What are reasonable house prices?

Nixxx

So, I was wondering, a lot of people of these forums seem to advocate waiting for house prices to fall a bit further to what they consider to be a "realistic price". But what is that exactly? For me a 3 bed semi in an average london area should be around £200k not £300k as a lot of them are now. A one bed flat shouldn't be more than £100k.

Obviously there are a lot of factors to consider in the value of a home so i use the term "average" very loosely and this is purely generalisation. But I just wanted to guage general thoughts and opinions.

What do you guys think?

Chris2685

Well work out what most people can afford to borrow on a modest wage, I guess that is where prices should be.

ukcarper

House prices in London have never been reasonable I had to move out and commute in 1972. I was able to buy a 3-bed terrace with a 10% deposit and a mortgage 4x my average salary 30 miles from the centre of London so I suppose you could say that’s reasonable. Similar house sold in March 2008 for £220,000.

gordano_2

Prices in London vary hugely by postcode, so its difficult to draw comparisons.

One approach is to focus on prices in the rental-end of the market, e.g. 1-2-3 bed flats and small terraced houses.

When rents equate to about 6% or so of the purchase price in London, then we are near the bottom of the market. This is the rate by when it starts to become more profitable for buy-to-let investors and also possibly cheaper for tenants to buy rather than rent.

Working on the assumption that 2nd time buyer properties relate directly to first time buyer properties (eg main stream rental market) then you can assume prices have hit the bottom - in a normal market.

I add the last caveat because even if properties are affordable you still need a mortgage, and if you cant get one prices will fall below the affordability level.

Nixxx

The average uk salary is just under £25k, which should mean that the average house price should be £75k - assuming the average house is a two bed. As much as I wish is would, I just think it will be a long time before house prices come down that much. I think most people are in agreement that house prices are over inflated, but at what point do we start saying thats a "good price"?

B33fy

I think we are at a stage where the true value of a house is now closer to what it would cost to build plus the value of the land, around me (North Manchester) that would be around £150k to build a 3/4 bed detached plus £50k for the land, total £200k, prices are currently £250-£300k so still a way to go, up to another 30%, but of course it does depend on how desperate people are to move and how available finances are as to whether a deal can be struck.

I know this is a generalisation but it helps me to try and gauge when prices are reaching the bottom.

chucky

Chris2685 wrote: »

Well work out what most people can afford to borrow on a modest wage, I guess that is where prices should be.

prices in London are not and can't be driven by affordability or a modest wage.

there are a number of other drivers that won't allow London prices to be driven by salary multipliers - foreign investment, cash investors and also rental demand

Wickedkitten

Personally I would say reasonable is being able to buy outside of London using traditional multiples of salary.

London is an entirely different beast altogether.

Nixxx

chucky wrote: »

prices in London are not and can't be driven by affordability or a modest wage.

there are a number of other drivers that won't allow London prices to be driven by salary multipliers - foreign investment, cash investors and also rental demand

I use london as an example but its really based on general opinion as to what a house is should be worth. Obviously in a prime location in london you can expect to pay a premium but based on heavy generalisation i find it difficult to understand how a 3 bed terrace in an average area could be worth £350k?

ninky_2

a reasonable price for houses is between three and four times the modal average income of workers within a 50 minute commute of the property. obviously many areas are way above this. hence the crashing prices.

i think a modal average is better to go with rather than a mean average as the latter allows a few high earners to distort things.

ad44downey

Nixxx wrote: »

So, I was wondering, a lot of people of these forums seem to advocate waiting for house prices to fall a bit further to what they consider to be a "realistic price". But what is that exactly? For me a 3 bed semi in an average london area should be around £200k not £300k as a lot of them are now. A one bed flat shouldn't be more than £100k.

?

Nationally the average 3 bedroom semi should cost about 90k so prices have alot further to fall yet.