Get ready for the storm

jonewer

HAMISH_MCTAVISH wrote: »

So the true test of affordability is the percentage of after tax income spent on mortgage payments.

Not really.

If a house used to cost £100k and now costs £300k then you need an extra £20k of savings to get a 10% deposit.

This is the reason volumes are so low and without the 'bank of mum and dad' the average age of a FTB is now 37.

Quite clearly, this is a significant indication that affordability is very poor indeed.

In fact, the only reason prices were able to rise to the extent they did was because you could get a mortgage with no deposit whatsoever.

92203

Procrastinator333 wrote: »

Hamish, do you have a link for the 31 and 37%? just curious how they arrive at the numbers.

E.g do they just take average wage, average house price and average mortgage interest rate? Or does it take some sample of homeowners, ask them their salary and mortgage payments.

This is a very good question. I work with a broad age range of people, some of whom purchased nice houses back in the 80s/90s/early 00s.

Many of the older people I know (who range in age from late 30s-early 50s) are paying around £200 per month for a nice semi detached house and cannot understand why it would cost me £600 per month to rent a flat or small house.

It is also worth factoring in to the equation that the people I mentioned in the paragraph above, are generally very well established within their careers and will be earning more their younger counterparts. Therefore it is likeley that even if these statsitics are actually real, they will be skewed by high earners who have low mortgage payments through buying at the right time!

RDB

chucky wrote: »

if the last 10 years were skewed upwards what happened in the previous 20 years?
the answer is that houses must have been cheap... the law of averages doesn't lie...

Yes houses were undervalued in the 90`s just as they are overvalued now. They will be undervalued again in the future just a question of when.

Everything goes from under to overvalued, always has always will.

Thats why the advice when gold is cheap buy gold when houses are cheap buy houses.

Gold is very cheap now.

property.advert

RDB wrote: »

Yes houses were undervalued in the 90`s just as they are overvalued now. They will be undervalued again in the future just a question of when.

Everything goes from under to overvalued, always has always will.

Thats why the advice when gold is cheap buy gold when houses are cheap buy houses.

Gold is very cheap now.

The problem is that you cannot live in gold and your assumptions fail to take into account rents which are the only alternative to ownership. There may be a better time to buy than now and prices may well go down, but you cannot put your deposit in gold and live on the street waiting for the apocalypse.

RDB

property.advert wrote: »

The problem is that you cannot live in gold and your assumptions fail to take into account rents which are the only alternative to ownership. There may be a better time to buy than now and prices may well go down, but you cannot put your deposit in gold and live on the street waiting for the apocalypse.

You just have to wait for gold and silver to go up and houses to come down.

System

The-mouth-of-the-south wrote: »

Chucky nice graphs. Back in the real world houses are unaffordable. Unfortunately your mind is already set and you can’t see the clouds brewing ahead.

Just felt I should point out, that just because they are unaffordable to you, they aren't unaffordable to everyone. Try getting a better job and/or try making some sacrifices so you can save the deposit.

chucky

RDB wrote: »

Yes houses were undervalued in the 90`s just as they are overvalued now. They will be undervalued again in the future just a question of when.

Everything goes from under to overvalued, always has always will

maybe people should understand that house prices will always go up in the long term and they may have missed a trick in the first half of 2009, at the begining of the last decade (2000-2003) and from 1991-1996 when property could have been bought cheaper than now.

it's no use blaming others for your failure to make the right financial decisions

Blacklight

92203 wrote: »

the long term average wage to house price ratio is 4:1. The current ratio is actually 5.5:1 which is a massive increase. It is also worth taking note that many people earn significantly below the national average wage

Then they're not in a position to make the largest financial commitment of their life and should go back to flipping burgers. Not everyone who earns a wage is going to buy a house.

Apart from about three people on this forum everyone has accepted that property costs what it does and they're happy to go about their lives buying and selling as they've always done.

If there were any signs of 'a storm' demand for cheap property would ensure it didn't happen now that credit is flowing again.

pingu2209

As a home owner with a vested interest in high prices; I do agree with the OP.

Between October 2007 - May 2009 prices in my area dropped by 20% for the average 3-4 bed semi/detached house. However, since May 2009 they have risen back up to the peak prices again.

I am not sure what it will be to force the prices to reduce again - perhaps BOE rate rises? Who knows. However, it will come and the prices will reduce by 20% again in my area.

Yoshua

chucky wrote: »

maybe people should understand that house prices will always go up in the long term and they may have missed a trick in the first half of 2009, at the begining of the last decade (2000-2003) and from 1991-1996 when property could have been bought cheaper than now.

it's no use blaming others for your failure to make the right financial decisions

Are you saying houses will never be undervalued like they were in the 90`s ever again?