Will the next generation be able to buy their own house?

westernpromise

AG47 wrote: »

Given the fundamental problems of property price to earning ratio being extremely distorted at the moment?

The extreme distortion will correct, so yes the next generation will be able to buy a home easier than the present time because of the extreme distortion in the property to earnings ratio:T

Your inability to afford property is nothing to do with its price and everything to do with your inability to handle minor debt. If you can't handle retail debt, mortgage debt is demonstrably beyond you. Your best bet is to vote Labour and hope they steal someone else's house off them and give it to you.

Herzlos

The problem seems to be a lack of supply at the bottom end of the market -starter houses are being extended out of budget, or kept/bought up as rentals, new properties being "luxury". Here there are pretty slim pickings in the £100k, a fair amount of family choices from about £180k and plenty of huge houses above £250k. One bed flats cost nearly as mich as 2 bed houses, and so on.

triathlon

Herzlos wrote: »

The problem seems to be a lack of supply at the bottom end of the market -starter houses are being extended out of budget, or kept/bought up as rentals, new properties being "luxury". Here there are pretty slim pickings in the £100k, a fair amount of family choices from about £180k and plenty of huge houses above £250k. One bed flats cost nearly as mich as 2 bed houses, and so on.

There are plenty of these types of properties, they have been snapped by property investors to rent out. It is not unfair, a conspiracy or even criminal or immoral, it is just market forces at play in which I have taken advantage as have many others. It could well be that in 20 or 30 years things could change and landlords are priced out or driven out by market forces, it is just life.

Herzlos

I'm not saying it's unfair or immoral, I'm just pointing out that the starter housing stock is dwindling but not being replaced.

andrewf75

Herzlos wrote: »

The problem seems to be a lack of supply at the bottom end of the market -starter houses are being extended out of budget, or kept/bought up as rentals, new properties being "luxury". Here there are pretty slim pickings in the £100k, a fair amount of family choices from about £180k and plenty of huge houses above £250k. One bed flats cost nearly as mich as 2 bed houses, and so on.

Yep, a lot of the problem seems to be a lack of innovation and forward thinking. Developers build new build estates full of 300k houses that are often out of reach of 1st time buyers. These IKEA houses sounds like a step in the right direction, but of course it depends what the aims are. Actually providing the houses we need as a society or keep the existing model which is tough on those who can’t ever buy but makes money for those who can.
https://www.homesandproperty.co.uk/property-news/buying/new-homes/ikea-affordable-homes-furniture-giant-branching-out-into-building-houses-in-the-uk-and-they-re-a131646.html

Malthusian

The key problem is not that evil landlords are stealing "starter homes" off first time buyers but that not many people want to buy a crappy house three miles from anywhere that starts falling apart as soon as you put your keys on the kitchen table, and also live in it. If you're a landlord and can pass on the cost of depreciation on to your tenants it's a different matter.

You may as well continue saving up and investing, maybe move in with your parents, take advantage of bungs like Lifetime ISAs and eventually buy a "forever home".

If you want a £250k house but your total budget including borrowings is £125k then you are not going to be moving into the house you actually want for another 5-10 years no matter what you do. So the only question is balancing your need for comfort in the present with running a surplus and saving up to afford a house you actually want. Buying a crappy house for £100k just for the sake of buying something, anything, does not fulfil either of those objectives.

There is no point trying to jump onto the lower rungs of the housing ladder solely to climb to higher rungs later if those rungs are infested with woodworm.

It is the same reason why rental is far more popular in places like Germany. Not many people want to buy a giant grey ex-communist cuboid to live in. It makes far more sense to rent it - even on a long-term agreement - and give yourself a defined end date.

GreatApe

AG47 wrote: »

Given the fundamental problems of property price to earning ratio being extremely distorted at the moment?

The extreme distortion will correct, so yes the next generation will be able to buy a home easier than the present time because of the extreme distortion in the property to earnings ratio:T

Why are you so sure it will crash in nominal terms and not 'real terms'?

I can foresee a 60% increase in nominal earnings over the next 10 years which means prices could stay the same for 10 years and in real terms be 40% cheaper but the same in nominal terms

So if there is a 40% real crash 0% nominal is it better to buy today or wait for 10 years?

It is still better to buy today rather than wait for this 40% real 0% nominal crash because you can spend the next 10 years paying 2% mortgage rather than 5% rent

Herzlos

It's definitely better to buy now*, at pretty much any point in the affordability wave, but to think we'll see a 60% increase in wages in the next decade is pure fantasy. We've been seeing below inflation wage growth for a while now, and Brexit isn't likely to push it in the right direction.




*You'll eventually own it and stop paying rent, it may appreciate in value, it's yours do with as you want, and it's a lot harder to get kicked out of a mortgaged house than a rental. Some people will be temporarily stung with negative equity (like every other crash) but with the tighter lending criteria they should be able to weather it for a while and it'll eventually recover.

westernpromise

Herzlos wrote: »

It's definitely better to buy now*, at pretty much any point in the affordability wave, but to think we'll see a 60% increase in wages in the next decade is pure fantasy. We've been seeing below inflation wage growth for a while now, and Brexit isn't likely to push it in the right direction.

Well, you say that, but according to the ONS (cited here https://www.verdict.co.uk/average-salary-in-london-big-cities/) London wages went up 6.5% YoY from 2016 to 2017 (2018 I guess is not out yet).

But 60% over 10 years is only 4.8% compound, and we've seen 6.5% just recently, so while it doesn't seem all that likely it certainly isn't unattainable in some parts of the country.

AG47

It’s not wages going up, it’s the fiat currency coming down, this is how the correction will come.