How far do you think the UK average property will slide down too?

meanmachine_2

I think we *might* see a return to 4x average single wage, in certain areas.

But for that to happen (putting the ave property at around 120K), we'll need IRs to nudge up, unemployment to rise and the credit crunch to continue.

Meantime, a 20% fall in nominal terms - taking the average back to the £150K mark - *seems* possible, but who knows?

WTF?_2

mitchaa wrote: »

I said this in another post but should a mortgage based on a single average wage actually be able to buy an average house? What is an average house? 2 bed flat, or 3 bed semi detached? (I would say 3bed semi detached family home)

Single average wage should be able to buy you a 1 bed, possibly 2 bed flat, but for a 3 bed semi detached family home, i dont get why people would think a single average would or should be enough?? Surely this then boils down to 2 x average wage (£50k)

If a couple had a joint income of 2 x £25k average wages then an averaged priced £150,000 home would only be 3x income and be deemed reasonably affordable.

I think some of you lot are nuts predicting 50%+ falls if im being honest. Houses would then become stupidly cheap, especially in a joint mortgage scenario (£50k joint income)

Depends on how overpriced they were to begin with but houses will have to fall in price to a level where FTBs can get onto the ladder.

In most places, a 50% fall would just bring prices back to where they were in 2003/2004. Perhaps you can tell us what has fundamentally changed since 2004 to justify the increase to 'peak' prices in Aug 2007?


Basically, lunatic lending would have to make a reappearance to keep the market propped up. If you give massive amounts of cash to anyone who asks with no regard to the risk of them defaulting then of course we can continue to 'enjoy' the house price levels that we have grown accustomed to in the last few years.


By the time this all pans out (5-6 years down the line) I predict prices in real (ie inflation-adjusted) terms will be about 40-50% of what they are now.

mitchaa

LittleMissAspie wrote: »

I don't think most households are earning 2x average salary. Out of my 5 colleagues plus me, not a single household is comprised of two people in full-time work earning 25k each.

My boss is well paid but lives on his own.
My manager works part time, has husband and children.
The other manager is part time, has husband and children.
Admin assistant is part time, has husband and child.
Trainee is full time but earns well under 25k. Has girlfriend, no children.
I work part time, have boyfriend and no children.

And then you have to remember that all the women with children who are part time are spending a LOT of their wages on childcare. The admin assistant has £200 a month left after childcare. Not sure why she bothers working 2.5 days a week for that.

So I don't think 6x single average income is realistic. I think 4x is more realistic. That takes into account that a lot of couples are both working now, but the mother is likely to be part time and childcare will make a dent into affordability.

Very true, but the average wage of £25,000 is for both men and women, its based on a single average person.

So an average couple would have a £50k income assuming Mr Average meets Mrs Average?

If this were the case then this average couple would then be able to buy a average property fairly easily £50k x 3

Yep i know it does not work like this in most cases, due to parenting, childcare etc

Im just trying to say that i do not agree that 3 x single annual salary should be able to buy an average 3 bed semi detached £150k home.

lostinrates

Something occured to me while reading this.

We all use average salary levels but perhaps the issue is that increasingly culture is going to be forced to chage to how things used to be that the average worker rented. (I suppose there was more work provided accomodation too). I really don't know, its just that averages seem erroneous if there are still people at the top who can price out those lower down?

If things drop to 30% of DH and I would stop deliberating and dreaming and seriously get moving because even if there is still a loss in the short term that would make something nice afordable for us without TOO much stretching and I am positive that things will rise eventually again (then fall, then rise...). Just as people like me a waiting for it to drop to buy a home investors will swoop in for 'bargains' and push things up again.

LittleMissAspie

mitchaa wrote: »

Im just trying to say that i do not agree that 3 x single annual salary should be able to buy an average 3 bed semi detached £150k home.

I do agree that 3x single salary isn't realistic for a family home to cost. But 3x double salary is also unrealistic because Mr and Mrs Average with their two children don't have a double salary, nor do they have the affordability of a couple without children.

meanmachine_2

This ain't going to help "affordability" either - for the first time since the mid 90s clothes are about to start feeding inflation into the CPI basket, rather than disinflation.

Poor old Mervyn.

Which means clothing is likely to suddenly disappear from the basket, I'd wager....

http://business.timesonline.co.uk/tol/business/industry_sectors/retailing/article3896949.ece

brit1234

mitchaa wrote: »

I think to get beyond 50% for every single home in the UK is complete and utter madness.

Why would that be? I'd like to remind you of a few facts:

1. Banks have been participating equally all across the UK in loose lending.
2. Buy to Let is also a national take up
3. Developers have fiddled land registry figures nationally not just locally

The British housing bubble is a national problem, prices have gone up massively every where on every type of property.

There is noting to stop all properties coming down over time by roughly the same percentage. There are I accept at the moment regional / local differences in prices coming down but doesn't mean they won't fall, they are just a little delayed and face the same fundamentals of other areas.

amcluesent

>Why would that be?<

The dynamic is interesting, IMHO there is still excess liquidity about which is driving inflation and the 'bubbles' in some assets such as fine art which are still inflating.

Unlike wine and pictures, houses have the utility of providing a home and/or yield from rental income.

As inflation rises and house prices fall, at some point the graphs will cross and it'll be sensible to put fiat money into a tangible asset you can live in.

obsessed_saver

meanmachine wrote: »

I think we *might* see a return to 4x average single wage, in certain areas.

But for that to happen (putting the ave property at around 120K), we'll need IRs to nudge up, unemployment to rise and the credit crunch to continue.

We don't have to rely on the IR or unemployment. I think the rate of increase in the cost of living is enough to put a dent in "affordability" to push people on the brink over the edge.

I've now got a really, really bad feeling about the state of the world economy. Something big is about to happen.

dopester

mitchaa wrote: »

I said this in another post but should a mortgage based on a single average wage actually be able to buy an average house?

If a couple had a joint income of 2 x £25k average wages then an averaged priced £150,000 home would only be 3x income and be deemed reasonably affordable.

In the 1950s, 60s, 70... could your average house be purchased at lending of x3 or x3.5 single income? When did more banks shift to lending at something like x 2.5 joint-income?

We are in a credit crunch. Every time I have ever heard Gordon Brown proudly claim "more people employed" than ever before, or variations on that, I think back to just before Labour came to power in 1997.

Conservatives had something like 37% people working in public sector. Isn't it something like a whopping 49% now under Labour? It's easy to lower employment when the Government puts loads of people on it's own payroll. In tough times, let's see if the State can afford so many people on it's payroll.

Why do you think Government can't now up the pay for UK soldiers (£16,227) who risk their lives, even though they earn less than traffic wardens (£17,000)?

This is why...

From The Times
June 6, 2008
Treasury says there is no money for a salary increase for soldiers
Michael Evans, Defence Editor

You only have to read like any news at all, on almost any day, and you hear bad bad credit crunch contagion fears for jobs.

Mirror.co.uk
Aviva crisis as 1,800 are Axed
Edited By Clinton Manning 7/06/2008

Britain's biggest insurer is axing up to 1,800 jobs as part of a plan to slash costs by £300million.

Huge numbers of staff, including 15,000 estate agents, will be shed as the credit crunch bites, the Centre for Economic and Business Research predicts.

Architects, lawyers, consultants and accountants will also be hit hard.

That looks like credit-crunch jobs contagion to me. You really think spending is going to carry on flowing in retail, builders, food & leisure sector ect?

You might all think £25,000 incomes are going to carry on being the norm, without people being asked to take pay cuts, work fewer hours, be made redundant, find it harder to find new jobs - but these are variables I use in my predictions.

There is a saying:

When we look at anything closely enough we find it connected to everything else in the universe