Are houses unaffordable?

ManicRower

elverson wrote: »

Yep.

Rents are expensive => Tenants can't save a deposit fast enough => House price increases in the meantime => Rents go up in parallel. It's a cycle.

Absolutely and 'something' (not sure what) needs to be done about the high rents, living in London I experienced it first hand whilst I saved my deposit.


But it's not unachievable for most, if you are prepared to put the work in and sacrifice some comforts for a year or two as I and many other people have done.

lincroft1710

ManicRower wrote: »

but my generation and younger (born late 80's) seem to struggle with prioritising/cut their cloth accordingly. We seem to be a 'I want it now' generation, or perhaps more accurately an 'I want it on credit' generation.

A lot of people born in the 1940s/50s/60s/70s/early and mid 80s were exactly the same!

ukcarper

lincroft1710 wrote: »

A lot of people born in the 1940s/50s/60s/70s/early and mid 80s were exactly the same!

The difference was in 40s, 50s, 60s, and early 70s. Credit was much more difficult to get.

Person_one

ukcarper wrote: »

The difference was in 40s, 50s, 60s, and early 70s. Credit was much more difficult to get.

Was it though? Plenty of people were in permanent debt, just to catalogues and doorstep lenders/loan sharks rather than to credit card companies.

Arthritic_Toe

bigfreddiel wrote: »

Are houses really unaffordable, or are people setting their sights too high?

Let's go back a few years, when you coould by a two up one down for £5,000.

Sounds great doesn't it, you could just use your credit card couldn't you?

Well let's put this in context, my first terraced house cost £7,000. And I had to go for as big a mortgage as I could get, I was a graduate aerospace engineer, salary £200/ month. Mortgage repayments, £80/month, then there was the usual rates, car costs, etf's, not much left after paying all that, then guess what, interest rates of 5 or 6%, peaked st 15% at one point.

I don't recall any of my friends also new to being a homeowner ever buying a new house, or any bigger than three bedrooms, no new kitchen, no new furniture, lots of stuff from parents, and so on. That was the way it was, even having a phone was considered a luxury.

So my thinking is nothing had changed, other than people needing their 'forever' home right away, and being upset when they can't.

Cheers fj

Yes lets put it into context fj. Yours is probably the most fortunate generation in history. A free university education, a starter home for 3 times your graduate salary and most likely retirement at 65 with a nice final salary pension.

None of the kids today want their forever home right away, or new kitchens, they just want to be given (even half of) the same chances you were.

franklee

_CC_ wrote: »

As to "who had it better", which would you prefer?

a) Buying a house priced at 2.5 times your income but high initial interest rate

b) Buying a house priced at 7-8 times you income but initial interest rate lowest in history?

Personally, I'd always take A. There's little room for rates to get a whole lot lower, but plenty of room for then to go higher.

A for me too. With A if you can hang on for the initial few tough years then inflation, particularly wage inflation erodes the debt.

Now with allegedly low inflation (they cheat IMO) and low wage inflation the debt stays large for longer so the key is to overpay and get the debt to manageable levels before interest rates rise. There's no saying how far away that is - I would not predict as I didn't see the 0.5% base rate for six years plus coming. However people seem to fall into the mindset that the last five years or so is normal and that could be a dangerous trap if interest rates rise one day.

Not that owning a house is enough either, a lot of older folks have hardworking children who can't save the deposit and who may be putting off having their own children so the homeowner misses out on grandchildren. A high house price isn't any compensation for that. What good is a high house price when the house is needed to live in. Does it really matter that much unless you own more than one or can move to a much cheaper area.

ukcarper

Person_one wrote: »

Was it though? Plenty of people were in permanent debt, just to catalogues and doorstep lenders/loan sharks rather than to credit card companies.

I think it was no credit cards, phone contracts, car lease purchase plans with low deposits. I lived on a council estate in the South East and don't know anybody who used loan sharks. The main types of credit were catalogues, tally men and HP which normally involved a large deposit and wait.

ukcarper

Arthritic_Toe wrote: »

Yes lets put it into context fj. Yours is probably the most fortunate generation in history. A free university education, a starter home for 3 times your graduate salary and most likely retirement at 65 with a nice final salary pension.

None of the kids today want their forever home right away, or new kitchens, they just want to be given (even half of) the same chances you were.

Be good if we all had that but obviously we didn't.

matchboxfull

I think another element of the equation is that often people really struggle to move up to the second or third rung of the ladder when they want to grow into a family.

Samsonite1

I think compared to the 80s, things have definitely got much more difficult, but not yet impossible. Things certainly seemed easier for my parents and more straightforward. They both had degrees with grants and no debts to pay. They bought a big family home based on my father's salary and it was less than 2x salary. My mother's salary was essentially extra money.

Houses are still affordable today but much more effort has to be put in and therefore it is more difficult. Student loans eat away at any pay rises or bonuses, making it harder to save a deposit. You also may have to make more compromises, but if you do, you may get what you want eventually.

Just to waffle about the things I did to get on the property ladder - nothing amazing, but took more effort than my parents put in...:

For me, I had considered buying as soon as I graduated, but interest rates were quite high and I was not sure if the first job I got would be long term or if I would want to move from my university town. I decided to save instead for a few years (as much as I could). I probably would not have had enough deposit anyway.

Next, a few years later, I got a job in the South East which paid better and bought my first house in 2006 in a nice village, but where houses were affordable partly as there was no train station to London unless you drove or caught the bus. My job was a 15 minute drive so this suited me and was glad to be building up capital - the mortgage was pretty low (£400 per month).

My next decision was to look at jobs in Central London which paid way more. I had a nasty commute, having to drive to the train station or catch a bus, then get a 1 hour train + 2 tubes. I stuck with this for a few years because even with travel costs, the extra salary (and bonuses) did help to overpay on the mortgage. Also student loan payments get quite big but you pay that off quickly at this point and it is like getting a £7-8k pay rise.

Sold the house in 2010 for about the same as I paid for it, in the middle of a recession, not sure if that was good or bad really. I used this time renting to move around the South East trying out locations until finding a place in Greater London where house prices were reasonable and commuting times were good (15 minutes to Central London) - this was in 2012. At this point, salary had doubled as had mortgage payments, but interest rates were lower so I guess I could have a bigger budget slightly.

So after all that, I suppose it is sad that despite starting off in a relatively cheap area (Wales), I ended up being drawn to a London salary, while keeping costs down (by living fairly far and getting up at 5:30am every day for work) - all in order to make some headway on the property ladder.