Is it really that hard?

[Deleted User]

So - in my neighbourhood (South Hertfordshire, within M25), house prices have risen by about 30% over the last 3 years. It was a struggle to get the mortgage sorted even then.

It's pretty hard to say that salaries have risen by that much over such a short timespan. I know I couldn't afford to buy my own home again if I only had the same deposit I had 3 years ago.

ergo - It's still getting tougher and tougher to get on the housing ladder (and to climb up it). People must be deferring until they earn enough and renting for longer.

Cornucopia

Samsonite1 wrote: »

It probably depends on your circumstances. I was always fairly "standard". First house was savings as a deposit and mortgage - it was all handled via the bank. Second house was a large deposit from the capital of the first house and another mortgage.

Exactly. So why does everyone think that a big house should be affordable just from a Mortgage?

Samsonite1

ukcarper wrote: »

The whole thing is general some areas improve some deteriorate so you might have to pay 10x what somebody paid to live in a particular road but within easy commuting distance you might only have to pay 5x.

The properties I used as examples are in reasonable areas with good links into London so as far as I can see you need to pay about 6x what I did in 1985.

That seems about right from check a few other areas - I am getting 6-7x each time. You can go down to 5x if you are willing to live in a rough area.

Cornucopia

ukcarper wrote: »

The properties I used as examples are in reasonable areas with good links into London so as far as I can see you need to pay about 6x what I did in 1985.

The flat I bought in 1988 was £52k, and a similar one is on the market now for £180k, so 3.5x as much.

Samsonite1

Cornucopia wrote: »

Exactly. So why does everyone think that a big house should be affordable just from a Mortgage?

You are right, that is why we have the property ladder. If you look at your first property (even a 1 bed flat) as a foot on the ladder, it is a useful vehicle for investing your money and building up a deposit. Yes, you can lose out if house prices go down, but the trend is generally upwards over a long period. You can also gain - timing is important and in most cases you do have control over when to buy and sell (but not always, your mileage may vary).

ukcarper

Samsonite1 wrote: »

That seems about right from check a few other areas - I am getting 6-7x each time. You can go down to 5x if you are willing to live in a rough area.

That's the thing prices are high about 6x average earnings compared to the long term average of 4.2x. But you can now borrow more in relation to what you earn and interest rates are lower.

ukcarper

Cornucopia wrote: »

The flat I bought in 1988 was £52k, and a similar one is on the market now for £180k, so 3.5x as much.

According to nationwide prices went from 3.5x average earnings in 1986 to 5x on 1989, timing is everything.

dktreesea

princeofpounds wrote: »

Gravesend - London Terminals season ticket is £3252, and that's assuming he is within walking distance of the terminus.


£3252 capitalised at 2.6% 5 year fixed mortgage rate is £123,181.


That travel cost instantly wipes out most of the so-called saving from commuting, at a significant cost to time and lifestyle.


It is maybe a bit better if he needs a zonal travelcard now and doesn't if he lives out in Kent, but it's quite likely he will want to travel within London frequently anyway. It only take missing the last train home once or twice to wipe out the monthly saving too.


He is not nearly as stupid as you think he is.

That's missing the point. It's not just about a straight financial calculation. Why would it be? He would probably only be in the first place for a few years, and then hold onto it to rent out while he buys another place.


To me, he is grieving. Grieving for what he thinks he should be able to afford but can't. Grieving for the fact his parents are asset rich but cash poor so can't help him out....well, not exactly, but they both want to retire in their 50s so are hoarding their cash.


He wants to buy his own place. He's fed up with living with his parents. But he can't afford Acton. His only choice, if he can't get a job paying £90k a year or so tomorrow (it would then be no problem borrowing £300k to £350k for a nice flat in Acton) is to move away. Grieving and feeling sorry for himself isn't going to solve his problem - he needs to act.


I suggested Gravesend to him because he could still get a train direct to work and he could easily afford it. He could probably also afford Hackney, but at least at Gravesend he'd have the river and a water view. And a much nicer place than he would be able to afford in Hackney. As to missing the last train, he can go and bunk with mum and dad in Acton if that's a possibility.


This isn't about the money per se. It's about him expecting to do better than his mum and dad did but being faced with the possibility that the only way he will ever afford the equivalent of their £1million+ house in Acton is if he inherits it. People who are in their twenties and doing well, even in London, find it hard to cope with the possibility that they could be in their fifties before they catch up to Mum and Dad, if ever. But one thing for sure, if he doesn't get onto the property ladder, failing being a stocks and shares whizz kid, or winning £1million on the premium bonds, he'll likely never catch up.

Samsonite1

ukcarper wrote: »

That's the thing prices are high about 6x average earnings compared to the long term average of 4.2x. But you can now borrow more in relation to what you earn and interest rates are lower.

Although the housing market is tough, you can start small.

I think the problems with house buying start with the societal issues of essentially being spoilt. I see young people every day with their iPhone 6 (how much did that cost?) - they simply must have it and there will be many other products they must have. This is the fundamental problem - from teenagers onwards, people spend their spare money on frivolous items. You can get a decent working phone for next to nothing if a phone is a necessity. An iPhone is never a necessity (but I will get teased if I don't have one - societal problems - you have the choice, don't be a sheep).

The next biggest one, but actually financially worse is the same people when they are young adults earning an average salary, they must have a brand new Mini Cooper - this is only affordable on HP with a loan for the deposit. That pretty much stops them from getting on the property ladder.

Sure life might be more boring (although that depends on your hobbies!) for a few years if you cannot have all the nice things, but then you may want a nice house and you cannot have that instantly.

Young people do not want to look much further than their own nose in terms of planning - at least that is my observation.

ukcarper

Samsonite1 wrote: »

Although the housing market is tough, you can start small.

I think the problems with house buying start with the societal issues of essentially being spoilt. I see young people every day with their iPhone 6 (how much did that cost?) - they simply must have it and there will be many other products they must have. This is the fundamental problem - from teenagers onwards, people spend their spare money on frivolous items. You can get a decent working phone for next to nothing if a phone is a necessity. An iPhone is never a necessity (but I will get teased if I don't have one - societal problems - you have the choice, don't be a sheep).

The next biggest one, but actually financially worse is the same people when they are young adults earning an average salary, they must have a brand new Mini Cooper - this is only affordable on HP with a loan for the deposit. That pretty much stops them from getting on the property ladder.

Sure life might be more boring (although that depends on your hobbies!) for a few years if you cannot have all the nice things, but then you may want a nice house and you cannot have that instantly.

Young people do not want to look much further than their own nose in terms of planning - at least that is my observation.

Personally I think it is to difficult to compare especially if you go back the 40 years the OP did. Things have changed so much over those years people leave full time education later, get married later, food is considerably cheaper while house prices are higher. People have higher expectations now, true people spend more money on luxuries now but then lots of those luxuries weren't available 40 years ago. I think the recent price increases have priced some people out. But the thing that I get fed up with is people telling me how easy I had when I first bought when I can assure I them didn't.