FTB expectations too high?

thegibdog

IveSeenTheLight wrote: »

"all being equal" statement?

My point is, two couple in mid thirties, one first bought 8 years earlier and may be now looking to upgrade, the other is starting with their first property.
Do you believe all being equal the second couple should be able to jump straight to the upgraded level of property without having previously been paying down a mortgage (unless as you point out that they have been putting away the equivalent capital outlayed in the mortgage, which let me remind you will not be the average FTBer)

You seem to put forward a theory based on "all being equal" but your conclusion is based on things not being equal - your point is based on flawed logic.

housesitter

tara747 wrote: »

People who are currently renting and saving are in a brilliant financial position and those with crippling mortgages and negative equity are, well, not. IMHO.

However, as one of those people I'm not looking because I'm ready but because I feel my hand is being forced by threats of quatative easing (AKA money printing) and very low savings rates.

I see this purely as an attempt to kick start the market once again. But faced with the threat of NE over 25years or my savings seeing large amounts of inflation, it is sensible to get my cash into assets.

Due to a weakening pound there is little to look to other than property at the moment.
I'd like to think I can wait till the last minute, but at somepoint this year I see myself getting burned one way or another.
Damned if I do and if I don't

tara747

Quote:
My point is, two couple in mid thirties, one first bought 8 years earlier and may be now looking to upgrade, the other is starting with their first property.
Do you believe all being equal the second couple should be able to jump straight to the upgraded level of property without having previously been paying down a mortgage (unless as you point out that they have been putting away the equivalent capital outlayed in the mortgage, which let me remind you will not be the average FTBer)

---

Er, firstly hardly any capital is paid off in the first few years of a mortgage!

Secondly, if the homeowners bought prior to the crash and the renters have been sensibly saving (thereby earning interest instead of paying it), they are in a far better financial position.

Your scenario is highly dependent on a lot of assumptions. The boom of the last few years was (imho) a one-off debt orgy which hopefully will never be seen again.

tara747

housesitter wrote: »

However, as one of those people I'm not looking because I'm ready but because I feel my hand is being forced by threats of quatative easing (AKA money printing) and very low savings rates.

I see this purely as an attempt to kick start the market once again. But faced with the threat of NE over 25years or my savings seeing large amounts of inflation, it is sensible to get my cash into assets.

Due to a weakening pound there is little to look to other than property at the moment.
I'd like to think I can wait till the last minute, but at somepoint this year I see myself getting burned one way or another.
Damned if I do and if I don't

Mmmm. Good point. But the required wage increases are not going to happen.

cupid_s

IveSeenTheLight wrote: »

I think your view is flawed.

If we take a hypothetical situation of a FTBer who bought a property for £100,000 with a £25,000 salary. The second person rents / travels (does not buy)
Lets say in 10 years time the property is worth £200,000 and both the income has increased to £50,000 (keeping same ratios)
In that 10 years, the outstanding mortgage would have been reduced by say £40,000.
Both situations are now that they want to upgrade / buy a property in the value of £300,000

The question is, would the person who did not buy 10 years earlier, likely to have saved up the £140,000 equity the other person has in equity? (Note: not including any savings the homeowner may have). If the answer is yes, then, you are right there is no difference to buying 10 years earlier, if the answer is no, then this can highlight why there is a benefit to owning a smaller property before buying a family home years later.

I think this view is flawed.
The only way your example works is if you get 10% per year property price increases. Maybe this was the norm in years gone by but anyone who bought more recently doesn't stand a chance of their property doubling in value in 10 years.

housesitter

tara747 wrote: »

Mmmm. Good point. But the required wage increases are not going to happen.

Depends on how many deposit savers feel the same way and start to come out of the woodwork.
I know a couple of people with a stash waiting in the wings.
Should be interesting tho, if we take our cash out of savings accounts and into mortgages what will that do for lending rates.

IveSeenTheLight

thegibdog wrote: »

You seem to put forward a theory based on "all being equal" but your conclusion is based on things not being equal - your point is based on flawed logic.

er no, I also included

(unless as you point out that they have been putting away the equivalent capital outlayed in the mortgage, which let me remind you will not be the average FTBer)

My point was that someone who bought previously and now looking to upgrade is in a far better position than someone who wants to jump straight onto the upgraded pproperty (unless as you point out that they have been putting away the equivalent capital outlayed in the mortgage, which let me remind you will not be the average FTBer)

IveSeenTheLight

cupid_s wrote: »

I think this view is flawed.
The only way your example works is if you get 10% per year property price increases. Maybe this was the norm in years gone by but anyone who bought more recently doesn't stand a chance of their property doubling in value in 10 years.

Actually it would only be 8.006% per year.

It was a theoretical example and you would notice that I equally increased the wages by the same percentage

If you want a lower percentage how about a 3% rise in both houses and wages

£100k house after 10 years is worth £130,500. Wages increase to £32,600 (remember before tax)
With these lower wages, would the average FTB have saved up circa £70,000 extra than the homeowner in the 10 years?

daveb975

tara747 wrote: »

*sigh*

Sorry if this point has been made already, haven't read the whole thread yet.

First time buyers these days tend to earn WELL ABOVE the average wage, unlike in the good old days! That's why we expect to get at least a 3-bed semi for our above-average wages and savings. I earn £32k, the OH is on a similar salary and we have £26k in savings (aiming for £37k by the end of 2009). Why the heck shouldn't we expect to buy more than a grotty flat with that??

If we were on £20k with few savings, we'd have to set our sights a bit lower - or keep saving and striving for promotions. People on the average wage have not been able to buy in the last few years in case you hadn't noticed (except for a sorry few who overstretched and shouldn't have - but that's another story).

We are not going to blow our hard-earned savings on any old place. Now that house prices are coming down, we are sitting and waiting for something decent that's value for money and have a short mortgage - 20 years max, just like in the good old days. We're not afraid of a 'doer-upper', by the way.

I can't remember if I posted this in this thread or another one, but it is totally area dependent.

With a joint salary of £64k, and a £20k deposit, you could reasonably be looking at houses upto £180k. In some areas, the 'average' 3 bed semi never came down to that money even in the depths of the last crash. Equally, you could probably buy a 4 bed detached house now in a lot of areas for that amount.

A certain property type can't be average IMO. A tiny studio flat in Chelsea is still an above average property because it would cost way in excess of the national average house price.

mower5

In the terrace i live in the most recent house sold for £275,000 in March 2007. In March 2000 a different house in the same terrace sold for £87,500. I am happy to not buy untill the bubble has run it's course and sanity resumes.