Average Income

[gilf]

intersted to know how this changes peoples veiws on the eventual bottom on prices, most on here seem to state £25k a year ?

As mentioned and obvious is that the average salary mentioned is the average salary of people taking on a mortgage, it has no relation to average salary across the board in this country.

You could do the same calculation of average salary for people buying a Ferrari and it would have the same relevance to real average salary as this figure.

If anything it illustrates than unless you earn £40k (joint or single) you can't afford to by a house, so basically very few people in this country are able to.

[suzyandjoe]

That is just a statement of fact - the salary that it takes to buy an average property at todays prices. What it does not say is that the average salary per household is £40k.

But maybe £40k is the average salary of those who own a property. Those on less will be in social housing -perhaps?

[Ignorant Steve]

Whenever this hoary subject of average salary gets raised no-one seems to mention the fact that the lower 20% of wage earners have never historically been in a position to buy. They were the council dwelling populace. Why anyone earning £12K stacking shelves considers themselves a potential home owner is beyond me.

So I think we should look at what the median salary is for the top 75% of men.

I fully understand that there are many highly paid women but I think the result will be skewed by those women that chose (or are forced to chose) a more flexible lower paid career.

Most home owning households have at least 1 higher earner and 1 standard earner.

So the multiple for whether an average house is affordable is as follows:

3 (or maybe 3.5 times) the national median wage for top 75% of men (X) plus 1 times the mean salary of total workers (Y).

So assuming X is £35,000 and Y is £15,000. (these are figures off the top of my head feel free to correct)

Average value of house should be £120K - £137.5K.

[munro]

How often do these things need to be repeated ?

£25K is the median, single male wage in the UK.

£36K is the mean, single male wage in the UK.

It may be "average" , at the moment, to have a £37,000 deposit for

a mid range house, but it is decidedly abnormal, historically.

Hence, prices must come down.

The results of the 2008 ASHE show that median weekly pay for full-time employees in the UK grew by 4.6 per cent in the year to April 2008 to reach £479. Median earnings of full-time male employees was £521 per week in April 2008; for women the median was £412.

The top 10 per cent of the earnings distribution earned more than £946 per week, while the bottom 10 per cent earned less than £262. Between April 2007 and April 2008 the distribution of gross weekly pay widened, with a 3.5 per cent increase at the bottom decile, and a 4.4 per cent increase at the top decile.

Median gross weekly earnings for full-time employees were highest for 40 to 49-year-olds at £539. Male employees reached their highest earnings in this age group at £598, whereas women reached their highest earnings for 30 to 39-year-olds at £480. Earnings increased until employees reached these age groups and steadily decreased thereafter.

Median full-time weekly earnings in London were £613, significantly higher than in other regions, where they ranged from £418 in Northern Ireland to £500 in the South East.

The full-time occupations with the highest earnings in 2008 were ‘Health professionals', (median pay of full-time employees of £977 a week), followed by ‘Corporate managers’ (£727) and ‘Science and technology professionals’ (£691). The lowest paid of all full-time employees were those in ‘Sales occupations’, at £272 a week.

The percentage difference between the median level of full-time earnings in the public sector (£523 per week in April 2008) and the private sector (£460 per week) narrowed over the year to April 2008, following annual increases of 4.3 per cent and 4.6 per cent respectively.

Source: http://www.statistics.gov.uk/cci/nugget.asp?id=285

So you need to be in the top 10% to earn £50k. At 3.5 times salary that's £175k - as steve99 says, suddenly £170k really does look like a lot of money. Particularly if you ever intend to pay it back; the modern definition of "affordability" seems to be "ability to pay IO", and never to pay back the capital.

[Daft Boy]

If the average mortgage is £112,000, and the average deposit is £37,000, then the average house price is £149,000.

I thought the latest Halifax figure was about £160,000.

Somebody's figures are wrong.

Also you have to bear in mind that the average salary of a homebuyer is probably higher than the average salary in general (lots of people priced out) and that the £40,000 figure quoted above is often spread between two people.

I agree. I think we can ignore any figure that comes from Halifax. The government have publicly stated that HBOS was incompetent in all its dealings with lending. The Nationwide average figure of £148K seems more accurate. Perhaps the mods should consider removing the Halifax indice to give this site more credibility. Lets just stick with good old reliable Nationwide and not some insolvent bank.

[Girly girl]

Girly girl, for info - is this childcare up to going to school, or does it carry on afterwards? As far as I can see this might enable a couple to support a big mortgage with her continuing to work, but not if the childcare drops away at school age so the kids have to be delivered by 8.30 and collected by 3.15 and looked after for half terms and holidays, which effectively rules out a full-time job for at least one parent.

No it countinues until they leave full time education, after school care/holiday until they are 18.

But if you do the maths carefully one partner is actually better off working 16 hours and no more because whatever they don't earn working the other 24 hours is topped up by the government.

Obviously this only applies to people earning about £50k between them but say a couple of nurses or a policeman and his wife would easily fit into this senario.

I really, really think you need to take this into account when making any decisions because quite simply lots of people who you might think are struggling simple aren't or haven't been fully informed how the system works but once they do they will be fine.

[fluffy666]

Wrong, if a couple earning £25k each have children then they get their childcare paid for by tax credits plus at least £100 childcare vouchers, making them able to easily afford £150k mortgage, when will this fact sink in on this board.

Up until you earn £61k between you, then the government will top you up and make having children and a mortgage affordable. Fact.

Not a fact. Trust me.

Childcare costs (raw) £930 per month (3 day week)

Nursery vouchers: £130 per month

Tax savins from vouchers: £100 x2 = £200 per month

Tax credits for childcare: £0 per month.

Net childcare costs: £600 per month.

Net salary for wife working: £130 per month..

Will be around £400 a month better off wehen the kids go to school, assuming some cost for after-school clubs, etc.

Were we looking to buy a house locally right now, we'd be lucky to afford a 2 bed terrace..

[Girly girl]

And it's fine for new mothers to be forced out to work just to keep a roof over their heads?

Yawn ..... new mothers have always worked, always right up until after WW2 when it was decided that the jobs were required for the men folk.

Oh and everybody gets 6 months maternity leave, most take 12 months.

[Girly girl]

Not a fact. Trust me.

Childcare costs (raw) £930 per month (3 day week)

Nursery vouchers: £130 per month

Tax savins from vouchers: £100 x2 = £200 per month

Tax credits for childcare: £0 per month.

Net childcare costs: £600 per month.

Net salary for wife working: £130 per month..

Will be around £400 a month better off wehen the kids go to school, assuming some cost for after-school clubs, etc.

Were we looking to buy a house locally right now, we'd be lucky to afford a 2 bed terrace..

Then you are earning too much, have a play around on www.entitledto.co.uk

It maybe that by working less you'll actually have more in your pockets each month.

And I would assume looking at those figures you have two kids of nursery age at the same time, which is simply bad planning on your part and why you can't afford a house being blunt.

Edited March 10, 2009 by Girly girl

[thecrashingisles]

But maybe £40k is the average salary of those who own a property. Those on less will be in social housing -perhaps?

A salary of £40k would put you well up the income distribution curve. Do you really think ~70% of people are living in social housing? Get real.

[Imminent_plunge]

A salary of £40k would put you well up the income distribution curve. Do you really think ~70% of people are living in social housing? Get real.

One in ten people in this country on a social housing waiting list. That doesn't include the people that don't have kids or disabilities and don't stand a cat in hell's chance of getting a house.

[VacantPossession]

Problem with jobs paying £40k and above is that when you lose them and there aren't any other jobs you will even be competing to get jobs in Asda and MacDonalds. Those jobs don't pay a quarter of £40k and so suddenly your mortgage is unaffordable.

My sister and partner have just found themselves in this situation. He's lost solicitors job with £50k salary. Mortgage: £170k

Well, my sympathies to them but in a wider sense, the problem all along is that white collar/upper tier management jobs have for far too long become way above their worth, but I emphasise that your sister's example sounds reasonable and is not included in what follows:

Many earned far too much in the first place. This of course leads inevitably to the question of wage parity in the UK. I am fed up to the back teeth of management level people touting the notion that industry "needs them" and needs others because corporations require the brightest people. If they were that bright they would not have contributed, en masse, to the delusional state of the UK economy and resulting meltdown.

Furthermore, the value to me of, for example, a diligent and excellent house cleaner is far higher than a consultation with a solicitor, most of whom I have only used for the purposes of procedural skills rather than knowledge of the law which I can look up for myself.

Recently a TV programme highlighted a yuppie young woman who was made redundant from her job as a PR consultant. She lived in a very desirable apartment overlooking Regents Park. It was clear that she felt an automatic entitlement to her £120k salary and her £350k mortgage. It did not occur to her that she'd been riding a delusional crest for a decade.

In my view, one really good thing about this recession is that it will knock the stuffing out of those in the "professional classes" who have arrogantly arrived at a mindset in which they feel entitled to a salary 5 times greater than someone else who works arguably harder but is looked upon as "menial" and thus gets a pathetic wage.

In other words, I think that the recession should, and will, promote a well overdue correction of the ludicrous chasm between wage levels. I'm not suggesting everyone should be paid absolutely equal wages but I am suggesting that the high and low differences are at insane levels.

VP

Edited March 10, 2009 by VacantPossession

[Vagabond]

If the average mortgage is £112,000, and the average deposit is £37,000, then the average house price is £149,000.

I thought the latest Halifax figure was about £160,000.

Somebody's figures are wrong.

Also you have to bear in mind that the average salary of a homebuyer is probably higher than the average salary in general (lots of people priced out) and that the £40,000 figure quoted above is often spread between two people.

No-ones figures need be wrong.

Its the same as with the wages, £149,000 can just be the the average price of the homes actually being sold at the minute. This is another bearish fact a it means that people still can't afford the average home of £160k, even on above average wages so prices still have further to drop.

[KingBingo]

No it countinues until they leave full time education, after school care/holiday until they are 18.

But if you do the maths carefully one partner is actually better off working 16 hours and no more because whatever they don't earn working the other 24 hours is topped up by the government.

Obviously this only applies to people earning about £50k between them but say a couple of nurses or a policeman and his wife would easily fit into this senario.

I really, really think you need to take this into account when making any decisions because quite simply lots of people who you might think are struggling simple aren't or haven't been fully informed how the system works but once they do they will be fine.

So the solution is to get everybody onto one kind or other of benefits.

Do you see a problem with the long term viability of this at all? Or assuming your dodgy numbers are right (some posters are pointing out their not) can endless government money plug every gap.

[Moo]

I really, really think you need to take this into account when making any decisions because quite simply lots of people who you might think are struggling simple aren't or haven't been fully informed how the system works but once they do they will be fine.

Have you actually looked at the figures for this? The only way I can make this work out is if mortgage interest rates stay below 5%, they have minimal transport costs, no unexpected one-off costs, and essentially live very much on the cheap. Yes, it's doable, but the conditions for it to remain doable are pretty tight, and do not, by any stretch of the imagination, apply nationally.

[munro]

At last, found the income distribution chart. The modal income is £300 per week - £15k a year. Two people on £15k is £30k, 3.5 times joint is £105k. So anyone with half a brain can see that average house prices at ca £160k is insane. I put £40k pa, single person with no kids, £1.5k pa in council tax into the calculator, and that comes out as better off than 97% of the population.

To see the chart you have to enter in some data and click through - http://www.ifs.org.uk/wheredoyoufitin/

If houses are going to come back anywhere in line with (falling) incomes, and if people are actually going to pay back their mortgages rather than permanently roll them over, then average houses have to drop well below £100k.

[Godley]

Wrong, if a couple earning £25k each have children then they get their childcare paid for by tax credits plus at least £100 childcare vouchers, making them able to easily afford £150k mortgage, when will this fact sink in on this board.

Up until you earn £61k between you, then the government will top you up and make having children and a mortgage affordable. Fact.

+1

Any evidence that contradicts the perceived 60% crash view is filtered on this board, its Sibley psychology except in reverse.

Also, filtered out and I will keep saying this is that there are 2.4 million people in the UK aged between 28-30 typical FTB age (source ONS). Now assume that only the top 20% were able to buy....................What do you think their salaries are? That's 480,000 people...............There's your demand. People in supermarkets, the unemployed, low paid etc etc are simply not part of the market..............Should they be? Of course they should, but Gordon has made sure they are not.

Soon as mortgages become more available at the 90% LTV level now you have the means of finance...........

If the market had been allowed to take its course without any government interferance then I would have concurred with the 50% + view, but it is not going to be ALLOWED to happen. Not while you have a Labour government...........

Now before I get hung, prices will continue down whilst the various things come together, and if you want my opinion it stinks, its wrong and its immoral............But people, get real you have all this because we have a f*** wit in power.

[Godley]

At last, found the income distribution chart. The modal income is £300 per week - £15k a year. Two people on £15k is £30k, 3.5 times joint is £105k. So anyone with half a brain can see that average house prices at ca £160k is insane. I put £40k pa, single person with no kids, £1.5k pa in council tax into the calculator, and that comes out as better off than 97% of the population.

To see the chart you have to enter in some data and click through - http://www.ifs.org.uk/wheredoyoufitin/

If houses are going to come back anywhere in line with (falling) incomes, and if people are actually going to pay back their mortgages rather than permanently roll them over, then average houses have to drop well below £100k.

The average income is £25k, go to the ONS website..........

What you have posted proves nothing, its crap sorry.

Edited March 10, 2009 by Godley

[Godley]

So the solution is to get everybody onto one kind or other of benefits.

Do you see a problem with the long term viability of this at all? Or assuming your dodgy numbers are right (some posters are pointing out their not) can endless government money plug every gap.

I can confirm that this is correct.

And yes I see the problem, tax credits is a transfer of wealth from the higher earners (remember the capped rate of NI?) to the lower paid. It makes them dependant on a government, thats socialism for you = dependancy..........It BS Kingbingo but this is Gordon's Britain.

God I am angry today.

[Olebrum]

The average wage is more obfuscation.

What really matters is the median wage, something you rarely see mentioned.

[munro]

+1

Any evidence that contradicts the perceived 60% crash view is filtered on this board, its Sibley psychology except in reverse.

Also, filtered out and I will keep saying this is that there are 2.4 million people in the UK aged between 28-30 typical FTB age (source ONS). Now assume that only the top 20% were able to buy....................What do you think their salaries are? That's 480,000 people...............There's your demand. People in supermarkets, the unemployed, low paid etc etc are simply not part of the market..............Should they be? Of course they should, but Gordon has made sure they are not.

Soon as mortgages become more available at the 90% LTV level now you have the means of finance...........

If the market had been allowed to take its course without any government interferance then I would have concurred with the 50% + view, but it is not going to be ALLOWED to happen. Not while you have a Labour government...........

Now before I get hung, prices will continue down whilst the various things come together, and if you want my opinion it stinks, its wrong and its immoral............But people, get real you have all this because we have a f*** wit in power.

So let's say that one-third of this group buy a house in any given year, that's 160,000. Or 13333 a month. But we know that price stability requires about 80,000 sales a month. If you think the group you have in mind can single-handedly support the housing market you are kidding yourself. Even if they all buy this year that's a sales rate of well under 40,000 a month - not enough.

edit - corrected numbers

Edited March 10, 2009 by munro

[Godley]

Well, my sympathies to them but in a wider sense, the problem all along is that white collar/upper tier management jobs have for far too long become way above their worth, but I emphasise that your sister's example sounds reasonable and is not included in what follows:

Many earned far too much in the first place. This of course leads inevitably to the question of wage parity in the UK. I am fed up to the back teeth of management level people touting the notion that industry "needs them" and needs others because corporations require the brightest people. If they were that bright they would not have contributed, en masse, to the delusional state of the UK economy and resulting meltdown.

Furthermore, the value to me of, for example, a diligent and excellent house cleaner is far higher than a consultation with a solicitor, most of whom I have only used for the purposes of procedural skills rather than knowledge of the law which I can look up for myself.

Recently a TV programme highlighted a yuppie young woman who was made redundant from her job as a PR consultant. She lived in a very desirable apartment overlooking Regents Park. It was clear that she felt an automatic entitlement to her £120k salary and her £350k mortgage. It did not occur to her that she'd been riding a delusional crest for a decade.

In my view, one really good thing about this recession is that it will knock the stuffing out of those in the "professional classes" who have arrogantly arrived at a mindset in which they feel entitled to a salary 5 times greater than someone else who works arguably harder but is looked upon as "menial" and thus gets a pathetic wage.

In other words, I think that the recession should, and will, promote a well overdue correction of the ludicrous chasm between wage levels. I'm not suggesting everyone should be paid absolutely equal wages but I am suggesting that the high and low differences are at insane levels.

VP

No it won't.

Rather than scoff at the 'professional classes', why don't you become one?

[munro]

The average income is £25k, go to the ONS website..........

What you have posted proves nothing, its crap sorry.

My post specifically and repeatedly referred to the MODAL wage. Any professional would be well aware of the difference between modal and average wages. You have just reminded me of just how poor the level of debate on hpc can be.

edit - typos

Edited March 10, 2009 by munro

[Godley]

So let's say that one-third of this group buy a house in any given year, that's 80,000. Or 6667 a month. But we know that price stability requires about 80,000 sales a month. If you think the group you have in mind can single-handedly support the housing market you are kidding yourself. Even if they all buy this year that's a sales rate of well under 20,000 a month - not enough.

You haven't thought my comment through...........

I was commenting on the start of the market, FTB's not the market as a whole.

80,000 sales a month stabilises the market? Are you sure about that, market stabilisation comes from supply satisfying demand in equal amount's. I would be interested to see you source on this claim please.

[KingBingo]

It BS Kingbingo but this is Gordon's Britain.

God I am angry today.

That just means your paying attention today.

Its why I don't go never this board on a weekend, or read the newspapers (and I never watch TV) I just ignore it all. I just pretend its not happening, I can't afford to be angry all the time, its bad for my health.

If Labour get re-elected I might as well buy a house, impregnate the wife, get made redundant. Live off the state, anything else is just peeing straight into a force 9 gale.