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

Loughton_Monkey

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.

dopester

Loughton_Monkey wrote: »

Thanks to that early start, I have been able to 'upsize' several times along the way and now have a very decent house.

There is no point FTBs reaching all out to get a starter home in a nice area at the "low £100Ks".

Reason being, it's very unlikely they'd ever be able to trade up in the same way you did, to the ever nicer homes.

Today and going forwards if values were to remaing, the leaps in price to better houses are too massive, both in terms of jobs/pay prospects, job stability, and mortgage lending/costs.

Your generation needs to give a lot of HPI back from decent houses (via crash), and even the starter homes in nice areas need to fall in value alongside the necessary correction.

seven-day-weekend

We still have the terraced house in the OK-but-not-green-and-leafy area that we bought in 1976. I am living in it as I type.

We resisted the urge to 'trade up' as it was big enough for us and near decent schools for our son.

It has been paid for since 1995 and instead of trading up we bought a small house in Spain where we will be for the winter and spring.

I agree with ther poster who said that many people want more than a small terraced house these days. However even my house would sell for £120k, could people on minimum wage afford even this? We bought it on one not too good wage. I don't tink that would be possible now. (However, we did have to find £700 deposit, a big chunk of the £3000 it cost).

I don't know the answer, these are just my comments.

System

Loughton_Monkey wrote: »

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.

I think you'll find that anyone could buy a house for 15p and a bag of skittles back then and society was wonderful as a result.

jozbo

In answer to the question, the reason it's unaffordable for us is that the banks don't take self employed earnings as seriously as an employed wage; hence if you're both employed and self-employed (as I was in 09-10) they will only take a section of your earnings into account.
What I dont understand is how we can be judged out of affordability for a mortgage that's going to cost us c£800 pcm even if the base rate went up to 8% on top of our 1.35% term tracker, when the lowest rent we can find in that area or anywhere in the vicinity (+20miles) is £700pcm for a dingy one bedroom flat. And that mortgage would be on a 3 bed house!
Nightmare.

System

jozbo wrote: »

In answer to the question, the reason it's unaffordable for us is that the banks don't take self employed earnings as seriously as an employed wage;

At the risk of being pedantic, that's not an affordability issue.

jozbo

surely it is, as to do with income multiples, hence affordability

System

You can afford it, the problem is the bank won't lend it.

jozbo

Exactly my point - the banks refuse to lend it on grounds of 'affordability' - yet to rent we'd consistently be paying significantly more per month. Rent is literally unaffordable for us.

ILW

jozbo wrote: »

Exactly my point - the banks refuse to lend it on grounds of 'affordability' - yet to rent we'd consistently be paying significantly more per month. Rent is literally unaffordable for us.

That assumes currently very low interest rates. would mortgage be less than rent at 8 or 9%?