What will average house prices need to fall to for the next generation to buy own home?

edgex

A couple on £20k each
Bank is willing to lend at 3x incomes = £120k mortgage
Which with the 10% deposit gives you £133k for a house


Now if they were planning on starting a family, I would hope that one of the earners is on more than £20k, so lets say they're both on £25k.
3x incomes = £150k mortgage
+ 10% deposit = £166k for a house
(but the affordability calculation would take into account a possible drop in earnings for the early years of a child, so the bank might reduce the mortgage a bit)

That strangely fits with something I figured quite some time ago;
A reasonable property value is £50k per bedroom.
(studio & 1bed flats are surely for the rental market)

RealElement47

edgex wrote: »

A couple on £20k each
Bank is willing to lend at 3x incomes = £120k mortgage
Which with the 10% deposit gives you £133k for a house


Now if they were planning on starting a family, I would hope that one of the earners is on more than £20k, so lets say they're both on £25k.
3x incomes = £150k mortgage
+ 10% deposit = £166k for a house
(but the affordability calculation would take into account a possible drop in earnings for the early years of a child, so the bank might reduce the mortgage a bit)

That strangely fits with something I figured quite some time ago;
A reasonable property value is £50k per bedroom.
(studio & 1bed flats are surely for the rental market)

If the couple start a family then they would almost certainly want another baby a few years after the first. Nobody wants an only child.

And if they have two they often want to have at least another one.

This could be upto ten years or at least several years of the mum not working all that much.

It's a very recent change to have two incomes, it always used to be one

worried_jim

RealElement47 wrote: »

If the couple start a family then they would almost certainly want another baby a few years after the first. Nobody wants an only child.

And if they have two they often want to have at least another one.

This could be upto ten years or at least several years of the mum not working all that much.

It's a very recent change to have two incomes, it always used to be one

That's council estate life now.

RealElement47

worried_jim wrote: »

That's council estate life now.

So if you want to be normal and have a normal family you have to live in a council estate?

haras_nosirrah

average family income of 40k based on 2 adults working
4x income - 160k
plus 10% deposit = a purchase price of around 175-180k

gets a 2-3 bed house in most areas of the country.

An average family and average earners will always struggle to buy in London and the south east without a massive income, massive deposit or family money - it was always the case.

RealElement47

haras_nosirrah wrote: »

average family income of 40k based on 2 adults working
4x income - 160k
plus 10% deposit = a purchase price of around 175-180k

gets a 2-3 bed house in most areas of the country.

An average family and average earners will always struggle to buy in London and the south east without a massive income, massive deposit or family money - it was always the case.

Average normal income is about 20K each, but as we said if a coup,e has a couple of kids then they lose half the income for a decade or so.

And it's not 4x income, the banking crisis has lowered it to 3x or maybe 3.5x income.

And it's useually 5% deposit

RelievedSheff

triathlon wrote: »

And yet another "when will life be fair" post so you can buy a property. How many decades longer are you going to wait to find it is highly unlikely this scenario will not play out for you, nor anyone.

It is always going to be the case that those who waited and missed the boat are going to be bitter about those who got on with life and now have what they worked hard for.

chucknorris

RealElement47 wrote: »

So if you want to be normal and have a normal family you have to live in a council estate?

What's wrong with living on a council estate, I lived in ex council properties for over 12 years (some council tenants still lived in the block). I chose to live there while letting out a house that today's price would be over £1m. Because it was better value to let my tenants buy that house for me, while I lived in cheaper but large decent ex council flats. But they provided a very decent place to live.

Malthusian

RealElement47 wrote: »

If the couple start a family then they would almost certainly want another baby a few years after the first. Nobody wants an only child.

With the rising age at which people have their first child, quite a lot of them may not have a choice.

And if they have two they often want to have at least another one.

Er, no. Average family size is down to 1.9 children. Eliminate the religious and most people - certainly most homeowners - are happy to stop with 2.

And see above about the rising age of people having children. The average age of a first-time mother is 30, but for well-off home-owning mothers the average will be higher. A few years after a few years after your first child and that may be your lot.

It's a very recent change to have two incomes, it always used to be one

No it didn't. Most women have always worked, only a minority of middle-class mothers could afford to lounge at home. And quite often mothers who appeared on the books as not working were in reality working in their husbands' business (my mother included). There was zero point in paying them separately for tax reasons. Until the Tories ended the practice of taxing married women's income as their husband's.

GreatApe

AG47 wrote: »

If an normal job for the next generation is around £20K then the bank will give a mortgage for around 3.5 x that, then £70K plus a 5% deposit average property for young first time buyers should be under £80k for the next generation to be able to afford their own homes.

But the normal wage isn't £20k it's closer to £35k for full time make workers and if both working it's a joint £65k

What about the £200 billion a year transferred from old to not so old?
What about the £600 billion a year or so of income that are not wages?

Ignore it's existence?
Pretend none of it goes to housing?

It's better to model housing like this

The bottom 1/3rd of homes (nationally) goes to FTBs
The middle 1/3rd goes to second time buyers (typically around age 40-50 they buy their second home. With all the equity in their first home and then additional new mortgage and or inheritance)
The top 1/3rd goes to the rich who have business income inherited wealth or mega paying jobs

So can FTB couple buy the median of the bottom 1/3rs of housing nationally? Yes they can which is why about 1/3rd of all home sales go to FTBs