7x average income, topped out

AG47

The housing crisis in the UK is dire. Shelter reports that the cost of an average home is seven times the average annual salary.

This is the top, it is ridiculous.

Distortions always correct eventually and usually overshoot on the correction.

Herzlos

I think it'll keep going whilst someone can afford to pay. Average people now just need to wait later in life before buying. Potentially too late to start a big family (35 seems to be the drop off rate) and feeling a need for more immigration to compensate.

But with inequality as high as it is now I'm not sure house prices are going to stop or even correct over the longer term.

Tom99

[FONT=Verdana, sans-serif]I think priced will stay at that sort of multiplier whilst interest rates stay low.[/FONT]
[FONT=Verdana, sans-serif]If interest rates move to a norm of say 7.5% and mortgages were capped at say 3x salary then maybe that multiplier would come down.[/FONT]
[FONT=Verdana, sans-serif]You also have the bank of Mum & Dad effect. Mum and Dad have inherited their parents house bought decades ago, don't need the money themselves so help their children.[/FONT]
[FONT=Verdana, sans-serif]I sold my parents house for 77x what they paid for it in 1967.[/FONT]

lookstraightahead

People don't work in multiples, they work in credit cards. Personally I don't think they have a clue what could happen.

lisyloo

Plenty of issues to add to the mix.
Inheritance, bank of mum and dad, immigration, btl, second homes, holiday homes, bolt holes, foreign buyers, banking bonuses.
Not just a question of average people buying average homes anymore.

comeandgo

So if you have a couple buying a home together it's 3 and a half time average salary. Very doable.

PasturesNew

The average home is not 1-2 beds... it includes 4-5 beds and detached.

To use the average home -v- the average salary has always been a nonsense.

AG47

Tom99 wrote: »

[FONT=Verdana, sans-serif]I think priced will stay at that sort of multiplier whilst interest rates stay low.[/FONT]
[FONT=Verdana, sans-serif]If interest rates move to a norm of say 7.5% and mortgages were capped at say 3x salary then maybe that multiplier would come down.[/FONT]
[FONT=Verdana, sans-serif]You also have the bank of Mum & Dad effect. Mum and Dad have inherited their parents house bought decades ago, don't need the money themselves so help their children.[/FONT]
[FONT=Verdana, sans-serif]I sold my parents house for 77x what they paid for it in 1967.[/FONT]

Most old people will have to sell their home or use the equity to pay for their old age care.

ukcarper

AG47 wrote: »

Most old people will have to sell their home or use the equity to pay for their old age care.

Have you any figures to back that up.

snowqueen555

I don't think immigration is an issue, we need it. Our economy relies on slow population growth, without immigration we would see a worser demographic crisis similar to what Japan and other places are experiencing, where people are not having enough kids and developing an aging population.

If everybody had more kids that would be another story and a solution.

MaxiRobriguez

I think the red herring is that the generation who will drive the market for the foreseeable future (30's-40's) have had their gift already from the bank of mum and dad, so they're on the rungs of the ladder, but they can't move up to a house more suitable for their family needs because the jump is too great, even with lower interest rates, and they can't rely on inheritance because by the time these people actually receive it, they'll be in their 50's-60's and their family needs will be less and the inheritance will likely flow straight through their account to their children's. That's two generations without a fully functioning market in non-FTB houses.

I'm in that boat - early 30's, couple hundred grand in equity/cash from aggressive saving and investing, to the point whereby I could almost pay off the mortgage on the property we live in, plus earning enough to be in higher tax band, partner works too above national average salary - could we afford a jump up to a house that would be befitting of those factors? Nope - too expensive. We're stuck where we are.