My first London flat (1988) is up for sale...

chucknorris

lisyloo wrote: »

Would you agree Jason that those who aren't happy with their lot might be better off trying to actively do sonmething about it (like getting an evening or weekend job) rather than moaning that they can't have what they what?
I think we'd all have great respect for the person that worked really hard and made sacrifices to get what they wanted.

The problem here is that you are talking about people with a loser's mentality, but you are describing someone with a winner's mentality.

lisyloo

Yeah - if someone came on here and said both of them were working 3 jobs and they still couldn't afford a fixer upper in the worst area then I think they really would get sympathy.

Strangely enough, we never see a post like that.

mwpt

lisyloo wrote: »

Yeah - if someone came on here and said both of them were working 3 jobs and they still couldn't afford a fixer upper in the worst area then I think they really would get sympathy.

Strangely enough, we never see a post like that.

I'm scratching my head. So, people are dismayed that the housing situation means they cannot afford the same quality of house their parents could. But they are not allowed to feel dismay, they are losers because of this and should work three jobs?

lisyloo

Oh I think they could. My parents lived with their parents after their marriage, so I think if they did what my parents did they could afford a home in most of the U.K. (Kensington, Chelsea excluded).

kinger101

westernpromise wrote: »

Three things stand out here. One is that in terms of monthly cost to buy, there is nothing to choose between now and then. It cost 70% of my then take-home to pay the mortgage in 1990, and it would still do so. The second is that over five years, at those kind of rates, I made for all sensible purposes no inroads whatsoever into the mortgage balance; it was £72k to start with and it still was, more or less, five years later

Paying down debt isn't the only way the balance is reduced.

In 1988, nominal average earnings were £8,853. By 1993 they were £12,447. Conversely, if we compare 2010 and 2015, the figures are £23,504 and £25,608.

https://www.measuringworth.com/datasets/ukearncpi/result2.php

Jason74

economic wrote: »

You are looking at two factors (rates and wages) separately. You have a very narrow and simplistic view resulting in your argument being completely useless. You can not forecast things in isolation for everything is connected and you are missing so so many other factors too. Good luck.

Managing to be quite so patronising while also being completely wrong is quite an achievement. Well done you :T :T :T

wotsthat

mwpt wrote: »

I'm scratching my head. So, people are dismayed that the housing situation means they cannot afford the same quality of house their parents could. But they are not allowed to feel dismay, they are losers because of this and should work three jobs?

Winners realise that with change it's unrealistic to expect the same input to lead to the same output and they adjust the input or expect a different output.

My first house was much much nicer than my parents and I've never had to commit as large a % of income to it either. I don't think that's unusual so expect a London bias is making it a fact that kids can't afford the same quality of house their parents could.

westernpromise

My old flat - on at £525k back in June - has been reduced in price twice in 6 weeks and is now down to £480k. I thought it would go for about £495k but in fact that would be more like £475k or perhaps even £450k. So all the numbers given above would be better to the tune of £20k to £40k less than assumed.

Serendipitously, my first house - the one I sold to buy the flat that was the subject of this thread - is now also for sale.

http://www.rightmove.co.uk/property-for-sale/property-60480260.html

I bought this place off the builder in 1986 for £25,500 with a 100% mortgage. I was on £8,300 a year at the time. I sold it two years later for £46,500. I used £13k of the inflationary gain to part-fund the flat buy, stashed the other £8,000 and the more-than-doubling of interest rates wiped the whole lot out inside 18 months.

What strikes me quite forcibly about seeing these two properties up for grabs simultaneously is that the last time this situation prevailed, in 1988, the one in London cost 1.83x what the one in Staffs cost to buy. Today, assuming £480k and £170k, the London one costs 2.83x as much. That is a pretty stark measure of how bad it has been for most of these last 28 years to be short of London property even if you were long of property elsewhere.

It also suggests that very little of London's prosperity has reached very far. If the price of a family home in a Tory shire is just £170k, there can be very little money and not many good jobs out there. Staffordshire is perhaps a microcosm of what a Britain with really cheap housing would have to look like.

I hope that our new PM will give some thought to this and do what can sensibly be done for my former neighbours.

westernpromise

Just by way of update, this flat is still on sale having been reduced twice now to an asking price of £480k. On the basis that it will likely go for £455k, that means the mortgage would need to be £385k rather than £419k and would cost £1,680 a month, which is 64% of the equivalent salary, rather than 70%.

The problem for a buyer today remains that even £385k is still 9x the equivalent salary today, which is a much higher multiple than the 3x I paid (or the 2.5x I'd have paid in 1990).

N1AK

westernpromise wrote: »

This is the flat I bought in London in 1988 as a second-time buyer.

Anyway, when I bought, I was on £24k. The national average salary then was £15k or so, so I was getting about 160% of that. You had a £3,005 personal allowance and you paid 25% on the first £20.7k of earnings and 40% above that, plus NI. On my £24k, stoppages were thus £6.6k or so, hence my net was £1,400 a month.

Three things stand out here. One is that in terms of monthly cost to buy, there is nothing to choose between now and then.

I'm not sure the point you're trying to make it? Judging affordability by comparing a period with 2% interest rates against one with 16% seems utterly ridiculous. In both situations it was broadly accepted that the rates were outliers on opposite sides of longer term averages.

Equally saying monthly costs are comparable when buying the flat today is comparing apples to star systems when it would require you to have ~3x your gross annual net pay available to cover deposit, fees and stamp duty today and it needed a couple of months gross when you bought.

If anything the thing your numbers demonstrate is how unsustainable the London price increases are becoming if affordability on a monthly basis is now at 2% interest rates is equivalent to 16% interest rates ~30 years ago for someone earning better than average money.