Wages Set To Increase

Falling house prices will soon make property more affordable for the Britain's workers, predicts David Kuo.

As our 'Your Finances in 2012' campaign continues, David Kuo's third prediction focuses on what a fall in house prices will mean for you and your earnings. David predicts that house prices are set to drop by 20% this year, while wages are set to rise by 3%. If he's right, it would mean that buying property will be more affordable in a year's time than it is today. And not a minute too soon either for today's first-time buyers: house prices, which were around four times average income in the 1960s, are now valued at over seven times the income of the average British worker. Indeed, if our salaries had kept pace with house prices in the first six months of 2007, they had to increase by £50 a day! Personally, I think David may be onto something. Earlier this week, the Royal Institution of Chartered Surveyors (RICS) said that property prices are falling at rates not seen since the housing recession of the 1990s. A massive 49.1% more surveyors saw more price falls than rises in December -- the worst figure since November 1992, when prices fell by around 8% (see How Often Do House Prices Fall?). RICS attributed the fall to last year's interest rate rises, together with tighter lending criteria across the market. If these trends continue, Britain's workers, who have long seen their wages rise at a much slower pace than house prices, will finally start to catch up. House Hares And Wage Tortoises The Office of National Statistics (ONS) states that in 2006 the average income for a woman was £20,488 and the average income for a man was £25,896. General trends suggest that wage growth has tended to mirror inflation. David predicts this trend will continue. So female workers can expect to earn £24,463 and males £30,905 on average by 2012. And there's even a chance the gender pay gap may close further - according to the ONS, it narrowed from 2006 to 2007 to its lowest value since records began, closing from 12.8% in 2006 to 12.6% in 2007. But according to a survey by the Fool, many of you think David is being quite optimistic in predicting a wages increase of 3% a year. Instead, 46% of you think wages will increase by just 5% in total by 2012. After all, the Government has stressed that pay rises in the public sector should stay within its inflation target of 2%. And as average wage inflation has slowed significantly from 8% over the last 70 years to just 3% over the last decade, a further slow-down would not be surprising. Boost Your Income Is there anything you can do to increase your earnings faster than David predicts? Well, you could always ask your boss for a pay rise. Money is always a tough subject to talk about, but as we know, if you don't ask, you definitely don't get. An alternative is to try to cut the costs on your biggest outgoings, such as ensuring you have the best possible mortgage. As David points out, the difference between a lender's fixed rate and the standard variable rate can be as much as 2%. On a £200,000 mortgage, that can add up to £250 a month. In fact, there are Five Ways To Increase Your Income and you may be surprised at how easy it can be! Be Assertive However you approach our predictions, remember that not everything has to be left up to fate. They say hindsight is a wonderful thing. It's a shame we don't have the power of foresight too, but being assertive and not waiting for things to simply happen is always a good start. > Switch your mortgage and save money with The Motley Fool's Fee-Free Mortgage Service.