FTB expectations too high?

Graham_Devon

lana22 wrote: »

I think our tracker has a collar on it below 2%, so sadly I don't think the bank can pay us! It's BOE + 0.69%, not 0.69%, so 2.69% at present, sorry didn't make myself clear. That sort of mortgage was pretty easy to get last year.

Even if my wages didn't go up we would still be fine. So basically 2 people earning pretty average wages who can afford a 3 bed house in the South East. Can't be that unusual! I know we wouldn't be able to afford St Albans or whatever, but Aylesbury suits me fine!

My mortgage was like that for the first 2 years, then it went to BOE + 2%. However, a the moment it's BOE + 3% as they won't budge on the 2.75% collar.

A 150k 3 bed house would be very unusual here, so maybe im coming at it from an angle of a high price, low wage area.

My parents recently sold their 3 bed, semi detached ex council home....nothing special. Just a standard 3 bed (one being a box room), no en suites, standard kitchen, lounge, no diner nothing like that....£280,000. So I guess from where I live, my figures could be skewed somewhat! My 2 bed terrace was more than your 3 bed! So unusual for me!

neverdespairgirl

lana22 wrote: »

I was a bit surprised as the house was in Cheshire which I always thought was fairly expensive?

SOme bits are, but not the whole county, I think.

neverdespairgirl

daveb975 wrote: »

TThat is not to say that they would not prefer a house to a flat, just that they put location above property size.

That's us - we choose to live in a flat rather than a house further away from work.

lana22

Graham_Devon wrote: »

My mortgage was like that for the first 2 years, then it went to BOE + 2%. However, a the moment it's BOE + 3% as they won't budge on the 2.75% collar.

A 150k 3 bed house would be very unusual here, so maybe im coming at it from an angle of a high price, low wage area.

My parents recently sold their 3 bed, semi detached ex council home....nothing special. Just a standard 3 bed (one being a box room), no en suites, standard kitchen, lounge, no diner nothing like that....£280,000. So I guess from where I live, my figures could be skewed somewhat! My 2 bed terrace was more than your 3 bed! So unusual for me!

I take it you are in the South West? It is an unusual area with high house prices and not a great deal of employment compared to other areas. If I had gone to another town nearby, it would have been £330k or thereabouts for a 2 bed 1930's semi detatched. Or somewhere like Berkhamsted (about 20 mins away) would be that for a terrace. But we chose Aylesbury because it's cheaper (and not too far from our parents).

daveb975

lana22 wrote: »

I saw that too! (I'm on nights at the moment and am loving a bit of daytime TV!) I was a bit surprised as the house was in Cheshire which I always thought was fairly expensive?
He was the general manager of the garden centre though, so I'm not sure how much he would have earned.

I guess Cheshire is a bit like Surrey - £250k can buy you a one bed flat or a 3 bed detached house in different areas of the same county.

As manager of the garden centre, I suppose he could have been earning £40k. That is a good illustration fo the point I was trying to make - £40k is a salary that will get you a long way on the 'ladder' in some areas, but hardly on it at all in others.

daveb975

chucky wrote: »

that's because many people are blinded by average price drops.

just because property may drop 30% in one area it may only drop 5% in another area.

there are going to be many disappointed FTBs when the time comes to go and find that bargain property that they're expecting to find wjhen they're expecting the vendor to accept a massive price drop.

I think you are right. However, my area has seen 25% falls in the price of flats, and 20% in the price of houses so far. I would have thought that this is keeping pace with the national average rate of decline.

I think that people speak too generally about 'the average house'. Where I am, a 3 bed semi never hit 3 or 4x the average salary. Now that Ourproperty shows actual sold prices back to 1995, I have found out that the 'average' 3 bed semi in a road that I am looking at sold for £160k in 1995 - that is still 6x an average £30k salary even at the bottom of the last cycle.

The fact that these houses sold for in excess of £700k in 2007 is crazy, however!

mbga9pgf

chucky wrote: »

that's because many people are blinded by average price drops.

just because property may drop 30% in one area it may only drop 5% in another area.

there are going to be many disappointed FTBs when the time comes to go and find that bargain property that they're expecting to find wjhen they're expecting the vendor to accept a massive price drop.

Not what I am witnessing in the areas I am looking to move.

Typically, flats are worst off around wiltshire closely followed by the 250-400K properties, as these are the ones that obviously have the equity buffer to drop prices, and are obviously negotiating discounts further up the chain. Case in point, property round the corner from me dropped from 350 (massively overvalued) to 255 overnight, a 3 bed semi with absolutely enormous garden. Other character props are dropping more or less in line with national averages, so its not as if I am not tracking falls to make sure I am not beating up the wrong path!

Even after this crash, a £50k salary will put you firmly in starter home territory in lots of parts of the SE, but may buy you an above average home elsewhere.

Yes, but the way I reckon things will revert is as follows. I look at my wage in comparison to what I could have afforded in 1999 taking off all pay increases from then to now. I then look at typical mortgage deals that I could have gotten with the deposit I will have minus a good 20%. (40%-20% = 20%) I then look at what I could have afforded house wise back then with my salary and that mortgage. I tell you something, this crash has a way to go yet before we get to similar affordability compared to 1999. We are talking 4 bed detatched with spacious garden here, on 3X salary multiple and affordable payments over 20 years.

Lana22, not a dig, you are benefitting right now from historically low IRs. What is the maximum IR you could cope with in say 12 months time, if Quantitative Easing causes skyrocketting inflation and they start to hike rates? You do know the long-term average Base rate is 6% dont you?

chucky

another angle to look at it, not knowing your area maybe it's the case that if there is another boom and bust cycle, the property that you will be buying will have big price drops like the ones that you are looking at now.

don't forget averages are that - there maybe 40% drops and even a 5% rise in those calculations - they're just averages.

i know it may be a long way away but do you want to take that risk of capital depriciation?

The_Maestro

brummybloke wrote: »

Is it just me but have people got far too use to jumping 2 levels up the ladder for their first home?

when i was growing up, people had a 1 bed flat for their first house, unless they had very well paid jobs or inheritted money. a few years later, they sold and got a 2 bed terrace or something along those lines, then moved up again a few years later.

nowdays though people seem to be complaining that 3 bed semis in decent areas should crash to 3 times the average wage so they become more affordable?

there is nothing wrong with having something nice which is affordable but are people forgetting the houseing ladder is just that, a ladder which you hopefully climb up, not a lift where you start at the bottom and go straight to the top or the middle.

different areas have different qualities, some places cost more to live in, there must be a reason for it? my thoughts are that it is because the houses are bigger, of a better quality, people have more money and take better care of where they live, this makes it more desirable to live there.
if house prices all became affordable to the average wage then would everywhere raise its standards to the nicer places? or will the standards lower?

i can say that in Birmingham, expensive areas such as edgbaston and harborne started going down hill as the prices in poorer areas went up, becoming closer to the nicer area prices. a 3 bed semi in handsworth was within 10% of a 3 bed house in harborne which is crazy talk.

obviously for people with savings or cash in the bank, they are now in a position to go as far up the ladder as they can, im talking about ftb who keep posting on the site with crash crash crash and then complain about affordability but expect a 3 bed semi and seem to be ignoring the actual property ladder.

I think you have been living on a different planet to me. My parents (A newly qualifed teacher and a housewife with 2 kids, no inheritance, income or savings other than from the one job) bought a 4 bed detached, big garden, double garage house in the Ribble Valley (good area) in 1978. It was their 2nd house. First was a 3 bed semi in a decent area.

3 bed Semi is a very average house and previous to the recent boom would have what someone on the average national salary would have looked at as a first home.

Of course only about 10% of people earn above the national average (currently about 24K a year and falling). Most people earn less.

During the boom (and still now) average earners were pushed down to looking at very small terraces or flats in grotty areas and the majority were looking at being able to afford nothing at all. Hence all the ridiculous income multiple and liar loans.

mbga9pgf

It wont happen. I am fairly certain of this as a result of the legislation the IMF will slap on British banks when we go begging our sorry behinds to them for more cash later this year.

The boom was caused by excessive lending. The complete drying up of credit, beyond what would be expected in more normal times, will drive prices well below the long term average.

But, then again, at the end of the day, do I really care? All I am doing is preserving my cash until the day comes along I can get the best house for my money. Once that day passes, I wont really care. At all, in the slightest, as I will finally have a home. Until that day though I will do absolutely everything in my power to try and get the best home for my family and I with what we have saved.