UK Affordability still very good

ukcarper

GreatApe wrote: »

It's a mistake to use the average household income in London because the average household wont be representative buyers

Its a bit like the transitional debate with Mr wind

A person might start working age 21 on £25k
Then at age 25 they might be on £30k
Then at age 30 they might be on £35k
At that point they might buy a house
They might see more wage increases and peak at say £40k in their 40s
Then they retire and their household income drops to the state pension of what £10k?
they stay like that for 30 years and then die

Whats the point in using this mans lifetime household income?
He is buying at age 30 thats the income you should look at

You might be thinking, I did not use this mans average lifetime income I was looking at London average household income. But a large group ie a city what you are effectively doing is what I have described above. You are looking at kids, the retired and other points in time that are irrelevant


For London 2 x full time income is reasonable. I would even say adding gifts and inheritances is reasonable but no need to add to the detail at this point

I haven't got figures but I think median household income everywhere is much lower than 2x median full time.

If you are going to use median income for your calculations you must use median household income for your joint income as by definition over 5O% of housholds earn considerably less than 2x full time median income.

GreatApe

ukcarper wrote: »

I haven't got figures but I think median household income everywhere is much lower than 2x median full time.

If you are going to use median income for your calculations you must use median household income for your joint income as by definition over 5O% of housholds earn considerably less than 2x full time median income.

It does not matter what average households earn because a lot of households are not buyers nor expected to be, eg pensioners or students.

There is also a mistake in looking at average houses, it would be a better model to split the housing market into at least two segments, the FTB segment and the second time buyer segment.

If say someone buys at age 30 they then buy again at age 50 and that is it. The 50 year old, the second time buyer has more resources and 20 years of paying down a mortgage to use this equity as a deposit on his second bigger home.

Using that model would be better, in which case the FTB should be able to buy not the median property but the median property in the cheaper half of the stock while the second time buyer can buy the median of the more expensive half of the stock

This model is better than a generic median wage should buy the median property.

So the median full time 30 year old couple should be able to buy the 25th percentile property while the 50 year old couple should be able to buy the 75th percentile property.

Or maybe the 30 year old FTB should be buying the 25th percentile property, the 50 year old second time buyer with no gifts/inheritences should be buying the 50th percentile and the 50 year old second time buyer with gifts/inheritences should be buying the 75th percentile property

Looking at birmingham on right-move
the median property costs £175,000 (£167,400 sold price according to LR so they are getting a 4-5% discount on asking)
While the 25th percentile costs £130,000 asking
and the 75tg percentile costs £250,000 asking



So instead of a crude median Birmingham wage should buy the £175,000 median property in Birmingham it would be better to say

The median FTB in Birmingham should be able to buy the 25th percentile property which costs £130,000 asking price (likely to get 4-5% off that price).

I believe the median full time male wage in brum is £31k so the first time buyer property costs 4.2 x single mans income or that is a 3.35 x income mortgage + 20% deposit

Very affordable even before considering a two income buyer which i feel is more common than one income FTBs

GreatApe

Simple model. Birmingham

25th percentile property £130,000
Median property £170,000
75th percentile property £250,000

FTBs should be buying the 25th percentile properties, Second time buyers should be buying the median properties and those with inheritances/gifts will be the second time buyers buying the 75th percentile properties.


In Birmingham The 25th percentile property is 24% cheaper than the median property and its reasonable to assume this would apply to most the country. So on the first table I really should reduce all the property prices by 24% to give a more realistic model of the market for FTBs

GreatApe

25th percentile, more typical FTB property

Crashy_Time

GreatApe wrote: »

You might actually be correct

You look at data and totally interpret it wrong

Maybe Mr ukcarper would like to comment on this as he seems a little more capable

ukcarper what do you think of the idea that renting is a transitional tenure. That stripping out those who are in private renting as a transitional tenure and looking at what remains is a better view point of how things stand in the uk

So while the headline data is this
2011 Cencus. UK born Housing tenure
68.8% are owners
16.5% in social
14.7% are renters.

If you assume 10% of an average adults life is in private renting before they move onto ownership/social then the figures taking account of this transitional tenure become

76.4% owner
18.3% in social
5.2% non transitional private renter

So the problem, if it is a problem at all is to reduce this 5.2% and turn them into owners or social renters.


Whats for sure is that the problem is far less acute than Mr wind and his hpc cheerleaders make it out to be.

How many are attached to large mortgage debts and susceptible to interest rate rises?

Windofchange

ukcarper wrote: »

I haven't got figures but I think median household income everywhere is much lower than 2x median full time.

If you are going to use median income for your calculations you must use median household income for your joint income as by definition over 5O% of housholds earn considerably less than 2x full time median income.

Jesus man, don't go throwing facts in there, you'll confuse the hell out of him!

The average household in London aren't buyers don't you know. Great Ape knows that because he just does OK!? A bit like he knows how young women think, and reckons the key to solving affordability for youngsters is to marry an 80 year old or at the very least only date people who's parents are millionaires.

His buddy Economic will be along shortly to tell us how house prices only ever stagnate or go up.

It's like the two Ronnies.

ukcarper

GreatApe wrote: »

It does not matter what average households earn because a lot of households are not buyers nor expected to be, eg pensioners or students.

There is also a mistake in looking at average houses, it would be a better model to split the housing market into at least two segments, the FTB segment and the second time buyer segment.

If say someone buys at age 30 they then buy again at age 50 and that is it. The 50 year old, the second time buyer has more resources and 20 years of paying down a mortgage to use this equity as a deposit on his second bigger home.

Using that model would be better, in which case the FTB should be able to buy not the median property but the median property in the cheaper half of the stock while the second time buyer can buy the median of the more expensive half of the stock

This model is better than a generic median wage should buy the median property.

So the median full time 30 year old couple should be able to buy the 25th percentile property while the 50 year old couple should be able to buy the 75th percentile property.

Or maybe the 30 year old FTB should be buying the 25th percentile property, the 50 year old second time buyer with no gifts/inheritences should be buying the 50th percentile and the 50 year old second time buyer with gifts/inheritences should be buying the 75th percentile property

Looking at birmingham on right-move
the median property costs £175,000 (£167,400 sold price according to LR so they are getting a 4-5% discount on asking)
While the 25th percentile costs £130,000 asking
and the 75tg percentile costs £250,000 asking



So instead of a crude median Birmingham wage should buy the £175,000 median property in Birmingham it would be better to say

The median FTB in Birmingham should be able to buy the 25th percentile property which costs £130,000 asking price (likely to get 4-5% off that price).

I believe the median full time male wage in brum is £31k so the first time buyer property costs 4.2 x single mans income or that is a 3.35 x income mortgage + 20% deposit

Very affordable even before considering a two income buyer which i feel is more common than one income FTBs

I think in does especially when talking about couples as the median household income is about 20% more than full time single earnings not 100% more. Also by using full time earnings which I think is fair enough you are also excluding a large number of people.

Where do you get percentile figures for house prices the cheapest house in Dagenham is £225k for a 1 bed terrace, next is £265k for 2 bed.

ukcarper

GreatApe wrote: »

You might actually be correct

You look at data and totally interpret it wrong

Maybe Mr ukcarper would like to comment on this as he seems a little more capable

ukcarper what do you think of the idea that renting is a transitional tenure. That stripping out those who are in private renting as a transitional tenure and looking at what remains is a better view point of how things stand in the uk

So while the headline data is this
2011 Cencus. UK born Housing tenure
68.8% are owners
16.5% in social
14.7% are renters.

If you assume 10% of an average adults life is in private renting before they move onto ownership/social then the figures taking account of this transitional tenure become

76.4% owner
18.3% in social
5.2% non transitional private renter

So the problem, if it is a problem at all is to reduce this 5.2% and turn them into owners or social renters.


Whats for sure is that the problem is far less acute than Mr wind and his hpc cheerleaders make it out to be.

To some extent but the percentage of people in social housing has decreased considerable while private renting has increased by a similar amount so percentage who own has not increased by as much a large number of people who would have beein social housing are now in private rented, I think the LHA bill confirms this.

GreatApe

What do you mean to some extent?
Clearly private renting for many private renters is a transitional tenure. You can see this even in the migrant community where those here for 10-30 years own more and rent less than those here for 5-10 years whi own more and rent less than those here for 0-5 years

Even if you assumed just 3.5 years of renting for the average adult (which means those who go to university buy straight away after leaving education) out of a 70 year adult life that means 5% of the 14.7% private renters in 2011 were transitional they should not even count as private renters as they will soon be owners or in social

GreatApe

ukcarper wrote: »

I think in does especially when talking about couples as the median household income is about 20% more than full time single earnings not 100% more. Also by using full time earnings which I think is fair enough you are also excluding a large number of people.

Where do you get percentile figures for house prices the cheapest house in Dagenham is £225k for a 1 bed terrace, next is £265k for 2 bed.

For 25th percentile I did a search on right move which showed for example 1000 homes listed and I ordered by price and had a look at the 250th property. For median you look at the 500th property and for the 75 percentile the 750th property.

For Birmingham it was £130k £170k £250k. The median price of £170k is very close to the Land Registry which shows the average sale at 4% below asking price on rightmove for the median.

I then checked for within the m25 and the 25th percentile was a similar 25% below the median so I applied 25% off land registry figures to the original table.


I think this is a much better model. With FTB buying the 25th percentile second time buyers buying the 50th percentile and those with gifts and inheritances able to buy the 75th percentile.

And thus the tables look even more affordable