The future of the first time home owner (affordability)
Discussion
Hi,
I feel the need to vent a little.
I live in a not particularly affluent area of Greater Manchester being a former mill town bordering Saddleworth and West Yorkshire. I have been keeping my options open to buy my first house, but had a few setbacks over the years.
What I am a bit frustrated at is seeing small one/two bed houses which having sold for between £125,000 and £130,000 two to three years ago now being listed at £150,000 and more. That gives an increase of over £10,000 per year. I don't consider myself poorly paid nor significantly well paid, but I get the impression that unless you are part of a couple who have both well above average salaries then it appears the prospective of owning a house is diminishing year on year for a first time buyer. I will admit I have not done the sums, but the feeling is that proportionality house values (and required deposits) are rising faster than salaries are keeping up (even with promotions and pay increases).
Are we rapidly reaching a point where a person who has not entered the property market before say 2025 will then be unable to buy but face rent equivalent to a mortgage forevermore?
I also strongly dislike the government help to buy schemes because on each occasion it can only increase prices as they increase a person's (or more often the couple's) buying power.
Thanks,
I feel the need to vent a little.
I live in a not particularly affluent area of Greater Manchester being a former mill town bordering Saddleworth and West Yorkshire. I have been keeping my options open to buy my first house, but had a few setbacks over the years.
What I am a bit frustrated at is seeing small one/two bed houses which having sold for between £125,000 and £130,000 two to three years ago now being listed at £150,000 and more. That gives an increase of over £10,000 per year. I don't consider myself poorly paid nor significantly well paid, but I get the impression that unless you are part of a couple who have both well above average salaries then it appears the prospective of owning a house is diminishing year on year for a first time buyer. I will admit I have not done the sums, but the feeling is that proportionality house values (and required deposits) are rising faster than salaries are keeping up (even with promotions and pay increases).
Are we rapidly reaching a point where a person who has not entered the property market before say 2025 will then be unable to buy but face rent equivalent to a mortgage forevermore?
I also strongly dislike the government help to buy schemes because on each occasion it can only increase prices as they increase a person's (or more often the couple's) buying power.
Thanks,
I think it’s been that way for ages, I’m in Milton Keynes so not a cheap area, I worked 7 days a week to be able to buy a 2 bed aged 24, a few friends got shared ownership which was an option for me, but I decided not to take it as I wasn’t sure if I would ever be able to move again, those same friends now have kids and can’t afford to move.
The same as you I kept seeing the prices go up, I was lucky that my mum didn’t charge me rent, just had to pay half the shopping bill so I was able to save about 22k in 3 years and still have some life. That was 15 years ago, I looked a while ago and I wouldn’t be able to do it now.
The same as you I kept seeing the prices go up, I was lucky that my mum didn’t charge me rent, just had to pay half the shopping bill so I was able to save about 22k in 3 years and still have some life. That was 15 years ago, I looked a while ago and I wouldn’t be able to do it now.
DickP said:
Hi,
I feel the need to vent a little.
I live in a not particularly affluent area of Greater Manchester being a former mill town bordering Saddleworth and West Yorkshire. I have been keeping my options open to buy my first house, but had a few setbacks over the years.
What I am a bit frustrated at is seeing small one/two bed houses which having sold for between £125,000 and £130,000 two to three years ago now being listed at £150,000 and more. That gives an increase of over £10,000 per year. I don't consider myself poorly paid nor significantly well paid, but I get the impression that unless you are part of a couple who have both well above average salaries then it appears the prospective of owning a house is diminishing year on year for a first time buyer. I will admit I have not done the sums, but the feeling is that proportionality house values (and required deposits) are rising faster than salaries are keeping up (even with promotions and pay increases).
Are we rapidly reaching a point where a person who has not entered the property market before say 2025 will then be unable to buy but face rent equivalent to a mortgage forevermore?
I also strongly dislike the government help to buy schemes because on each occasion it can only increase prices as they increase a person's (or more often the couple's) buying power.
Thanks,
Hah! Try living in the South East I feel the need to vent a little.
I live in a not particularly affluent area of Greater Manchester being a former mill town bordering Saddleworth and West Yorkshire. I have been keeping my options open to buy my first house, but had a few setbacks over the years.
What I am a bit frustrated at is seeing small one/two bed houses which having sold for between £125,000 and £130,000 two to three years ago now being listed at £150,000 and more. That gives an increase of over £10,000 per year. I don't consider myself poorly paid nor significantly well paid, but I get the impression that unless you are part of a couple who have both well above average salaries then it appears the prospective of owning a house is diminishing year on year for a first time buyer. I will admit I have not done the sums, but the feeling is that proportionality house values (and required deposits) are rising faster than salaries are keeping up (even with promotions and pay increases).
Are we rapidly reaching a point where a person who has not entered the property market before say 2025 will then be unable to buy but face rent equivalent to a mortgage forevermore?
I also strongly dislike the government help to buy schemes because on each occasion it can only increase prices as they increase a person's (or more often the couple's) buying power.
Thanks,
I sympathise though, so many people seem to think of house price growth as a good thing, which it isn’t at all IMO.
Some commentators seem to expect price growth to slow/cool off over the next 3-12 months so hopefully that happens and helps your position.
I get the OP's point about houses rising faster in some areas.
It's hard for the first house, as it feels someone keeps pulling the ladder up, that extra rung.
All I can say is,sacrifice everything you possibly can, to get your deposit of minimum 10%.
So for a £150k, you are going to need a minimum of £18k in the bank.
Sure, its not easy, but year on year, it is going to get that little bit harder.
It's hard for the first house, as it feels someone keeps pulling the ladder up, that extra rung.
All I can say is,sacrifice everything you possibly can, to get your deposit of minimum 10%.
So for a £150k, you are going to need a minimum of £18k in the bank.
Sure, its not easy, but year on year, it is going to get that little bit harder.
I'm going to ask a question now which may seem a bit stupid.
Why does property increase in value (most of the time) beyond inflation and as the OP says wages etc?
Nothing else in life gains money (ok some investments do and perhaps the odd painting or work of art, or even a classic car), but in general you lose money on everything in life.
So why is it a given that property gains? Is it simply that fact that land itself is a finite resource?
Why does property increase in value (most of the time) beyond inflation and as the OP says wages etc?
Nothing else in life gains money (ok some investments do and perhaps the odd painting or work of art, or even a classic car), but in general you lose money on everything in life.
So why is it a given that property gains? Is it simply that fact that land itself is a finite resource?
Thin White Duke said:
So why is it a given that property gains? Is it simply that fact that land itself is a finite resource?
We've done hundreds of pages over five volumes trying to answer that question here (https://www.pistonheads.com/gassing/topic.asp?h=0&f=205&t=1758374&i=9600)I think the story over the last 10 years is really one of interest rates and leverage.
Interest Rates
It is a basic tenet of bond maths that when the market yield for something goes down its price goes up.
Think of a rental house as a financial asset that produces X of rent per annum net of maintenance and agency costs.
Back in the pre-2007 days, an appropriate valuation yield was, say, 8%. The house is worth X/8%.
That same yield is now 3%, so the house is worth X/3%. That yield change alone accounts for a 260% increase in price (1/3%)(1/8%) before you even think about X increasing due to higher rents.
Leverage
Another way to think about house prices is through the lens of affordability.
The price of the average house should equal deposit plus mortgage.
In the old days you could borrow 3.5x your salary. At 85% LTV that implies the property costs 4.1x your salary and the deposit is 0.6x your salary.
Now increase bank lending multiples from 3.5x to 5.5x, keeping the same 85% LTV. Now the same property costs 6.5x your salary and the deposit is 1x your salary. You have to save almost twice as much just for the deposit; the SDLT bill has probably more than doubled as well.
mikef said:
I’ll just mention here than when I took out my first mortgage the rule was 2.5x earnings and mortgage interest rate was 16% (anyone else remember Mrs Thatcher?). Both of those kept house prices affordable
Indeed. If the 16% had persisted for the whole term it would have been painful, but I think it was about 3-4 bad years (i.e. double digits) in total? Being on the right side of the fall in rates from 16% to 0.1% has been a great time to own a fixed income asset.DickP said:
Hi,
I feel the need to vent a little.
I live in a not particularly affluent area of Greater Manchester being a former mill town bordering Saddleworth and West Yorkshire. I have been keeping my options open to buy my first house, but had a few setbacks over the years.
What I am a bit frustrated at is seeing small one/two bed houses which having sold for between £125,000 and £130,000 two to three years ago now being listed at £150,000 and more. That gives an increase of over £10,000 per year. I don't consider myself poorly paid nor significantly well paid, but I get the impression that unless you are part of a couple who have both well above average salaries then it appears the prospective of owning a house is diminishing year on year for a first time buyer. I will admit I have not done the sums, but the feeling is that proportionality house values (and required deposits) are rising faster than salaries are keeping up (even with promotions and pay increases).
Are we rapidly reaching a point where a person who has not entered the property market before say 2025 will then be unable to buy but face rent equivalent to a mortgage forevermore?
I also strongly dislike the government help to buy schemes because on each occasion it can only increase prices as they increase a person's (or more often the couple's) buying power.
Thanks,
If youre not in a relationship, what wrong with flats? Its your first property. It isnt supposed to be pretty. At least any mortgage isnt money down the drain, like rent. I feel the need to vent a little.
I live in a not particularly affluent area of Greater Manchester being a former mill town bordering Saddleworth and West Yorkshire. I have been keeping my options open to buy my first house, but had a few setbacks over the years.
What I am a bit frustrated at is seeing small one/two bed houses which having sold for between £125,000 and £130,000 two to three years ago now being listed at £150,000 and more. That gives an increase of over £10,000 per year. I don't consider myself poorly paid nor significantly well paid, but I get the impression that unless you are part of a couple who have both well above average salaries then it appears the prospective of owning a house is diminishing year on year for a first time buyer. I will admit I have not done the sums, but the feeling is that proportionality house values (and required deposits) are rising faster than salaries are keeping up (even with promotions and pay increases).
Are we rapidly reaching a point where a person who has not entered the property market before say 2025 will then be unable to buy but face rent equivalent to a mortgage forevermore?
I also strongly dislike the government help to buy schemes because on each occasion it can only increase prices as they increase a person's (or more often the couple's) buying power.
Thanks,
Im in Southampton. My flat was £112k (cheapest houses around here are £200k) My deposit was £11200 exact, so £100800 mortgage.
All in, per month, my flat costs me £750. If you then deduct the capital repayment part of the mortgage, my flat costs me £550 per month. Far less than renting somewhere similar. (plus historically its likely to go up by 2% a year or £2200)
Dont forget, although the houses may have gone up from £125k to £150, you only have to find the extra £2500 of the 10% deposit.
DickP said:
Hi,
I feel the need to vent a little.
I live in a not particularly affluent area of Greater Manchester being a former mill town bordering Saddleworth and West Yorkshire. I have been keeping my options open to buy my first house, but had a few setbacks over the years.
What I am a bit frustrated at is seeing small one/two bed houses which having sold for between £125,000 and £130,000 two to three years ago now being listed at £150,000 and more. That gives an increase of over £10,000 per year. I don't consider myself poorly paid nor significantly well paid, but I get the impression that unless you are part of a couple who have both well above average salaries then it appears the prospective of owning a house is diminishing year on year for a first time buyer. I will admit I have not done the sums, but the feeling is that proportionality house values (and required deposits) are rising faster than salaries are keeping up (even with promotions and pay increases).
Are we rapidly reaching a point where a person who has not entered the property market before say 2025 will then be unable to buy but face rent equivalent to a mortgage forevermore?
I also strongly dislike the government help to buy schemes because on each occasion it can only increase prices as they increase a person's (or more often the couple's) buying power.
Thanks,
Has always been the way to a lesser or greater extent. I can remember thinking I'd never get on the ladder, but you do. You find a way. You find a way to get paid more; you find somebody to team up with; you find a way to save more; you make a leap of faith. I feel the need to vent a little.
I live in a not particularly affluent area of Greater Manchester being a former mill town bordering Saddleworth and West Yorkshire. I have been keeping my options open to buy my first house, but had a few setbacks over the years.
What I am a bit frustrated at is seeing small one/two bed houses which having sold for between £125,000 and £130,000 two to three years ago now being listed at £150,000 and more. That gives an increase of over £10,000 per year. I don't consider myself poorly paid nor significantly well paid, but I get the impression that unless you are part of a couple who have both well above average salaries then it appears the prospective of owning a house is diminishing year on year for a first time buyer. I will admit I have not done the sums, but the feeling is that proportionality house values (and required deposits) are rising faster than salaries are keeping up (even with promotions and pay increases).
Are we rapidly reaching a point where a person who has not entered the property market before say 2025 will then be unable to buy but face rent equivalent to a mortgage forevermore?
I also strongly dislike the government help to buy schemes because on each occasion it can only increase prices as they increase a person's (or more often the couple's) buying power.
Thanks,
In the bad old days you could only get a mortgage from a building society; you needed to have saved with them for a year; needed an interview with the manager; you could borrow 2 or 2.5 times first salary plus just the 2nd salary; 10% deposit was mandatory; interest rates double digits.
Hang in there it will come good, you will find a way if you want to.
Only bought my first house when I bought with my fiancee. We sold one of our 2 cars to make up over half of the deposit for the house. Bought another cheap car not long after buying the house so we were back to a car each.
We paid just under £145k for a 2 bed house in Edinburgh. 95 %mortgage. £525 a month. Its less than the rent on the one bed flat we moved from to the house.
We paid just under £145k for a 2 bed house in Edinburgh. 95 %mortgage. £525 a month. Its less than the rent on the one bed flat we moved from to the house.
GT03ROB said:
In the bad old days you could only get a mortgage from a building society; you needed to have saved with them for a year; needed an interview with the manager; you could borrow 2 or 2.5 times first salary plus just the 2nd salary; 10% deposit was mandatory; interest rates double digits.
With the exception of very high interest rates were these measures really “bad” though? They seem to have kept prices held at reasonable levels. Loosening restrictions on mortgage lending seems to have kick started the price boom (anyone remember the Northern Rock 125% Together mortgage?) in particular the rise of the self certification mortgage (“liar loans”) in the early 2000s and interest only BTL mortgages.
I’ve never really understood why increasing house prices are seen as a “good thing”. While it may be comforting to know your main asset has appreciated you’ve got no way of getting your hands on that money unless you borrow against it or downsize. And price rises discourage mobility - if prices go up 10% across the board the next rung on the housing ladder has just got 10% further away...
funinhounslow said:
GT03ROB said:
In the bad old days you could only get a mortgage from a building society; you needed to have saved with them for a year; needed an interview with the manager; you could borrow 2 or 2.5 times first salary plus just the 2nd salary; 10% deposit was mandatory; interest rates double digits.
With the exception of very high interest rates were these measures really “bad” though? They seem to have kept prices held at reasonable levels. Loosening restrictions on mortgage lending seems to have kick started the price boom (anyone remember the Northern Rock 125% Together mortgage?) in particular the rise of the self certification mortgage (“liar loans”) in the early 2000s and interest only BTL mortgages.
I’ve never really understood why increasing house prices are seen as a “good thing”. While it may be comforting to know your main asset has appreciated you’ve got no way of getting your hands on that money unless you borrow against it or downsize. And price rises discourage mobility - if prices go up 10% across the board the next rung on the housing ladder has just got 10% further away...
Supply and demand.
Gov/councils keeping supply low and s
t, gov keeping interest rates low which keeps demand high.
So gov are shafting future generations for arbitrary reasons... loads of land, and tons of land to make good housing stock... and interest rates low to mask their fiscal incompetence (essentially bailout, rather than restructure)
But it won’t go on forever. Black swans dancing around a government house of cards.
Sadly we’ll all be paying... again... while their rich mates make out like bandits.
Gov/councils keeping supply low and s
t, gov keeping interest rates low which keeps demand high.So gov are shafting future generations for arbitrary reasons... loads of land, and tons of land to make good housing stock... and interest rates low to mask their fiscal incompetence (essentially bailout, rather than restructure)
But it won’t go on forever. Black swans dancing around a government house of cards.
Sadly we’ll all be paying... again... while their rich mates make out like bandits.
DickP said:
Hi,
I feel the need to vent a little.
I live in a not particularly affluent area of Greater Manchester being a former mill town bordering Saddleworth and West Yorkshire. I have been keeping my options open to buy my first house, but had a few setbacks over the years.
What I am a bit frustrated at is seeing small one/two bed houses which having sold for between £125,000 and £130,000 two to three years ago now being listed at £150,000 and more. That gives an increase of over £10,000 per year. I don't consider myself poorly paid nor significantly well paid, but I get the impression that unless you are part of a couple who have both well above average salaries then it appears the prospective of owning a house is diminishing year on year for a first time buyer. I will admit I have not done the sums, but the feeling is that proportionality house values (and required deposits) are rising faster than salaries are keeping up (even with promotions and pay increases).
Are we rapidly reaching a point where a person who has not entered the property market before say 2025 will then be unable to buy but face rent equivalent to a mortgage forevermore?
I also strongly dislike the government help to buy schemes because on each occasion it can only increase prices as they increase a person's (or more often the couple's) buying power.
Thanks,
You are right to vent, you should be as angry as hell.I feel the need to vent a little.
I live in a not particularly affluent area of Greater Manchester being a former mill town bordering Saddleworth and West Yorkshire. I have been keeping my options open to buy my first house, but had a few setbacks over the years.
What I am a bit frustrated at is seeing small one/two bed houses which having sold for between £125,000 and £130,000 two to three years ago now being listed at £150,000 and more. That gives an increase of over £10,000 per year. I don't consider myself poorly paid nor significantly well paid, but I get the impression that unless you are part of a couple who have both well above average salaries then it appears the prospective of owning a house is diminishing year on year for a first time buyer. I will admit I have not done the sums, but the feeling is that proportionality house values (and required deposits) are rising faster than salaries are keeping up (even with promotions and pay increases).
Are we rapidly reaching a point where a person who has not entered the property market before say 2025 will then be unable to buy but face rent equivalent to a mortgage forevermore?
I also strongly dislike the government help to buy schemes because on each occasion it can only increase prices as they increase a person's (or more often the couple's) buying power.
Thanks,
What you are talking about here is a massive house price bubble, propped up with QE ( magicked up cash stolen from you and i ) and low mortgage rates pushed down by the Bank of England's Term Funding scheme/scam then made even worse with their "HelpToBuilders" scam ( tory party is funded by bankers and developers ) and just as prices were about to collapse the BoE magicked up another £895Bn, brought back the Term Funding scam and Rishi Sunak, who owns 9 houses, cut stamp duty and pushed people into a buy frenzy.
That night explain what you have witness and given the banks collapsed in 2007 due to a smaller bubble the people responsible should be held to account.
The prices are unsustainable now, they might entice more idiots to prop up their pyramid scam with a too good to be true -ve interest rate deal or a 50 year fixed rate mortgage, truth is, at some point the prices will collapse in real or nominal terms, it is inevitable.
If you choose to buy now then good luck, you'll need it.
Gassing Station | Finance | Top of Page | What's New | My Stuff