What Quarter of a Million gets you in London

Graham_Devon

Conrad wrote: »

Well as someone dealing with London buyers, my average client couple earns £89000.
These are ordinary folk not bankers or professionals in the main.



One couple - she works in a hairdressers, he is a self employed builder, Russians, just bought first place, a 3 bed house in Romford for £250k. She works central London. His real income is going to be higher than that he pays tax on (for example use of room in home as an office is not a real cost).

To be fair, all your clients are abit.... well... "dodge" aren't they.

Cabbies reducing their income to £0 for tax purposes with you securing a mortgage on a their "real" income, including cash in hand backhanders pulling in £110k a year etc.

So it's no real surprise that your self employed builder and hairdresser are raking in £89k

[Deleted User]

Graham_Devon wrote: »

To be fair, all your clients are abit.... well... "dodge" aren't they.

Cabbies reducing their income to £0 for tax purposes with you securing a mortgage on a their "real" income, including cash in hand backhanders pulling in £110k a year etc.

So it's no real surprise that your self employed builder and hairdresser are raking in £89k

It's also a good example of 'selection bias' - as only people earning large amounts with unusual revenue streams will need your guidance

PasturesNew

BillJones wrote: »

I can buy a 2,000 square foot flat on the water here in central London for only two years' salary. Is that not good value?

Meanwhile, back in the real world, in a random town elsewhere in England, somebody like me could buy a house 1/3rd of the size of that for 10-12x annual salary

cells

Expensive areas exist outside of London too

For instance the town of Harpendon is v.expensive and the town of Luton which is very close is relatively cheap

Both have plenty of land around them to expand if need be

Harpendon is expensove because roch people have displaced the poor enough so that the value of the homes is more than the bricks and more than the la d it sits on. The buyers pay the sums they do to be away from poor people. Or rather rich people congregate together which is a nicer way of saying it


London or lots of London is now like harpenden. The price is the value of the home itself £ 150k plus the plot of land which is inflated because its in London and close to transport links say another £150k and then a widely varying premium for being close to other rich people and far to poor people.

its why you can have huge differences in prices. Eg buckhurst hill proces are over 2m romford they are closer to 0.2m even though they are both about as far from central London


Every country has this, even France which builds 400k homes a year...inner Paris is v.expensive.

However the uk is expensive overall. A new build in some town or city most people couldn't easily find on a map costs £3k per sqm. The same new build in a town most natives in France or Germany couldn't easily find on a map costs closer to half that figure.

cells

PasturesNew wrote: »

Meanwhile, back in the real world, in a random town elsewhere in England, somebody like me could buy a house 1/3rd of the size of that for 10-12x annual salary

His arguments are quite stupid effectively boiling down to

I can pay £50 for a cup of coffee so it is affordable

Although his thinking is wrong he is correct that people are and will continue to pay those and higher prices. Not because of the flat not because of the location but because of human nature.

its a bit like the art market. A canvas selling for $100m. Its not the frame it's not the paint its not even the labour in the work its value is its value in others believing. A 100% perfect replica would not even be worth $100k


so pretty much ignore inner london and maybe going forward lots of oiter london too. The rest of the country by comparison to London may lool cheap but by comparison to French or gerkan new builds uk new builds are 2-3x the price per sqm

BillJones

IronWolf wrote: »

The value of a property is completely independent of whether you personally can afford it or not.

Maybe I shouldn't be surprised someone in the finance industry struggles to differentiate price from value

Value is subjective. The value to me is what I am willing to pay for it.

BillJones

PasturesNew wrote: »

Meanwhile, back in the real world, in a random town elsewhere in England, somebody like me could buy a house 1/3rd of the size of that for 10-12x annual salary

I'd not agree that your world is more "real" than mine.

If we want to talk about affordable, we don't just get to chop the bits of the population out that distort the numbers from where we'd like to claim that they are, but even looking at examples back up where II'm from, family members are on £30-40k, and you can get a very nice three bedroom semi for about £160k.

IronWolf

BillJones wrote: »

Value is subjective. The value to me is what I am willing to pay for it.

True value exists outside the minds of people in an economics sense, of course noone can really know what "true value" is.

I think the best way to value houses in general is the discounted present value of future rental cash flows, much like any other investment is valued. In other words, I think a houses value is directly related to the rent it could achieve on the market.

This works particularly in London because so many properties are rented out and the market is competitive.

Lets go back to you as an example, you say you can afford to buy a flat in said area for 2x salary so it is good value. Is it still good value if you could rent that same flat for only 0.05x salary per year? You're buying that house for 40 years worth of rent, and you will probably be spending more than 0.05x of your salary a year on interest on your mortgage. To me it is better value to rent and invest the money you save elsewhere.

I'm a good example of how prices are dislocated from value now. I have always lived in zone 1 since moving to London. I now live 30 seconds from Pimlico tube station so very affluent area, used to live in Westminster, and not in a crappy ex-council estate but a nice building, the neighbours in the building next door drive Astons and Mercedes usually.

I live with my gf and can comfortably afford the rent and have plenty of disposable income for socialising.

But if I look at where I can actually buy a flat, I can't even afford to buy a £250k flat, which means I can't afford to live in even a crime ridden, tiny ex council flat about 30-60 minutes further from the centre than where I live now! My only hope of having a decent flat would be shared ownership. Something is clearly not right given where I live now, and where I can afford to buy.

The situation may never change, I don't know, but I know for me I'd prefer to just rent. Hell maybe I'll get a BTL place up north that I can afford and get a 10% yield like my parents do. Couple of those would cover my zone 1 rent for much a smaller outlay!

posh*spice

IronWolf wrote: »

True value exists outside the minds of people in an economics sense, of course noone can really know what "true value" is.

I think the best way to value houses in general is the discounted present value of future rental cash flows, much like any other investment is valued. In other words, I think a houses value is directly related to the rent it could achieve on the market.

This works particularly in London because so many properties are rented out and the market is competitive.

Lets go back to you as an example, you say you can afford to buy a flat in said area for 2x salary so it is good value. Is it still good value if you could rent that same flat for only 0.05x salary per year? You're buying that house for 40 years worth of rent, and you will probably be spending more than 0.05x of your salary a year on interest on your mortgage. To me it is better value to rent and invest the money you save elsewhere.

I'm a good example of how prices are dislocated from value now. I have always lived in zone 1 since moving to London. I now live 30 seconds from Pimlico tube station so very affluent area, used to live in Westminster, and not in a crappy ex-council estate but a nice building, the neighbours in the building next door drive Astons and Mercedes usually.

I live with my gf and can comfortably afford the rent and have plenty of disposable income for socialising.

But if I look at where I can actually buy a flat, I can't even afford to buy a £250k flat, which means I can't afford to live in even a crime ridden, tiny ex council flat about 30-60 minutes further from the centre than where I live now! My only hope of having a decent flat would be shared ownership. Something is clearly not right given where I live now, and where I can afford to buy.

The situation may never change, I don't know, but I know for me I'd prefer to just rent. Hell maybe I'll get a BTL place up north that I can afford and get a 10% yield like my parents do. Couple of those would cover my zone 1 rent for much a smaller outlay!

Do people really think like that about buying a house? I dont - i think what a graet love nest or what a great nest for me OH and our babes - rental yields ?? Nahhhh

Generali

posh*spice wrote: »

Do people really think like that about buying a house? I dont - i think what a graet love nest or what a great nest for me OH and our babes - rental yields ?? Nahhhh

You may not think of it in those terms directly but it surely is a part of your thinking.

If you're renting a flat in Poshton and look to buy and can only afford to live in Hellholesville then perhaps you put off buying.