How far will house prices fall [volume 5]
Discussion
sambucket said:
Report reckons average inheritance for someone born in 80s is 14% of lifetime earnings. So assuming even spread, 200k plus for someone on 35k?
Surely someone born in the 80s won't have had an inheritance yet? Even assuming 35-year old mother (think they call that "geriatric birth"?) and a 1980 birth that would make the mother 75. Which is less than the female life expectancy (only just, but still).Flooble said:
sambucket said:
Report reckons average inheritance for someone born in 80s is 14% of lifetime earnings. So assuming even spread, 200k plus for someone on 35k?
Surely someone born in the 80s won't have had an inheritance yet? Even assuming 35-year old mother (think they call that "geriatric birth"?) and a 1980 birth that would make the mother 75. Which is less than the female life expectancy (only just, but still).The IFS report found that on average, the inheritances of adults born in the 1980s will be worth as much as 14% of their overall lifetime earnings from work, compared to 8% for people born in the 1960s.
https://www.theguardian.com/inequality/2020/jul/22...
AyBee said:
TheFungle said:
This.
My wife and I have a good PAYE household income and with a 10% deposit would be able to borrow about £650k.
In a town with a buoyant market (Harrogate) it means that to truly upgrade from the house we are in we have almost no chance. Even if we could move our existing house in an average postcode to a desirable postcode it would require us spending at least £500k.
It feels crazy that with such a strong income we have very little chance of moving up the ladder unless we really, really stretch ourselves.
This doesn't make sense - your household income is somewhere in the region of £150k p.a. and you a) can't raise more than 10% deposit in North Yorks (where's all your money going?) and b) don't want to "stretch" to a c.£1,500 per month mortgage (£500k)?My wife and I have a good PAYE household income and with a 10% deposit would be able to borrow about £650k.
In a town with a buoyant market (Harrogate) it means that to truly upgrade from the house we are in we have almost no chance. Even if we could move our existing house in an average postcode to a desirable postcode it would require us spending at least £500k.
It feels crazy that with such a strong income we have very little chance of moving up the ladder unless we really, really stretch ourselves.
Even if we used equity from our house to effectively make it a £0 deposit that would still represent an extra £1700pm in extra payments per month.
It's nice to be in a situation in a house that we like with a sensible income multiplier but it's also a bit of a head scratcher as to what level of income people must have to be able to afford houses in the £650K+ category which in Harrogate, is many.
I should add that my wife and I have never had any family money or profit from property to benefit from.
TheFungle said:
it's also a bit of a head scratcher as to what level of income people must have to be able to afford houses in the £650K+ category which in Harrogate, is many.
I dont mean to sound flippant, but guessing at your numers; couple, each on £75k, whats that? £4500 a month each? Save £2k a month each.In 4 years thats £200k, is four years a long time to save for a home? Not really. £200k down, non stressed £450k mortgage at circa £2k a month between you, easily affordable, and this is without previous equity or inheritance.
Fairly simple answer really, I dont understand the need for head scratching.
sambucket said:
Flooble said:
sambucket said:
Report reckons average inheritance for someone born in 80s is 14% of lifetime earnings. So assuming even spread, 200k plus for someone on 35k?
Surely someone born in the 80s won't have had an inheritance yet? Even assuming 35-year old mother (think they call that "geriatric birth"?) and a 1980 birth that would make the mother 75. Which is less than the female life expectancy (only just, but still).The IFS report found that on average, the inheritances of adults born in the 1980s will be worth as much as 14% of their overall lifetime earnings from work, compared to 8% for people born in the 1960s.
https://www.theguardian.com/inequality/2020/jul/22...
red_slr said:
dan98 said:
I purchased in 2007 - within 6 months the property had lost between 1/4 and 1/3rd of it's value.
Over the next few years it was impossible to sell and when I needed to move I was forced to rent it out and become a landlord, which was a total nightmare.
It eventually returned to it's previous value, but I never want to go through that again.
Thats kind of what happened to us.Over the next few years it was impossible to sell and when I needed to move I was forced to rent it out and become a landlord, which was a total nightmare.
It eventually returned to it's previous value, but I never want to go through that again.
Bought 2005 for 180k
Wanted to sell around 2008 but was told it was worth 150k.
Finally around 2015 the market seemed to be moving again and bought a new place and rented out the old place.
It was not till 2019 that the house was worth somewhat more than we paid, sold it for £220k.
So 15 years and we went from 180k to 220k but if you adjust for inflation it actually lost 20k!!!
The only saving grace was in the 3 years we rented it out we probably made that £20k. So we broke even.
It seemed particularly jarring in contrast to the comparative fun and easy going times in our first couple of years at uni. But these otherwise smart and rational people were convinced it was a one way bet, and that you'd be a mug not to dive in as quickly as possible.
My parents, despite a few decades of additional life experience also seemed to get caught up in this frenzy, and were encouraging me to pile in, sending me rightmove links every week, whilst my girlfriend (who worked for a bank at the time) was trying to convince me that the high house prices weren't a problem for us, as 'with our good jobs, the bank would lend us enough money' to buy one of these overpriced properties!
Luckily I absorbed the parental pressure, and held off until the autumn of 2008 when things started to go south. Started looking seriously in Jan 2009 and finally bought in May 2009 after about 8 months of consecutive price drops. So thankful I followed my instincts, as I estimate that it saved us about 30% vs land registry prices of neighbouring houses from the previous year, and about 7 years on our mortgage.
Now we're eyeing up a move to somewhere slightly bigger but with more outside space and maybe a double garage, but once again feel like we could be on the verge of another dip. People will say 'what does it matter - its a home not an investment' etc. but after seeing the difference it made for us the first time round, I don't want to get it wrong this time..
TheFungle said:
It's nice to be in a situation in a house that we like with a sensible income multiplier but it's also a bit of a head scratcher as to what level of income people must have to be able to afford houses in the £650K+ category which in Harrogate, is many.
I don't know how old you are but of the 3 people I know with c£650k houses in Harrogate who are in mid/ late 40s:1. Bought first house (flat needing work) at 23 years old, did well climbing ladder and riding the rising market
2. Bought in London, made good money there and then used that to buy well in Harrogate
3. Bought a wreck for £325k 10 years ago, spent money renovating and extending.
There are plenty of decent houses at less than £650k, just the nice ones that everyone wants are above that, hence values remained strong.
gibbon said:
TheFungle said:
it's also a bit of a head scratcher as to what level of income people must have to be able to afford houses in the £650K+ category which in Harrogate, is many.
I dont mean to sound flippant, but guessing at your numers; couple, each on £75k, whats that? £4500 a month each? Save £2k a month each.In 4 years thats £200k, is four years a long time to save for a home? Not really. £200k down, non stressed £450k mortgage at circa £2k a month between you, easily affordable, and this is without previous equity or inheritance.
Fairly simple answer really, I dont understand the need for head scratching.
Accept the fact that aside from a more desirable postcode that extra expenditure would achieve nothing for us.
Arguably your scenario of saving £2k per month is only to enable adding £1k to an existing mortgage.
We're not planning on having any children so we haven't got our eye on the 'forever family home with 4 bedrooms, garage and garden'.
Ultimately we've made a decision to live within our means (without being tight!) and live in a house that we both love without having to sacrifice too much of our monthly incomes.
TheFungle said:
Or
Accept the fact that aside from a more desirable postcode that extra expenditure would achieve nothing for us.
Arguably your scenario of saving £2k per month is only to enable adding £1k to an existing mortgage.
We're not planning on having any children so we haven't got our eye on the 'forever family home with 4 bedrooms, garage and garden'.
Ultimately we've made a decision to live within our means (without being tight!) and live in a house that we both love without having to sacrifice too much of our monthly incomes.
You didnt ask the pros and cons of why people may choose to do it, and i am not arguing for or against your specific, or any specific scenario, you said it was a head scratcher as to how they afford it, the answer is it isnt, financially speaking.Accept the fact that aside from a more desirable postcode that extra expenditure would achieve nothing for us.
Arguably your scenario of saving £2k per month is only to enable adding £1k to an existing mortgage.
We're not planning on having any children so we haven't got our eye on the 'forever family home with 4 bedrooms, garage and garden'.
Ultimately we've made a decision to live within our means (without being tight!) and live in a house that we both love without having to sacrifice too much of our monthly incomes.
Your priorities are your own, others differ, but that is why the market for those houses is where it is, just because you have decided you cannot personally justify it doesnt mean others wont.
BeefMaster9000 said:
I remember those years quite vividly - I remember being a little taken aback at how there was this almost obsessive desire amongst my peers, to get the final year out of the way, get a job and buy a house ASAP, 'before it was too late'.
It seemed particularly jarring in contrast to the comparative fun and easy going times in our first couple of years at uni. But these otherwise smart and rational people were convinced it was a one way bet, and that you'd be a mug not to dive in as quickly as possible.
But through recent history these people have almost always been right. It has made sense to stretch yourself and eat beans on toast and have no social life.It seemed particularly jarring in contrast to the comparative fun and easy going times in our first couple of years at uni. But these otherwise smart and rational people were convinced it was a one way bet, and that you'd be a mug not to dive in as quickly as possible.
Of course there has been a few short periods in time where this didn't work out in the short term, but as a blanket rule it was a reasonably good one.
Not many people are going to see more free money than scraping to pay 10% down on a house they can't afford, to see it rise in value by a few hundred grand.
NickCQ said:
Mathematically what you say is true, but it does make me think that the salary percentile calculators underestimate how much people really earn.
Per the IFS, £100k household income puts you in the top 5% of the UK. £100k allows you to borrow £500k and, at 80% LTV, live in a £625k house if you can save up £125k plus costs (which you should be able to over a reasonable timeframe).
Is that £625k house going to be in the most expensive 5% of the country? Of course not. It's probably not in the most expensive 5% of the town. Hence a lot of people feel that they are a lot further down the housing ladder than they should be based on their income.
I've always thought that the number of people working via public service companies / one man ltd. companies must distort the official salary statistics down from the 'real' figures.Per the IFS, £100k household income puts you in the top 5% of the UK. £100k allows you to borrow £500k and, at 80% LTV, live in a £625k house if you can save up £125k plus costs (which you should be able to over a reasonable timeframe).
Is that £625k house going to be in the most expensive 5% of the country? Of course not. It's probably not in the most expensive 5% of the town. Hence a lot of people feel that they are a lot further down the housing ladder than they should be based on their income.
Widespread use across lots of industries that tend to pay multiples of the average UK salary, but significant proportions of those workers would effectively be earning minimum wage for the purpose of any statistical analysis.
Edited by BeefMaster9000 on Wednesday 22 July 22:50
TheFungle said:
Using the above example of a £650k house with 10% deposit I make the mortgage £2,562 over 25yrs at 2.29%.
Even if we used equity from our house to effectively make it a £0 deposit that would still represent an extra £1700pm in extra payments per month.
It's nice to be in a situation in a house that we like with a sensible income multiplier but it's also a bit of a head scratcher as to what level of income people must have to be able to afford houses in the £650K+ category which in Harrogate, is many.
I should add that my wife and I have never had any family money or profit from property to benefit from.
The first mistake you are making is not enough deposit to reduce the lenders risk, you need to be LTVs around 70%, the 2nd is calculating the mortgage repayment at such a high % rate. Assuming you are good credit, you should be 1% below that rate on an introductory period of 2 years, and the chances of BoE or any base rate increasing in the next few decades is exceptionally low. Very low. Its more likely that banks and lenders have to increase their margins than the BoE raises rates. If they BoE) do its because the inflationary environment has improved and you should be benefiting from wage growth (and the value of the debt has been eroded).Even if we used equity from our house to effectively make it a £0 deposit that would still represent an extra £1700pm in extra payments per month.
It's nice to be in a situation in a house that we like with a sensible income multiplier but it's also a bit of a head scratcher as to what level of income people must have to be able to afford houses in the £650K+ category which in Harrogate, is many.
I should add that my wife and I have never had any family money or profit from property to benefit from.
Its obviously prudent to plan for rate shocks, but risk / return profile of investments and borrowing has been flipped on its head. There will be almost no return for savers investing in low risk products (savings accounts), and rewards for borrowers or those investing in riskier asset classes. Basically the lower rates go, the more banks return suffers, so at some point savers will get penalised. In Europe it will become the norm that any HnW will pay to deposit cash, its already the case in Holland for those with over 100k. Although you can also negative rate mortgages there too, so they pay you take the cash away.
Its sucks for those struggling to build assets / own that initial equity, but thats what decades of expansive monetary policy does. Its not crazy per-se, but requires individuals to re-evaluate risk reward and years of cognitive programming that rewards prudence.
Also, if its your forever home; even if its Mark to Market worth drops over the life of the mortgage, its only relevent at point of sale. If you are confident in income over the mortgage period and can service the debt, you still have a roof over your head. That fall in value or "wealth", will likely translate to taking less PCP'd Range Rover Sports, or whatever people spend their feelgood wealth on.
Edited by stongle on Thursday 23 July 06:22
Edited by stongle on Thursday 23 July 06:23
stongle said:
Also, if its your forever home; even if its Mark to Market worth drops over the life of the mortgage, its only relevent at point of sale.
Or at the point of needing to find a new mortgage deal?Edited by stongle on Thursday 23 July 06:22
Edited by stongle on Thursday 23 July 06:23
menousername said:
Or at the point of needing to find a new mortgage deal?
This is what worries me about taking the “new view “ on attitude to mega debt.I completely see and agree that it’s been a good strategy to lever up over the last ten years or more, and that rates and debt levels probably aren’t changing in the near future.
There is also the problem though that if there is a dip of say 20% during the next couple of years, that’s likely to coincide with circumstances that cap wage growth and increase unemployment.
If you’re unlucky enough to be on the losing side of that you could end up being a rate prisoner sitting on a massive pile of debt.
Bullet-Proof_Biscuit said:
NerveAgent said:
I was pretty confused thinking loads of people have 2 storey extensions...until I realised what they thought it meant.Sun said:
Planning laws currently prevent homeowners from extending houses above a certain height, depending on the size and type of property.
For example, owners of detached and terraced houses with two storeys or more can build up to two extra storeys, up to a height of 18 metres.
https://www.thesun.co.uk/money/12179999/families-a...For example, owners of detached and terraced houses with two storeys or more can build up to two extra storeys, up to a height of 18 metres.
711 said:
This is what worries me about taking the “new view “ on attitude to mega debt.
I completely see and agree that it’s been a good strategy to lever up over the last ten years or more, and that rates and debt levels probably aren’t changing in the near future.
There is also the problem though that if there is a dip of say 20% during the next couple of years, that’s likely to coincide with circumstances that cap wage growth and increase unemployment.
If you’re unlucky enough to be on the losing side of that you could end up being a rate prisoner sitting on a massive pile of debt.
As always. Something wonderfully ironic about money being cheap to borrow for those who don't require a loan and vice versa. And then the mega wealthy/famous in fact often being gifted for free.I completely see and agree that it’s been a good strategy to lever up over the last ten years or more, and that rates and debt levels probably aren’t changing in the near future.
There is also the problem though that if there is a dip of say 20% during the next couple of years, that’s likely to coincide with circumstances that cap wage growth and increase unemployment.
If you’re unlucky enough to be on the losing side of that you could end up being a rate prisoner sitting on a massive pile of debt.
TheFungle said:
AyBee said:
TheFungle said:
This.
My wife and I have a good PAYE household income and with a 10% deposit would be able to borrow about £650k.
In a town with a buoyant market (Harrogate) it means that to truly upgrade from the house we are in we have almost no chance. Even if we could move our existing house in an average postcode to a desirable postcode it would require us spending at least £500k.
It feels crazy that with such a strong income we have very little chance of moving up the ladder unless we really, really stretch ourselves.
This doesn't make sense - your household income is somewhere in the region of £150k p.a. and you a) can't raise more than 10% deposit in North Yorks (where's all your money going?) and b) don't want to "stretch" to a c.£1,500 per month mortgage (£500k)?My wife and I have a good PAYE household income and with a 10% deposit would be able to borrow about £650k.
In a town with a buoyant market (Harrogate) it means that to truly upgrade from the house we are in we have almost no chance. Even if we could move our existing house in an average postcode to a desirable postcode it would require us spending at least £500k.
It feels crazy that with such a strong income we have very little chance of moving up the ladder unless we really, really stretch ourselves.
Even if we used equity from our house to effectively make it a £0 deposit that would still represent an extra £1700pm in extra payments per month.
It's nice to be in a situation in a house that we like with a sensible income multiplier but it's also a bit of a head scratcher as to what level of income people must have to be able to afford houses in the £650K+ category which in Harrogate, is many.
I should add that my wife and I have never had any family money or profit from property to benefit from.
My wife and I haven't had family money either, but we've saved hard and are happy spending a quarter of our takehome on somewhere nice to live.
gibbon said:
If you have a relatively stable income, why are people adverse to borrowing money at below inflation to buy a hard asset that hugely effects their quality of life?
Within reason, i will borrow all i can at below inflation please, its a long game, but fairly proven, yes there will be bumps in the road but housing is not a short term bet, find somewhere you love, buy it, enjoy life.
This was quite thought provoking, gibbon - thanks for that! Within reason, i will borrow all i can at below inflation please, its a long game, but fairly proven, yes there will be bumps in the road but housing is not a short term bet, find somewhere you love, buy it, enjoy life.
Edited by gibbon on Wednesday 22 July 18:50
Edited by limpsfield on Thursday 23 July 10:54
711 said:
This is what worries me about taking the “new view “ on attitude to mega debt.
I completely see and agree that it’s been a good strategy to lever up over the last ten years or more, and that rates and debt levels probably aren’t changing in the near future.
There is also the problem though that if there is a dip of say 20% during the next couple of years, that’s likely to coincide with circumstances that cap wage growth and increase unemployment.
If you’re unlucky enough to be on the losing side of that you could end up being a rate prisoner sitting on a massive pile of debt.
Having experienced both sides of the coin, I blame the appalling state of the rental market for much of this attitude.I completely see and agree that it’s been a good strategy to lever up over the last ten years or more, and that rates and debt levels probably aren’t changing in the near future.
There is also the problem though that if there is a dip of say 20% during the next couple of years, that’s likely to coincide with circumstances that cap wage growth and increase unemployment.
If you’re unlucky enough to be on the losing side of that you could end up being a rate prisoner sitting on a massive pile of debt.
In Germany it's possible to rent an excellent home for relatively little, and the laws being what they are, you can usually stay there as long as you like without any fear of being thrown out or the rent bumping up. Indeed my neighbours have rented their apartment since 1949.
Excess earnings actually go where they should IMO, into long term investments or pensions.
It's so liberating to be free of life-long debt slavery, the lottery of the housing market, or the burden of responsibility for some knackered pile of Victoriana masquerading itself as a house.
It's become an alien concept to most Brits now, to the point where it's almost a social stigma not to have a mortgage and be tied up in the life-long palava.
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