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

westernpromise

Eventually sold in September for £475k
http://www.zoopla.co.uk/property/6/st-simons-hall/19-macroom-road/london/w9-3hy/25119671

As this is really a single person's flat it seems clear that today's London buyers are richer than I was...

steampowered

Thank for your post westernpromise. It is a few months old but I only read it just now. I found it very interesting.

I suppose the key point for me is that interest rates are incredibly low right now. If interest rates stay low you are correct that mortgages are affordable but if they go up your analysis would change.

The other point to consider is mortgage affordability criteria. Let's assume you have a £125,000 deposit and need a mortgage for the remaining £350,000.

Today, to get a mortgage of £350,000 you need to have an income of about £80,000. This is about 300% of the average national wage.

To put it another way, you were able to get your mortgage while earning 160% of the average national wage. Today you would need to be earning 300% of the average national wage to get a mortgage on the same property, even assuming you have a £125,000 deposit. So you would never have been able to afford that property if you were buying today.

westernpromise

If you were indeed on 160% of the current national average, no, you couldn't afford it. But today a 20-something analyst in an oil company in London wouldn't be on that today; s/he'd be on 3x the national average and would make £74k or £84k rather than £24k.

The jobs in London now are, quite simply, better than those of 30 years ago. A proxy for how much better is what the holders can pay for property.

They can also do this with a lot more confidence because the probable 2TB who's bought that has been paying down the FTB mortgage at rock-bottom rates since 2009 and can lock them in at these rates for 10 more years.

When I bought, remortgaging was relatively uncommon and it wasn't even possible if you had negative equity. If you had an interest-only endowment mortgage, you would have paid off none of the mortgage at all after 10 years whereas today's buyer would get rid of nearly 30% of it over that span.

steampowered

westernpromise wrote: »

If you were indeed on 160% of the current national average, no, you couldn't afford it. But today a 20-something analyst in an oil company in London wouldn't be on that today; s/he'd be on 3x the national average and would make £74k or £84k rather than £24k.

The jobs in London now are, quite simply, better than those of 30 years ago. A proxy for how much better is what the holders can pay for property.

A very valid point and well made.

I suppose it raises questions about whether the divide in the wages paid to high-earners in London vs the rest of the country is sustainable, and therefore whether the difference between property prices in London vs the rest of the country is sustainable.

Crashy_Time

westernpromise wrote: »

I should perhaps add that when I bought a one-bed flat for £85k in a ropey area in 1988, I was mightily ticked off that to buy in St John's Wood as my parents had done when not much older than I was wold have required a mortgage of 10x my salary.

Then as now areas become less affordable, including wherever you grew up. You can either gather on a website and whine for a crash, or you can just live somewhere else and wait for it to get less grotty.

You could always "gather" on a forum read by half a dozen people and post long daily rants about why property is such a great bet.....:rotfl:Touching (or worrying maybe) that Cells thinks property was affordable in London ten years ago, makes you wonder why the PTB had to step in to save the banks and mortgage borrowers by manipulating rates and a host of other schemes.. :rotfl:Recent buyers, in London especially, are in deep doo doo when rates rise I`m afraid, really wouldn`t want to be in their shoes. I was amazed recently to find out there are still people squatting in London, in the same houses they occupied in the late 70`s/80`s, and that the local authority has only recently got the legal right to finally evict them! Watching this bubble in motion and people defending it is always entertaining, keep up the good work! Most of London is on some kind of benefit (QE or HB of one form of another) will be interesting to watch as we disengage from the EZ.

Crashy_Time

westernpromise wrote: »

If you were indeed on 160% of the current national average, no, you couldn't afford it. But today a 20-something analyst in an oil company in London wouldn't be on that today; s/he'd be on 3x the national average and would make £74k or £84k rather than £24k.

The jobs in London now are, quite simply, better than those of 30 years ago. A proxy for how much better is what the holders can pay for property.

They can also do this with a lot more confidence because the probable 2TB who's bought that has been paying down the FTB mortgage at rock-bottom rates since 2009 and can lock them in at these rates for 10 more years.

When I bought, remortgaging was relatively uncommon and it wasn't even possible if you had negative equity. If you had an interest-only endowment mortgage, you would have paid off none of the mortgage at all after 10 years whereas today's buyer would get rid of nearly 30% of it over that span.

A person, especially new to the company, in that type of job would be in fear of losing their job constantly now IMO, massive debt is the last thing they need in a rate raising environment! Don`t ever try to rival Stephen King with your lengthy tales, you are no good at creating credible characters in credible scenarios....:rotfl:

westernpromise

What's your BCR again Crashy? 130% is it not?

How's your short looking?

Crashy_Time

westernpromise wrote: »

What's your BCR again Crashy? 130% is it not?

How's your short looking?

Miss me?

Crashy_Time

westernpromise wrote: »

What's your BCR again Crashy? 130% is it not?

How's your short looking?

Seriously, it will be better than one of your imaginary characters when he loses his job and rates rise. You should write a book called Brave New Bubble Buyers of the 21st Century, should make a great comedy.....:rotfl:

Jack_Johnson_the_acorn

Crashy_Time wrote: »

A person, especially new to the company, in that type of job would be in fear of losing their job constantly now IMO, massive debt is the last thing they need in a rate raising environment! Don`t ever try to rival Stephen King with your lengthy tales, you are no good at creating credible characters in credible scenarios....:rotfl:

Does the truth hurt Crashy?

I was 25 when I bought, what are you now, 45? Must be pretty humiliating for somebody with such financial savvy....... :rotfl: