Interest rates at historical lows, housing prices through the roof, wages stagnant and Brexit.

bigadaj

Linton wrote: »

I suggest you rethink your maths. If wages have gone up 5-fold and house prices have gone up 10 times, then house prices are twice as expensive in relation to wages as they were. This can be simply explained by the fact that more women work now, are able to get decent salaries, and do not give up their careers when they have children. In the past mortgages were largely based on the man's wages, now they are based on joint wages. As twice as much money is available market economics ensures that house prices will rise to use it. Tough on singles who are priced out of the market, but then they did not usually buy a house in the past either but lived at home or rented until they got married.

Clearly house prices are affordable now. If they werent large numbers of houses would be standing empty. The market ensures that the number of people who can afford to buy a house approximately equals the number of houses available.

That is utter rubbish, house price inflation post gfc is fundamentally caused, or supported, by near zero interest rates.

There seems to be a fundamental misunderstanding of how the property market works and it's not down to two incomes. Not only have you got incredibly cheap mortgages, meaning that people can ' 'afford' to pay more but you've had help to buy to keep house prices high, sorry I mean increase access to home ownership. This selfless act by governments to subsidise home ownership at inflated levels has cost the taxpayer billions and fed straight into record profits at house builders, how else can persimmon achieve a 52% return in equity?

The fundamental difficulty is that not only is house price inflation the only 'good' form of inflation, but people think that is 'real' eventhough you can't readily access the money because you're living in it. It has negative knock on effects in terms of savings, investment and pension provision, and the holy cow of property ownership can't be questioned. One thing that would solve issues around excessive house price inflation would be to remove the capital gains tax exemption on owner occupied properties, but that would never get support from the population, who are so clever to have bought their house and lived in it to have made hundreds of thousands.

just for clarity I'm not a millennial, solid mid generation xer who has their own property and is comfortably off. I just think the whole market is crazy, but when I bought my house twenty years ago I didn't think it was particulalrly cheap then, so it seems you rarely lose in property no matter what level you purchase at.

veryintrigued

Part of me sort of hopes Corbyn gets in.

That way (when they see the consequences) a generation will never vote Socialist Labour ever again.

bowlhead99

benbay001 wrote: »

Its a shame you can't buy houses with self pity or the op could become a property tycoon.

True. The whole, "I am a single person who has had his life on track for 5 years, but it would be 'a horrible reality to accept' if the first home I purchased had only one bedroom..." really tugs at the heartstrings.

If you have another 30+ years of career growth to go, and are not factoring in the earnings of a partner because 'that would be a huge commitment', it is not particularly surprising that you can't yet buy a nice house with multiple bedrooms.

I bought in my late 30s, and not on my own. So it wasn't an entry-level property. But by then I'd had 15 years of career growth since leaving university. Some of that career growth came from the flexibility of being willing and able to move cities, including a couple of stints overseas; not having a property and a mortgage was convenient for that.

Looking back I could have made different choices, and we can all see people whose comfortable life is partly attributable to getting in on home ownership early and wonder if we should or could have done that. But life is more than 'what if's. Get out and live it.

The concern of 'stagnant wage growth' is perhaps overblown. There is something somewhat contradictory about saying 'wages are pathetic' and also saying you were a young person who never would have dreamt you would have been earning £38k now. But when you're early in your career, you do not need wages to rise much, to earn more money. The wages for a particular role can stay the same, but you move through the roles and pay grades as you build your career. At the start, your wages don't buy much and you live in a run down flat. By the end, you hope for something better.

Canada might be an interesting place to live. Generally scores well on quality of life, and they have more space per person so land is relatively cheaper. The flipside is that it can be a much longer distance from the cheap place in the middle of nowhere to the high paying job in the middle of somewhere.

A good thing about cheap places in the middle of nowhere is that increasingly, technology allows us to live in one place with lower living costs while still accessing work from another place where it would have cost us more. You could apply that to the UK or Europe without needing to move as far as Canada. It does of course mean that you are competing for employment, globally, with people who are willing to live in places that you personally would find less desirable. Back in the day, you might think of local jobs for local people and work in the same factory for 40-50 years until you retire. The world has moved on. The people who embarked on that 40 years in the factory probably would never have dreamt of participating in online forums, much as OP five years ago would never have dreamt of earning £38k...

onwards&upwards

veryintrigued wrote: »

Part of me sort of hopes Corbyn gets in.

That way (when they see the consequences) a generation will never vote Socialist Labour ever again.

I don’t think it works like that.

After all, look at the consequences of voting for right wing Tories 3 times in a row but there are still people who think that’s a sensible and right thing to do.

MissMollyJ

I moved out of the south east so that I could buy a house for me and my children. Outside of the southeast is not 100% rural villages you know. Move to a cool city up North and buy a nice house.

Btw I am 43, on 28k pa, have 4 children and just bought a 3 bed house for us. Do not lose hope! Just change your viewpoint maybe.

fred990

As if two wages aren't enough there's the bank of mum and dad to help too....apparently the tenth biggest lender into the pyramid scheme.
It seems even that is not enough, now grandparents are being cheerfully encouraged to join in! Either torygraph/guardian article, average £7000 apparently.
What could possibly go wrong.......

ruperts

AnotherJoe wrote: »

LOL. In Germany most people rent not own and there's no aspiration to own as there is here,
P,us, a search for "housing crisis in Germany" finds plenty of results affirming that actually, there is an issue there.

The rate of home ownership in Germany is about 52% compared to the UK where it's about 64%. So for all that Germany is often referred to as a nation that prefers to rent, there isn't actually a lot of difference.

ruperts

I've got some sympathy with the OP. Even the IFS in their latest report recognised that the boomer generation have lived lives of "extraordinary privilege", and the history of the house price to income ratio simply cannot be denied - it is now much harder to buy a home than it used to be.

However £38k is enough of a salary to buy a perfectly fine starter home almost anywhere in the country apart from a few particularly expensive areas, so really their complaint is specific to the expensive south east and doesn't apply anywhere else.

Thrugelmir

CreditCardChris wrote: »

And house prices were 1/10th of what they are now. Ergo house prices are 5x more expensive in relation to wages today than they were when you bought your house.

What don't you understand?

For my first property we could only borrow 2.75 joint earnings. Took 3 years of hard saving to get the 5% deposit together. A 95% mortgage. Then as the LTV was over 75% had to pay a one off MIG fee. All for a 2 bed second floor flat. Bought what we could just to get one foot on the first rung of the ladder. There was no bank of mum and dad to bail out.

Linton

bigadaj wrote: »

That is utter rubbish, house price inflation post gfc is fundamentally caused, or supported, by near zero interest rates.

There seems to be a fundamental misunderstanding of how the property market works and it's not down to two incomes.

Of course 2 incomes is a major factor. Prices rise through people being able to outbid other potential buyers. Simple observation shows that in general people are prepared to pay almost all they can afford to buy a house. If they can afford a £300K house they see themselves as £300K people and dont settle for a "grotty" £150K house to save money. Broadly speaking, a 2 person household will out-bid a one person household. This was less true in the distant past since the wife's income was largely disregarded for mortgages. However for social reasons single people were much less inclined to buy anyway.

Not only have you got incredibly cheap mortgages, meaning that people can ' 'afford' to pay more but you've had help to buy to keep house prices high, sorry I mean increase access to home ownership. This selfless act by governments to subsidise home ownership at inflated levels has cost the taxpayer billions and fed straight into record profits at house builders, how else can persimmon achieve a 52% return in equity?

I agree the government's policy to subsidise new house buyers is totally self-defeating. Prices rise to absorb the extra money. I disagree that this all goes into builders high profits because land costs rise in line with house prices. Also competition forces builders to offer extras such as luxury kitchens that weren't provided in the past.

The fundamental difficulty is that not only is house price inflation the only 'good' form of inflation, but people think that is 'real' eventhough you can't readily access the money because you're living in it. It has negative knock on effects in terms of savings, investment and pension provision, and the holy cow of property ownership can't be questioned. One thing that would solve issues around excessive house price inflation would be to remove the capital gains tax exemption on owner occupied properties, but that would never get support from the population, who are so clever to have bought their house and lived in it to have made hundreds of thousands.

I dont think most people do see their home as part of their wealth as they only make hundreds of thousands of pounds profit if they trade down. In order to make a significant gain the down trade must be to a very much less desirable house. This may be difficult emotionally and the process wastes a lot of capital. As the arguments over care funding show people are irrationally attached to their home even if they cant live in it.


Ironically, the people who gain the hundreds of thousands arent the people whose houses have increased greatly in value but rather their beneficiaries. However increasing life expectancy means that the beneficiaries are likely to only make their undeserved gains well after the point at which they have bought a house and are aleady living relatively comfortably.


I fear we will return to the days of rigid class boundaries defined by inherited wealth based on land ownership, or its absence.