How do people afford expensive houses

u0362565

Hi all,

I'm in the process of buying my first flat and it's got me wondering how people ever afford to buy houses say more than £400k. I used to think, oh you sell your old home, make a profit, pay off the mortgage and buy something more expensive. However I realise that all property in general will increase in value so you would never get nearer to your goal of a bigger house as everything moves relative to each other, salaries on average don't change that much and you probably can't borrow much more as time goes on. Am I missing something here? Unfortunately I'm perhaps buying at a bad time investment wise for a start as prices are pretty high again, hopefully they continue upwards for a while before there's another big dip like 2008.

G_M

They get high-paying jobs?

Mrs_pbradley936

We started off in 1968 with a house that cost around £10k. In those days what a woman earned was not taken into account and we had something called MIRAS:
https://en.wikipedia.org/wiki/Mortgage_interest_relief_at_source

House price inflation really kicked off from about the late 70s to early 80s.
A house that we bought for £32K in 1976 we sold for £145K in 1981. I think the reason for that was being allowed to (by then) take what a woman earned into the mortgage calculation. Being able to borrow a lot more meant that houses cost a lot more!

If I still had that house I expect it would fetch over £2 million - alas I do not! However the house we have now would sell for about £750K.

We are comfortably off but back when we started out we were considered to be about average and certainly not well off. We have good pensions, and could easily downsize to release equity if we needed to.

So my answer to your question is house price inflation being on their side.

Person_one

Most people outside London and the SE never do spend that kind of money on their home.

Mrs_pbradley936

I forgot to add that somewhere along the line housing became an investment rather than just a place to live. All due to a combination of Right to Buy, Buy to Let and the introduction of Assured Shorthold Tenancies.

gazter

Mrs_pbradley936 wrote: »

I forgot to add that somewhere along the line housing became an investment rather than just a place to live. All due to a combination of Right to Buy, Buy to Let and the introduction of Assured Shorthold Tenancies.

Yes, was never a good idea to let these working class oiks acquire property of their own, theyll only end up passing it onto their children and creating intergenerational prosperity. Much better to keep them in perpetual serfdom to their local council.

booksurr

1. by having a career and progressing up its ladder

2. by taking advantage of relative inflation rates between areas when selling and buying

3. by cutting their cloth according to their means

ognum

1. Saving
2. Moving area
3 Marrying or living with another person
4 Inheritence
5 Luck
6 Doing up a low value property and selling on
7 Gradually moving up the ladder
8 Inflation

It's late can't think of any more at the moment but it's not rocket science to work this out

Davesnave

I think some of us just bought the right house first time, second time, third time etc.

A very boring answer, but it's possible, either by luck or judgement, to buy a house that will rise faster in value than others, due to areas becoming more fashionable or convenient.

My first two properties were like that, being on the edge of a 'posh' area, which grew in popularity and expanded as much as it could physically. It was also down to people using their legs more, as car parking in the city slowly developed into a nightmare and a house that offered a 15 minute level walk to town became more desirable.

My third property, a smallholding, is entirely different and a bit of a gamble from a wealth-enhancing point of view, but at my stage of life I don't care. I'm certain that smallholdings aren't increasing in numbers, so if the 'good life' and a desire for more space increases in its appeal, I shall be quids in......but only after I've sold it!

Pixie5740

gazter wrote: »

Yes, was never a good idea to let these working class oiks acquire property of their own, theyll only end up passing it onto their children and creating intergenerational prosperity. Much better to keep them in perpetual serfdom to their local council.

Living in social housing with a secure tenancy is far from serfdom. If someone living in social housing wants to buy a property there's absolutely nothing stopping them buying a property on the open market. In fact it's easier for someone in social housing to save up and do that compared with their counterparts in the private rental sector who face having to move regularly and higher rents. It's also interesting how many of those who exercised their RTB have now put those properties into the private rental sector and helped reduce the social housing stock for their own decendants. Serfs my !!!!.

moneyistooshorttomention

The traditional route for my generation (baby boom) was basically:

- get married (so there were two incomes available for housebuying)
- buy a starter house and, by the time some equity was paid back, then one or both of you would have probably got promoted at work too (ie extra income to borrow on). So - go up the ladder.
- rinse and repeat stage 2 and go up the ladder again.

Dave is correct that an element of luck comes into it as well.

It can work both ways too - I was lucky that womens salaries had to be taken into account for mortgage purposes come the time I started looking to buy my first house but what I gained (in theory) on the swings I lost on the roundabouts (being single and competing with married women taking up that right at that time).

There is also the housing being seen as "investment" angle and that has pushed housing costs up.

There are a lot more people needing/wanting housing than previously - extra people being allowed into the country on the one hand and a lot more marriages breaking up (thus creating two households after housing).