouldn't miss out on what other children get, maybe they have so little that no-one could get by on it.  Maybe they don't know how to save money by cooking fresh food, maybe they can't be bothered or don't have time.  Maybe a higher proportion than ever before are attempting the difficult task of bringing up children as single parents.  All sorts of reasons.

 

Mortgage rates going up must be a beggar, but food banks pre-date that.  Availability of credit and the lack of stigma of being in debt is definitely a factor; if you're borrowed to the hilt and your income (or other expenses) take a hit, then you've no wriggle room.  There will be some people who have cut all reasonable costs and still can't cope, there will be others who are not budgeting properly or who don't know how to save or who simply can't stop themselves from spending and that's why they can't cope.  

 

One stat that was in the Daily Telegraph but I can't find it on the internet - in the 1950's, one third of the average household income went on food.  As of about 5 years ago, it was 8%.  It will have gone up since, I dare say, but only to 10% or so.  Food prices, regardless of food bank usage and so on, are cheaper than ever.  It's not the high price of food in comparison with the past, that is causing suffering.

Yeah food prices have come down as a proportion of income. Food of course is not the only measure of cost of living though. Other things replaced it as the major costs of living such as housing. Mortgages went from 11% of income in the 70's to around 45% of income now. Hopefully the will come down soon  to make up for years of low wage growth, utility bill rises, transport rises etc etc etc. 

 

 

[ozleicester]

.

Edited 22 May 2023 by ozleicester

[ozleicester]

Australia’s big supermarket chains persistently increased their margins on their food businesses throughout the pandemic and cost-of-living crisis...


https://www.theguardian.com/business/2023/may/22/australias-big-supermarkets-increased-profit-margins-through-pandemic-and-cost-of-living-crisis-analysis-reveals




Wage "growth"

Edited 22 May 2023 by ozleicester

[Foxdiamond]

9 hours ago, dsr-burnley said:

Build more houses.

 

At present the population is increasing faster than the housing stock, which makes it inevitable that prices will rise. The government is making it harder and more expensive to be a landlord, and that will drive up prices as well. If they accepted that we need to build a lot more homes and make it easier to be a landlord, then rents would fall. (I'm not advocating the return of Rackman, just that they should take away the artificial discouragements to small landlords like the mortgage restrictions, the stamp duty surcharge, and the environmental grade C rating.)

One of the issues is that the houses built are not truly affordable for many. Also some 40% of council houses sold off cheap are now in the hands of private landlords charging far higher rents than they were by the council. People need a decent affordable home before even thinking of owning. 

[dsr-burnley]

2 hours ago, foxes1988 said:

Yeah food prices have come down as a proportion of income. Food of course is not the only measure of cost of living though. Other things replaced it as the major costs of living such as housing. Mortgages went from 11% of income in the 70's to around 45% of income now. Hopefully the will come down soon  to make up for years of low wage growth, utility bill rises, transport rises etc etc etc. 

 

 

Bank base rates were in double figures for most of the period from 1975 to 1987, and mortgage rates would be higher so they would be in double figures all the time.  So someone with an interest-only mortgage whose mortgage was no more than a year's annual household income, would be paying something like 11% of their income on the mortgage; someone with a more typical 3x household income would be paying over a third.

[dsr-burnley]

1 hour ago, Foxdiamond said:

One of the issues is that the houses built are not truly affordable for many. Also some 40% of council houses sold off cheap are now in the hands of private landlords charging far higher rents than they were by the council. People need a decent affordable home before even thinking of owning. 

I agree.  The problem is of course that there is no affordable way to make housing cheaper for people that don't have a house, without drastically reducing the value of the houses belonging to people that do have one.  The population is increasing very fast, and has been for years - up by 10 million in 30 years - and new homes built in that period is of the order of 6 million.  Taking into account those that have been knocked down, and the continued propensity for smaller household groups, it isn't enough IMO.

[dsr-burnley]

9 hours ago, Heathrow fox said:

The 30% of household income on food stat you keep quoting.Does it take into account that most households were single income?

Yes.  Not that it makes any difference - if food spending is 30% of the total income of UK people,  then it would be 30% whether we're counting individuals or households.

 

Here's an article from Which that quotes the 30% figure.

 

https://www.which.co.uk/news/article/heres-how-our-food-prices-compare-to-30-years-ago-and-you-might-be-surprised-aBqFY5C7lgai

[Foxdiamond]

1 hour ago, dsr-burnley said:

I agree.  The problem is of course that there is no affordable way to make housing cheaper for people that don't have a house, without drastically reducing the value of the houses belonging to people that do have one.  The population is increasing very fast, and has been for years - up by 10 million in 30 years - and new homes built in that period is of the order of 6 million.  Taking into account those that have been knocked down, and the continued propensity for smaller household groups, it isn't enough IMO.

Perhaps if people owning a house think it more of a place to live rather than how much it will increase in value might be a start. 

[ozleicester]

 

• In a speech in January, then-Fed vice chair Lael Brainard said wages weren't the main driver of inflation and pointed to a "price-price spiral," where companies mark up prices far higher than the increases in their input costs.

https://www.axios.com/2023/05/18/once-a-fringe-theory-greedflation-gets-its-due#

[leicsmac]

39 minutes ago, Foxdiamond said:

Perhaps if people owning a house think it more of a place to live rather than how much it will increase in value might be a start. 

Yeah,  I struggle to have much sympathy for the haves compared to the have nots in this case.

[dsr-burnley]

1 hour ago, Foxdiamond said:

Perhaps if people owning a house think it more of a place to live rather than how much it will increase in value might be a start. 

The problem in causing house prices to fall is with the people who do think of it as a place to live, and who only have the one house, and who will find themselves paying way over the odds for the mortgage.  Government policy for years, decades, has had the effect of stoking up house prices to a ridiculous degree, by restricting supply, by special deals for fist time buyers, and by artificially low interest rates.  Sooner or later people are bound to suffer.

 

As for landlords, the people on buy-to-let will suffer when prices drop because they will lose money.  Well, that's the risk with investments.  These things happen, they knew the risk.  The landlords who have invested actual money as opposed to borrowed money will suffer less because they might make lower profits or a loss on their investment, but they won't be in debt.  Again, their risk.  The problem with this hopelessly unjoined-up thinking about driving private tenants out of business, without addressing the multiple other problems, is that the people who suffer most are the tenants.  They become homeless.

[leicsmac]

17 minutes ago, dsr-burnley said:

The problem in causing house prices to fall is with the people who do think of it as a place to live, and who only have the one house, and who will find themselves paying way over the odds for the mortgage.  Government policy for years, decades, has had the effect of stoking up house prices to a ridiculous degree, by restricting supply, by special deals for fist time buyers, and by artificially low interest rates.  Sooner or later people are bound to suffer.

 

As for landlords, the people on buy-to-let will suffer when prices drop because they will lose money.  Well, that's the risk with investments.  These things happen, they knew the risk.  The landlords who have invested actual money as opposed to borrowed money will suffer less because they might make lower profits or a loss on their investment, but they won't be in debt.  Again, their risk.  The problem with this hopelessly unjoined-up thinking about driving private tenants out of business, without addressing the multiple other problems, is that the people who suffer most are the tenants.  They become homeless.

I'm sorry, I can understand the arguments being made here but I'm honestly not sure exactly how more laissez-faire rather than better government intervention is going to help here. Could you elaborate on that?

Edited 22 May 2023 by leicsmac

[foxes1988]

3 hours ago, dsr-burnley said:

Bank base rates were in double figures for most of the period from 1975 to 1987, and mortgage rates would be higher so they would be in double figures all the time.  So someone with an interest-only mortgage whose mortgage was no more than a year's annual household income, would be paying something like 11% of their income on the mortgage; someone with a more typical 3x household income would be paying over a third.

Maybe I'm just misunderstanding what you're saying but from what I can find doesn't seem to support this.  In 1980 when interest rates where 15% when the mortgage payments where only 11.3% of income compared to around 45.1 % in 2022 (mortgage rates now are equivalent to a rate of 25.7% in 1980) .  Surely that just means houses cost more now or am I interpreting this incorrectly.

 

Source: Leeds Building Society

 

[dsr-burnley]

39 minutes ago, leicsmac said:

I'm sorry, I can understand the arguments being made here but I'm honestly not sure exactly how more laissez-faire rather than better government intervention is going to help here. Could you elaborate on that?

Government intervention at present is aimed at making private lettings (especially by small landlords) more difficult and more expensive.  This will have two effects, one that prices will rise because of the extra costs, the other is that landlords will get out of the letting market and sell their houses.  This will reduce the properties available for rent which will further drive prices up.

 

If the ogvernment cancelled the unnecessary restrictions, such as the abolition of fixed term lets, the abolition of no-fault evictions, and the insistence that tenants must not be allowed to live in properties with lower than grade C energy efficiency, the rentals market would be healthier.

[leicsmac]

2 minutes ago, dsr-burnley said:

Government intervention at present is aimed at making private lettings (especially by small landlords) more difficult and more expensive.  This will have two effects, one that prices will rise because of the extra costs, the other is that landlords will get out of the letting market and sell their houses.  This will reduce the properties available for rent which will further drive prices up.

 

If the ogvernment cancelled the unnecessary restrictions, such as the abolition of fixed term lets, the abolition of no-fault evictions, and the insistence that tenants must not be allowed to live in properties with lower than grade C energy efficiency, the rentals market would be healthier.

Still not sure how the consumer (of a fundamental human right, I might add) isn't going to get shafted in a "healthier" market though. Historical experience with such markets shows that rather clearly - the "freer" a market is, the more the purveyor is "free" to shaft the consumer - that was pretty much the case from when a housing market first arose in the UK until better regulations came about around WWII.

 

Of course, too much intervention from a command economy doesn't end well either. So I would say again that the problem here isn't too much government intervention, it's intervention of the wrong type, if at all.

[dsr-burnley]

22 minutes ago, foxes1988 said:

Maybe I'm just misunderstanding what you're saying but from what I can find doesn't seem to support this.  In 1980 when interest rates where 15% when the mortgage payments where only 11.3% of income compared to around 45.1 % in 2022 (mortgage rates now are equivalent to a rate of 25.7% in 1980) .  Surely that just means houses cost more now or am I interpreting this incorrectly.

 

Source: Leeds Building Society

 

I don't believe the figure of average household disposable income in 1980.  The average weekly wage was about £100, or £5k per year, so there would have to be at least four averagely-paid employees per household to have gross income (let alone disposable income)of £18k.

 

2022 average wages were £640, so the 2022 figure looks correct.  But wage inflation was about 500% not 100% in that period.  Have you a link to the actual table?

 

https://www.retrowow.co.uk/social_history/80s/earnings_1980s.php?utm_content=cmp-true

https://ourworldindata.org/grapher/nominal-wages-consumer-prices-and-real-wages-in-the-uk-since-1750

Edited 22 May 2023 by dsr-burnley

[dsr-burnley]

8 minutes ago, leicsmac said:

Still not sure how the consumer (of a fundamental human right, I might add) isn't going to get shafted in a "healthier" market though. Historical experience with such markets shows that rather clearly - the "freer" a market is, the more the purveyor is "free" to shaft the consumer - that was pretty much the case from when a housing market first arose in the UK until better regulations came about around WWII.

 

Of course, too much intervention from a command economy doesn't end well either. So I would say again that the problem here isn't too much government intervention, it's intervention of the wrong type, if at all.

I'm not going to argue that.  There certainly do need to be regulations, just not these ones. 

[yorkie1999]

3 hours ago, dsr-burnley said:

I don't believe the figure of average household disposable income in 1980.  The average weekly wage was about £100, or £5k per year, so there would have to be at least four averagely-paid employees per household to have gross income (let alone disposable income)of £18k.

 

2022 average wages were £640, so the 2022 figure looks correct.  But wage inflation was about 500% not 100% in that period.  Have you a link to the actual table?

 

https://www.retrowow.co.uk/social_history/80s/earnings_1980s.php?utm_content=cmp-true

https://ourworldindata.org/grapher/nominal-wages-consumer-prices-and-real-wages-in-the-uk-since-1750

It was defineatly not anywhere near that figure, but what it does show is that the banks are lending more than what people can afford. It used to be 3 1/2 times your salary an 1 times your mrs'.

[Otis]

20 minutes ago, yorkie1999 said:

It was defineatly not anywhere near that figure, but what it does show is that the banks are lending more than what people can afford. It used to be 3 1/2 times your salary an 1 times your mrs'.

Which is why we are where we are with house prices today. 

[yorkie1999]

35 minutes ago, Otis said:

Which is why we are where we are with house prices today. 

Sorry, 2.5 times your salary and 1 times your mrs', which was about 18 grand mortgage and you'd make a couple of grand selling on. The reason we are where we are with house prices is banks were lending 5 x your salary and 30 years to pay it off meaning you've got more to spend on a house and consequently sellers are asking more. I've heard of people buying houses for 350 grand, doing them up a bit and flogging them on for 650 grand after a couple of years, no way is that sustainable.

[Otis]

20 minutes ago, yorkie1999 said:

Sorry, 2.5 times your salary and 1 times your mrs', which was about 18 grand mortgage and you'd make a couple of grand selling on. The reason we are where we are with house prices is banks were lending 5 x your salary and 30 years to pay it off meaning you've got more to spend on a house and consequently sellers are asking more. I've heard of people buying houses for 350 grand, doing them up a bit and flogging them on for 650 grand after a couple of years, no way is that sustainable.

Apologies, that's what I was getting at. If lending criteria stayed more or less than it was  prices could never have escalated to the levels we see today. 

[foxes1988]

9 hours ago, dsr-burnley said:

I don't believe the figure of average household disposable income in 1980.  The average weekly wage was about £100, or £5k per year, so there would have to be at least four averagely-paid employees per household to have gross income (let alone disposable income)of £18k.

 

2022 average wages were £640, so the 2022 figure looks correct.  But wage inflation was about 500% not 100% in that period.  Have you a link to the actual table?

 

https://www.retrowow.co.uk/social_history/80s/earnings_1980s.php?utm_content=cmp-true

https://ourworldindata.org/grapher/nominal-wages-consumer-prices-and-real-wages-in-the-uk-since-1750

It was done by Leeds building society. Income was based on statistics from the Office for National Statistics

housing-is-now-at-its-least-affordable (1).pdf

[dsr-burnley]

10 minutes ago, foxes1988 said:

It was done by Leeds building society. Income was based on statistics from the Office for National Statistics

housing-is-now-at-its-least-affordable (1).pdf 172.28 kB · 1 download

That's a very embarrassing fail for Leeds Building Society. Their household income figures from the ONS are inflation adjusted. This means their data is meaningless, and so obviously wrong for someone working in the trade that that page should never have got anywhere near being published.