First Time Buyers - Enough is Enough!

meanmachine_2

I think everyone on this board, myself included, should be listening to Slater - someone who looks at the property market from the perspective of a realist.

Jancee, your shaky grasp on figures is starting to worry me now.

We're comparing the average wage to the average house price. Do you not understand that? Are you now expecting a FTB on an average wage to have to squat in a below average property? How then will they EVER be able to climb the ladder?

The point of the FTBer is that they are *meant* to be earning below the average wage so that, as their earnings move nearer to the average they can AFFORD to move up the ladder.

If they are unable to do this - as is the case right now, April 30th 2005 - the whole property ladder freezes up. Bingo - that is where we are today.

The one stat that should be turning everyone's blood cold is that the average age of the FTB is now an incredible 34. A 34 year old isn't on the first rung of the career ladder. They're probably at the peak of their pay scale, and yet they STILL can't afford to get on the ladder.

Does that sound sustainable to you? No. Hence the impending "correction".

And again, anyone who thinks property is a safe investment, and a replacement for pensions is going to be heartbroken come retirement age.

meanmachine_2

Oh, and one other fact that has been conveniently forgotten by some people on this board. Wages can go down as well as up.

Wages might have increased by around 4% over recent years (still not nearly enough to keep up with soaring house prices), but in an economic slowdown, do you know what happens to average wages? Uh uh, they go down.

Still think house prices can only go up?

Still think that, over the next 25 years, IR rates can't possibly go back to their historical average of 8%?

Still think that borrowing 5.5 times your salary is a clever move? Well then, how about when we hit a recession and your wage starts falling real terms, so that your mortgage suddenly becomes 6.5 times your salary? Or 7.5 times your salary? You think house prices are going to keep going up then?

JanCee

slater14 wrote:

Jancee,

As a not so new money saver, I take it you do grasp the idea of what "average" implies?

ALL house prices have risen to the same levels.
.

I'm well aware of what average means thanks. What I am saying is that if average house prices across the country are £190k then it stands to reason that lots of houses are priced under that figure. Start low and work your way up. I've just checked in our local paper and at a quick glance there are at least 30 houses at under £100k.

All houses prices havent risen to the same level, they may have risen by the same level but that's a totally different thing.

meanmachine_2

JanCee wrote:

I'm well aware of what average means thanks. What I am saying is that if average house prices across the country are £190k then it stands to reason that lots of houses are priced under that figure. Start low and work your way up. I've just checked in our local paper and at a quick glance there are at least 30 houses at under £100k.

All houses prices havent risen to the same level, they may have risen by the same level but that's a totally different thing.

Read my post and educate yourself. You've got a lot to learn about the property business.

meanmachine_2

JanCee wrote:

I'm well aware of what average means thanks. What I am saying is that if average house prices across the country are £190k then it stands to reason that lots of houses are priced under that figure. Start low and work your way up. I've just checked in our local paper and at a quick glance there are at least 30 houses at under £100k.

All houses prices havent risen to the same level, they may have risen by the same level but that's a totally different thing.

Oh I see - start low and work your way up. Aah got it. Doh, it's so simple!

34 year old FTB on average wage of 25K starts low, buying a below average property @ 100K. It's a sh*thole, but never mind.

Five years later, 39 year old FTB is still on average wage. This is now £28K. After all, they bought a property at an age where they couldn't really climb any higher up the pay scale.

Jancee now suggests they move up to the second rung on the property ladder. House prices have gone up 4%, and the next property on the ladder now stands at £210K. FTBer is stuffed. Can't move up, and certainly can't move down, because Jancee advised them to buy at the very bottom of the ladder.

Now what's your advice?

JanCee

meanmachine wrote:

Read my post and educate yourself. You've got a lot to learn about the property business.

:rotfl:

Sorry I thought the idea was to get FTBers on the property ladder not to get them on halfway up, my mistake.

Your delightful description of properties at the lower end of the price range is an insult to the people who live in them.

I'm now off to look after my successful property portfolio(small but perfectly formed)

meanmachine_2

JanCee wrote:

:rotfl:

Sorry I thought the idea was to get FTBers on the property ladder not to get them on halfway up, my mistake.

Your delightful description of properties at the lower end of the price range is an insult to the people who live in them.

I'm now off to look after my successful property portfolio(small but perfectly formed)

I give up.

If you don't understand the points I'm making, that says more about you than it does me.

10 years ago, a FTBer was typically someone in their mid 20s on a BELOW AVERAGE WAGE. They had years ahead of them and the likelihood of moving up the ladder as their financial situation improved.

Now, a FTBer is a 34 year old on average or even ABOVE AVERAGE wage. Because of this fact, the ladder stops becoming a ladder and becomes a prison. If you don't get that, then I feel sorry for you.

slater14

Jancee,

Please forgive my appaling mistake (I think everyone got the gist of it). Anyway, back to the burning issue -

*PLEASE* Do try and follow me very carefully on this point

Step 1. the AVERAGE wage is £23,500
Step 2. The AVERAGE house price is £185,000

Question - if the AVERAGE wage is £23,500 and you can borrow 3.5 times salary how much should the AVERAGE house cost?

Question - If the AVERAGE house is £185,000 how much should the AVERAGE salary be?

Jancee,

In you posts you are trying to use only one set of the averages (namely income) but the two are linked together, indeed some say they are one but shown on two paralels. They were NEVER meant to stand alone - when you say "so buy a cheaper house" that isnt the idea of the "AVERAGE" is it?

deemy2004

The times are rare when the conditions for FTB's are perfect......... Its usually just after an recession, the last time it was so was in 1992 to 3. Since which every year things have got worse for FTBers... Now having reached an extreme level where people are talking about 30, 40 year mortgages. As in the past the time will come again when the FTB's will have the upper hand, and so the cycle will begin again.

We are probably still about 4-5 years away from the optimum time for FTB's.

The main thing that FTB's should be doing is SAVING ! Save as though your paying a mortgage, for when it is a perfect time to buy, is usually coupled with tight credit and high interest rates so makes it harder to get mortgages especially the 90%+'s

Some fantasy sums
Save £10k per year for 5 years with 5% interest = £58k in 5 years time. House prices fall 15% - Say target house prices £200k today = £170k in 5 years - Less cash £58k = £112k mortgage. So the MAIN thing is to SAVE, SAVE, SAVE ! Plus in a buyers market you have more lee-way to knock the odd £10k off the price...

Also the real value of a £170k property in 5 years time will be £146k as against its value today(taking into account inflation of 3%).

So this IS the best time for FTB's to sit on their hands and SAVE as much as they can ! Cos NOW the trend is in YOUR favour ! Just don't get tempted into jumping in at the top !

Those that have recently jumped on the Housing bandwagon will feel the pain as in 5 years time the real value of their property on a 15% price drop will be 30% LOWER !!!

And if by some miracle house prices stagnate and move sideways then still your looking at a drop of 15% in real terms.

Now as some are hoping in a crash - lets do the sums for a 3 year crash.........
Crash = 30% drop (10% per year)
Inflation 3%

On three year times property will be 38% lower in real terms.
Followed by another 2 years of sideways movement
Property will be 42% lower in real terms.

slater14

meanmachine,

Thank you for your above comment.

I dont have all the answers (I wish I did) but I can spot an anomoly when I see one. It does surprise me that on a website such as this (a savers site) that people can be so blinkered when it comes to houses.

If this topic was on a new money saving invesment I think people would want to know in depth how the proposed financial return would work. If it looked shakey, they would walk away.

The only other "financial investment" that I can even compare current house prices to is - Women Empowering Women (a horrible little pyramid). I tried to explain to my girlfriend IN DETAIL what it was and why it couldnt work...."but Susie made £24,000" was all she could say....and Susie subsequenly "reinvested" her 24k into more "hearts" and guess what? She lost the lot (so no big surprse there then)

Current house prices are built on the same quicksand as that tosh.