Reality of the property 'ladder'

Turnbull2000 · 14 July 2007 at 12:03PM

This is the first mainstream article I've come across that acknowledges the fallacy of a property 'ladder' under current conditions. I get the impression that many first-time buyers do not consider the possibility that up-sizing may not be financially possible. A common misconception seem to be that rising prices equals a larger deposit/profit for the next move - but the reality is that your ideal family home has simply moved further out of reach.

http://www.theherald.co.uk/features/editorial/display.var.1545706.0.0.php

Clydesdale's figures confirm an increasingly bleak situation across Scotland, and put disturbingly high figures on the cost to a family of moving from a two-bedroom property to a three-bedroom home.
The hike in cost for such a move, the survey reports, is worst in Aberdeen, where the average sum paid for moving into a larger property is £175,000. Over the country as a whole the price leap from two-bedroom terrace to a three-bedroom semi-detached is on average £93,000. Even at the lower figure, which masks the reality in several of Scotland's property hotspots, the income required to buy more space is often beyond the means of those who most need to move, and entails taking out a burdensome and sometimes unsustainable mortgage. The price of progressing from a starter flat to a family home is in danger of moving beyond the reach of many

wolvoman · 14 July 2007 at 4:23PM

Of course as prices rise the amount needed to 'upsize' gets bigger and bigger.

However upsizing often coincides with a change in financial circumstances that makes it more affordable. A couple deciding to move in together and hence 2 salaries and 2 sets of equity/deposit to add together. A promotion or pay rise. An inheritance or trust maturing.

In fact since house sales turnover was the highest last year for a long time and the proportion of FTBs is at near historical lows, then it must indicate that more people than ever are upsizing and downsizing (I have no idea what the split is though).

BrandNewDay · 14 July 2007 at 10:31PM

As it currently stands, we could have stretched ourselves to buy a 3bd house. I think we could have pulled it off. I'm just so paranoid that I felt better about buying a much cheaper 2bd terrace. We have two small children - luckily, both boys, so they can share a room indefinitely.

The loft is big and would probably be quite convertable - others on the street have done it. So, we anticipate converting the loft rather than trying to move to a bigger home. I just hope we can afford that in three years or so.

seven-day-weekend · 15 July 2007 at 12:05AM

The best thing we ever did, right at the start of our married life, was to buy a three-bedroom house in a 'reasonable' area, rather than a two-bed in a 'good' one. We never needed to move and paid for it in 20 years, even though we didn't have a huge salary coming in.. We still have this house after 31 years.

I think although house prices have risen so much, this may still be an option for some FTBs.

Turnbull2000 · 15 July 2007 at 12:18AM

seven-day-weekend wrote: »

The best thing we ever did, right at the start of our married life, was to buy a three-bedroom house in a 'reasonable' area, rather than a two-bed in a 'good' one. We never needed to move and paid for it in 20 years, even though we didn't have a huge salary coming in.. We still have this house after 31 years.

I think although house prices have risen so much, this may still be an option for some FTBs.

Those FTBs would have to be earning way above average.

Your average semi-detached home now costs in the region of 190K. My sister's three-bedroom terrace in Whitley Bay, Tyne & Wear, was recently valued at this price (though whether it sells for that is another matter).

You say you didn't have a huge salary coming in, so I'm assuming you mean below average. A FTB today would need to borrow nearly 8 times single salary or 4 times combined if they were earning what's considered an average wage of 25K. Anybody earning below this wouldn't stand a chance of achieving what you did without some major financial assistance. And heaven forbid should one lose their job or they wish to have a child.

I'm sure you'll also understand that salaries are no longer inflating like they used to. The mortgage on that 190K home will be like a noose round their neck for many, many years. With the likelihood of food and energy costs soaring in the near future, the income of today's FTB will not go very far at all.

Sapphire · 15 July 2007 at 12:35AM

seven-day-weekend wrote: »

The best thing we ever did, right at the start of our married life, was to buy a three-bedroom house in a 'reasonable' area, rather than a two-bed in a 'good' one. We never needed to move and paid for it in 20 years, even though we didn't have a huge salary coming in.. We still have this house after 31 years.

I think although house prices have risen so much, this may still be an option for some FTBs.

For myself area would always be a priority over space. I think it is much better to live in an area that is safe, pleasant and desirable than to live in an area that is only 'reasonable'. You can end up being very miserable in an unpleasant area that is dirty, over-crowded and violent - particularly true of many parts of inner London. :cool:

seven-day-weekend · 15 July 2007 at 7:30AM

Turnbull2000 wrote: »

Those FTBs would have to be earning way above average.

Your average semi-detached home now costs in the region of 190K. My sister's three-bedroom terrace in Whitley Bay, Tyne & Wear, was recently valued at this price (though whether it sells for that is another matter).

You say you didn't have a huge salary coming in, so I'm assuming you mean below average. A FTB today would need to borrow nearly 8 times single salary or 4 times combined if they were earning what's considered an average wage of 25K. Anybody earning below this wouldn't stand a chance of achieving what you did without some major financial assistance. And heaven forbid should one lose their job or they wish to have a child.

I'm sure you'll also understand that salaries are no longer inflating like they used to. The mortgage on that 190K home will be like a noose round their neck for many, many years. With the likelihood of food and energy costs soaring in the near future, the income of today's FTB will not go very far at all.

I understand what you are saying; however in my home city in the Midlands you can srtill get a three-bed terrace in the inner city for less than £100,000 and a large two bedroom flat in a nice area for under £100,000.

So it is do-able for some FTBs.

xycom1 · 15 July 2007 at 8:23AM

I'm FTB and bought a 4-bedroom house. The only compromise I had to make was moving out of London where it would have cost 3x as much and even a 1-bed flat would have been more expensive.

Gorgeous_George · 15 July 2007 at 10:11AM

Buying as big a house as possible is just commonsense. Certainly, there is little value in buying a house that you will outgrow within a few years - stamp duty, EA fees, solicitor fees etc. are paid every time that you move. Each move incurs risks of the chain collapsing.

Maybe an option for those who can buy bigger at a push is to look on the extra bedroom as space for a lodger. The additional income would off-set the increased costs and when your family grows and the extra space is needed, the lodger can be asked to find somewhere else.

GG

seven-day-weekend · 15 July 2007 at 11:49AM

Gorgeous_George wrote: »

Buying as big a house as possible is just commonsense. Certainly, there is little value in buying a house that you will outgrow within a few years - stamp duty, EA fees, solicitor fees etc. are paid every time that you move. Each move incurs risks of the chain collapsing.

Maybe an option for those who can buy bigger at a push is to look on the extra bedroom as space for a lodger. The additional income would off-set the increased costs and when your family grows and the extra space is needed, the lodger can be asked to find somewhere else.

GG

Yes, this is how we did it on a student grant/one wage: We had a succession of lodgers. Our son lives in it now with two lodgers.

We also had ONE old car,and when my husband was a student, bought our clothes from jumble sales and didn't have a phone.

meanmachine_2 · 15 July 2007 at 1:21PM

wolvoman wrote: »

Of course as prices rise the amount needed to 'upsize' gets bigger and bigger.

However upsizing often coincides with a change in financial circumstances that makes it more affordable. A couple deciding to move in together and hence 2 salaries and 2 sets of equity/deposit to add together. A promotion or pay rise. An inheritance or trust maturing.

Hold on, so I'm meant to buy an average house on ONE average FTBer salary, then buy an above average house on 2 salaries, then pay for the mortgage on this bigger house once my partner falls pregnant (after all that's why we're buying the bigger house, isn't it?)

THis is cloud cuckoo land.

Oh, but phew, I have daddy's trust fund coming my way, so that's OK.

Ridiculous.

Reality of the property 'ladder'

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