House price increases. Is everyone absolutely loaded?

lisyloo

zagfles said:

getmore4less said:

Gycraig said:

MobileSaver said:

Grumpy_chap said:

Well, isn't this the problem - the supply of money facilitating an increase in house price to salary ratio?

If the financial services industry simply applied a maximum salary multiple of 3x salary, the result would be a sharp step-correction in the housing market

The supply of money is a factor in HPI but it's clearly not the only or even the main factor as you have to remember that a third of all properties are bought with cash, so nothing at all to do with the financial services industry.

Fundamentally, house prices are dictated by supply and demand; there are not enough homes that people want being built for the ever-increasing number of people that want and can afford them.

In particular, one of the often-forgotten issues is an important lifestyle change; more people than ever are living alone and the numbers keep increasing. So even if the population generally wasn't increasing (when obviously it is) you would still need extra homes built because more and more John and Janes now need two homes to live in rather than just one.

Grumpy_chap said:

This would, of course, mean that those with property experience a drop in the fictional paper worth of their asset but that is probably a cost that can be tolerated in the interest of the wider financial good. 

Do you really think over 20 million homeowners will tolerate a deliberate attempt to downvalue their main assets just so the younger generation can buy a cheap house?!?!

Do you think the cash buyers would pay as much if they knew there competition could only pay up to 3x there income ?. 

Me and my partner earn 60k a year between us meaning at 4.5 we can borrow 270k, at 3x we could borrow 180. Do you really think the 270k house would stay being worth anywhere near that if the average family couldn’t get a mortgage on it ?. Heck some mortgages are allowing x6 as a multiplier. 1500 a month ish mortgage on a 60k income is insanity. 

£60k is between  £3.6k-£4k  take home depending on split.

6x on high LTV 4% rate. 35years £1600pm   less than 1/2 the income and plenty left to live on

For a job with income growth that won't be a problem in a few years throwing any pay rises at the mortgage before increasing lifestyle costs.  eg. 2x£30k going to 2x£40k adds £1kpm net   

Throw that at the mortgage for 5 years

amount	rate	payment	owing
£360,000.00	4.00%	£2,600.00	£267,181.43

Now 75% LTV(before HPI)  where rates around 1.5% are available

Drop the term to 16 years similar payment releasing the £1kpm for lifestyle/pension) and in another 5 years

amount	rate	payment	owing
£267,000.00	1.50%	£1,565.03	£190,331.76

<60% LTV with best rates available.

a few years pain better bigger house to avoid the house moving costs and sitting pretty for the rest of your lives.


With a bit of HPI that 75% LTV could come even sooner.

Of course some couples want to have children, at which point they'll either lose a salary or be faced with the current ridiculously high childcare costs.

Some have access to free childcare via grandparents. Although I 100% agree their living costs will rise.

zagfles

lisyloo said:

zagfles said:

getmore4less said:

Gycraig said:

MobileSaver said:

Grumpy_chap said:

Well, isn't this the problem - the supply of money facilitating an increase in house price to salary ratio?

If the financial services industry simply applied a maximum salary multiple of 3x salary, the result would be a sharp step-correction in the housing market

The supply of money is a factor in HPI but it's clearly not the only or even the main factor as you have to remember that a third of all properties are bought with cash, so nothing at all to do with the financial services industry.

Fundamentally, house prices are dictated by supply and demand; there are not enough homes that people want being built for the ever-increasing number of people that want and can afford them.

In particular, one of the often-forgotten issues is an important lifestyle change; more people than ever are living alone and the numbers keep increasing. So even if the population generally wasn't increasing (when obviously it is) you would still need extra homes built because more and more John and Janes now need two homes to live in rather than just one.

Grumpy_chap said:

This would, of course, mean that those with property experience a drop in the fictional paper worth of their asset but that is probably a cost that can be tolerated in the interest of the wider financial good. 

Do you really think over 20 million homeowners will tolerate a deliberate attempt to downvalue their main assets just so the younger generation can buy a cheap house?!?!

Do you think the cash buyers would pay as much if they knew there competition could only pay up to 3x there income ?. 

Me and my partner earn 60k a year between us meaning at 4.5 we can borrow 270k, at 3x we could borrow 180. Do you really think the 270k house would stay being worth anywhere near that if the average family couldn’t get a mortgage on it ?. Heck some mortgages are allowing x6 as a multiplier. 1500 a month ish mortgage on a 60k income is insanity. 

£60k is between  £3.6k-£4k  take home depending on split.

6x on high LTV 4% rate. 35years £1600pm   less than 1/2 the income and plenty left to live on

For a job with income growth that won't be a problem in a few years throwing any pay rises at the mortgage before increasing lifestyle costs.  eg. 2x£30k going to 2x£40k adds £1kpm net   

Throw that at the mortgage for 5 years

amount	rate	payment	owing
£360,000.00	4.00%	£2,600.00	£267,181.43

Now 75% LTV(before HPI)  where rates around 1.5% are available

Drop the term to 16 years similar payment releasing the £1kpm for lifestyle/pension) and in another 5 years

amount	rate	payment	owing
£267,000.00	1.50%	£1,565.03	£190,331.76

<60% LTV with best rates available.

a few years pain better bigger house to avoid the house moving costs and sitting pretty for the rest of your lives.


With a bit of HPI that 75% LTV could come even sooner.

Of course some couples want to have children, at which point they'll either lose a salary or be faced with the current ridiculously high childcare costs.

Some have access to free childcare via grandparents. Although I 100% agree their living costs will rise.

Yes, the grandparents could provide free childcare because the couple can't afford to drop a salary, or to pay for childcare, because they're paying a vast amount for their housing.

So effectively the grandparents provide free "labour" because of HPI. Still, their house is worth a lot, bet that gives them a glow.

Personally if I ever have grandkids in my retirement, I'd want to be able to see them as and when, not as a full time job. I want my retirement to be on my terms, be able to go away on holiday for 2 months if I want, take last minute trips out if I want, not be stuck with the same committment of a full time or even part time job again.

MoJoeGo

Back to the original question - yes OP, around my way, 'loaded' is probably the word. So much cash floating around from not commuting, not having a decent holiday etc etc whilst still earning their London salaries. 

Everyone taking advantage of being extra flush by doing home improvements, to the point where you can't get a builder or building materials for love nor money. Still, I don't hear anyone complaining. At least not close by...

...all of which is of course a bit tongue in cheek, but if you're the right age, in the right job and in the right location then... kerching! Even my teenage daughter is making an absolute fortune from her (supposedly) part time job because it seems like no one wants to work in entry level service sector jobs any more...

And I'm merely Gen X, can't even be blamed for being a Boomer.

MobileSaver

Gycraig said:

MobileSaver said:

Grumpy_chap said:

If the financial services industry simply applied a maximum salary multiple of 3x salary, the result would be a sharp step-correction in the housing market

The supply of money is a factor in HPI but it's clearly not the only or even the main factor as you have to remember that a third of all properties are bought with cash, so nothing at all to do with the financial services industry.

Do you think the cash buyers would pay as much if they knew there competition could only pay up to 3x there income ?. Do you really think the 270k house would stay being worth anywhere near that if the average family couldn’t get a mortgage on it ?

If everything else stayed the same except that there was suddenly a lower cap on salary-multiples then you are correct that house prices would fall but that isn't how the real world works; everything else does not stay the same.

The fundamental point you are missing is that house prices are not based solely on salary-multiples, there are numerous factors that affect the "supply and demand" equation and house prices rise or fall based on the balance between those differing factors.

MobileSaver

zagfles said:

MobileSaver said:

zagfles said:

MobileSaver said:

Do you really think over 20 million homeowners will tolerate a deliberate attempt to downvalue their main assets just so the younger generation can buy a cheap house?!?!

Well I would. But I do agree that the majority are too stupid to understand that houses are a cost of living as well as an asset,

Of course there is nothing to stop you and others who think the same from selling your house with a 30% or more discount and only selling to a FTB... do you think it would catch on?

Err...I'm using my house! You know, to live in! So I'm not going to sell it.

My comment was of course tongue in cheek although there is no reason why those who feel strongly enough couldn't leave specific instructions for when they have no further use for their home (e.g. death or care home.)

The real point being that I just don't think that many people care enough to actually take a hit on their own assets, even once they are dead!

zagfles

MobileSaver said:

zagfles said:

MobileSaver said:

zagfles said:

MobileSaver said:

Do you really think over 20 million homeowners will tolerate a deliberate attempt to downvalue their main assets just so the younger generation can buy a cheap house?!?!

Well I would. But I do agree that the majority are too stupid to understand that houses are a cost of living as well as an asset,

Of course there is nothing to stop you and others who think the same from selling your house with a 30% or more discount and only selling to a FTB... do you think it would catch on?

Err...I'm using my house! You know, to live in! So I'm not going to sell it.

My comment was of course tongue in cheek although there is no reason why those who feel strongly enough couldn't leave specific instructions for when they have no further use for their home (e.g. death or care home.)

The real point being that I just don't think that many people care enough to actually take a hit on their own assets, even once they are dead!

You really don't get it. Why doesn't that surprise me.

It's no use to my kids if my house in particular sells for 20% less. It's of great benefit to them (and all FTBers) if houses in general are 20% cheaper. So I would welcome any policy which would result in a general reduction in house prices.

It's like those who'd welcome higher taxes to fund the NHS or whatever being told "well you can pay more if you want"

Most people would be better off with lower or at least stable house prices. But most aren't intelligent enough to realise it. It's no surprise, the state of financial education in this country is appaling, most people don't understand taxes, savings, how interest works, pensions etc.

Getting_greyer

When mobile saver talks about the entitled youth.  Whilst i think it's a poor use of language, he does have a point.  There are 1000's of non-auction, mortgagable houses on rightmove that are 50k that and appear habitable.  As it stands you would need 2.5k deposit and an income of 10-11k perhaps. If you cannot manage that, then what can you manage?

Of course, a lot of these houses look like the setting of peaky blinders but without the swag.  But if you really want to buy for the sakes of buying why not buy these?  Probably because of the reasons that they're listed as 50k in the first place.  

Is it from a sense of entitlement we may not want to buy these homes? Are we just snobbish and sneering about potential neighbours? Or is it that we look at these homes, far from social services, gutted local economy and the closest we'll get to any culture us the local Gregg's and betting shops.

I think it's more to do with the fact your standard of living, and access depends a lot on your postcode.  Some post codes are so expensive, your only hope of living there is via social housing.  Well not much of that going spare atm.  

Are we all suddenly loaded as the OP asks? I think not but it may be that we are willing to spend up to the monthly costs of private rents which means we're outbidding each other and so it goes on.  

Will the gov do anything? Yes, but not anything helpful.  I see a day in the not to distant future election campaign where gov backed 100% mortgages are announced.  Does it help dampen prices? Of course not.  Will it lead to the massive crash Crashy tells us all is coming? Probably.  Would people vote for it, I reckon by a land slide.

RelievedSheff

Getting_greyer said:

When mobile saver talks about the entitled youth.  Whilst i think it's a poor use of language, he does have a point.  There are 1000's of non-auction, mortgagable houses on rightmove that are 50k that and appear habitable.  As it stands you would need 2.5k deposit and an income of 10-11k perhaps. If you cannot manage that, then what can you manage?

Of course, a lot of these houses look like the setting of peaky blinders but without the swag.  But if you really want to buy for the sakes of buying why not buy these?  Probably because of the reasons that they're listed as 50k in the first place.  

Is it from a sense of entitlement we may not want to buy these homes? Are we just snobbish and sneering about potential neighbours? Or is it that we look at these homes, far from social services, gutted local economy and the closest we'll get to any culture us the local Gregg's and betting shops.

I think it's more to do with the fact your standard of living, and access depends a lot on your postcode.  Some post codes are so expensive, your only hope of living there is via social housing.  Well not much of that going spare atm.  

Are we all suddenly loaded as the OP asks? I think not but it may be that we are willing to spend up to the monthly costs of private rents which means we're outbidding each other and so it goes on.  

Will the gov do anything? Yes, but not anything helpful.  I see a day in the not to distant future election campaign where gov backed 100% mortgages are announced.  Does it help dampen prices? Of course not.  Will it lead to the massive crash Crashy tells us all is coming? Probably.  Would people vote for it, I reckon by a land slide.

Cheaper houses don't have to be wrecks. Just out of interest I have had a look what you can get for under £80k where we live and was genuinely surprised at how nice some of the properties look. You can get a lot of property for not a lot of money.

https://www.rightmove.co.uk/properties/107773184#/

https://www.rightmove.co.uk/properties/77306136#/

https://www.rightmove.co.uk/properties/88657237#/

https://www.rightmove.co.uk/properties/90799720#/

lookstraightahead

Lots of different perspectives!

I don't think it's harder now particularly, except that many people want to buy on their own rather than as a couple. I bought years and years ago but there were two incomes. It would have been impossible on one.

lots of things come in to play. Everyone seems to want everything new (not just FTB) new car, new furniture, new carpets etc. When I first bought everything was passed down, or from second hand shops.

people don't seem to want to commute. My husband recently changed jobs and they asked him why he wanted to work so far away from home - it's 45 mins - perfectly do-able.

I also think parents think it's good for kids to stay at home longer and save. I'm not so sure. I would certainly miss the income more if I had been used to having it go straight in my bank account.

I do think income needs to be better assessed. Self employed people really miss out, when often they're incomes are a lot more secure. 

It wasn't easier then in my opinion. It's just that we view things differently,

Grumpy_chap

MobileSaver said:

Do you really think over 20 million homeowners will tolerate a deliberate attempt to downvalue their main assets just so the younger generation can buy a cheap house?!?!

Well, why is that a problem?
My house has 4 bedrooms, 2 reception rooms, driveway and garden.

What difference will it be when I wake up in the morning whether the house is worth £1.25m, £250k, £5m, or £25m?
Absolutely none whatsoever!

If I wake up in the morning and find two bedrooms and the garden missing, that would be a major difference.

Actually, if the value of all those houses were to fall by 50%, I'd be much closer to having what is now the £25m house, so the opportunity for me to improve my standard of living just went up.