House prices are close to affordable levels, reveals survey... BUY!! BUY!!! BUY!!!

Max_Headroom_3

See now you're being too clever for me, long time since I did averages at school (there werre three types weren't there? Mean, Median and something else).

Point is, where I live a "working mans" two bed shoebox or an old three bed in a scruffy (but ok) part of town is £150K, and a typical wage is probably £20K max, usually less.

So the numbers are a long long way from adding up, whatever the maths say.

PasturesNew

Max_Headroom wrote: »

So we need to be careful that we don't confuse average with typical. If a typical wage is (say) £15,000 then it's not really possible for anyone to be on massively less than that, but it is very possible for some to be on massively more, skewing the average way above the typical.

Hope that makes sense!

I only did a quick google, one search, pick the first result vaguely like what I really wanted, and found this:

2004/2005 - the income distribution graph
http://www.sochealth.co.uk/confs/Gini.jpg

Source: http://www.sochealth.co.uk/confs/munro.htm

IveSeenTheLight

Max_Headroom wrote: »

I think the other danger with quoting average income is that there's an assumption that goes with it that average income must therefore be what most people are on (because "average" suggests "typical").

However if I might explain it this way (using extreme cases to make the point easy to understand).

Take 10 people, nine are earning £5,000/year, one is earning £1,000,000/year.

Now it's clear to see that the typical wage is £5,000/year, however the average wage is £104,500/year.

So we need to be careful that we don't confuse average with typical. If a typical wage is (say) £15,000 then it's not really possible for anyone to be on massively less than that, but it is very possible for some to be on massively more, skewing the average way above the typical.

Hope that makes sense!

Would this similaring affect the UK average house price?
A property in London / South East/West is far greater in price than a similar property elsewhere in the country.
A 20% drop in London / South East/West will mean a higher UK percentage drop

mitchaa

Cat695 wrote: »

Interesting to hear what people think the average income is (even with links)

some saying "income" as one person in the family some saying "income" as two people's salary (family)
According to the BBC at the end of last year (2207)the average "family" income was £32,779 and that was before tax (can't really give a average income for 2008 as its not over yet)http://news.bbc.co.uk/1/hi/uk/7071611.stm (oh and they got their statistics from the ONS not made up by some BBC bod)

32779 x 3.5 = 115k (give or take a couple of hundred quid) even with a 10% deposit thats still only 126.5k

So House prices still have some way to come down (in some not all areas) for a family to be able to afford a family home.

Thank god I earn more than the average family (and i still can't afford to buy a house in the SW yet comfortably!!)

The way you manipulate the data;)

That data is from TY 05/06 ie April 2005-April 2006. (Read the part at the bottom) We have since gone TY 06-07, TY 07-08 and we are now in TY 08-09.

It is in the region of around £38k today, which i dont find too unrealistic.

£38k x 3.5 = £133k mortgage allowing for an average house price ITRO of £145-£150k when 10% deposit taken into account.

We are only £15-20k off of that just now so prices do not have that much to fall to be ''affordable''

So many reports say different things though, this report shows average household income at £53k..

http://www.telegraph.co.uk/news/uknews/1565499/Disposable-income-at-lowest-level-in-10-years.html

I guess they've just predicted that the average household consists of 1 x Mr average and 1 x Mrs average each earning national average wage

carolt

Has the average household wage really gone up from 32.7-38K in 2 years? Seems highly unlikely - that would suggest wage inflation at over 15% in 2 years.

What industry do you work in, mitchaa?

Don't think you'd find that was typical across the UK, somehow.... :rolleyes:

Price of cheese up 15%+, yes. Wages, no.

IveSeenTheLight

mitchaa wrote: »

We are only £15-20k off of that just now so prices do not have that much to fall to be ''affordable''

While I would agree with you, historically we can see that prices overshoot the long term trend, so while 15-20k may be the required amount to reach the average affordable level, be prepared for it to drop by more before the bottom is reached

PasturesNew

If we're manipulating data, then the average house isn't the first house you buy, but the 2nd/3rd. And into that one you're expected to have put some equity/further savings since your first purchase.

Realy

carolt wrote: »

Price of cheese up 15%+, yes. Wages, no.

But if you were paid in cheese that's a different matter.;)
But if you gave around 3.5 % for the two years (pay rises are awarded at the start of the financial year) you are looking at £35K.

mitchaa

Another example, this 1 showing 2008 income levels at yep you guessed it £38k

http://www.mortgageguideuk.co.uk/blog/house-prices/house-prices-income/

Lets just assume that it's inbetween £35k and £38k depending on what figures you believe and taking into account inflation on the ONS £32.7k figures 2yrs back;)

Anyway, the point is we are not really that far off. Perhaps another years worth of drops before we can argue that they are ''affordable''

Carolt..I work in engineering in the O+G industry, personally my wages have risen by around 20% in the last 2 years but i know thats far from being the norm as my partners has only gone up by around 6% and public sector workers around the same.

carolt

Realy wrote: »

But if you were paid in cheese that's a different matter.;)
But if you gave around 3.5 % for the two years (pay rises are awarded at the start of the financial year) you are looking at £35K.

But not 38K.

This misses my original point - there is no breakdown of figures from the original article as to how they came up with the figures.

Personally, I find the maths very unconvincing; we are on far, far above average household income and would feel very uncomfortable buying at current prices, assuming we could get a mortgage (don't know - not about to try!).

Without knowing on what they based their claims for relative affordability, it's just going to be one voice versus another.

Put it this way, realy - could you afford to buy an equivalent place to the place you currently own in the equivalent job you were then?

Research after research has shown that very few people could afford to buy their current properties at current prices, despite (presumably) salary increases in the meantime.

Until prices have fallen considerably - or wages have risen considerably, which I think is less likely - suggesting affordability has been reached is clearly nonsense.

The fact is, prices have gone up by 300% nationally over the last decade - and no-one is going to tell me salaries have too! In many parts of London and the SE I know of, prices have gone up 4, 5 or even more times their price a decade ago.

THAT IS NOT SUSTAINABLE. SORRY!