Harder now for 1st time buyers?

ukcarper

littlegreenfrog wrote: »

I never said anything about hardship. I have a good job and a decent salary and I know that makes me one of the luckier ones.

But that just underlines my point really, doesn't it? I am a good few years into my career, have been saving hard and making sacrifices. For the last couple of years I've moved back in with my parents in order to save - another thing which I'm lucky enough to be able to do. I've nearly saved a 15% deposit. But despite the fact that I am a higher rate taxpayer, my salary and my deposit are not enough to buy anything more than a very small flat. If I am lucky I will be able to get something with a small second bedroom, meaning that I could have a child and not have to move out immediately. If I'm lucky.

I am one of the lucky ones. I am better off than most people I know. If I am all but priced out, what hope is there for anyone younger than me, earning less than me, or with a bigger student debt than me?

We seem to have reached a point where if you're a young person working in London you will be permanently priced out of the property market unless you inherit or are given a substantial deposit. Your choices are either to rent forever (never having any stability or building up any equity, being constantly at the whim of your landlord and the rental market) or move out of London. Except that in many professional careers, opportunities outside of London are limited.

Do you think that's fair, or right, or sustainable?

The only thing I would disagree with is permanently, things do change and it is possible that price will fall if not nominally in real terms. When I bough in the 70s prices were rising rapidly faster than they are now and I was lucky to buy when I did and if I had missed that house I would not have been able to buy, yet a few years latter relative to earnings price had fallen.

littlegreenfrog_2

ukcarper wrote: »

The only thing I would disagree with is permanently, things do change and it is possible that price will fall if not nominally in real terms. When I bough in the 70s prices were rising rapidly faster than they are now and I was lucky to buy when I did and if I had missed that house I would not have been able to buy, yet a few years latter relative to earnings price had fallen.

You're right, prices could go down. But if mortgage interest rates shoot up, it will be people like me (if I manage to get on the ladder soon) or my friends who just about managed to buy in London two years ago who get absolutely hammered, whereas the investors who bought for cash and pushed all the prices up for ordinary people will be able to hang on and ride out the storm. (And probably use it as an excuse to put rents up and turn a tidy profit.) And if prices come crashing down, it will be people like us who are in negative equity and trapped where we are for the foreseeable future.

Whether prices continue to go up or whether they come down, it will be normal hardworking people who get hurt, not the people who caused all this mess.

ukcarper

littlegreenfrog wrote: »

You're right, prices could go down. But if mortgage interest rates shoot up, it will be people like me (if I manage to get on the ladder soon) or my friends who just about managed to buy in London two years ago who get absolutely hammered, whereas the investors who bought for cash and pushed all the prices up for ordinary people will be able to hang on and ride out the storm. (And probably use it as an excuse to put rents up and turn a tidy profit.) And if prices come crashing down, it will be people like us who are in negative equity and trapped where we are for the foreseeable future.

Whether prices continue to go up or whether they come down, it will be normal hardworking people who get hurt, not the people who caused all this mess.

You will be surprised at how you can cope if rates rise and I'm not sure cash buyers have had that much impact on prices in this area. The population is increasing in the area and house building has not kept up and there is a lot of opposition to new developments in the area as you probably know. There is a distinct lact of property for sale in the area which increases prices.

looknohands

It's difficult to buy a house in the first few years of getting a job as starting salaries are so low relative to house prices / deposits. My first proper job in 2010 at 25 was earning £18k I did not save anything and my rent was around 1/2 of my income. I could have probably saved the deposit for my current house in 3 years or so had I lived a very frugal lifestyle...

I'm 30 now and I bought a house two months ago, easily afforded deposit as i'm getting paid a lot more and the mortgage payment is about 1/6th of my salary (not including o/h)

In total I'm guessing I probably missed out on 2/3 years of having my own place and having to pay rent.
However I enjoyed the past 5 years a lot more without stressing about saving too much, I made more friends, did a job I love and got to see the world a bit more.

Now I'm older I can easily afford the mortgage and still get to live a decent life, I can overpay, save or whatever. I think during your 20s you can get super stressed getting on the ladder, I had that feeling, that you're being left behind, but it's false, it's not actually a big deal.

racing_blue

If it's getting harder, why are more people doing it?

bigfreddiel

littlegreenfrog wrote: »

Yes, thank you, Captain Obvious.

Clearly I am unable to work out any of that by myself, and you know all about my new car and cigarette habit. You've been a huge help, really.

No problem, glad to help fj

littlegreenfrog_2

racing_blue wrote: »

If it's getting harder, why are more people doing it?

It would be useful to see a source for this graph.

However, taking this at face value, the graph shows a peak in home ownership in around 2006, shortly before the financial crisis. The last date shown on the graph is 2008, when the line already seems to be showing the beginning of a sharp decline.

What has happened since 2008? Well, interest rates have remained at rock bottom, which has hugely benefited those who were already property owners. It has been exceptionally unprofitable to keep cash sitting in the bank and the stock market has been volatile. At the same time, property prices - after a brief dip shortly after the crisis took hold - have shot into the stratosphere.

What has been the consequence of that? Well, people who already owned properties have benefited from extremely cheap borrowing and seen the value of their property shoot up. Many have used their increased equity to invest in BTL. Of course this has meant that many people have been very highly leveraged, but as long as property prices continue to climb and interest rates stay low, they can't lose.

Conversely, people not already on the property ladder have seen almost zero return on their cash savings, their rents have increased year on year, and greater restrictions on mortgage lending have meant that they have needed to save up much bigger deposits and pass stricter affordability tests.

It would be interesting to see where that line would be going if your graph included data from 2008-2016. As it is, it is woefully out of date and not particularly helpful for assessing current trends in home ownership.

Berger_3

racing_blue wrote: »

If it's getting harder, why are more people doing it?

A graph showing population growth overt the same period would probably look very similar.

ukcarper

littlegreenfrog wrote: »

It would be useful to see a source for this graph.

However, taking this at face value, the graph shows a peak in home ownership in around 2006, shortly before the financial crisis. The last date shown on the graph is 2008, when the line already seems to be showing the beginning of a sharp decline.

What has happened since 2008? Well, interest rates have remained at rock bottom, which has hugely benefited those who were already property owners. It has been exceptionally unprofitable to keep cash sitting in the bank and the stock market has been volatile. At the same time, property prices - after a brief dip shortly after the crisis took hold - have shot into the stratosphere.

What has been the consequence of that? Well, people who already owned properties have benefited from extremely cheap borrowing and seen the value of their property shoot up. Many have used their increased equity to invest in BTL. Of course this has meant that many people have been very highly leveraged, but as long as property prices continue to climb and interest rates stay low, they can't lose.

Conversely, people not already on the property ladder have seen almost zero return on their cash savings, their rents have increased year on year, and greater restrictions on mortgage lending have meant that they have needed to save up much bigger deposits and pass stricter affordability tests.

It would be interesting to see where that line would be going if your graph included data from 2008-2016. As it is, it is woefully out of date and not particularly helpful for assessing current trends in home ownership.

http://www.bbc.co.uk/news/business-35603893 According to above article it fell to 63% but there was a slight rise last year.

audigex

London is, frankly, insane.

I earn above the average UK salary and own a 3 bedroom semi in the North.

Even if I didn't buy a semi-detached house in London and dropped to 2 bedroom, I would still be looking at triple the price. And even with that, on Rightmove, I can only find houses which are much smaller (even accounting for being 2-bed) and much tattier than my home.

So that's triple the price, for which I'd need to more than triple my (already fairly good) salary and deposit. In fact, even after tripling my salary I'd need to find a deposit equivalent to 40% of my mortgage, and even then it would push me onto a worse LTV and therefore higher rate (more expensive).

In fact to buy in London at all you appear to need an absolute minimum of £20k deposit and £45k/year... for a fairly crap looking house nowhere near a tube station.

To get a house like my own is nearly 4x as expensive. Meaning I'd have to earn well over £120k/year and have a deposit of 60k (very close to my actual mortgage) to get a comparable house at a comparable rate. How many first time buyers are on that kind of income?

There are first time buyers in London who need almost the price of my house as a deposit, that's absolutely baffling to me.