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Weekend reading: House price affordability

This week’s best post from elsewhere, plus more good links from around the Web.

Anyone who read my post on house prices predictions [1] may have sensed my enduring frustration with the London property market.

If you thought cockroaches were hard to kill, you should try stamping out house price inflation in desirable streets in Zone 2.

London prices will always be high, absent a dirty bomb. The question is are they justifiably tear-jerkingly elevated, or are they pricey even for loaded Londoners?

To investigate, I was all set to produce some pretty graphs as a follow-up. But then I noticed The Finance Blog has sprung back into life and done it for me.

I’m all about the 80/20 rule of time management [2], so my Post of the Week comes from the Finance blog [3]!

Here’s its crunching of the current house-price to earnings ratio:

[4]

The bounce before the bottom?

Perhaps its wishful thinking, but to me the London ratio looks like a trend reverting to mean, interrupted by emergency interest rates in March 2009.

Alternatively, perhaps the recovery in equity markets resurrected London house prices by reflating bankers’ bonuses? I say that because the North has only flat-lined, despite the deluge of cheap money (for those who can access it).

The Finance blog also has useful graphs on affordability, and on the percentage of FTB pay that goes on a mortgage. Property addicts should go check it out [3].

Meanwhile, please do add your house price prediction for 2011 to the comments [1] on my article. There will be a prize for the most accurate guess forecast!

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