Million Pound Housing on Minimum Wage ?

thequant

Just being running the latest government incentives for housing in London, which if I have my calculations correct means in the near future that minimum wagers in London will be able to compete for £1,000,000 properties.

e.g.

property is worth £1,000,000

Less government discount of 20%, property will be sold for £800,000

Under the new shared ownership rules, a person could buy say 50% share.

With a 5% deposit and 40% interest free loan, the buyers will need to find a mortgage of £220,000.

With the minimum wage due to rise to nearly £20k per year, then a couple both on NMW could theoretically get a mortgage at this multiple.

If NMW'ers can compete for £1 million properties in London, this will cause London prices to go even higher.

lisyloo

I think the £40K deposit will be an issue for most minimu wage earners.

Are you really saynig a couple on about £40K can get a £220K mortgage (5.5 times) even though they have a loan as well?
I'm not a mortgage expert but that seems a high multiple to me.

thequant

lisyloo wrote: »

I think the £40K deposit will be an issue for most minimu wage earners.

Are you really saynig a couple on about £40K can get a £220K mortgage (5.5 times) even though they have a loan as well?
I'm not a mortgage expert but that seems a high multiple to me.

In my example the 5% deposit would be £20K on the part of the house they can buy.

Not sure what multiples are achievable, but I've been offered x5 in the past, so x5.5 doesn't seem unlikely.

Anyway my example is more illustrative in that it shows the kind of leverage that is now available in the London Market.

princeofpounds

In London these schemes tend to be exploited by low wage 'key workers' and the like who have wealthy parents and/or partners to actually do the private financing.


It's all one big stupid idea really, you don't solve a housing shortage by boosting demand to a special interest group.

thequant

princeofpounds wrote: »

In London these schemes tend to be exploited by low wage 'key workers' and the like who have wealthy parents and/or partners to actually do the private financing.


It's all one big stupid idea really, you don't solve a housing shortage by boosting demand to a special interest group.

That's one of the key changes, these schemes are now open to everyone, "key workers" no longer get preference and are available to everyone on less than £90k per annun.

ging84

you have strung together a bunch of schemes you can't just string together

You can't just decide you want to buy a home shared ownership, it needs to be for sale as shared ownership, the restrictions being lifted are restrictions on who qualifies, 2 minimum wage earners would almost always have qualified.

The help to buy equity loan is not something you can use to buy a shared ownership property, and there is an afordability check for this, i believe the limit is a 4.5 lending multiple on your mortage, and that may well be reduced for those taking an equity loan higher than 20%, so even if they could get a mortgage at 5.5x income, they would not be allowed on the help to buy scheme.

So the most a couple on £40k a year would likely be able to afford in london on the help to buy scheme would be about £330k
which is still quite a lot, but nowhere near the £1m claimed
Also even in 2020 when the minimum wage is £9 an hour, you would need to work 42-43hours a week to earn £20k, well above the average for a full time worker.

thequant

ging84 wrote: »

you have strung together a bunch of schemes you can't just string together

You can't just decide you want to buy a home shared ownership, it needs to be for sale as shared ownership, the restrictions being lifted are restrictions on who qualifies, 2 minimum wage earners would almost always have qualified.

The help to buy equity loan is not something you can use to buy a shared ownership property, and there is an afordability check for this, i believe the limit is a 4.5 lending multiple on your mortage, and that may well be reduced for those taking an equity loan higher than 20%, so even if they could get a mortgage at 5.5x income, they would not be allowed on the help to buy scheme.

So the most a couple on £40k a year would likely be able to afford in london on the help to buy scheme would be about £330k
which is still quite a lot, but nowhere near the £1m claimed
Also even in 2020 when the minimum wage is £9 an hour, you would need to work 42-43hours a week to earn £20k, well above the average for a full time worker.

Thanks, obviously I was constructing extreme example at the top end of the bracket (assuming the schemes can be linked together, has there been any details if they can or can't)

Interesting that as a counter example at the bottom end, the figure you came out with is £330k. Also don't forget a lot of Min wagers will be security guards and other jobs that do involve long hours.

Ultimately, the min wagers won't be buying as they will always be out competed by those on higher earnings in London. But if they can apply this kind of buying power from the bottom of the market, then those who can afford to buy are going to pushed into making higher offers probably by utilizing the same schemes.

I think this is going to create another boom in London.

lisyloo

a year would likely be able to afford in london on the help to buy scheme would be about £330k
which is still quite a lot

This is not a lot in London.
What sort of area/zone could you buy something reasonable for that price (by reasonably I mean not rat infested, next to a crack den etc.)

thequant

lisyloo wrote: »

This is not a lot in London.
What sort of area/zone could you buy something reasonable for that price (by reasonably I mean not rat infested, next to a crack den etc.)

Plenty of nice areas in londons outer zones, with decent transport links where this will buy a modest 2up2down.

And for those were zone 1 is the be all and end all, here's a 1 bed flat living next to millionaires for £360k

http://www.zoopla.co.uk/for-sale/details/36577895?search_identifier=3170bed72792c09a35f811ca580d80a0#fgIgYkJziMTG8Xr4.97

Aberdeenangarse

thequant wrote: »

Plenty of nice areas in londons outer zones, with decent transport links where this will buy a modest 2up2down.

Does Roger the Lodger have two up two down?

thequant

Aberdeenangarse wrote: »

Does Roger the Lodger have two up two down?

Yes AbderdeenArse, he does have one I have put in his name so I can save on the tax bill.