We’d like to remind Forumites to please avoid political debate on the Forum.

This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

Debate House Prices


In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non MoneySaving matters are no longer permitted. This includes wider debates about general house prices, the economy and politics. As a result, we have taken the decision to keep this board permanently closed, but it remains viewable for users who may find some useful information in it. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

Why is property unaffordable for even the relatively well-off among the population?

11314151618

Comments

  • chucky
    chucky Posts: 15,170 Forumite
    10,000 Posts Combo Breaker
    shupufski wrote: »
    The cracks in the global financial system started to appear once interest rates started to rise. This exposed the level of debt as excessive.

    The US was the first to go and although the level of default in the UK did not reach the same level this was mainly a timing issue; ergo, rates were slashed and liquidity provided to banks that couldn’t get money from elsewhere because of the huge debts that were going bad and panic in the market.

    You know full well that to try to pick apart the chain of events to assert that the level of UK debt is "normal" is at best disingenuous and at worst ignorant.

    Abnormally low interest rates exist because of abnormally high amounts of debt.
    that's all very nice but has very little to do with you trying to claim that interest rates were lowered exclusively to hep home owners remain in their homes
    shupufski wrote: »
    If house prices were at the correct level then there would be no need to have pushed interest rates down to 0.5%

    You can talk about incomes all you like but history shows that when interest rates started rising to levels of around 5% in 2007 the underlying loans were exposed as being excessive.

    If the value of the loans secured against property were historically consistent then the slashing of rates would not have been necessary.
  • Hectors_House
    Hectors_House Posts: 596 Forumite
    Part of the Furniture 500 Posts Combo Breaker
    edited 12 January 2011 at 12:29PM
    MrPThomas wrote: »
    £40K - £60K wage is way above average.

    Lets talk about average wages in the UK.

    Someone with average wages has always been able to buy a house with a little deposit.

    This is the norm, at the moment house prices are inflated compared with average wages.



    I earn less then £20k. My sister earns about £3k less then me.

    We are in the East Midlands.

    Our house was on the market for £120k but was repossessed and put back on for £95k by the bank.

    It had been totally gutted so we took a risk and put in our final offer of £72k.

    We got the house.

    We put a £10k deposit down and have spent another £10k getting the place up to a liveable standard. We buy bits and pieces for it as and when we can from sales and whenever one of us has a little spare money.

    I think for people on our level of wage this is about right.

    I cannot understand anyone on our kind of wage possibly thinking it's doable to take on a mortgage of much more then we did in the current climate so house prices need to come down IMHO.

    I should just point out that the bank was willing to lend us £140k but we didn't want that kind of debt hanging over us and I'm someone who had £15k debt hanging around my neck when I was younger. I learnt the hard way to not believe the bankers when they tell you you can 'afford' whatever they want to lend you. LOL!
  • Nitha
    Nitha Posts: 472 Forumite
    Back to the original question - "Why is property unaffordable.."

    I must admit to being baffled by this.

    One major thing I have noticed, though. We bought our own first house in 1973. If you saw a cat with a tail in the area, you knew it was a tourist. I still cringe at the house - a characterless, mid-terrace, house in a "rabbit hutch" estate. It came with "Lounge Carpet" included, but we had not a stick of furniture between us.

    The vendors were the meanest people on this earth, as evidenced by (a) not a single light bulb left in the house, and (b) yes, they left the lounge carpet, but took the underlay!

    We slowly built up some furniture by scrounging from relatives, and buying "distressed" items in sales.

    This was quite 'acceptable' in those days, even for a young professional.

    We have lots of nieces/nephews either buying or looking, and we have spoken to many younger people about buying a house, and it seems to me that these days, it is unacceptable to slum it like we did. Most young people, it seems to me, want their 3-bed semi in a 'decent' area straght away, with enough money to buy up half of IKEA.

    The point was, I think, that it was natural, back then, for people of my generation to work out what they could get on their salary/deposit. And then simply went and bought the 'least bad' of the bunch. At least it got us 'on the ladder' and gave us relief from the rather poor flat we were renting. And when mortgage interest rates went up to 18% or so, the bulk of people just kept their heads down and paid it without too much moaning.

    Thanks to that early start, I have been able to 'upsize' several times along the way and now have a very decent house. Even so, although I live in quite an expensive area (on Central Line and close to very good schools etc.) it is still possible to buy here at the low "100K's", and also well under £100K by going some distance away.

    With mortgage rates as they are, now, the sensible people will be buying, I think. But those who want to 'start' in a house that they envisage staying in for, say, the next 20 years are entitled to think and act that way. I am convinced that there will be lots of young people in Nottingham (where we were at time of first purchase) desperately moaning about not being able to afford, but actually could afford a house like mine.

    So I am convinced that one part of the problem is simply higher expectations.

    Completely agree. We're renting in the midlands for the next five years with a view to saving up £10k (we have two kids under school age so really wanted to wait until we both had full-time incomes to buy). We don't intend on getting anything worth more than £100k (despite being 'eligible' to borrow more) with a view that if interest rates go up we could afford it. There is plenty to choose from in the market that a family of five could comfortably live in - yes the gardens and decor may not be to our taste and yes we may be living with mismatched furniture for the first few years living there, but we'll be living well within our means without worrying that interest rates might go up.
    Taking baby-steps :beer:
  • StevieJ
    StevieJ Posts: 20,174 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    edited 12 January 2011 at 1:46PM
    I earn less then £20k. My sister earns about £3k less then me.

    We are in the East Midlands.

    Our house was on the market for £120k but was repossessed and put back on for £95k by the bank.

    It had been totally gutted so we took a risk and put in our final offer of £72k.

    We got the house.

    We put a £10k deposit down and have spent another £10k getting the place up to a liveable standard. We buy bits and pieces for it as and when we can from sales and whenever one of us has a little spare money.

    I think for people on our level of wage this is about right.

    I cannot understand anyone on our kind of wage possibly thinking it's doable to take on a mortgage of much more then we did in the current climate so house prices need to come down IMHO.

    I should just point out that the bank was willing to lend us £140k but we didn't want that kind of debt hanging over us and I'm someone who had £15k debt hanging around my neck when I was younger. I learnt the hard way to not believe the bankers when they tell you you can 'afford' whatever they want to lend you. LOL!

    Are you saying that you are buying a house with your sister? If so you will have around £2700 coming in a month with a mortgage of around £400 ( based on 6% IR and equals 15% of net income). Yet you don't think it is 'doable' for anyone to take on a mortgage of much more than this? Apologies if I have the wrong end of the stick.
    'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher
  • With prices still so far above long term average earnings ratios people are having to get together with siblings and shared ownership to get a mortgage. There are all kinds of problems with shared ownership if one wants out or just can not sell ect.
  • StevieJ wrote: »
    Are you saying that you are buying a house with your sister? If so you will have around £2700 coming in a month with a mortgage of around £400 ( based on 6% IR and equals 15% of net income). Yet you don't think it is 'doable' for anyone to take on a mortgage of much more than this? Apologies if I have the wrong end of the stick.

    Yes, your sums are about right.

    Neither of us expects decent pay rises for a few years yet and have gone for sums that mean, should one of us lose our jobs we won't lose the house.

    As I said, we were offered much more from the bank but I didn't feel at the time (and still don't) that the properties in that price-range would hold that value in the coming years.

    We got lucky with the house we bought as others that have sold there in the last 5 years were for daft sums like £130k.
  • StevieJ
    StevieJ Posts: 20,174 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    Yes, your sums are about right.

    Neither of us expects decent pay rises for a few years yet and have gone for sums that mean, should one of us lose our jobs we won't lose the house.

    As I said, we were offered much more from the bank but I didn't feel at the time (and still don't) that the properties in that price-range would hold that value in the coming years.

    We got lucky with the house we bought as others that have sold there in the last 5 years were for daft sums like £130k.

    I don't agree with your ultra negative outlook (generally) but so what, you have somewhere to live with minimal outgoings can't argue with that.
    'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher
  • myhouse_2
    myhouse_2 Posts: 553 Forumite
    500 Posts
    Not at all.

    UK mortgage lending standards didn't cause this mess.

    Yes, they did.
    They fuelled a decade long speculative bubble in property where people thought it was normal to borrow 6 times salary and buy at a price 10-20% higher than the year before.
  • asc99c
    asc99c Posts: 134 Forumite
    Are you talking about if they do not get a good job then they do not have to pay back their loan? But all the time the compound interest is well compounding.

    If ever they come into some money relative leaves them in will or something they will have to pay off their loan.

    Aarrghh!! Another post of this vein. Please will people refrain from inventing bad stuff about student loans, and possibly scaring off a generation from going to university.

    You wouldn't have to pay back any extra amount of your loan in this circumstance. It just doesn't work this way. I had an income-contingent loan (now paid off), and it just isn't like normal debt. Until you've paid it back, it is in effect just like an additional income tax.
  • Does no-one look at this before going to university and say to themselves that if a decent house in the area they want costs £1m then they will need to earn about £150-200k within a few years and then aim for that ? No point in knowing you need £1m but choosing a career which pays basic wage and then bleating on about it is there ?
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 352.1K Banking & Borrowing
  • 253.5K Reduce Debt & Boost Income
  • 454.2K Spending & Discounts
  • 245.1K Work, Benefits & Business
  • 600.7K Mortgages, Homes & Bills
  • 177.5K Life & Family
  • 258.9K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.