Homeowners more impoverished than renters

mylittlefriendbaxter

"People normally think of people in poverty being single mums on council estates or people living in a rented bed-sit but this is a stereotype.

"By far the largest number of people in poverty are homeowners, many of them young first-time buyers." Professor Roger Burrows of the University of York's sociology department, an expert on UK poverty, told BBC News.

http://news.bbc.co.uk/1/hi/business/4081596.stm

dag_2

Yeah, right.

But the devil lies in the detail. How do you define poverty?

In this instance being in poverty is defined as earning below 60% of average incomes.

Heh - by that definition, a millionaire could be considered to "be in poverty". A normal person's definiton of poverty would consider all means - not just income, but savings and investments, and perhaps even the family support network too. Even if you are just looking at income - most people would only count income net of housing costs, ie net pay minus rent or mortgage interest.

If the equity you can release by selling your mortgaged house is enough to pay rent for a year or two, then you're not in poverty, in my book.

However, I agree that there are serious pitfalls to buying properties, especially at today's inflated prices, and with the market as jittery as it is.

What if your house or flat is next door to an Al Qaeda bomb factory? If you're renting your home, then as soon as it ceases to exist, you stop paying rent. But if you own your home, it's tough luck - you've still got to pay the mortgage. Sometimes, buying simply doesn't make sense, even if you can get a mortgage.

nearlyrich

People have always streched themselves a little to get on the property ladder, ask your parents what they paid for their first house, ask them if it seemed like a really big committment at the time? My first house cost £8500, we had the chance to buy a really nice big house for £17000 but on joint earnings of £100 per week (1982) it was not deemed to be a good idea so we let it go. (We were approved for the mortgage) The main problem these days is that many first time buyers already have debt before they take on a mortgage and if they have been living with their parents they don't really know the true cost of living. Also most of my friends and family started out with a houseful of furniture donated by friends, bought second hand etc, many people want to spend thousands on furniture and they don't have the money so they take out a loan or put it on the credit cards.

The house we have now was bought in 1992 with a £60k mortgage, it's worth at least 4 times what we paid mainly due to the price of property escallating, the house we paid £8500 for in 1982 is now worth around £150k and would be beyond the reach of a typical first time buyer around here where there are not too many jobs paying much above the minimum wage. I worry about my children being able to afford a house at all.

John_M_Business

I also think it's about time that the definition of 'poverty' was changed for good.

The existing definition would not look out of place in a communist regime... however even some of our neighbours living in Council Accommodation live a really good life - two incomes, all the mod-cons, etc. They are NOT in poverty...

Finally, I would add that those homeowners living in poverty now are the sensible ones. They're actually INVESTING in a substantial asset that they will be able to realise in a few years' time. Those renting and spending all the 'extra cash' are the ones in REAL danger of future poverty.

mylittlefriendbaxter

i agree in part but if you are honest with yourself were you earning alot of money as a FTB?

many people i know even on the salaries of junior doctors / lawyers / accountants (i.e. 40-60k) cannot afford to buy much more than a 1 bed flat in the south east these days.

John_M_Business

mylittlefriendbaxter wrote:

i agree in part but if you are honest with yourself were you earning alot of money as a FTB?

I was not earning a huge amount. My wife and I bought jointly on salaries of about £25k each. We haven't looked back...

mylittlefriendbaxter wrote:

many people i know even on the salaries of junior doctors / lawyers / accountants (i.e. 40-60k) cannot afford to buy much more than a 1 bed flat in the south east these days.

And that's all they need for the time being. They are one person, one bed will do, surely?

If they find a partner, then they can double-up and acquire more. If they inherit/access additional funds they can do the same. If they continue to save money each year - then they can move up the ladder.

mylittlefriendbaxter

ok, but if the some of the richest people can only afford to buy a 1 bed flat, what is everyone else supposed to do?

personally I don't believe a market (and society) where you have to earn over 50k just get a 1 bed flat in an average area of London is sustainable, but thats my opinion and you are entitled to yours.

its ok to say sure that will do for now, but don't forget youngsters these days don't have the advantage of 10% wage inflation every year.

John_M_Business

Are junior doctors rich?

Sure, at the time they are earning a good salary - but they aren't really 'rich' per se.

Spendless

John_M_Business wrote:

I was not earning a huge amount. My wife and I bought jointly on salaries of about £25k each. We haven't looked back...

£25k each??? £50K combined. I'd call that a lot. I bought my first place on a salary of £10,500 a MTH that cost £25,000.

John_M_Business

Spendless wrote:

£25k each??? £50K combined. I'd call that a lot. I bought my first place on a salary of £10,500 a MTH that cost £25,000.

£25k after five years out of University, in 1999, is about average for a Graduate at that time. The fact that there were two of us allowed us to buy a two bedroomed home (a point I was trying to make earlier).

What date were you earning £10,500? and where can you now find ANY property in this country for £25k???

pandas66

My sheds up for sale at 25k, its about all thats on offer in Lancs. Got running water too at present !
Property in this area has gone through the ceiling. 2/3 bed terraced are arounf 100k, no off road parking, no garden. You may get a demic for 70/80 but it'll need gutting. I wonder whats round the corner for my kids. My mortgage of 26k is peanuts to what the house is worth but 12 years ago before I reduced it, it was hard going. I was on a lot less money and I'd hate a booming bang just now.