Average house price now 8.7 times average income
Discussion
I live in London and currently earn a smidge over £32k. I'm going for a job that is currently a smidge over £38k.
I hold £20k in savings that I have accumulated over the last few years through overtime and penny pinching.
I still don't see how me and my partner will be able to own our own place. Partner doesn't work through ill health.
I hold £20k in savings that I have accumulated over the last few years through overtime and penny pinching.
I still don't see how me and my partner will be able to own our own place. Partner doesn't work through ill health.
I was shocked last month when my niece and her husband (both 30yrs) bought their first house - £750k with a 30 year mortgage.
That's approx 5x joint salary, 3 bed house near Guildford, prime commuter belt location.
Even if affordable, it's seems a massive commitment as their first home. Not planning on moving for a long time though, and room for children when they come along. Tried to jump up a step or two of housing ladder with longer term thinking. Hope it works for them.
Hard to relate that to the first house i bought 25 years ago - with the limiting factor of banks only offering 3.5-4x joint salary lending. (Unless the bank was called Northern Rock of course).
That's approx 5x joint salary, 3 bed house near Guildford, prime commuter belt location.
Even if affordable, it's seems a massive commitment as their first home. Not planning on moving for a long time though, and room for children when they come along. Tried to jump up a step or two of housing ladder with longer term thinking. Hope it works for them.
Hard to relate that to the first house i bought 25 years ago - with the limiting factor of banks only offering 3.5-4x joint salary lending. (Unless the bank was called Northern Rock of course).
Sheets Tabuer said:
Tango13 said:
Spare tyre said:
Fella at my work told me to sell my iPhone and that’d help
I take it you've curtailed your consumption of artisan avocado toast too?snoopy25 said:
I live in London and currently earn a smidge over £32k. I'm going for a job that is currently a smidge over £38k.
I hold £20k in savings that I have accumulated over the last few years through overtime and penny pinching.
I still don't see how me and my partner will be able to own our own place. Partner doesn't work through ill health.
Shows how things have changed.I hold £20k in savings that I have accumulated over the last few years through overtime and penny pinching.
I still don't see how me and my partner will be able to own our own place. Partner doesn't work through ill health.
You earn an average salary just like I did when I bought my first property in London. Difference is my first house was £57k in 1996 and while it was a push, was affordable. That same house was sold last year for £500k which is simply unaffordable for anyone on an average wage.
This wasn’t some semi-detached in a leafy suburb but a two bedroom terrace in a ‘challenging’ neighbourhood.
I’m not sure what the answer is but the status quo cannot carry on indefinitely. All those that simply say to buy less Starbucks or cancel Netflix haven’t a clue what it’s like for those struggling to get on the ladder.
Good luck, mate.
The only metric which really counts is mortgage payment as a % of take home pay after tax. IIRC, this hasn’t moved dramatically over the years. Folks need to remember that circa 5% base rates are historically low. The problem is 10+ years of ‘emergency’ ZIRP, supercharged by the covid QE response. Pay rises are simply being absorbed by the housing market, preventing values adjusting from 0.1 to circa 5% base rates.
Interesting how everyone blames "the rich" (which is somehow always somebody else). The reality is a combination of demographics and changes in lending practices driven by those demographics. Those who say we aren't building enough homes are of course right, but we only need those homes because of a sea change in how we live. Our housing model was based on people operating in families - two married adults with a number of children, all of whom remained at home until they married and formed their own households. That controlled demand. Demand was further suppressed by the post-war expectation that most people would live in state-owned housing as subsidised renters. At the same time we only allowed lending on the basis of one income (the assumption being that there would only be one income). That limited pricing but also of course suppressed supply.
Then at roughly the same time, we started lending on both salaries as our social model changed and government policy explicitly encouraged home ownership. So demand rose enormously, as did price elasticity. But supply remained limited by planning policies developed during the previous era. When demand outstrips supply, prices will rise to the limit of elasticity.
Then, again at roughly the same time, our social model changed again to one with many more single households (now one-third of all households in the UK). At the same time we had a long period of artificially low interest rates, and - to accommodate the social changes - relaxation of salary multiplier rules and extension of mortgage terms. So demand rose again, and price elasticity rose again, but supply still remained constrained. So prices rose.
All of this has been exacerbated by immigration, which has compensated for our falling birthrate by sustaining population growth in the UK. Countries like Italy face falling house prices outside the major conurbs because they are depopulating. We should not wish ourselves into their problems, though.
As others have pointed out, we also suffer from competely mismatched concentrations of demand. Far too many people want to live in single households in London - and in specific bits of London, to boot - despite London having some of the greatest supply constraints.
If we want housing to be affordable without changing the social model, we have to allow supply to rise to meet demand. Prices will equilibrate at the point of affordability; this will bring down the price of some existing houses, of course, but remember that houses are by definition not moveable goods so location will always matter. However, raising supply would mean relaxing planning rules to a degree that I would suggest is completely unthinkable in Britain.
So don't blame the rich, because although many people became "rich" by having bought in before the prices rose, it's not their fault and it's not in itself real wealth - they can't use the money tied up in their house for anything else. Blame terrible planning rules and NIMBYs, but also blame the move to single households. Perhaps the expectation that needs to be lowered isn't mashed avocado on overpriced sourdough but splendid isolation and freedom from parental oversight. We're not "supposed" (according to our building model) to move out of home after university and then live singly, in a flat or house we own, for a decade or more before we might perhaps find a partner. This became possible (for my generation and early millennials) because of changes in lending policy and - later - low interest rates, a rash of conversions of family homes into multi-occupancy buildings and the availability of former council flats for sale, but we're not doing anything like the amount of building needed to sustain it now.
Then at roughly the same time, we started lending on both salaries as our social model changed and government policy explicitly encouraged home ownership. So demand rose enormously, as did price elasticity. But supply remained limited by planning policies developed during the previous era. When demand outstrips supply, prices will rise to the limit of elasticity.
Then, again at roughly the same time, our social model changed again to one with many more single households (now one-third of all households in the UK). At the same time we had a long period of artificially low interest rates, and - to accommodate the social changes - relaxation of salary multiplier rules and extension of mortgage terms. So demand rose again, and price elasticity rose again, but supply still remained constrained. So prices rose.
All of this has been exacerbated by immigration, which has compensated for our falling birthrate by sustaining population growth in the UK. Countries like Italy face falling house prices outside the major conurbs because they are depopulating. We should not wish ourselves into their problems, though.
As others have pointed out, we also suffer from competely mismatched concentrations of demand. Far too many people want to live in single households in London - and in specific bits of London, to boot - despite London having some of the greatest supply constraints.
If we want housing to be affordable without changing the social model, we have to allow supply to rise to meet demand. Prices will equilibrate at the point of affordability; this will bring down the price of some existing houses, of course, but remember that houses are by definition not moveable goods so location will always matter. However, raising supply would mean relaxing planning rules to a degree that I would suggest is completely unthinkable in Britain.
So don't blame the rich, because although many people became "rich" by having bought in before the prices rose, it's not their fault and it's not in itself real wealth - they can't use the money tied up in their house for anything else. Blame terrible planning rules and NIMBYs, but also blame the move to single households. Perhaps the expectation that needs to be lowered isn't mashed avocado on overpriced sourdough but splendid isolation and freedom from parental oversight. We're not "supposed" (according to our building model) to move out of home after university and then live singly, in a flat or house we own, for a decade or more before we might perhaps find a partner. This became possible (for my generation and early millennials) because of changes in lending policy and - later - low interest rates, a rash of conversions of family homes into multi-occupancy buildings and the availability of former council flats for sale, but we're not doing anything like the amount of building needed to sustain it now.
troika said:
The only metric which really counts is mortgage payment as a % of take home pay after tax. IIRC, this hasn’t moved dramatically over the years. Folks need to remember that circa 5% base rates are historically low. The problem is 10+ years of ‘emergency’ ZIRP, supercharged by the covid QE response. Pay rises are simply being absorbed by the housing market, preventing values adjusting from 0.1 to circa 5% base rates.
You're forgetting the small issue of the deposit. That's the bit that really screws most first time buyers and is a factor that wasn't there for past generations, both through lower house prices and lax LTV requirements.Mortgage payments as a percentage of salary are currently well above average, about 15% higher, and increasing rapidly.
I have been very lucky.
I bought and renovated two terraced houses in one.They were 60k at an auction.I doubled my money on them and bought a cosy little one bedroom terraced house outright with the profit.
Although I am a Southerner I moved North.Dont kid yourself its not the Powerhouse the Politicians keep dangling under our noses.However the Natives are dead friendly and you are never alone in a pub up North.
These property values are of course unthinkable to the genuine Southerners.I kid myseld that my humble abode would be worth £2 million in Chelsea(thats good enough for me)...and it comes without endless traffic problems (parking,traffic lights,20mph zones,expensive goods).
So without causing a another War what is the attraction of living down South!! And for those of you who are my age...please remember the State Pension payments are the same in Huddersfield as they are in Wimbledon(ahem).
I bought and renovated two terraced houses in one.They were 60k at an auction.I doubled my money on them and bought a cosy little one bedroom terraced house outright with the profit.
Although I am a Southerner I moved North.Dont kid yourself its not the Powerhouse the Politicians keep dangling under our noses.However the Natives are dead friendly and you are never alone in a pub up North.
These property values are of course unthinkable to the genuine Southerners.I kid myseld that my humble abode would be worth £2 million in Chelsea(thats good enough for me)...and it comes without endless traffic problems (parking,traffic lights,20mph zones,expensive goods).
So without causing a another War what is the attraction of living down South!! And for those of you who are my age...please remember the State Pension payments are the same in Huddersfield as they are in Wimbledon(ahem).
troika said:
The only metric which really counts is mortgage payment as a % of take home pay after tax. IIRC, this hasn’t moved dramatically over the years. Folks need to remember that circa 5% base rates are historically low. The problem is 10+ years of ‘emergency’ ZIRP, supercharged by the covid QE response. Pay rises are simply being absorbed by the housing market, preventing values adjusting from 0.1 to circa 5% base rates.
Link?Evanivitch said:
AlexC1981 said:
They could have got on the property ladder earlier by buying a flat when they were younger.
And sink all their cash on a short term solution? Why? If our hypothetical couple had bought a flat at 25 rather than waiting to buy a house at 35, they would have seen their investment grow, which would help with the deposit for the house they need now.
Over the last 10 years property prices have increased more than putting the money in a savings account would have. Interest rates have been good for borrowers, not savers.
I'm not saying everything is great and easy, you have to do the best with the hand you're dealt.
CHLEMCBH said:
Thing is, I "couldn't afford" a deposit until my mother died and I suddenly inherited 40+ bags from the sale of her house. I was pushing 50. I put £36,000 down on a £186,000 boring 3 bed semi. Had I not spent the previous 30 years spending at least £5k a year on booze and crappy food I could have bought much earlier (and not had type 2 diabetes.) Yes, I know it's much harder and more expensive now, but the principles are the same, surely?
My comment about avocado toast was firmly tongue in cheek as were I suspect the comments on I-phones and Costa coffee.I was lucky, changed jobs when I was 24 and managed to save all the extra I was earning so four years later I had enough of a deposit to buy my first property, pay all the legals etc
If I had waited another year I doubt I could've afforded to buy it and after a couple of years the flat was increasing in value every month by more than I was taking home, as I say, pure luck that I bought when I did.
AlexC1981 said:
Because it isn't desirable to live until you are 35 with your parents or in house shares or lodging, whilst you save up for your dream home.
If our hypothetical couple had bought a flat at 25 rather
If our hypothetical couple had bought a flat at 25 rather
Oh dear. So what you're saying is the hypothetical graduate needs to graduate at 21/22 and in 2-3 years have a 10-20k deposit, probably when they're renting because they've relocated for a decent job in the first place and paying rent.
The bottom of the market (80-120k flats) has not moved anywhere near as fast as the semi-deatched, work-from-home, 2.5 bed family home. The vast, vast gap between them has only accelerated.
Meanwhile, owning a flat comes with all the hidden costs of communal space and shared responsibility.
AlexC1981 said:
Evanivitch said:
AlexC1981 said:
They could have got on the property ladder earlier by buying a flat when they were younger.
And sink all their cash on a short term solution? Why? If our hypothetical couple had bought a flat at 25 rather than waiting to buy a house at 35, they would have seen their investment grow, which would help with the deposit for the house they need now.
Over the last 10 years property prices have increased more than putting the money in a savings account would have. Interest rates have been good for borrowers, not savers.
I'm not saying everything is great and easy, you have to do the best with the hand you're dealt.
I bought my first house 3 weeks after my 18th birthday in 2000.
I was realistic what I wanted to achieve and what I needed to do to achieve it.
I also knew that buying where my parents lived (Sunderland) was unattainable so made a temporary move to Hartlepool for the buy and to get on the ladder.
I know I’m far from a typical person in this regard but it amazes me when I hear nieces, nephews and niblings talking about the impossibility of them being able to buy at all when in reality it’s possible if they think outside the box.
I have a niece who happily spends hundreds a month on nails, hair, fillers, tattoos, etc. and that’s before the 4-5nights out every week she has - dinner and drinks.
My daughter is 9. She’s been with me when I’ve viewed and purchased rental flats etc. and is being “educated” in the art of the possible and understanding/seeing value. Alongside being involved in the build process for my current house - I hope it pays off and she is more savvy than her cousins … It may however not work, but I’ll try!
I was realistic what I wanted to achieve and what I needed to do to achieve it.
I also knew that buying where my parents lived (Sunderland) was unattainable so made a temporary move to Hartlepool for the buy and to get on the ladder.
I know I’m far from a typical person in this regard but it amazes me when I hear nieces, nephews and niblings talking about the impossibility of them being able to buy at all when in reality it’s possible if they think outside the box.
I have a niece who happily spends hundreds a month on nails, hair, fillers, tattoos, etc. and that’s before the 4-5nights out every week she has - dinner and drinks.
My daughter is 9. She’s been with me when I’ve viewed and purchased rental flats etc. and is being “educated” in the art of the possible and understanding/seeing value. Alongside being involved in the build process for my current house - I hope it pays off and she is more savvy than her cousins … It may however not work, but I’ll try!
CLK-GTR said:
BoRED S2upid said:
Take London out of the equation and it’s a lot less. Still 3 x oop north which it always has been.
Average house price in the North East is 189k. Average salary is 27k. That's far from 3x. Try 7x.If you think it’s bad in the country try somewhere like Australia. Crazy over there.
Evanivitch said:
Oh dear. So what you're saying is the hypothetical graduate needs to graduate at 21/22 and in 2-3 years have a 10-20k deposit, probably when they're renting because they've relocated for a decent job in the first place and paying rent.
The bottom of the market (80-120k flats) has not moved anywhere near as fast as the semi-deatched, work-from-home, 2.5 bed family home. The vast, vast gap between them has only accelerated.
Meanwhile, owning a flat comes with all the hidden costs of communal space and shared responsibility.
A young couple earning way under average salary of £25k each and living with parents can jointly save up £30k in one year.
If they choose to live anywhere other than with parents or lodging or house sharing during this year, then they have been poorly advised. Yes the costs of house sharing will delay things, but that should be a last resort option if your parents have kicked you out.
3.33 x (£25k + £25k) is £166.5k.
£5k set aside leaves £25k as a 13% deposit on a £191.5k property.
Their monthly payment on a 25 year mortgage at 5.25% will be £998 per month. Their combined take home wage is £3,545 per month.
Anecdotal, but my own flat in Romford increased in value from £105k to £200k from 2010 to 2020. I appreciate London/Greater London is an aberration.
x5tuu said:
I bought my first house 3 weeks after my 18th birthday in 2000.
I was realistic what I wanted to achieve and what I needed to do to achieve it.
I also knew that buying where my parents lived (Sunderland) was unattainable so made a temporary move to Hartlepool for the buy and to get on the ladder.
I know I’m far from a typical person in this regard but it amazes me when I hear nieces, nephews and niblings talking about the impossibility of them being able to buy at all when in reality it’s possible if they think outside the box.
I have a niece who happily spends hundreds a month on nails, hair, fillers, tattoos, etc. and that’s before the 4-5nights out every week she has - dinner and drinks.
My daughter is 9. She’s been with me when I’ve viewed and purchased rental flats etc. and is being “educated” in the art of the possible and understanding/seeing value. Alongside being involved in the build process for my current house - I hope it pays off and she is more savvy than her cousins … It may however not work, but I’ll try!
I respect what you've achieved and your drive. However you were blessed with being born into or moved into an area which quite frankly has some of the cheapest housing available in the uk. In the late 90s and early 2000s some areas around where you have mentioned were so cheap they were almost free. You could have purchased a house in hartlepool for 30k in 1999/2000.I was realistic what I wanted to achieve and what I needed to do to achieve it.
I also knew that buying where my parents lived (Sunderland) was unattainable so made a temporary move to Hartlepool for the buy and to get on the ladder.
I know I’m far from a typical person in this regard but it amazes me when I hear nieces, nephews and niblings talking about the impossibility of them being able to buy at all when in reality it’s possible if they think outside the box.
I have a niece who happily spends hundreds a month on nails, hair, fillers, tattoos, etc. and that’s before the 4-5nights out every week she has - dinner and drinks.
My daughter is 9. She’s been with me when I’ve viewed and purchased rental flats etc. and is being “educated” in the art of the possible and understanding/seeing value. Alongside being involved in the build process for my current house - I hope it pays off and she is more savvy than her cousins … It may however not work, but I’ll try!
It doesn't lie in anyone's mouth to compare the ridiculous affordability of the housing in the areas you've mentioned at the time you were a ftb compared to some poor prick who works in London who earns 50k a year and has no chance whatsoever of ever buying anything that is in a commutable or habitable location on their own.
CLK-GTR said:
BoRED S2upid said:
Take London out of the equation and it’s a lot less. Still 3 x oop north which it always has been.
Average house price in the North East is 189k. Average salary is 27k. That's far from 3x. Try 7x.There are others under £50k but I wanted to easily screen out the proper fixer-uppers that are sub£10k
AlexC1981 said:
Your attitude isn't actually helping young people. We should be encouraging and advising, not telling them they have no hope. They will be waiting for their entire lives if they are expecting the government to magically make houses drastically cheaper.
A young couple earning way under average salary of £25k each and living with parents can jointly save up £30k in one year.
If they choose to live anywhere other than with parents or lodging or house sharing during this year, then they have been poorly advised. Yes the costs of house sharing will delay things, but that should be a last resort option if your parents have kicked you out.
3.33 x (£25k + £25k) is £166.5k.
£5k set aside leaves £25k as a 13% deposit on a £191.5k property.
Their monthly payment on a 25 year mortgage at 5.25% will be £998 per month. Their combined take home wage is £3,545 per month.
Anecdotal, but my own flat in Romford increased in value from £105k to £200k from 2010 to 2020. I appreciate London/Greater London is an aberration.
That'll leave 550 a month to live on, assuming no pension contributions. Part of a house to pay for, maybe it's not free to live at home, add on commuting costs. Is that enough? A young couple earning way under average salary of £25k each and living with parents can jointly save up £30k in one year.
If they choose to live anywhere other than with parents or lodging or house sharing during this year, then they have been poorly advised. Yes the costs of house sharing will delay things, but that should be a last resort option if your parents have kicked you out.
3.33 x (£25k + £25k) is £166.5k.
£5k set aside leaves £25k as a 13% deposit on a £191.5k property.
Their monthly payment on a 25 year mortgage at 5.25% will be £998 per month. Their combined take home wage is £3,545 per month.
Anecdotal, but my own flat in Romford increased in value from £105k to £200k from 2010 to 2020. I appreciate London/Greater London is an aberration.
AlexC1981 said:
Your attitude isn't actually helping young people. We should be encouraging and advising, not telling them they have no hope. They will be waiting for their entire lives if they are expecting the government to magically make houses drastically cheaper.
Encouraging and advising them to find 10s of thousands in their pockets?If the right had their way and actually crushed immigration numbers, we would be in a population crisis. UK mothers aren't having children sufficiently to sustain the population, let alone a workforce to care for the boomers and pay their pensions that grow faster than wages.
AlexC1981 said:
A young couple earning way under average salary of £25k each and living with parents can jointly save up £30k in one year.
A young couple with a take home of £20,000 each can live off £5k for the year? Yeah sure, if bank of mum and dad aren't asking for rent and they don't have significant commuting costs. The second any one of those isn't true that £400 a month to live on vanishes.AlexC1981 said:
If they choose to live anywhere other than with parents or lodging or house sharing during this year, then they have been poorly advised. Yes the costs of house sharing will delay things, but that should be a last resort option if your parents have kicked you out.
I'm not sure how you think early careers work. Most towns can't sustain a graduate population, people relocate for work.AlexC1981 said:
Anecdotal, but my own flat in Romford increased in value from £105k to £200k from 2010 to 2020. I appreciate London/Greater London is an aberration.
Ah the M25 mentality, of course.Gassing Station | The Lounge | Top of Page | What's New | My Stuff