What are reasonable house prices?

ninky_2

Cannon_Fodder wrote: »

Where is it written, "and lo, woman shall work to keep the roof over their head because the bloke doesn't earn enough".

next to the bit that says "if that doesn't work, lo, send up the little ones to sweepeth the chimneys that they may also earn and prop up the house prices of the land".

penguine

mitchaa wrote: »

I believe when women were granted equal rights. Gone are the days of the male being the bread winner and the female being the housewife.

Regardless of whether one or neither parent wants to stay at home with the children, it's not sustainable to base affordability criteria for a house purchase on a couple both earning full-time wages. Because as soon as children come along, most if not all of one wage is likely to be wiped out by childcare costs.

mitchaa

Cannon_Fodder wrote: »

it could be the other way round, I'm not meaning to be sexist.

point is why the second income has become an essential in life.

it just makes a rod for everyone's backs.

I guess the powers that be enjoy seeing us with our noses to the grindstone.

I see your argument but then to counter act, my argument of average income couples potentially being able to afford 5/6 bed houses is surely not realistic, nor should it be as it has a knock on the further and further you go down the chain.

The 3.5x multiple on earnings is often quoted as being the norm, i believe this figure is used as it roughly relates to 33% of a take home pay(At 5% IR)

If 1/3 is going towards the mortgage, it's still leaving plenty leftover to live a comfortable lifestyle on the remainder especially if you have 100% of a partners salary. If both earning the same you can then say housing costs are 16.5% of the couples income, leaving 83.5% to be spent elsewhere.

Why waste the 83.5%? Sensible heads would reinvest a portion of that into either A) a bigger nicer home, or multiple homes. Over the boom years, you'll know this to be true with the BTL market. Houses are proven to be a safe investment over a 25yr period so there is little risk.

We are only speaking about basic average earners being able to do this.

I think we are getting too far away from reality with this 1. What we talk of here is housing being stupidly cheap affordable. I dont think i've ever read or heard anyone state that buying a house was ever financially easy but what you are suggesting here is stating exactly that. If you as a couple can buy an average home on a 3.5x multiple and still have 83.5% of you salary to do as you please with, the argument of housing being financially straining is blown right out of the water.

My view anyway.

daveb975

chucky wrote: »

http://www.statistics.gov.uk/downloads/theme_labour/ASHE_2008/tab7_7a.xls

so.... £33k is the median and £49k the mean, look at London

£33k x2 = £66k
£66k x 3.5 salary = £231k
£231k + £58k (25% deposit) = £289k


£49k x 2 = £98k
£98k x 3.5 salary = £343k
£343k + £86k (25% deposit) = £429k

which part of that is fantasy

The maths is exactly right, but the only way that a couple living in London on a £33k joint wage would be able to save a £58k deposit before the time they were ready to retire is if they lived with their parents.

£58k is a massive amount to save when you have a joint salary of less than £2.5k per month and you have to pay most of that out for rent and bills.

chucky

penguine wrote: »

Regardless of whether one or neither parent wants to stay at home with the children, it's not sustainable to base affordability criteria for a house purchase on a couple both earning full-time wages. Because as soon as children come along, most if not all of one wage is likely to be wiped out by childcare costs.

so in the same context if you take out a mortgage in Year 1 by Year 10 you will probably be earning much more than you did in Year 1.

there are too many variables and personal circumstances like these to say a house price is priced reasonably.

chucky

daveb975 wrote: »

The maths is exactly right, but the only way that a couple living in London on a £33k joint wage would be able to save a £58k deposit before the time they were ready to retire is if they lived with their parents.

£58k is a massive amount to save when you have a joint salary of less than £2.5k per month and you have to pay most of that out for rent and bills.

absolutely right - if i had put 10% deposit, someone would have said that deposit amounts should be at least 20% or 25%.

in addition i took the deposit amount as 25% of the loan amount instead of the property price so my figures were about a 20% deposit.

i'm not sure what the right answer is.

ukcarper

People survived 15% interest rates with the 3.5 salary multipliers, which would be the equivalent of 10.5 x with present interest rates.

tara747

chucky wrote: »

http://www.statistics.gov.uk/downloads/theme_labour/ASHE_2008/tab7_7a.xls

so.... £33k is the median and £49k the mean, look at London

£33k x2 = £66k
£66k x 3.5 salary = £231k
£231k + £58k (25% deposit) = £289k


£49k x 2 = £98k
£98k x 3.5 salary = £343k
£343k + £86k (25% deposit) = £429k

which part of that is fantasy

Errrr.... since when was it normal to borrow 3.5x JOINT salary???? That's my point. 3.5x joint (or 7x single!) mortgages are insane.

Thank goodness for this HPC, when it has bottomed out people will no longer have to borrow 3.5x joint salary to buy an average house and might actually be able to afford to have a life as well as a mortgage! :beer:

chucky

tara747 wrote: »

Errrr.... since when was it normal to borrow 3.5x JOINT salary???? That's my point. 3.5x joint (or 7x single!) mortgages are insane.

Thank goodness for this HPC, when it has bottomed out people will no longer have to borrow 3.5x joint salary to buy an average house and might actually be able to afford to have a life as well as a mortgage! :beer:

in the 1980s it was 2.5 or 2.8 times i believe - progressively this changed dependent on your credit score.
the higher the credit score the higher the multiple.

funniliy enough i've just been offered 4.8 times on a 60% LTV with Halifax - i won't be taking that because as you say it would be very dificult to live well.

don't forget that dependent on age your salary in year 10 (and if you go out further even more) of your mortgage will be higher than year 1 of your mortgage and will not be 3.5 times your initial income.

many people forget this.

mitchaa

ukcarper wrote: »

People survived 15% interest rates with the 3.5 salary multipliers, which would be the equivalent of 10.5 x with present interest rates.

I can't see how anyone would be able to afford a 15% mortgage rate and a 3.5x multiple without help from a 2nd income source.

£25000 income after tax is £1588, An £87500 mortgage at 15% is £1120

Just over 70% of take home.

Food, bills and normal living expenses would surely see to the above home being repossessed.