Average house price now 8.7 times average income

[okgo]

Don’t earn an average income. Simple

[Evanivitch]

borcy said:

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?

It's just over £400 with income tax and 3% pension contribution.

[gotoPzero]

VanDriver99 said:

However....our Kids/Grandkids ...what on Earth are they going to do??

The answer is simple, not buy the average house as their first house.

Just like every other generation before.

Start at the bottom work your way up.

[okgo]

Even a far less than average property in much of the U.K. is as much as the average house price.

My first property I bought 11 years ago for £240k, was 25 then. It was a 600 sqft 1 bed flat in the arse of zone 6. It’s apparently worth £380k today, I sold it for £315k. It was very far below the average property in every measurable way but cost near to the average house price of the time.

I don’t particularly worry for my son as we’ve done quite well financially but it’s pretty hard for your average person these days. Even among other people my age, many are nowhere near where their parents would have been at the same age.

That all said, I am in a far better position than many of then because I saved my money and bought early, they were renting in more trendy locations in the main.

Edited by okgo on Saturday 16th March 19:03

[ATG]

troika said:

The only metric which really counts is mortgage payment as a % of take home pay after tax.

It's this sort of thinking that has got us in the current hole. We don't apply that logic to buying a pack of corn flakes, but many do think that way about cars and houses. "Can I meet the monthlies?" Sod the term of the loan, non-house price inflation, etc.

[borcy]

Evanivitch said:

borcy said:

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?

It's just over £400 with income tax and 3% pension contribution.

I'll blame a dodgy online salary calculator. Either way it's not much to pay bills, food, get to work. Maybe some can live completely free, but generally if you're on a lower salary so are your parents and therefore less likely you can live at home for free.

[troika]

ATG said:

It's this sort of thinking that has got us in the current hole. We don't apply that logic to buying a pack of corn flakes, but many do think that way about cars and houses. "Can I meet the monthlies?" Sod the term of the loan, non-house price inflation, etc.

Of course, and the banks and govt love it. Everything is financialised, just look at the likes of klarna. Total madness. Instant gratification combined with cheap and easy credit is a potent cocktail and is why we are where we are. That and workplace equality, which I’m obviously in favour of, but has made it mandatory for both partners to work full time to afford a house, which simply wasn’t the case when I was growing up.

[valiant]

gotoPzero said:

The answer is simple, not buy the average house as their first house.

Just like every other generation before.

Start at the bottom work your way up.

And in the SouthEast?

Or are all the youth expected to move up north first?

[nuyorican]

valiant said:

And in the SouthEast?

Or are all the youth expected to move up north first?

And where do the youth of the north move to when they're out-priced by the youth of the south? Greenland?

[AlexC1981]

Evanivitch said:

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.

I'm impressed by how quickly you managed to multi-quote and respond to all that.

Part 1. Not sure what that has to do with what I wrote, but it I don't think any helpful guidance for young people was in there.

Part 2. £21.5k each take home, not £20k. It would be a very bad parent who takes rent when you're making a concerted effort to save for the short period of one year. I would hazard a guess that the kids who get charged rent are the ones who don't do any jobs around the house, don't cook any family meals, expect their washing done and generally treat the place like a hotel.

Make it two or three years then if you think those numbers are too tight and want to quibble. It doesn't change the position of my argument. There wont be any Starbucks, but they won't be on gruel either.

Part 2/3. You're putting young people down again and telling them it's impossible to achieve anything. Aged 18-20 whilst at college I inserted jam in Sainsbury's doughnuts every Sunday Morning and sliced bread one weekday evening for three years. By the time I finished studying I owned outright an 10 year old low milage economical little car. Perfect for commuting. I'm nothing special, I just listened to my mum's advice. Where would I be if you were my mum, eh?

[Evanivitch]

AlexC1981 said:

I'm impressed by how quickly you managed to multi-quote and respond to all that.

Part 1. Not sure what that has to do with what I wrote, but it I don't think any helpful guidance for young people was in there.

Because it's in the interest of government, which you brought into the conversation.

AlexC1981 said:

Part 2. £21.5k each take home, not £20k. It would be a very bad parent who takes rent when you're making a concerted effort to save for the short period of one year. I would hazard a guess that the kids who get charged rent are the ones who don't do any jobs around the house, don't cook any family meals, expect their washing done and generally treat the place like a hotel.

Nope, £20,920. You've forgotten the 3% pension contributions as a bare minimum.

Clearly you're not aware of how modern households are under financial pressures. An extra adult in the house isn't free. Be it because of food bill, council tax implications or simply to make the bills balance.

AlexC1981 said:

Make it two or three years then if you think those numbers are too tight and want to quibble. It doesn't change the position of my argument. There wont be any Starbucks, but they won't be on gruel either.

Have you seen how much house prices can move in 3 years?

AlexC1981 said:

Part 3. You're putting young people down again and telling them it's impossible to achieve anything. Aged 18-20 whilst at college I inserted jam in Sainsbury's doughnuts every Sunday Morning and sliced bread one weekday evening for three years. By the time I finished studying I owned outright an 10 year old low milage economical little car. Perfect for commuting. I'm nothing special, I just listened to my mum's advice. Where would I be if you were my mum, eh?

Yep and you're looking at £4000 for a Fiesta and nearly £900 in car insurance... at £7.49 minimum wage that's 654 hrs work.

I'm not putting youngsters down. I was bloody lucky with my circumstances, in all respects. Pretending that the under 30s today just need to work hard, be smarter is a joke. The entire game is stacked against them. And it starts with government of over a decade knowing that they don't need their votes!

[Crudeoink]

This is money today saying the average 25-29 only saving 3.7% of their income a month, circa £929 a year. Me and Mrs CO lived in the cesspit that is Swindon for 5 years to save for a house. On about 30k each in that time we managed to put away £400 each a month. So around 10k a year saved. Rent was £700 so after bills etc we still had about £600/month for other things.
We managed to buy a couple of years ago and thankfully locked in at a good rate for 5 years. Got friends buying now that weren't ready 2 years ago, property hasn't crashed and interest rates are savage. Some of them are looking at £1800/month mortgages for a 3 bed, crazy

[Cheib]

I was talking about this only a couple of days go…my kids are 15 and 13. Very aware that unless there’s financial assistance it is hard to see how they will be able to afford to buy anywhere in the South East unless they end up getting very well paid jobs. Certainly can see them coming back home if they go to university but we now live 30 miles outside London so commuting would be incredibly expensive, ….season ticket £6k a year.

I bought in 1994…850 sq ft two bed flat in Swiss Cottage in London. I was earning £30k a year at the time as a 26 year old which was pretty good at that time, I’d inherited some money because my Dad had died a couple of years before so had a decent deposit. Flat cost £120k.

If I had that same job now I’d be earning £50k a year…that flat would now probably cost £700k.

What I find amazing in the South East is how much property costs in the commuter belt outside the M25. Probably looking at £300k plus for a two bed flat in a pretty average town.

[CLK-GTR]

x5tuu said:

Rightmove, Sunderland and 20mins radius, £50k - £100k … no schemes, part ownership, etc. … 1855 properties to choose from

There are others under £50k but I wanted to easily screen out the proper fixer-uppers that are sub£10k

That's not an average though is it. Just like not everybody earns the average wage.

There are always cheaper areas but they're cheaper for a reason, either they're rough as dogs or the jobs nearby don't pay well, or both.

[x5tuu]

CLK-GTR said:

That's not an average though is it. Just like not everybody earns the average wage.

There are always cheaper areas but they're cheaper for a reason, either they're rough as dogs or the jobs nearby don't pay well, or both.

Not so, a number of those properties are simple 2 bedroom terraced cottages, starter homes - very serviceable, decent areas with normal working / working class families.

The problem is they aren’t detached with driveways, gardens, 4+ bedrooms.

Many FTBs don’t want starter homes - as said over and over, that’s the major issue here.

[AlexC1981]

Evanivitch said:

AlexC1981 said:

I'm impressed by how quickly you managed to multi-quote and respond to all that.

Part 1. Not sure what that has to do with what I wrote, but it I don't think any helpful guidance for young people was in there.

Because it's in the interest of government, which you brought into the conversation.

AlexC1981 said:

Part 2. £21.5k each take home, not £20k. It would be a very bad parent who takes rent when you're making a concerted effort to save for the short period of one year. I would hazard a guess that the kids who get charged rent are the ones who don't do any jobs around the house, don't cook any family meals, expect their washing done and generally treat the place like a hotel.

Nope, £20,920. You've forgotten the 3% pension contributions as a bare minimum.

Clearly you're not aware of how modern households are under financial pressures. An extra adult in the house isn't free. Be it because of food bill, council tax implications or simply to make the bills balance.

AlexC1981 said:

Make it two or three years then if you think those numbers are too tight and want to quibble. It doesn't change the position of my argument. There wont be any Starbucks, but they won't be on gruel either.

Have you seen how much house prices can move in 3 years?

AlexC1981 said:

Part 3. You're putting young people down again and telling them it's impossible to achieve anything. Aged 18-20 whilst at college I inserted jam in Sainsbury's doughnuts every Sunday Morning and sliced bread one weekday evening for three years. By the time I finished studying I owned outright an 10 year old low milage economical little car. Perfect for commuting. I'm nothing special, I just listened to my mum's advice. Where would I be if you were my mum, eh?

Yep and you're looking at £4000 for a Fiesta and nearly £900 in car insurance... at £7.49 minimum wage that's 654 hrs work.

I'm not putting youngsters down. I was bloody lucky with my circumstances, in all respects. Pretending that the under 30s today just need to work hard, be smarter is a joke. The entire game is stacked against them. And it starts with government of over a decade knowing that they don't need their votes!

I said the government aren't going to help by drastically reducing prices and your response was nothing to do with that. Nevermind...

Meh, if you can afford a 14 year old's food you can afford an 18 year old's. To be fair, it has just occurred to me that child support will stop and so a contribution may be needed.

You can opt out of the pension for your first year of saving for a house. You need the money now.

House prices are static/decreasing. I still think they can do it in a year-ish.

Using your 654 hours, that's less than 18 months work based on 9 hours a week. I appreciate that due to scrappage schemes and things like ULEZ it is harder to find a cheap car these days. If you want to bring politics into it (I don't) my sister has just scrapped a 20k mile, tatty but supremely reliable 26 year old car due to Khan's forced upgrade.

It's not a joke! I honestly feel quite passionate about this, and I can see that you do from your position, which is a good thing.

A 27 year old colleague of mine has just bought a £350k house with his girlfriend entirely using their own money. He drives a 12 year old car and plenty of times over the last year he missed out on beer and lunch at the pub because he was saving up. Good for them, I have nothing but respect for that.

By the way, my comments are in no way trying to stick up for the government. They aren't going to do a thing and neither will the next one. I just don't want young people to read this thread and start wasting their money because you have convinced them they have no hope.

Edited by AlexC1981 on Saturday 16th March 21:38

[dalzo]

It seems to be getting harder too.

I moved out at 24 and had been putting about 10% of my monthly wage away since I was 16 and still needed help (I was only 2 years out an apprenticeship so wages were shocking)

Moved into second home with my partner and was incredibly lucky with the timing as it went from being worth 285k to 400k in just over 18 months, if the timing wasn’t right we wouldn’t have been able to afford it.

My sister moved out 2 years ago and getting the same help I got and having a fiance to half the costs with they had to move to a cheaper area and smaller house despite probably saving harder.

[monkfish1]

valiant said:

gotoPzero said:

The answer is simple, not buy the average house as their first house.

Just like every other generation before.

Start at the bottom work your way up.

And in the SouthEast?

Or are all the youth expected to move up north first?

You mean like many people did?

I was born and raised in west London. In 1993 i moved. There was simply no way i could afford to buy a house there. I wanted to buy a house.

Still plenty of cheap housing about, but its not in the south east. But there is life outside the south east.

[monkfish1]

964Cup said:

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.

Short version. Supply and demand.

Massively increased demand, and no appreciable supply side increase and here we are.

Blame for that lies with government. Only government can change it. But wont.

Only alternative is that we experience a net outflow of people, thus reducing demand. Seems unlikely in the near term

[CheesecakeRunner]

okgo said:

Don’t earn an average income. Simple

It’s not some much that, it’s “don’t equate average income with average house price”.

People earning the average income have never bought houses that are the average price. Because the average income is a pretty low, so they’ve bought below average price houses.

One average is not the same as another average.