Todays events...Any FTBs feeling poor? I do

Alan_M_2

twirlypinky wrote: »

I'm 27, single and sick to death of people telling me that i can really only expect to buy a bedsit, studio flat or a maisonette. Just because I'm single, why should I. Why the hell should i live somewhere grim just because I've not found "the one". It's bloody daft.

50 years ago my Grandad bought a 3 bed semi in south london for £6.5k. On his wages alone, my nan's wages weren't taken into consideration. So someone please tell me why these days singltons are expected to live in a tiny space?? The ratios are not right anymore, and they haven't been for a long time.

I'm in the situation now where I'm going to have to find a partner or wait for a relative to die before i can buy a home. I think it's a very sad world we live in.

I'm 40 this year, I bought my fisrt house in 1989, with a friend of mine (it was the only way we could afford to buy - by sharing) I was earning £11,000 per year at the time and our turn of the century scruffy and unloved fixer upper was a two bedroom turn of the century terrace in Coulsdon in Surrey. Price, £72,000., and we'd knocked them down from an asking price of £95,000.

Things are not so different now, you have to be realistic. For some reason our obsession with owning property has got us into this position where we must own a home at all costs. Now we seem to expect to be able to own what we want, in a nice part of town, with a drive and a garage and a spare room/office.

It's just not like that and a lot of people are waking up and smelling the roses.

Incidentally, 4 years after I bought my first house, it's value had dropped to £45,000......interest rates had reached 15% and our mortgage and endowment payments had ballooned to more than my gross income.....it wasn't sustainable and I lost the lot.

Alan_M_2

JayScottGreenspan wrote: »

Hmm... at the peak of the bubble the average house price was 8 times the average UK salary. In the nineties this ratio was 4:1, not 8:1.

Back then an FTB on the average UK salary who had saved a deposit could buy a three bed semi in a lot of areas. Of course, the majority of FTBs would be on below average salaries (probably reflective of their age) and would only be able to be afford flats.

From about 1993 onwards this could possibly be correct (i.e. the bottom of the market after the last crash).

However, we're not at the bottom now are we, we've only just started the slide and it still has a long way to go......then your figures may add up again.

My first house bought in 89 was almost 7x my salary...that was a two bedormm terrace and in quite a mess. Thinngs are not so differnet now as people would have you believe.

sympatex

Ah well at least this discussion has ended all ok, i briefly saw the old chestnut "limited supply / pent up demand" pop out from borker. I think we've gone full circle and can put it to bed!

Good anecdotal Alan M. When you say you lost the lot when buying at 7X it seems right now we're at that precipice in my area, with the tories around the corner, will they raise interest rates above 6%? if they do i think there will be _serious_ problems. 10% and we might as well get the tin foil hats out.

My original post was just about how all the bad news and the various measures to avoid catastrophe which have been implemented have all disadvantaged me in some way. The only positive thing i've got is the £120 tax "rebate" from the chancellor when the 10% tax fiasco and other thing was sorted out.

Everything else, lack of house prices going down (i have not been able to negotiate more than about 7% off anything and i've therefore given up), savings rates down, inflation is actually up on anything i need on a daily basis and pay is static. apparently i am thankful to have a job though, i'll count that as positive or negative?! and pension (which is small fortunately is getting smaller as the FTSE crashes)

Thanka all for your contributions, i think i'll rent!

baileysbattlebus

JayScottGreenspan wrote: »

Depends on the area, obviously. A three bed semi in a not so nice area was within the reach of 'UK average salary man' in the nineties. The ratio of average salary to average house price was actually fairly stable throughout the nineties. It was only in the noughties that it went completely mad.

From 1995 to 2008:
AEI went up by a factor of 1.73
Nationwide house prices went up by a factor of 3.65

Thus the ratio of house prices to average salary doubled.

An FTB in 1995 with a 3.5x salary mortgage could buy the same house as an FTB in 2008 with a 7x salary mortgage.

When you factor in interest rates the change in affordability is not be so great. But anyone who buys on the basis that interest rates will stay this low for anything more than the short term is taking one hell of a gamble.

That may have been true for the 1990's but have you looked at the late 1980's

In our area, outer metroplitan, FTB's according to Nationwide, salary multiples were 5.4 in 1989, at the peak in 2007 it was 5.8. It's 4.6 now. So it is getting better.

There was only one area in the UK where the ratio reached 8 x (according to the Nationwide) and that was Northern Irleand at the peak.

It's more affordable to buy a house now than it was 20 years ago, Nationwide started an affordabilty index - going back to 1985, the higher the index number the harder it was.

In 1989 the index for here was 168, at the end of Q2 2008 it was 100. It's probably less than that now.

They take into account wages for the areas, mortgage repayments as % of salary, tax & Ni at the relevant rate and interest rates.

http://www.nationwide.co.uk/hpi/historical.htm

Have a look through some of the tables - you might be surprised - it's quite interesting.

nobblyned

sympatex wrote: »

Everything else, lack of house prices going down (i have not been able to negotiate more than about 7% off anything and i've therefore given up), savings rates down, inflation is actually up on anything i need on a daily basis and pay is static. apparently i am thankful to have a job though, i'll count that as positive or negative?! and pension (which is small fortunately is getting smaller as the FTSE crashes)

So your savings have increased effectively by 7% in the year, which is around 10% pre-tax.

And you are saying you are worse off than when the interest rate was 7% and house price inflation was 10%+?

I give up.

Sir_Humphrey

lukekelly wrote: »

Well as a first time buyer I'm not feeling poor at all. The house I can get for my cash increased massively last year and looks like doing the same thing this year. The falling market and being a first time buyer puts me in a strong negotiating position. Falling prices and low interest rates are both excellent for first time buyers.

So first time buyers stop whining and enjoy it!

:beer:

Well said. The more cash FTBs have in savings, the better off they are. The interest lost is peanuts compared to the gains from the house price crash.

In fact, the IR cuts may be doubly good for FTBs. By reducing the incentive to save (because of foolishness related to money illusion), and stimulating the other parts of the economy, this could well end up keeping potential FTBs in work whilst failing to stop the house price falls.

Waiting for another 12-18 months or so as prices fall is not that much of a hardship surely?

andrewmp

Alan_M wrote: »

Here may be the root of your problem, a 3 bed semi is not a first time property and I don't think there has ever been a time when a 3 bed semi has been anywhere near 3.5 x a single persons salary......

The traditional FTB property for singleton is a studio flat or 1 bed flat....maybe a 2 bed with a partner/friend....a three bed semi? that one or two properties further on unless you had an inheritance or unusually well paid job.....

I bought a three bed semi for my first house last year. It was 4 times my salary and my salary is nowhere near good.

Sir_Humphrey

andrewmp wrote: »

I bought a three bed semi for my first house last year. It was 4 times my salary and my salary is nowhere near good.

It depends where you are. In lots of West Yorkshire (the area where I was born) it ought to be not too difficult for any professional type, even on a bit-lower-than-average wage. 3 bed stone terraces in the old mill towns cost peanuts compared to London (less than a studio flat in most of London)

lostinrates

Sir_Humphrey wrote: »

Well said. The more cash FTBs have in savings, the better off they are. The interest lost is peanuts compared to the gains from the house price crash.

In fact, the IR cuts may be doubly good for FTBs. By reducing the incentive to save (because of foolishness related to money illusion), and stimulating the other parts of the economy, this could well end up keeping potential FTBs in work whilst failing to stop the house price falls.

Waiting for another 12-18 months or so as prices fall is not that much of a hardship surely?

I do agree with you, and the points on interest rates, albeit grudgingly , but where I get grumpy is the additional issue of the QE. If the debttors debts are worth less, and my savings are worth less, how does that help my non-growing savings work for me buying a house?

andrewmp

Sir_Humphrey wrote: »

It depends where you are. In lots of West Yorkshire (the area where I was born) it ought to be not too difficult for any professional type, even on a bit-lower-than-average wage. 3 bed stone terraces in the old mill towns cost peanuts compared to London (less than a studio flat in most of London)

Yeah, I live in the North East of England. My wage is pretty crap but I managed to get this house last year. At peak it was on the market for £115k (overpriced I reckon - it sold for £88k in 2004), I got it for £75k. I'm not benefiting from interest rate drops though as I couldn't take the risk of them rising so fixed :mad:

I fully expect it to be worth less than I paid for it soon, if not now. I just hope to keep my job and therefore keep my house and am saving for a potential rainy day.

I wouldn't have considered buying a 1 bed flat though, not in a falling market. I'm single, I wouldn't want to be in a position where the flat would no longer be big enough and I had to sell at a big loss.