Wheres the Eqilibrium

kriss_boy

Ok, consider this.

Take a colleague and his wife- combined income of 40K and currently living in a 300K house with a mortgage of probably only 30/40K having accumulated equity over the years whilst upsizing in a rising market.

Take my girlfriend and I- combined income of 45K but living in a 90K house with a 75K mortgage.

I cant fathom how its possible if houses prices and wage inflation are minimal over the next 10 years how we could ever upsize.

If there is no wage inflation and house prices dont rise then how will people like us build equity other than over paying our mortgage by a grand a month for 10 years.

Its impossible.

Would anyone agree than if there is little wage inflation over the next 10/15 years then it will impact the housing market severly.

carolt

That's why it was a really bad time to buy within the last few years.

You're right, it is near impossible and very depressing for anyone in that situation.

Hopefully they've been taking advantage of the low rates punishing all savers to overpay massively. So it could be worse.

kriss_boy

I dont think its exclusive to those that just bought in the last couple of years.

Ive got mates who bought flats for 40K in and around 2003 that are now worth 80/90K. But its still only got them 50K of capital.

They too cannot afford a really nice family home at around 200/250K.

I live in an average town in Scotland and looking at the property pages I just cannot see how anyone in their 20s/30s could afford some of these places.

Theres a really nice stone built semi near me up for 200K and I saw a couple in their 40s checking it out. Realistically very, very few 'young' people could afford a house like that in our town and theres dozens listed.

And like I say, my girlfriend and I are young and earning a decent wage- more than the vast majority of our friends.

silvercar

Take a colleague and his wife- combined income of 40K

I would have hoped that career progression (excluding general wage inflaton if you are assuming there is none) would mean that the combined wage increases.

phil_b_2

Maybe that's just the way it is and it's tough !!!!!! for those who cant buy exactly what they want right now? Time will tell.

Besides if you were on a combined £45k you could surely aim a lot higher than a £90k house?
Use a comfy 3.5 multiple and chuck in a £20k deposit and you can look at stuff around £175k, above the average, which in most places will get you what you want.

then think of how your wage and earning potential will increase over time. Consider inheritances and other areas of good financial fortune.

No problem.

globalds

kriss_boy wrote: »

Would anyone agree than if there is little wage inflation over the next 10/15 years then it will impact the housing market severly.

It would if nothing were to change........

We are in a period of artificiality low interest rates.
We have not the resources to continue this for very long.

The fairly immediate impact of interest rate rises may change a large enough percentage of owners views on the effort involved in owning (or paying for) there own home, to cause further drops.

kriss_boy

silvercar wrote: »

I would have hoped that career progression (excluding general wage inflaton if you are assuming there is none) would mean that the combined wage increases.

It will, but wage inflation would help too.

If you take a cross section of the types of property for sale in our town and you look around at the demograph and the likely salaries people are on and it simply does add up.

I suppose Im missing one think- my parents have a 300K house so its likely I will inherit a reasonable amount of money one day.

That aside though i feel if you take a look around, young people are settling down later, buying property later. I dont think prices at the top are sustainable.

michaels

Why can't you pay off 1k of capital per month - my mortgage to income is a lot higher, more % of my income goes in tax, I have 3 kids but I can easily afford that level of overpayment.

kriss_boy wrote: »

If there is no wage inflation and house prices dont rise then how will people like us build equity other than over paying our mortgage by a grand a month for 10 years.

Its impossible.

kriss_boy

Its hard to tell to what degree would could over pay. I reckon £1000 a month is possible even if rates do creep back up.

But being our first house we've spent a lot of money on rennovating it and just buying furniture etc. Plus we both bought cheapish used cars to commute to work in and went to Australia last year.

By June/July I want the cars paid off and the overpayments upped.

I suppose if Im being honest for the first time Im thinking about settling down... but financially its not possible for at least 6 or 7 years! I dont want to be an old dad!!!!

CLAPTON

kriss_boy wrote: »

Ok, consider this.

Take a colleague and his wife- combined income of 40K and currently living in a 300K house with a mortgage of probably only 30/40K having accumulated equity over the years whilst upsizing in a rising market.

Take my girlfriend and I- combined income of 45K but living in a 90K house with a 75K mortgage.

I cant fathom how its possible if houses prices and wage inflation are minimal over the next 10 years how we could ever upsize.

If there is no wage inflation and house prices dont rise then how will people like us build equity other than over paying our mortgage by a grand a month for 10 years.

Its impossible.

Would anyone agree than if there is little wage inflation over the next 10/15 years then it will impact the housing market severly.

why will high house price inflation and wage inflation help you?

if your house doubles to be worth 180k and their's doubles to be worth 600k ; you now need to find 420,000 extra to buy their house.
why is that a good thing?


what will help you is building more houses in relation to the number of people wanting them

kriss_boy

But the housing market is so stagnant how will extra homes help? Simply by driving prices down because of the extra competition?