In 70% of England you can buy the average terrace on minimium wage

Graham_Devon

missbiggles1 wrote: »

But nobody's forcing you to buy a house. If it's important to you then you'll make the sacrifices in time and money, if not you rent in York.

I understand that.

Do you understand the premise of this entire thread though? If not, we'll be going around in circles.

ukcarper

Long term earnings to house price indices are based on median male full time earnings and the longterm average is 4x lowest is just under 3x.

Towser

So where is the best place to settle according to your calculations?

cells

Towser wrote: »

So where is the best place to settle according to your calculations?

on the non exhaustive list above stoke-on-trent is the cheapest relative to full time wages where to buy a terrace costs just 1.78 x local full time income

of course that does not mean its the best place to settle, that would probably be kensington & chelsea the most expensive area of the country

cells

ukcarper wrote: »

Long term earnings to house price indices are based on median male full time earnings and the longterm average is 4x lowest is just under 3x.

And a lot of the country is below 4 x with three regions at 3.1 x or below

Three regions of England are cheaper in nominal terms than they were 10 years ago and a lot cheaper in real terms

This really is largely a London problem with prices 13x wages and within London is even a huge differential of crazyness like K&C at 101x wages and Islington/Hackney at 25-30x wages

michaels

I am nervous about the minimum wage analysis. If I earn 11k or 22k then I have the option to spend a similar amount on food, energy, life insurance etc and yet on the higher income I would have much more income left after these 'essentials' to spend on property. Thus the 3.5x income whilst being a good rule of thumb no longer works when using 'affordability' based mortgage lending as is now mandated by the regualros (and happened in the dim and distant past with local building societies/bank managers assessing suitability for mortgage).

Against this is the question of whether we expect everyone to be able to afford a home - in a survey only 86% said they aspired to home ownership and obviously there are a myriad of reasons to rent short term. Do we really expect home ownership to be fiancially possible for 100% of the household income spectrum?

Finally there is the question of what will happen as the govt shifts policies against private provison of rental property. Yes it will be less attractive for landlords to provide housing but I suspect a large proportion of those who rent are not in a postion to buy a home even if prices were to fall substantially (I am not sayign the reduction in landlord purchasers will have this impact merely looking at what will happen if it did) so we then get to a situation where there are not enough rental properties for those who 'have to' rent and rental prices are pushed higher as more people are forced to share rental property.

cells

I think the reason London and especially inner London costs so much is because London and inner London must have more full time earners per property than elsewhere

The national workforce is ~32 million full&part-time and the housing stock is ~28 million giving ~1.15 employed per property.

In my area of inner London my rentals average ~3.8 full time workers per property.

So that can explain why and how the high rents are affordable and the high rents drive high prices.

and it explains why London is a higher portion of renters than elsewhere. With renters bidding nearly 4 full time workers per house and with owners wanting to bid at most 2 full time workers per house it shows a clear shift towards renters outbidding owners.

There is also the large social stock and immigration at play. Inner London places like Hackney and Islington have 40% plus social homes. These homes probably largely do not cater at all to sharers and probably have zero to two full time workers and likely less than the national average.

So where the market is trying to allocate the max number of workers close to their jobs the councils are allocating families with 0 jobs to a max of two jobs per property into central London.

In this regard London high house prices could be helped greatly by selling down the social stock (or the social stock acting like the private rental stock and renting to full time working sharers).

for the first time in a long time I am reevaluating my position which was simply that everywhere in england has a shortage of homes some moreso than others

cells

michaels wrote: »

I am nervous about the minimum wage analysis. If I earn 11k or 22k then I have the option to spend a similar amount on food, energy, life insurance etc and yet on the higher income I would have much more income left after these 'essentials' to spend on property. Thus the 3.5x income whilst being a good rule of thumb no longer works when using 'affordability' based mortgage lending as is now mandated by the regualros (and happened in the dim and distant past with local building societies/bank managers assessing suitability for mortgage).

Against this is the question of whether we expect everyone to be able to afford a home - in a survey only 86% said they aspired to home ownership and obviously there are a myriad of reasons to rent short term. Do we really expect home ownership to be fiancially possible for 100% of the household income spectrum?

Finally there is the question of what will happen as the govt shifts policies against private provison of rental property. Yes it will be less attractive for landlords to provide housing but I suspect a large proportion of those who rent are not in a postion to buy a home even if prices were to fall substantially (I am not sayign the reduction in landlord purchasers will have this impact merely looking at what will happen if it did) so we then get to a situation where there are not enough rental properties for those who 'have to' rent and rental prices are pushed higher as more people are forced to share rental property.

regulations can and probably should be changed. a while ago hamish suggested mortgages should be solely underwritten against rent not income not affordability which at the time I thought silly but now I think it an interesting and maybe decent idea (the protection for both sides being at least a 10-20% deposit)

There can not be 100% owners if for nothing else but the fact that ~18% of homes are social so the max is 82% owners (or the government can sell down its social stock of homes to allow a higher OO figure)

There is also as you point out the need to rent for some people some of the time. I think this figure is 10%. Taken together the max home ownership rate is probably ~72% in the UK and we got close to it in 2005 but its been downhill since then

I think there is now also an invisible force making inner cities (especially London) more dense. People wanting/needing to live closer to work. In those areas renters are now a huge majority (about 80% of people in Hackney rent) and the figure will continue to increase. The reason is renters are willing to bid 3-4-5 full time incomes to be close to work but owners are only willing to bid upto 2 x full time incomes

So what happened over the last 15 years makes a lot of sense. As the population of London boomed and transport become more congested and people valued their travailing time more there was a shift to higher working occupancy nearer to work. This to me explains how inner London got so expensive so fast. (before the year 2000 there was plenty of homes to go around in London as the three decades before that saw a population decline in London)

missbiggles1

Graham_Devon wrote: »

I understand that.

Do you understand the premise of this entire thread though? If not, we'll be going around in circles.

I was going to ask you the same thing.:D

michaels

cells wrote: »

I think the reason London and especially inner London costs so much is because London and inner London must have more full time earners per property than elsewhere

The national workforce is ~32 million full&part-time and the housing stock is ~28 million giving ~1.15 employed per property.

In my area of inner London my rentals average ~3.8 full time workers per property.

So that can explain why and how the high rents are affordable and the high rents drive high prices.

and it explains why London is a higher portion of renters than elsewhere. With renters bidding nearly 4 full time workers per house and with owners wanting to bid at most 2 full time workers per house it shows a clear shift towards renters outbidding owners.

There is also the large social stock and immigration at play. Inner London places like Hackney and Islington have 40% plus social homes. These homes probably largely do not cater at all to sharers and probably have zero to two full time workers and likely less than the national average.

So where the market is trying to allocate the max number of workers close to their jobs the councils are allocating families with 0 jobs to a max of two jobs per property into central London.

In this regard London high house prices could be helped greatly by selling down the social stock (or the social stock acting like the private rental stock and renting to full time working sharers).

for the first time in a long time I am reevaluating my position which was simply that everywhere in england has a shortage of homes some moreso than others

I completely agree with this analysis. I also think that the disparity of house prices may explain issues like 'land banks' - in some parts of the country prices are so low that even with planning permission there is little profit to be made from building. It would be interesting to know if 'land banks' are predominently in lower priced areas?

I am not sure you got my point about income multiples being too crude to assess affordability because 'costs other than housing' do not increase linearly with income, in fact it is almost that amount spent on housing can expand to take up all income beyond 'essentials'.