I know I am more of a lurker than a poster on here (because I never seem to know the answers to people's questions), but hopefully people will still reply.
I want to know why houses are so much more expensive in relation to incomes than ever before. Is this actually a fact and if so, why is it like this. What has changed. What can be done to change things back, or is it actually a good thing and should be welcomed?
I realise I should know this sort of thing as a home owner, but I don't, so if anyone can enlighten me that would be great
Supply and demand, mainly Ruthann. We have more people wanting or having to live alone, but they dont want to live in flats. We have more people buying houses to rent out as a pension vehicle. We have more people buying second homes. But we have strong constraints on building on green fields, and developers can make more profit on larger 'luxury' style houses than smaller cheap ones. The low interest rates have also allowed prices to rise above what people would have been able to afford in the past too.
I'd agree more with intereset rate point of view. the actual price is not as important as the monthly repayment costs.
you will see what happens to house prices when- sorry, IF- interst rates take off.
suppose some would say why can't prices stay the same and everyone benefit from low rates - this would certainly be ideal, but that's where demand for housing comes into the equation.
Jim G has just about summed it all in a nutshell really but you only have to look at the Telly Programs to see another cause of the problem like people putting down deposits with their credit cards and buying 2nd homes on the invisible, not-your-money equity that has built up thanks to the rise in property values. Foundations built on sand in my opinion. Interest rates are the major factor and only time will tell over the next few Months which way the mop will flop and I reckon rates will rise soon after the election.
To what other have said above, I would add that house prices appear to be fundamentally unstable – when they are going up, more people want to buy, and will pay over the odds (worries of being left behind, or see easy money to be made), and when they are falling, nobody wants to buy (worries about negative equity, or will only buy at a large discount). The market is cyclic, and switches (at the top) when you earn more from your house than from your proper job, or when you need to spend over (say) half your net income to service your mortgage. Expect prices (relative to income) to fall back naturally, but, in the absence of any hike in interest rate, the timescale to reach the bottom is open to debate (crash, about 4 years; or stagnation, about 12 years).
I feel I have to add it was the norm when I was a child to have a single income in a family, bringing up children seen as being a job in its' own right. (unpaid of course)
I'm not saying it would be great to go back to that, especially as Dads often had little input to family life then, but the Govt has accepted that houses and families are only affordable on two incomes so consequently we have fewer families and impossibly expensive homes. IMHO
I think that now people can see what a house they are buying has sold for previously it should help restrain prices to a degree.
Before WW2 it was possible to buy a small to average home for the average salary (in today's money around £23K). You wouldn't get much of a property today for £23K. This was because far more people rented, and never expected to become home owners. There were also far fewer single people living alone, unlike now with so many one-parent families, divorcees etc. So it is supply and demand. Also the population of the UK has increased tremendously in the last 50 years. When I was a child in the 1940s, the population of Britain was 48 million. Now it is 60 million. We only have so much land available, the land area is not increasing, unlike bigger countries like France which have far more space available. No wonder property has become so expensive.
I certainly can't foresee property ever getting any cheaper, as the population presumably will go on increasing, the building land available is never going to get any larger, and more and more families are splitting up and divorcing, creating a need for two homes instead of one. Second home owners don't help either.
Connie – I agree with what you are saying, but I think these supply/demand pressures act over a long time, many decades, and set the long term drift in house prices, BUT superimposed on this trend is the boom/bust cycle – this is responsible for the house in Treorchy, Wales, going from £21k in 2000, to $41k in 2004, and then to an asking price of £80 to £90k in 2005 (data from Nethouseprices). And it will unwind just like it has before.
Wow - thanks for so many replies . What you say makes sense, especially about supply and demand. Jim has summed it up in nice easy language for me Also the bit about needing two incomes for a house - this is what has prompted my interest (rather than just accepting things). My husband and I earn just above average each and have a small but very nice 3 bed semi in a good commuter area in Essex. We would really like to have kids but the mortgage means we can't afford to, and we love the area so much we don't want to move away (we grew up here). I guess I was thinking of my own childhood (I'm 29) and wondering why things are so different now. With the election coming up I wondered if voting for a particular party would make things better, but from what you are all saying this is just a fact of life and will not get any better no matter who runs the country.
Its sad though that nothing can be done to fix things, it doesn't seem 'right' although maybe people who have been cleverer than me and made lots of money from it would say otherwise!
. What you say makes sense, especially about supply and demand. Jim has summed it up in nice easy language for me 
