Average house prices as a multiple of average gross annual income:
1979: 4.5x —vs— 2020: 8.2x
Poor 2020 buyers, right?
Wrong.
In 1979, 31% of gross income went to HM treasury in taxes, 48% went straight to the bank as interest. Only 21% was left to pay equity on your mortgage and to fund your life.
By 2020, only 20% went in taxes, only 13% in bank interest, while 67% went into equity on your home and living costs.
By 2020, it had grown progressively easier and cheaper to buy a house — hence price rises. Moreover, buyers that slaved in 1979 are now passing that capital on to their grandchildren in the biggest transfer of wealth since the Spanish conquest of South America. The ubiquitous narrative that Baby Boomers had a better deal on housing than later generations is too entrenched to be dispelled. But it is bullshit.
belowtheline.blog 
robinhale1@icloud.com
Perhaps you have oversimplified the numbers to make a polemical point; that “Boomers did not have it easier,”
There are some fairly basic circumstances which have been cast aside, deposits, wage growth, childcare costs, tuition fees, rent inflation, and the collapse of social housing provision. If we take these into consideration younger generations really do face a tougher challenge in purchasing a home.
I really must take issue with some of your assumptions:
Firstly, house price to income ratio. The ratio has risen: in 1979, average UK house prices were about 3-4 times average earnings, whereas by 2020 they were closer to 7-8 times (depending on source and region). So that part is broadly correct; but do you not think that ratios are not the whole story — affordability depends on interest rates, deposits, wage growth, taxation, and living costs.
Secondly your claim of the tax burden standing at 31% in 1979 as opposed to 20% in 2020 is very misleading.
The average tax wedge (income tax + NI + indirect taxes) in 1979 was not uniformly 31%, nor was it uniformly 20% in 2020. Top marginal tax rates were extremely high in 1979 (83% on earned income; 98% on investment income), but very few people paid them, For average earners, effective tax rates in both 1979 and 2020 were closer to 20-30%, not so dramatically different.
Thirdly, regrettably your supposition that the interest burden of 1979 was 48% is nonsense; in 1979, interest rates were indeed high (mortgage rates around 11-13%, but house prices were much lower relative to income. Mortgage repayments on an average house for an average earner typically consumed 20-25 of gross income , not nearly half.
Finally I would suggest it is true that those who bought cheap houses in the 1970s/80s ended up with huge capital gains. That is why intergenerational wealth inequality is such a live issue. However, so you not think the narrative that “Boomers had it harder” is revisionist. They faced high inflation and interest rates, but much lower price-to-income multiples, much smaller deposits, and a society that provided more affordable council housing and grants for education.
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Robin! How lovely to hear from you! Fancy dinner? I’m mostly London but occasionally Cheltenham — happy to meet either side. 🫶🏻
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