i live in the suburbs of London. How do people afford houses?

time2deal

I bought my first little flat in london when I was 30, and have been lucky with it and my current flat. My 2 bed flat is creeping towards a million quid, and I just cannot imagine who can afford to buy it. What type of family/couple wants to spend that much on a flat. I have a high salary, but I couldn't afford my own flat in a million years.

But the market is incredibly hot, and the flats are appearing and going under offer very quickly. Ill take my equity and head out of london soon enough, and I'm grateful I've been so lucky (and made some good decisions) but I must admit I find it hard to think of why its worth so much and what type if person will buy it from me.

melanzana

Hot markets Can cool down very quickly.

IMV there is a London and SE market out there, and probably always will be. Capital city, lots of rich people want to live there.

The problem as I see it, is when ordinary folk are offered massive mortgages multiple times their income to buy a shoebox, that means trouble ahead.

That is just fuelling a bubble.

You just have to look at Ireland. No way the same as London, but a similar property frenzy happened there up to 2008. Banks, light touch regulation, giving huge mortgages to those who really could not ever afford them in the long term.

Now there is massive negative equity, defaults, insolvency, and a construction industry collapse.

However, despite all that prices are creeping up signifantly in
Dublin. Why? Lack of supply, and it is the capital city..people want to live there.

So be warned. it's ok if you have a massive salary, good equity, etc., but if you are just like me, and on a decent, but not huge salary...don't get sucked into the blurb of the banks. There will be tears for those like us. Everyone else will be ok.

shortchanged_2

92203 wrote: »

There's nothing that can be done, and you can't really fight against the system. The government and their paymasters (the banks) want high house prices, no matter what the cost.

Inadequate supply (due to restrictive planning regulations, IMO designed to cause a shortage and drive prices up)combined with population growth and financial meddling by the government/central bank (FLS, Help to Buy, low interest rates etc) will only push house prices further.

You're not alone in feeling despondent on the matter.

What we have could almost be described as an intergenerational apartheid ;

Those who were able to buy houses pre-boom (2002 or earlier) were able to afford homes at a reasonable ratio to their earnings, in many cases it was possible to afford a house on a single income. These people now enjoy very low mortgage repayments as the equity they hold allows them to get
low interest rates on their mortgages.

Anyone who made the mistake of being born 5-10 years too late will now have to pay 2-3 times as much for the same house, meaning that they have to be more indebted, have better jobs and ultimately work harder to get the same house as the people who were old enough to buy when prices were more reasonable.

This for instance could make the difference between being able to have a happy family life, or a strained one (both parents working and child at nursery/childminder), or even not having a family at all.

I'm not even referring to London here, I imagine that prices have increased significantly more there than elsewhere in the country.

Unfortunately your measured response was a reply to a sarcastic comment from blacklight.

Cornucopia

ruggedtoast wrote: »

It hasn't sunk into the national consciousness yet how radically the social fabric of the UK has changed, and how quickly.

People without equity or savings, having to rent, on average salaries, have next to no chance of being stakeholders in the SE. All they can do is watch as rents rise, prices spiral and zeros are added to houses that used to be affordable on one salary.

There is a video on the front page of Priced Out stating that a house in Mitcham, adjusted for general inflation should cost £18,000 - £33,000 now. Yet they go for £300,000, a sum that is considered absurdly cheap for a dormitory town now.

More than ten times an average salary.

You've made the mistake of assuming that people will dive straight in and buy a 3-bed house. That was never the case in London, going back over a period of probably 50 years.

In reality, there are 1000s of properties within 30 miles of London (therefore potentially commutable) which are on the market for less than £125k (and therefore affordable to a couple both on average salaries).

I know people like to latch on to the zeros in house prices and fret about how bad it all is. The reality is (as always) more complicated than that.

Oh, and I don't believe the "Priced out" figures - they imply that the house should cost roughly annual average salary, and AFAIK houses have never been that cheap in any part of London.

The bottom line is: if you don't want to pay London prices, don't. Either commute in from somewhere affordable, or go and live in one of the UK's many other vibrant cities.

Fella

Triffid wrote: »

I live in London too and work in public services and see the same behaviour. I also see so many people of equivalent class/income level driving around in flash cars. I think it can only be explained by one thing. I'm taxed PAYE and can't cheat the system.....however many of my neighbours are self employed business/trades 'entrepreneurs' who often get paid 'cash in hand'......obviously in order to help the customer so they don't have to pay VAT on the job;)

Yes, clearly if anyone has a better car than you they must be a criminal, it's the only possible explanation. We should instruct the police to immediately arrest anyone driving something better than a 7-year-old Nissan, the tax-dodging scum.

Loughton_Monkey

HAMISH_MCTAVISH wrote: »

20 years from now people will be saying the same thing.

Prices always go up over the long term in an inflationary monetary system.

Except for those who faff around and miss the boat again.

The_White_Horse wrote: »

they are in well paid jobs - but not THAT well paid. somewhere between £50k to £100k. no more.

Inheritance?

zagubov

Bought first house jointly about 20 years ago. Sold and bought again about 4 years later and then 5 years after that when the 2nd house doubled in value. Now living in a 4-bed semi with garden but no drive.

Bought at the right time I suppose.
Would like to live somewhere further into London when kids have fled the nest.

If we'd bought earlier not so good and now we don't know how easily we could manage this.

setmefree2

ash28 wrote: »

They live in a 3 bed terrace they paid about £700k for (they could have a lovely family house in Berkshire for that sort of money).

They can get a loft conversion and make it into a 4 / 5 bedroom house.

In London they don't have to run any cars (though most families have one). That saves a fortune.

The state schools are the best in the country ( http://www.bbc.co.uk/news/education-19151471 ) and everyone uses them. That saves a fortune.

The teenage kids won't be trapped in a house waiting to get a lift from Mum or Dad - they can walk or use public transport, so they have more freedom. They won't demand a car at 17. That saves a fortune.

They won't have a long, expensive commute. That saves a fortune.

Work is plentiful, interesting and well paid for all the family.

Plus, they won't have to live in some anonymous boring village that means nothing to them and their adult children will never come back to. Instead they can live in one of the best cities on this planet.

Berkshire - allow it!

Conrad

The_White_Horse wrote: »

that is what I want to know. I know people that are buying 3 bed semis for £800k. of course, these prices are madness and people are mugs BUT - where are they actually getting the £800k from to buy these houses?

these people are moving up - not selling houses in mayfair and kensington and moving out to the suburbs - these are people that are selling £400k homes and then buying £800k homes.

even if these people owned their first home completely - which 99% of them don't - they would still require mortgages of £400k and a single earner on £100k would be lucky to get that.

the reality is, they might have £150k-200k in equity. so are getting mortgages of £600k. how are they managing this??????

Pretty much a standard case for me now are people with about 25/30% deposit buying £800k houses.

As I always say, there is tons of money being earned, the national income statistics are flawed on many counts.
Lot of clients are self employed consultants - their true income is much higher than that reported in their SA302's - for example they might pay their partner £50k per year.

Black cabbies I deal with take home about £5000 pm after tax (even airport cabbies I deal with make this now), but their tax returns generally show a modest profit less than £30k pa.
Everyday stuff.

I think the average joint income I come across is something like £70k.

Conrad

time2deal wrote: »

I bought my first little flat in london when I was 30, and have been lucky with it and my current flat. My 2 bed flat is creeping towards a million quid, and I just cannot imagine who can afford to buy it. What type of family/couple wants to spend that much on a flat. I have a high salary, but I couldn't afford my own flat in a million years.

But the market is incredibly hot, and the flats are appearing and going under offer very quickly. Ill take my equity and head out of london soon enough, and I'm grateful I've been so lucky (and made some good decisions) but I must admit I find it hard to think of why its worth so much and what type if person will buy it from me.

You are indicative of the sorts of people that buy in my village forcing up the prices out here some 35 miles from central London. It's making a lot of villages middle class 'super Mum' enclaves which I guess has it's downsides.