The First Time Buyer - How do they have it really?

thedalmeny

chewmylegoff wrote: »

Yes but if you compare an area with 33% owner occupancy to an area with 70% owner occupancy then it is difficult to draw any reliable conclusions by comparing the data. The disposible income (before housing costs) of someone who already owns a house is likely to be higher than someone who is renting one.

Thus when you look at the data for other areas and compare it to London, the average earnings in the other areas is dragged up by all of the owner-occupiers living there and the average earnings in London are dragged down by all the people living in govt subsidised accommodation. The reason the owner occupier stats in London are so low is that the relatively affluent middle class all live outside London and commute in. They could afford to buy there if they wanted to but they have gone to live somewhere else and their absence means that average incomes are dragged down by the population consisting of poor people interspersed with small populations of super rich (who declare no income in the UK).

There is little point trying to assess affordability by looking at average wages in an area. It would be more relevant to look at average wages of people who don't yet own a house but have some sort of hope in help of buying one. (People living in london off housing benefit in minimum wage jobs have never been able to afford to buy and never will, for instance).

You really need to look at the data in which this is extrapolated from, as i think you somewhat misunderstand what the source data represents. Owner occupancy rates, potential differences in living costs for renters or owners... None of this impacts the figures displayed. For example, the ONS average earnings is based on full-time employee statistics, it does not include people on housing benefit.

It looks at the following base information;

• The average salary for the region for a full-time worker according to the ONS
• The average house price by type for the region, according to the Land Registry
• The average rent cost for the region based on a Buy To Let Index.
• An Acceptable Standard of Living average excluding rent, as per JRF Standard of Living report.

This allows me to get to the following answer;

If 'Person A' lives in 'Region B' and earns the average salary for that region, rents a house which is of an average price for that region and spends 'X' each month to achieve an acceptable standard of living, they will be left with 'Y' per month.

From that i can determine how long it would take that person to raise a 10% deposit for an average flat in the same region, subsequiently based on a average 5% interest rate what percentage of their net income is spent on mortgage repayment.

Now there is always a case for further refinement - but in this case it is a look at the statistical average and what that means for a single first time buyer. It's nice a simple category of buyer... However, i personally wouldn't want to do this same analysis on same a family with 2 children and their potential buying power.. As that becomes more complex, regional costs of childcare for example would play a significant part.

What you could say is while i have split rent / mortgage costs out of the JRF, as they're affecting considerably by region.. You could argue that general living costs may be increased as per region, such as travel expenses.. However, these are negligible and wouldn't represent a significant enough swing in term of averages.

[Deleted User]

lazer wrote: »

Thats your choice - you have to accept that if you live in London its more expensive and not easy to buy a house.

Personally I wouldn't live in London if it had the lowest house prices in the UK, but its all personal choice.

I moved out of the city (Not London though) so I could afford to buy a house instead of a flat.

And I had to stay within London to keep my job.. so the answer is - i must abandon my career and my wife must move away from her family, so we can afford a home?

Our first home was a house anyway.. but it was out in Zone 6 of London. We had to move even further out to move into a 'family' home (I can hear the M25 if i open my window). Still, only 35 minutes to Euston so it's not too bad

BUT - i'm not an average earner, i make a good 50% more than the 'London' average. Even though the London average is higher than national wages, there would't be a cat-in-hells chance of me buying my house on that money.

Citing individual examples ('My SIL bought a house, so everyone must be able to') is rather pointless. I know people in their 30s who bought £1m houses in London under their own (wealthy) steam. I know loads of people in their late-20s who must live in london for work, but won't buy in the only available areas they could afford (because they're usually nasty skankholes)

Yes, moving out of London is a great idea - but then you move out of the area that has the most high-paying jobs, and the best area for continual employment. The free museums are a bonus though...

thedalmeny

In a similar way that i got frustrated by the press lumping the U.K into one big pile in terms of house prices and affordability, so decided to look at it from a regional perspective.. The same could in a way be said about my breakdown.

Undoubtedly some areas of London will be disproportionately expensive compared to others, in the same way Wilmslow is going to be disproportionately expensive compared to many other places in Cheshire. However, i think the regional averages go about as far as you'd want for a broad look at the U.K without going into to much detail.

For example, i'm personally 29, earn twice the average salary for the North West (Wife earns just below the average) yet we have just purchased a 4 bedroom detached property for 14% less than the regional average.

[Deleted User]

thedalmeny - you might like this - http://www.zoopla.co.uk/heatmaps/

The horrible irony is that 2 years ago, i moved firms and now i'm a 'virtual worker' - so i could live anywhere in the country I chose. It is convenient to live near London as that's where most of my customers are, but I've got colleges in Scotland, Bristol, Leeds - and our head office is up in the North west.

The problem is, once you've spent £9k on stamp duty and got your kids into a decent school, you don't feel like moving house again too quickly

thedalmeny

ringo_24601 wrote: »

thedalmeny - you might like this - http://www.zoopla.co.uk/heatmaps/

The horrible irony is that 2 years ago, i moved firms and now i'm a 'virtual worker' - so i could live anywhere in the country I chose. It is convenient to live near London as that's where most of my customers are, but I've got colleges in Scotland, Bristol, Leeds - and our head office is up in the North west.

Once you've spent £9k on stamp duty, you don't feel like moving house again too quickly

Zoopla! Never seem to trust them... Their statistics always appear a little odd to me, especially their 'Zoopla Estimate'

£9000 stamp duty? even my 1% stamp duty was covered by Halifax as a first time buyer offer .

Sometimes i wonder if we should of spent more, but a 4 bedroom house at 1250sqft.. 10-15 mins from work, decent schools... It seems plenty for me, wife and son. Guess i'm cautious, we're debt free except for the mortgage.

chewmylegoff

thedalmeny wrote: »

You really need to look at the data in which this is extrapolated from, as i think you somewhat misunderstand what the source data represents. Owner occupancy rates, potential differences in living costs for renters or owners... None of this impacts the figures displayed. For example, the ONS average earnings is based on full-time employee statistics, it does not include people on housing benefit.

It looks at the following base information;

• The average salary for the region for a full-time worker according to the ONS
• The average house price by type for the region, according to the Land Registry
• The average rent cost for the region based on a Buy To Let Index.
• An Acceptable Standard of Living average excluding rent, as per JRF Standard of Living report.

This allows me to get to the following answer;

If 'Person A' lives in 'Region B' and earns the average salary for that region, rents a house which is of an average price for that region and spends 'X' each month to achieve an acceptable standard of living, they will be left with 'Y' per month.

From that i can determine how long it would take that person to raise a 10% deposit for an average flat in the same region, subsequiently based on a average 5% interest rate what percentage of their net income is spent on mortgage repayment.

Now there is always a case for further refinement - but in this case it is a look at the statistical average and what that means for a single first time buyer. It's nice a simple category of buyer... However, i personally wouldn't want to do this same analysis on same a family with 2 children and their potential buying power.. As that becomes more complex, regional costs of childcare for example would play a significant part.

What you could say is while i have split rent / mortgage costs out of the JRF, as they're affecting considerably by region.. You could argue that general living costs may be increased as per region, such as travel expenses.. However, these are negligible and wouldn't represent a significant enough swing in term of averages.

Au contraire - the housing benefit angle does impact the calculation as people are subsidised to live in London by housing benefit. Because it is not factored into the average income equation it makes the figures misleading as there are large swathes of people (most of whom are in employment - I think 90% or so) living in houses which cost more to rent than they could possibly afford to pay from their salary. You them just look at the salary vs. housing costs and conclude that virtually the whole salary is spent on housing costs when it is not. Given that there are something like 800,000 households (with about 2-3 million people living in them) claiming housing benefit in London, I personally think there is likely to be a signficant skew to the figures which doesn't really exist in the figures for other areas.

The reality is that it doesn't take an average FTB couple who work in London 16 years to save up for a flat deposit. The stats are obviously nonsense and I am fairly confident that the explanation is the different in current owner-occupier% skewing the income stats and the fact that many people working in London do not live there because they would prefer to buy on the outskirts instead. Whilst many parts of London may be largely unaffordable this does not, in my view, support your conclusion that it is not worth working in London from a purely economic standpoint.

OffGridLiving

Loughton_Monkey wrote: »

Basically, what I glean from this is that if I were a single person, living rent free at home, and earning £60K, I could probably rustle up the deposit for a house in a couple of years.

If, on the other hand, you were married with 2 kids, living in rented accommodation, earning £30K, it might take you 99 years to save for a deposit.

Perhaps something they should have thought about getting on the property ladder before having their 2 kids?

[Deleted User]

OffGridLiving wrote: »

Perhaps something they should have thought about getting on the property ladder before having their 2 kids?

Oh, if everyone planned their lives out on a spreadsheet the world might simple enough for you to understand

thedalmeny

chewmylegoff wrote: »

Au contraire - the housing benefit angle does impact the calculation as people are subsidised to live in London by housing benefit. Because it is not factored into the average income equation it makes the figures misleading as there are large swathes of people (most of whom are in employment - I think 90% or so) living in houses which cost more to rent than they could possibly afford to pay from their salary. You them just look at the salary vs. housing costs and conclude that virtually the whole salary is spent on housing costs when it is not. Given that there are something like 800,000 households (with about 2-3 million people living in them) claiming housing benefit in London, I personally think there is likely to be a signficant skew to the figures which doesn't really exist in the figures for other areas.

The reality is that it doesn't take an average FTB couple who work in London 16 years to save up for a flat deposit. The stats are obviously nonsense and I am fairly confident that the explanation is the different in current owner-occupier% skewing the income stats and the fact that many people working in London do not live there because they would prefer to buy on the outskirts instead. Whilst many parts of London may be largely unaffordable this does not, in my view, support your conclusion that it is not worth working in London from a purely economic standpoint.

I think you've have to be pretty dense to think i'm suggesting the average first time buyer takes 16 years to save for deposit in London, what it does illustrate is that somebody on an average salary in London cannot reasonable afford to purchase a flat in London at the average value.

Furthermore, what you say is pure conjecture. You have yet to state a reputable source for your information or even prove how the source data used in this analysis is not suitable.

Jack_Johnson_the_acorn

ringo_24601 wrote: »

Oh, if everyone planned their lives out on a spreadsheet the world might simple enough for you to understand

It's hardly a difficult bit of logic.... kids are expensive, houses are expensive....... plan ahead