Is London living cost affordable?

princeofpounds

cashbackproblems wrote: »

That doesnt really make sense, as most rental prices are similar to mortgage payments so how are you able to "invest" this money elsewhere when its not there. PLus the way the markets are at the moment small private investors are not going to be making any big gains in the foreseeable future without taking big unjustified risks.

Paying a mortgage is in itself an investment as your building up equity in that property plus you have somewhere which is your own and you can do up etc, something which you cant put a price on.

Unfortunately if you don't get the concept it will probably take a longer post than I can write now to explain it (writing on a phone).

First, understand that although all three housing options (rent, mortgage or owning) have a cost of ownership, the cost is
a) not necessarily the same for each method at the same time and
b) some of the costs are explicit (rent, interest) and some are implicit (forgone earnings on the capital tied up in the house).

If the concept of implicit costs is unfamiliar, for now I suggest you google 'opportunity cost' or I will explain when at a keyboard.

The other quick way that might help you conceptualise is to realise that interest charges on a mortgage are just the cost of *renting* the capital you borrowed to pay for the house.

milliebear00001

I lived in London in my twenties, earned an average salary for most of that time and was able to afford to rent a nice flat (with then bf who also earned an average salary) and live a pretty nice lifestyle. As soon as we began to think about buying/starting a fmaily, we quickly realised the trade off all avergae incomed Londoners have to make at some time - commuting longer and paying extortionate travel costs in order to be able to afford a decent sized home/start family. OR, stay renting in a small (though lovely!) flat.

We bought out in the sticks, did an hour and a half's commute each way. Quickly realised this was not tenable and moved 'home'. I am now the sole breadwinner, earning less than I did back then, have two children to support, and am about to purchase a bigger house than I owned before. My commute has dropped to 40 minutes and I live in a very nice town on the edge of the Peak National Park - can't understand why anyone who has a choice, wants a family and the trappings that come with that choice, would stay (and nor can my OH who was born and bred in Herts!)

cashbackproblems

princeofpounds wrote: »

Unfortunately if you don't get the concept it will probably take a longer post than I can write now to explain it (writing on a phone).

First, understand that although all three housing options (rent, mortgage or owning) have a cost of ownership, the cost is
a) not necessarily the same for each method at the same time and
b) some of the costs are explicit (rent, interest) and some are implicit (forgone earnings on the capital tied up in the house).

If the concept of implicit costs is unfamiliar, for now I suggest you google 'opportunity cost' or I will explain when at a keyboard.

The other quick way that might help you conceptualise is to realise that interest charges on a mortgage are just the cost of *renting* the capital you borrowed to pay for the house.

I understand perfecting what opportunity cost means seeing as i studied Economics at undergrad and then did a PG in Finance at LSE!!

But still you dont make any sense, your talking about an hypothetical scenario whereby the money you apparently save fron renting you invest and make money else where...

However for 90% of people in london renting is the SAME cost as having a mortgage and you still pay bills etc.

If for example you take out an interest and capital payment mortgage, your paying this "rent" which you will get back after selling in 5-10 years time (minus interest on loan), plus long term property prices will slowly rise again especially in lndon so this in itself is an investment. Whereas if you rent for the same period you have NOTHING to show for it...whats the opportunity forgone exactly???

As i said i currently rent so am not being snobby by arguing about home ownership but see the benefits long term. Sure if your renting for a year or 2 to be flexible its fine.

silvercar

cashbackproblems wrote: »

Iv looked before and didnt find anything decent for that price.

My requirements are:

1. fairly new build/modern
2. not in a crowded complex/development as alot of them are, 6/7 floors max.
3. ideally (not essential) walking distance to the tube, this helps it hold its value and easier to sell
4. not on a council estate

e.g. http://www.rightmove.co.uk/property-for-sale/new-homes/property-17602076.html

Funnily enough since i posted my message yesterday, i found out today from grandparents that they are giving me and my sister some money theyv been saving to use towards a deposit (30k) so my dream might not be too many yrs away!

Exactly my point that wannabe first time buyers are more fussy than they used to be. Here is a 2 bed flat, in a decent area, that satisfies points 2 to 4. It just isn't that new, given that new builds don't hold their price that isn't a bad thing.

http://www.rightmove.co.uk/property-for-sale/property-31547465.html

olly300

silvercar wrote: »

Exactly my point that wannabe first time buyers are more fussy than they used to be. Here is a 2 bed flat, in a decent area, that satisfies points 2 to 4. It just isn't that new, given that new builds don't hold their price that isn't a bad thing.

http://www.rightmove.co.uk/property-for-sale/property-31547465.html

Added to that older flats tend to have bigger rooms then new builds plus areas/cupboards for storage.

cashbackproblems when you go and look at your new build have a look at where you are going to store household bits and pieces like an ironing board and vacuum cleaner, and bikes.

I have stayed with people who live in new built houses and flats, and those that have bikes or anything outdoorsy of value have had to store them on a balcony, in the downstairs toilet if it was near the front door or in part of the kitchen.

Houses and flats built before 1980 tend to have a place outside that is bigger enough to store a bike. Yes you may have to secure it by bolting it to the floor or brick wall.

They also have a cupboard or cupboards inside that are big enough to store a vacuum cleaner and an ironing board. Lot of new build properties don't have that so they are stored in the hall or second bedroom.

adindas

Dear milliebear00001

What would you suggest the affordable place to buy property, or to rent (let say within 1 hour commuting time) if you want to work in London. I know for working in London, there is normally a weighitng allowance of about £3.000 do you think this is reasonable ?.
Thank you for your time

ADINDAS

milliebear00001 wrote: »

I lived in London in my twenties, earned an average salary for most of that time and was able to afford to rent a nice flat (with then bf who also earned an average salary) and live a pretty nice lifestyle. As soon as we began to think about buying/starting a fmaily, we quickly realised the trade off all avergae incomed Londoners have to make at some time - commuting longer and paying extortionate travel costs in order to be able to afford a decent sized home/start family. OR, stay renting in a small (though lovely!) flat.

We bought out in the sticks, did an hour and a half's commute each way. Quickly realised this was not tenable and moved 'home'. I am now the sole breadwinner, earning less than I did back then, have two children to support, and am about to purchase a bigger house than I owned before. My commute has dropped to 40 minutes and I live in a very nice town on the edge of the Peak National Park - can't understand why anyone who has a choice, wants a family and the trappings that come with that choice, would stay (and nor can my OH who was born and bred in Herts!)

adindas

I totally agree with this idea I am not a conservative supporter but with regard to the Housing allowance cap I totally agree with this.

Why should people support to pay someone or family rent that they themslves can not afford ?.

People have a choice how many children they could afford whether to live in London or not. But for this, they have to pay the price. It is a sick system. It will encourage a family to live in London and have children as many as possible even they could not afford.

I have seen on BBC that the people who are receiving a huge housing benefit living in a quite posh area in London argue:
" how could you tell 9 years children that we have to move, because we can not afford the pay for the rent".

Well for me it is not a legitimate argument. A lot of people need to move elsewhere because the job requires them to move, some even with less pay then they used to get.

The politician interest is just to win the election. You could count on how many family on housing benefit will support them.

ADINDAS

Fiddlestick wrote: »

It's what's known as a "perverse incentive".

The real solution is for people to:

a) Stop having children they cannot afford
b) Stop expecting the state to pay to raise their children
.

adindas

Dear ruggedtoast

Interesting story though.
One quick question. How could students who are studying in London manage to survive ?

I have heard many international students just get in less than £800 per month from their parents but they manage to survive in London ?. How could we explain this ??

ADINDAS

ruggedtoast wrote: »

I was earning around the 30s mark, my wife the mid 20s. A bit above normal for our age basically.

We used to live in Zone 2, just South of the river. Paid £750pcm for a small 1 bed loft flat, no lift, no central heating. When we wanted to have a child we moved to Zone 4, small 2 bed house with postage stamp gardn, £1100pcm.

We've moved out to the home counties now as I have another job so no longer live in London. However once the little toaster came along, wifes income cut in half, childcare costs, travelcards, council tax etc, we'd have been eating into our savings just to stand still.

In order to move somewhere cheap enough so we could claw back a little each month, our son would have been growing up around gangs and streetcrime and going to a primary school where English was most kids 2nd or 3rd language. Not really the middle class dream.

You have this curious problem moving outside of London and commuting in however. Rents and house prices drop as you go further out, but not that much, however the price of rail travel rockets. Leaving you no better off and with the real prospect of a rail fare hike leaving you at a big disadvantage.

If you're unfortunate enough to need to be on a Tube you could be looking at up to £400pcm just for a travelcard.

So what do people do, well they rent and hope basically. They hope rents will come down, house prices will come down, that railfares will come down, they'll get that payrise, that a job will come up outside London, that something or other will turn up.

If they are single they flatshare and hope. It can be 'fun and sociable', it can also be a screaming nightmare, depending on who your flatmates are.

London is basically full. The infrastructure it has cannot support the number of people who need to live there. Unlike other cities you cant cut your cloth in London because nowhere is cheap and a great many places are hazardous to your safety.

adindas

There a lot of Home, EU, International students who are studying in London and living in the student dorm in London could take this jobs, are not they ?

ADINDAS

ukcarper wrote: »

Don’t get me wrong I agree something has to be done but you will always need people to do the low paid jobs and you can’t afford to commute very far on minimum wage. Obviously you don’t need to live in Kensington and Chelsea but how many claimants do.

milliebear00001

adindas wrote: »

Dear milliebear00001

What would you suggest the affordable place to buy property, or to rent (let say within 1 hour commuting time) if you want to work in London. I know for working in London, there is normally a weighitng allowance of about £3.000 do you think this is reasonable ?.
Thank you for your time

ADINDAS

I am not sure exactly what you are asking. There are lots of places within a one hour journey of London, but many of them are still quite expensive and/or not places I'd choose to bring up my family. Certainly much more expensive than house prices where I live now. Your £3000 'weighting' (are you public sector?) would be eaten by the extra travel costs (I used to pay about £2500 pa for train and Tube, and that was nearly ten years ago.

I can only suggest you think about where you are likely to need to get to for work, then follow the train service lines out until you hit the house prices you can afford, then go and visit!