What would happen if house’s dropped to the magic 3.5 times average income?

Strings

How long do you think it would last for? I don’t think it would last for very long, people would just buy more as the demand for housing would be very high given it would be so cheap.

So in reality, the 3.5 x salary for housing is nothing but a dream, as it will never be maintained

Out,_Vile_Jelly

What kind of salary: price ratio do you think is sustainable in the current economic climate?

Strings

Single income or double?

Blacklight

Absolutely. The more doom and gloom about prices dropping on the main stream news, two things happen:

1) investors/landlords rub their hands together and get ready to jump on the bandwagon
2) sellers shut up shop and take their property off the market

It just won't happen the way the tin-foilers like to think it will - prices will not drop magically overnight allowing them to buy a luxury house for next to nothing.

You can make what you like of 0.X% rises and falls but prices will clearly now/have/are stagnating until wages catch up a bit to make property more affordable.

If you're waiting for big reductions in shop windows I'm afraid you missed the boat two years ago.

Strings

If prices ever fell it 3.5 times income, I would just buy more and outbid the average buyer, simply because I could afford too.
Oh wait, that is what is happening now

Strings

Out,_Vile_Jelly wrote: »

What kind of salary: price ratio do you think is sustainable in the current economic climate?

For what it is worth, my wife and I can afford 8 times combined salary.
This is what we have done in the sense of our overpayments.

This is based on a 5% interest only rate

Generali

Strings wrote: »

How long do you think it would last for? I don’t think it would last for very long, people would just buy more as the demand for housing would be very high given it would be so cheap.

So in reality, the 3.5 x salary for housing is nothing but a dream, as it will never be maintained

There is nothing important about house prices being 3.5x the average salary. It's rubbish just like when at the end of the news they say the Dow was down by 5 points because of a rise in the oil price.

Markets are just a bunch of buyers and sellers being brought together. House price indices are just a particular set of averages measured over the course of a month.

Graham_Devon

Strings wrote: »

How long do you think it would last for? I don’t think it would last for very long, people would just buy more as the demand for housing would be very high given it would be so cheap.

So in reality, the 3.5 x salary for housing is nothing but a dream, as it will never be maintained

If it dropped to 3.5x salary, it would probably be because of lending practices.

The only way it would run away from that 3.5x salary average, would be if lending practices suddenly changed and became more lax.

You say 3.5x salary would be so cheap people would just buy more. Yet the average savings not so long ago in the country was £800. So I don't see where people would just "buy more".

Strings wrote: »

If prices ever fell it 3.5 times income, I would just buy more and outbid the average buyer, simply because I could afford too.
Oh wait, that is what is happening now

You wouldn't. What would be the point? You'd be paying over the odd's for something, presumably as an investment. Which is an extremely poor investment choice.

Do you go out and find the most expeinsive petrol station to fill up at "just because you can afford to"?

Do you go onto comparison sites, and list the products in 'high to low' price and buy the highest one, "just because you can afford to"?

Anyway. You would likely run out of funds after buying the first house and paying more than it's worth. not likely to affect the market.

Strings

Graham_Devon wrote: »

If it dropped to 3.5x salary, it would probably be because of lending practices.

The only way it would run away from that 3.5x salary average, would be if lending practices suddenly changed and became more lax.

You say 3.5x salary would be so cheap people would just buy more. Yet the average savings not so long ago in the country was £800. So I don't see where people would just "buy more"..

What about those that do have money, those with average savings of £800 are unlikely to even own property.

You wouldn't. What would be the point? You'd be paying over the odd's for something, presumably as an investment. Which is an extremely poor investment choice.

Do you go out and find the most expeinsive petrol station to fill up at "just because you can afford to"?

Do you go onto comparison sites, and list the products in 'high to low' price and buy the highest one, "just because you can afford to"?

Anyway. You would likely run out of funds after buying the first house and paying more than it's worth. not likely to affect the market.

A property is deemed as an asset to many people, so comparing it petrol is rather foolish.

Also, how would I run out of funds provided I stayed within the salary ratio? (lending issues aside)

Graham_Devon

Strings wrote: »

A property is deemed as an asset to many people, so comparing it petrol is rather foolish.

Also, how would I run out of funds provided I stayed within the salary ratio? (lending issues aside)

Compare it against anything you like. I fail to see why you would go in offering more than the house is worth....especially considering I assume it would be an investment (you said buy more).

If houses fell to 3.5x salary on average, we'd be in a whole new landscape. I think you are assuming investing in property would be just as profitable as it has over the last decade so just think "well, I'd buy them all up". Two words... "The Wilsons"....apart from you'd be carrying out that kind of plan right after we'd just learnt all the lessons.

How would you run out of funds? Well presumably you don't have an endless bottomless pit of money? If you do, there is plenty of people out there you could be helping

Chris2685

I remember seeing something a while ago, can't remember what show it was. A woman had a whole bunch of houses, and basically had bought them all out of the perceived equity of the other houses, and it just spiralled on and on and on until she had a whole load of houses, but didn't actually own any of them. What she actually had was a whole load of debt, built up on equity. When the market faltered, her whole empire came crashing down. Can't remember the ins and outs of it, but it was quite interesting.

It seems to me like this type of thing is what Strings is basing his buying power on, correct me if I'm wrong though.