FTB expectations too high?

longtimelurker_2

There are a multitude of FTB scenarios, surely it's inaccurate to plonk all FTBs into one category?

The important thing is that an FTB has an appropriate expectation for their situation. In the case of a big deposit and two strong incomes - a three bed semi could be appropriate.

Of course some FTB's expectations will be too high, but whereas before they could be lead to buy anyway, now they are given a dose of reality. No bad thing, but not all FTBs have too high expectations.

I imagine there are quite a lot of prospective FTBs out there...!

IveSeenTheLight

The_Maestro wrote: »

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.

Welsome Maestro,

One thing to consider is the belief that everyone has the right to buy and hence why people believe that average earner should be able to buy average properties.

As a homeowner, I toohad a desire to buy and maybe I was fortunate to be in an era where I could work towards buying property.

Historically however, property ownership was restricted to the wealthy

StevieJ

IveSeenTheLight wrote: »

Welsome Maestro,

One thing to con'sider is the belief that everyone has the right to buy and hence why people believe that average earner should be able to buy average properties.

As a homeowner, I toohad a desire to buy and maybe I was fortunate to be in an era where I could work towards buying property.

Historically however, property ownership was restricted to the wealthy

What I find quite odd are the potential FTB's on here that are always having a go at other for wanting everything now (you know the posts, greed, credit cards, debt,etc), yet they seem to think they should be able to buy properties that were well out of FTB's reach not so long ago.

daveb975

The_Maestro wrote: »

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.

As I put in a previous post, a 3 bed semi has not always been an average house in all areas. If it was £160k in 1995 then that was 6x a good salary even then. I guess it may have been much less than that if you go back to the 1970's.

You also have to remember that inheritance plays a massive part in affordability. It is all very well someone earning £100k saving £40k a year for 5 years, but they still waon't have as much money as a minimum wage earner who saves nothing but inherits £400k when his/her parents die.

longtimelurker_2

The ageing population must surely be a factor too?

85 year old grandma living alone in a fully owned 5 bedroom family house, while her grandchild, his wife and their 6 month old baby rent a one-bed flat - surely very common now?

Really2

longtimelurker wrote: »

The ageing population must surely be a factor too?

85 year old grandma living alone in a fully owned 5 bedroom family house, while her grandchild, his wife and their 6 month old baby rent a one-bed flat - surely very common now?

Said about that earlier in this post.
Based on only 1.5 over 65 year olds surviving out of two (your average couple:)) that would be around 6,500,000 homes with 1 or 2 people in. Just over 26% of the UK housing stock.
I Think by 2025 that could be around nearly 9,000,000 homes as 22% of the UK population will be over 65.(36%of all homes)

The_Maestro

daveb975 wrote: »

As I put in a previous post, a 3 bed semi has not always been an average house in all areas. If it was £160k in 1995 then that was 6x a good salary even then. I guess it may have been much less than that if you go back to the 1970's.

£160K would be a very high price for a 3 bed semi in 1995. I'm sure there were some very expensive areas in the south where such houses existed, but I think they would be a tiny minority of total houses of this type.

In northern towns such houses would average 50-80K (area dependent) in 1995. In 2007 the same houses would have been in the 200-300K area.

You are right though, it is area dependent. Some 3 bed semis could be hugh and be worth £1 million in 2007 (obviously not an average house)

The_Maestro

IveSeenTheLight wrote: »

Welsome Maestro,

One thing to consider is the belief that everyone has the right to buy and hence why people believe that average earner should be able to buy average properties.

I'm not saying everyone should have the right to buy a house. I don't know about way back in history but I know that for the past 3 generations at least, someone earning the national average salary could easily afford a nice sized house (at least a average sized 3 bed semi) is most areas of the country.

Most house price versus earning graphs I've seen show the average house is 3X average income going back for centuries. Of course it used to be much harder to get a mortgage but if you were sensible with your money you could get a mortgage and a very nice home.

What people forget is that most people don't earn the average or higher, only 10% of people do. What has happened is that the lower earners in society started demanding average houses and they are the people who overstretched themselves.

I think the OP would have been right if he was talking about lower earners unrealistic expectations (unjustified by history), but I believe hes wrong to apply this argument to average earners.

adrian_bond

hi,

me and the missus bought our 1 bedroom flat in norwich in april 2007 for 103k. now worth approx 95k (online estimate). bah.

however, we have a fixed rate mortgage that will see us through for another 3 years which has a fairly lowish rate (5.5%) which we can easily afford (borrowed 97500k). our combined earnings at the time were 35k approx, with a 5k deposit, plus extra for solicitors fees and the like. we now earn more, but save and enjoy the money as we see fit.

we are very comfortable. we can go on holidays. shop. eat well. both own and drive practical but nice cars, and are doing well.

we had the opportunity to borrow 6 x our comibined salary (210k!!!) at the time, but politely turned it down as after talking to various people about houses before looking to buy, that 3.5 x is really the highest you should ever go unless your a major risk taker. i heeded this warning and didnt want the existance whereby it was cold beans and arguments every night becuase of overspending and ridiculous mortgages.

we knew the crash was coming, although like all people, didnt know when. we were absolutely against renting as we wanted to live together where our money was being put (even if only slightly) to our long term benefit, not to a landlord. rental experience at uni put me off for life!

i know people that have had to secure a mortgage by working six days per week, on a 100% mortgage, for the next 35 years. that sucks. they are stuck where they are, but for now are hapy not to move for ten years!

some people will ultimately disagree with my lifestyle, but we are happy and will move up the ladder when were good and ready (or when the missus gets so broody that its time to expand!).

please reply as this thread makes very interesting reading. cheers everyone. have a good weekend.

lana22

mbga9pgf wrote: »

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!


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?[/quote]

I do know that, yes. I know a lot of people don't realise it though. It was 5% when we took the mortgage, and it was very affordable then. (same as rent) We could afford it now easily up to 10%, and I doubt it will go higher than that in the next 3 years. If it does, well my salary increases will cover it. To be honest that's why we went with a tracker, because we are flexible with what we can pay. If we had pushed ourselves we would have got a fixed rate.