FTB expectations too high?

daveb975

The_Maestro wrote: »

£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)

These are the 'standard' 3 bed 30s semis, and are in the most expensive part of an average priced London suburb. They never went as high as £1m, peaking at about £650 - £700k in 2007.

A more average price for the area as a whole would have been £100k in 1995 going upto £450k in 2007.

That is why I don't agree with a 3 bed semi being termed an average house. In expensive areas they have only been affordable to high earners since before the last boom/bust cycle.

IveSeenTheLight

The_Maestro wrote: »

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.

Possibly property was affordable, but I do know 1 generation ago, my in-laws, even though they had saved for yeard and showed they had the means to afford a property, practically had to threaten to withdraw savings and move to another building society before a mortgage was approved.

therefore property possibly was affordable, but lending was much harder to receive.

The_Maestro wrote: »

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.

Well, according to this link, the average over the last 25 years (2 1/2 centuries) is 4.01.
You would also be forgetting a major factor in that centuries ago, the double income familes were percentually much less.
If you are advocating a return to 3 x income lending, are you also advocating only one person family incomes?

The_Maestro wrote: »

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.

does this mean according to you, only 10% of people should be able to afford an average home or better?
Anyway, I think you are factually incorrect
According to this website, between 60% and 70% earn £27,000 or more, so 35% earn the average wage or more
20% earn £35,000 or more.
These figures are full time employment both men and women, figures would be higher if only considering those in full time employment

penguine

StevieJ wrote: »

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.

What I find quite odd, as someone who viewed a number of properties off and on over the past 5 years, is that people who carried out virtually no maintenance or improvements to their homes thought they could sell them for 3-4x what they'd paid for them just because they'd lived there for a decade or two.

We've been living below our means for a long time, saving up a substantial deposit, have no debts other than a very small mortgage on our current property, and yes I think we should be able to buy properties that were well out of our reach not so long ago.

IveSeenTheLight

adrian_bond wrote: »

hi,

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

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 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.

Thanks for the post.
I find it realistic in modern times that a 3.5 x joint (not single) earnings is one basis to consider when borrowing.
Of course, other factors should seriously be considered such as outgoings to assess affordability.

thegibdog

IveSeenTheLight wrote: »

Possibly property was affordable, but I do know 1 generation ago, my in-laws, even though they had saved for yeard and showed they had the means to afford a property, practically had to threaten to withdraw savings and move to another building society before a mortgage was approved.

therefore property possibly was affordable, but lending was much harder to receive.

Surely this was a much better situation than that which was prevalent a couple of years ago? If it still had been as hard to get mortgages as it was a generation ago then there wouldn't have been such a problem with house price inflation.

the average over the last 25 years (2 1/2 centuries)

Err, what?

mitchaa

IveSeenTheLight wrote: »

Possibly property was affordable, but I do know 1 generation ago, my in-laws, even though they had saved for yeard and showed they had the means to afford a property, practically had to threaten to withdraw savings and move to another building society before a mortgage was approved.

therefore property possibly was affordable, but lending was much harder to receive.



Well, according to this link, the average over the last 25 years (2 1/2 centuries) is 4.01.
You would also be forgetting a major factor in that centuries ago, the double income familes were percentually much less.
If you are advocating a return to 3 x income lending, are you also advocating only one person family incomes?



does this mean according to you, only 10% of people should be able to afford an average home or better?
Anyway, I think you are factually incorrect
According to this website, between 60% and 70% earn £27,000 or more, so 35% earn the average wage or more
20% earn £35,000 or more.
These figures are full time employment both men and women, figures would be higher if only considering those in full time employment

£27k or less;)

IveSeenTheLight

lana22 wrote: »

mbga9pgf wrote: »

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?

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.

Interest rate can go up yes, but in relation to quantative easing, I would think that a sustained period of hyper inflation would also affect wages, such that the cost and earnings of everyone is increased but the debt remains fixed
i.e. earnings £30,000 per year, outgoings £10,000 per year and debt of £150,000 (includes mortgage)
becomes
earnings of £60,000, outgoings of £20,000, debt ramains at £150,000.
Thus the debt affordability is achieved again.

izzybusy23

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

Not when you nearing 37, husband 34 and a 4 year old daugher, then no, I wouldn't say that I, as a 'FTB' my expectations are to high. Sure I want something more than a 1 or 2 bed flat and at our age it should be quite attainable ... especially when we earn a pretty good wage of over £50k but sadly it isn't and I am not prepared to settle for something I would not be happy in.

IveSeenTheLight

thegibdog wrote: »

Surely this was a much better situation than that which was prevalent a couple of years ago? If it still had been as hard to get mortgages as it was a generation ago then there wouldn't have been such a problem with house price inflation.



Err, what?

HeHe, ok decades
I'm obviously catching a bit of the wifes pregnancy brain
anyway, I'm sure the OP was not referring to a couple of thousand years ago

IveSeenTheLight

izzybusy23 wrote: »

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

Not when you nearing 37, husband 34 and a 4 year old daugher, then no, I wouldn't say that I, as a 'FTB' my expectations are to high. Sure I want something more than a 1 or 2 bed flat and at our age it should be quite attainable ... especially when we earn a pretty good wage of over £50k but sadly it isn't and I am not prepared to settle for something I would not be happy in.

I can understand why you would want something a bit bigger.
I do wonder why at mid thirties, you are in a position as a FTBer and not as someone who previously bought and now looking to upgrade.