I Earn £40k A Year, Can't Afford My Own Home ?

[Muphex]

I live in London (!) and earn £200K. I bought my first 2 bedroom flat in West Hampstead for £155K back in 1998. It might now be worth around £350K. It is now a buy to let. I make about £1000/month from it, pre-tax.

I bought a second flat in West Hampstead in 2003, for £250K. I think it might now be worth around £275K but not much more. It is a buy to let. I make about £1000/month from it, pre-tax.

I live in a 5 bedroom house in Dulwich that I bought in 2007 for £650K. I did it up myself and spent about £30K on it. As it is a detached family size home on a good street, I think it is probably worth about £700K, although I couldn't really say. My neighbour's house (same as mine) was on the market for £1.2m recently but of course didn't sell. I am not planning to sell either.

With the money I made on my properties over the years, I bought a villa in Spain in 2001. This is a family holiday home and we do not plan to sell, although I doubt it is worth much more than we paid for it (about EUR200K) even though it has a large garden, a pool and is 5 minutes walk from the beach. The Spanish property market has tanked, as you know.

I am 40 years old this year. Probably the last generation to aspire to home ownership. I would like to leave Great Britain when the new tax rate comes into effect, but I'm not sure where I would go. And, actually, life isn't that bad here.

****** me there really are some twats on here

[monty1080]

Was just answering the question - who owns all the houses. xxx

Doesn't really help does it. The reason he can't afford anywhere is unfortunately because £40k really isn't that much in London, if he had a partner also earning £40k he might be in with a chance, the sad fact is though, that when you and I bought houses in the late 90s income multiples were still relatively sensible. Even after the recent , stalled correction, income multiples are way too high.

An average income in London does not buy an average house.

Edited September 2, 2009 by monty1080

[Neverland]

Doesn't really help does it. The reason he can't afford anywhere is unfortunately because £40k really isn't that much in London, if he had a partner also earning £40k he might be in with a chance, the sad fact is though, that when you and I bought houses in the late 90s income multiples were still relatively sensible. Even after the recent , stalled correction, income multiples are way too high.

An average income in London does not buy an average house.

I think its a combination of incomes rising (they have nearly doubled in some occupations as far as i can figure in 15 years), interest rates going down and income multiples lent increasing (the last two are related of course)

[Joey Buttafueco Jr]

probably just another who thinks the number of people who claim to earn hunDredZ of Kay in London in super-duper high-pressure "metallic hydrogen can kiss my ass" style jobs yet still manage to have daytime post totals here in the thousands is somewhat contradictory. I'm not saying any particular individual is bullshitting, but for the group as a whole I reckon a fair amount are acting out daydreams.

ps, london median/average earnings, here as per the last time I posted them -->

http://www.hmrc.gov.uk/stats/income_distri...enu-by-year.htm

Specifically, page 6 of this doc says in 2006-07 the majority of london males earned less than 30k and the bulk of those that did earn more didn't break 50k -->

http://www.hmrc.gov.uk/stats/income_distri...table-jan09.pdf

We've already posted more up to date numbers

[Confusion of VIs]

I earn around £30k gross in London and have lived, like all my 20something acquaintances, in a series of shared houses in okayish (not the worst, but not great either) areas for £400-500 a month. I eat out a lot, go to the pub with friends whenever I feel like it, do the London cultural things with my gf from time to time and have plenty of holidays in the UK and abroad. By shopping carefully and maintaining a fairly studenty lifestyle (though I eat much better now!) I am able to save £10k a year without much effort, and I am contributing to an occupational pension and paying back my government student loan through my wageslip. Of course, when they were my age my parents (also graduate immigrants to London) were buying their starter home, and there is absolutely no way I could afford to do that at current prices. That's the main difference as I see it, housing is ridiculously expensive of course (both to buy and to rent) but you can live well while you wait for prices to crash and there's no reason to postpone life just for the sake of buying a house. I feel bad for people a few years older than me who are now in their early 30s and have been doing this for a lot longer and just want to get on with it (probably a lot of people jumping into the market in 2009 fit into this category), but I guess that's just bad luck. No reason you can't start a family in rented (though of course you have to convince the missus)!

A big difference between today and yesteryear is that whem I purchased in 1983 I, like everyone else I knew, accepted that the eating out, pubbing, holidays etc had to stop while I first saved for a deposit and then paid around £60% (3.25 times salary at 14%) of my wage in mortgage. For the first couple of years after I purchased my mortgage, bills and work travel amounted to 100% of my salary and I survived by letting out a room and living off the income.

[Saver]

People who:

• bought before the bubble

• fabricated their income on their mortgage application

• have convinced relatives (usually parents) to buy them somewhere

If you cannot buy a decent starter home on £40k I would conclude that the market is very over-valued and heading for a crash, as withouht FTBs being able to enter it there is no new money coming in to sustain it.

It's difficult but the answer is - rent and wait.

or move to take a job somewhere cheaper. True there's probably less job opportunities in other cities, but if you really want to and look long enough I wold have thought you can find something. Even if you earn less the income multiples are better in some other cities.

[LondonLondonLondon]

I think the best thing would be for people who can't afford to buy houses, to simply accept it and get on with their lives.

I also think the UK needs to implement legislation to give tenants greater assurances re: long term leases, rental rates etc. See Germany, France, Netherlands. That way, the bitter pill of having to accept that they will never buy their own properties will be a little easier to swallow for these lifelong renters. And I write that as a landlord.

In the long term, the UK will divide neatly into those who own property, and those who rent it.

All the real tw@ts on this board are the jealous haters who continue to hope for a 50% drop in prices.

Enjoy the wait, folks.

[bomberbrown]

I think the best thing would be for people who can't afford to buy houses, to simply accept it and get on with their lives.

I also think the UK needs to implement legislation to give tenants greater assurances re: long term leases, rental rates etc. See Germany, France, Netherlands. That way, the bitter pill of having to accept that they will never buy their own properties will be a little easier to swallow for these lifelong renters. And I write that as a landlord.

In the long term, the UK will divide neatly into those who own property, and those who rent it.

All the real tw@ts on this board are the jealous haters who continue to hope for a 50% drop in prices.

Enjoy the wait, folks.

+1 Hear hear.

House prices went up 300% in 10 years, I don't think it's unreasonable to expect them to fall 50% in the next 5 to 10 years, do you?

[guitarman001]

I've never earnt more than 33K as a software engineer, and even that was after haggling them up from 31K. It doesn't seem to matter either what skills, experience or qualifications you have either as far as I can tell, or the location. Companies based in London seem to expect you to just accept the higher living costs and low quality of life for the same wage as far as I can tell.

For example, I went to a job interview in London once and I demanded 40K instead of the low 30's to at least start trying to make up for the pain that is known as the London commute. They couldn't find the right skills. I had developed the skills when the technology first came out and I had helped design the architecture of their leading competitor who is a market leader. They're still looking.

I personally find it far more preferable to live in a nice part of the country with a more enjoyable job on a lower wage. Engineers are paid peanuts in this country because this country is a parasitocracy. You are judged on immediate return on investment rather than how useful or productive you are. This is typical of the short-termism endemic in this shallow country.

So you went for stable job rather than contracting for more money? If so I have to say it's what I'd prefer! I know contractors who are dying for a full-time job now but who aren't getting any luck as employers think they'll be off when the next big pay-cheque is dangled in front of them.

I'm actually going to be taking a cut down towards £24k if I get this new job in electronics. Not bad for a grad wage to be honest, and I know some guys there on £60k+, but you only get that if you move around companies and barter. On the whoe though, I agree - shocking pay and indicative of the parasitocracy.

I'm in Edinburgh and trying to stay here - money is the same down South but 'property' (hate that word) is a tad cheaper.

[gimble]

I live in London (!) and earn £200K. I bought my first 2 bedroom flat in West Hampstead for £155K back in 1998. It might now be worth around £350K. It is now a buy to let. I make about £1000/month from it, pre-tax.

You make 12K a year (gross) on an asset worth 350K? Sucker! I wish you were my landlord.

[manchester50]

A big difference between today and yesteryear is that whem I purchased in 1983 I, like everyone else I knew, accepted that the eating out, pubbing, holidays etc had to stop while I first saved for a deposit and then paid around £60% (3.25 times salary at 14%) of my wage in mortgage. For the first couple of years after I purchased my mortgage, bills and work travel amounted to 100% of my salary and I survived by letting out a room and living off the income.

I do think there's a lot of truth in this and changing expectations/consumer society etc. I was bemoaning relative house affordability recently - my parents bought a 3 bed detached in a reasonable area on one moderate salary, if I were single I could afford the same house today but have a much more highly paid job relatively.

They pointed out that holidays (if they involved a trip at all) meant Pontins, Wales or Cornwall caravan, they didn't buy fancy electronics (hi-fi, home cinema, computers, DSLRs, portable musisc players), thought taxis were for 'well-off' people, eating out was for a treat/birthday etc and they'd saved for five years before buying a place.

I believe current house prices are at a silly level, but I also wonder if their relative unaffordability isn't compounded by modern expectations, i.e. that everyone deserves all the consumer toys and that the idea of sacrificing things to 'save up' has, to a degree, been lost.

[noodle doodle]

So you went for stable job rather than contracting for more money? If so I have to say it's what I'd prefer! I know contractors who are dying for a full-time job now but who aren't getting any luck as employers think they'll be off when the next big pay-cheque is dangled in front of them.

I'm actually going to be taking a cut down towards £24k if I get this new job in electronics. Not bad for a grad wage to be honest, and I know some guys there on £60k+, but you only get that if you move around companies and barter. On the whoe though, I agree - shocking pay and indicative of the parasitocracy.

I'm in Edinburgh and trying to stay here - money is the same down South but 'property' (hate that word) is a tad cheaper.

In Edinburgh too, and if anyone wants to know why London is out of the question, have a look at my sums

for the sake of clarity, I'm using round figures here

I have a 200k flat (oh yes i do hpc boys and girls) and 100k equity, 100k mortgage after moving from a previous hovel

I've looked at london and a similar flat in a similar area (low crime, nice skools) is 350k

"oh no, I'll have to pay nearly twice as much"

nope, I'll have to pay nearly 3 times as much

my 100k mortgage would be replaced with a 250k mortgage (plus 100k equity)

given my current mortgage is £800, I'd be looking at £1200 a month EXTRA

given above 40k ish is 40% tax territory I'd need an extra £1200*1.667=£2000 a month to pay that before tax

I'd need an extra £24k a year, just for housing, just to keep the same QoL in London

So that's why I won't be moving to london, and why I'd suggest most other people don't either.

[ManInTheStreet]

I live in the NW (hyndburn) with my fiancee. We have a combined salary of 70k and still can't find anything suitable. She is getting very frustrated and just wants us to buy something regardless. However, i refuse to spend 220k on a 3 bed semi when 6 years ago they were 60/70k :angry:

p.s. we currently have a 2 bed semi but we hope to have children soon and could do with more space.

I'm sorry that you're in that position, and understand your frustration. Your tale, and various others on this thread should remind people that the huge hike in house prices is not, as is often said, some kind of boomer conspiracy in which property was all tied up back in the 70s and 80s and forever withdrawn from the younger generations.

I lived in Leeds during the 90s. In the mid-90s you could pick up decent terrace houses for around £25K. This isn't very long ago. Annoyingly, it never occurred to me that I should be buying up these places. Nowadays, I suspect they are 5 or 6 times higher in price.

We always want someone to blame for a missed opportunity. It's the boomers, or the bankers, of the Labour government, or the BTL-ers, or the 'property porn' shows, or the Daily Express or the BBC, or RBS, or rich kids in the City, or estate agents.....

Pick a handy target for your wrath, people. The fact is that, like me, the chance you missed was relatively recent, and not some inter-generational strike against non-home owners, many of whom incidentally, belong to the boomer generation that is so often castigated.

I'm pissed off that I missed the chance of tripling, quadrupling my investment in various shares this year. I could have had all the gains of ten years of HPI, and more, all in the space of a few months. Why didn't I buy all those cheap shares in March? The answer is that I didn't foresee what was going to happen, and I didn't fancy taking the risk. It's no one's fault but mine. I feel annoyed, but it's my tough luck.

As it happens, I think that the housing market will have to drop further. I'm in a relatively fortunate position, but I do have kids who quite soon will be looking to get their own property, and it's for this reason I don't feel in any way triumphant about my housing having increased in paper value. What's the point this house doubling in price if the next house we move to, or try to help our kids buy, is also twice the price it used to be? Makes no sense.

[Guest Skinty]

I'm actually going to be taking a cut down towards £24k if I get this new job in electronics. Not bad for a grad wage to be honest, and I know some guys there on £60k+, but you only get that if you move around companies and barter. On the whoe though, I agree - shocking pay and indicative of the parasitocracy.

I'm in Edinburgh and trying to stay here - money is the same down South but 'property' (hate that word) is a tad cheaper.

I'm on 24K myself as a post-doc researcher in computer science with 5 years industry experience in R&D. I felt far poorer when living down south and I don't plan to return there ever again. I also hope I don't have to return to industry, at least not in the UK.

[guitarman001]

I want to stay here for the next 5 years at least until I get some really good experience and then bugger off to the U.S. where pay is st least twice as much as here.

Post-doc huh? Well done! I quit my PhD a while back, preferred industry! I'm only 24 (well, 25 soon!) so many years left - let's hope time will be good to us!

[ManInTheStreet]

I do think there's a lot of truth in this and changing expectations/consumer society etc. I was bemoaning relative house affordability recently - my parents bought a 3 bed detached in a reasonable area on one moderate salary, if I were single I could afford the same house today but have a much more highly paid job relatively.

They pointed out that holidays (if they involved a trip at all) meant Pontins, Wales or Cornwall caravan, they didn't buy fancy electronics (hi-fi, home cinema, computers, DSLRs, portable musisc players), thought taxis were for 'well-off' people, eating out was for a treat/birthday etc and they'd saved for five years before buying a place.

I believe current house prices are at a silly level, but I also wonder if their relative unaffordability isn't compounded by modern expectations, i.e. that everyone deserves all the consumer toys and that the idea of sacrificing things to 'save up' has, to a degree, been lost.

I agree with much of that. I watched that "Benefits Busters" prog on TV the other week which featured a single mother, unemployed, who was £75K in debt because she had bought everything she wanted -- plasma TV, gadgets, car, modern furniture -- as part of some sort of 'entitlement' mindset. I wouldn't wish poverty on anyone, particularly a child, but there was a time when poor people led poor lifestyles which I guess was some sort of incentive to improve their lot. Now, many poor people pretend to be not poor by racking up huge debts.

[Guest_FaFa!_*]

I do think there's a lot of truth in this and changing expectations/consumer society etc. I was bemoaning relative house affordability recently - my parents bought a 3 bed detached in a reasonable area on one moderate salary, if I were single I could afford the same house today but have a much more highly paid job relatively.

They pointed out that holidays (if they involved a trip at all) meant Pontins, Wales or Cornwall caravan, they didn't buy fancy electronics (hi-fi, home cinema, computers, DSLRs, portable musisc players), thought taxis were for 'well-off' people, eating out was for a treat/birthday etc and they'd saved for five years before buying a place.

I believe current house prices are at a silly level, but I also wonder if their relative unaffordability isn't compounded by modern expectations, i.e. that everyone deserves all the consumer toys and that the idea of sacrificing things to 'save up' has, to a degree, been lost.

A fair point. However the median single salary (25k) would not get you a 3 bed semi even living with thge bare minimum. 2 people living on 25k would not be able to go out or save much. What I think people in general don't understand is that the last 10 years is the anomaly. We will return to people being able to afford 3 bed semis on an average single salary over the next few years. Sad for the people who will get burnt, but there you have it.

I agree with LLL when he says that there needs to be proper legislation for long term tenants. However like gimble says I don't see how his numbers stack up. The yield looks shitty to me, but then I'm not a hot shot on 200k, so what do I know?

[SpiceWorld!]

wow - you've done very well for yourself - can i ask what sector are you in?

Fund Management.

I have been very lucky by being in the right place at the right time.

[manchester50]

A fair point. However the median single salary (25k) would not get you a 3 bed semi even living with thge bare minimum. 2 people living on 25k would not be able to go out or save much. What I think people in general don't understand is that the last 10 years is the anomaly. We will return to people being able to afford 3 bed semis on an average single salary over the next few years. Sad for the people who will get burnt, but there you have it.

I agree with LLL when he says that there needs to be proper legislation for long term tenants. However like gimble says I don't see how his numbers stack up. The yield looks shitty to me, but then I'm not a hot shot on 200k, so what do I know?

Agree. I'm not saying house prices belong as high as they currently are - hence my use of 'compounded' rather than 'explained by'.

Also agree on the tenancy thing. We're looking at buying a house over the next year as we think about having a family and needing more space than a flat. We've both previously rented places and been turfed out of them when the landlords have wanted to sell. I don't want that kind of instability with children, but at the same time have a friend (he's late 30s) with very young children in Germany who's just moved from a rented flat to a large rented house. No intention to buy but much more stability in long term rental.

[LondonLondonLondon]

I agree with LLL when he says that there needs to be proper legislation for long term tenants. However like gimble says I don't see how his numbers stack up. The yield looks shitty to me, but then I'm not a hot shot on 200k, so what do I know?

I keep the buy to lets on 70% LTV mortgages and put the rest of the money towards my residential mortgage.

I don't claim to be a financial wizard and I'm sure there are other ways I could manage my assets and liabilities, but this is just what works for me. Keep it simple, dudes.

[wealthy]

I'm on 24K myself as a post-doc researcher in computer science with 5 years industry experience in R&D. I felt far poorer when living down south and I don't plan to return there ever again. I also hope I don't have to return to industry, at least not in the UK.

24k?! I thought the floor was about 28K bare minimum these days. Well at least you're in for a fat pay rise in about 2-3 years

Edited September 2, 2009 by wealthy

[Saver]

24k?! I thought the floor was about 28K bare minimum these days. Well at least you're in for a fat pay rise in about 2-3 years

Must vary from field to field then. In my area (particle physics) a fresh phd gets 28k starting salary as a postdoc (though this can vary by +-1k from university to university).

Edited September 2, 2009 by Saver

[wealthy]

Must vary from field to field then. In my area (particle physics) a fresh phd gets 28k starting salary as a postdoc (though this can vary by +-1k from university to university).

I thought it was the same for CS, at least I'm not aware of any postdoc positions that pay at that salary grade

[Saver]

I thought it was the same for CS, at least I'm not aware of any postdoc positions that pay at that salary grade

not sure what you mean - are you saying particle physics postdocs are getting a much higher salary than other fields and most other fields pay less?

[wealthy]

not sure what you mean - are you saying particle physics postdocs are getting a much higher salary than other fields and most other fields pay less?

Nope, it's generally the same for sciences including computer science (CS) which is why I'm a bit gobsmacked that any institution is getting away with salaries that low for postdocs. (The salary grade I was referring to was 24K not 28K)

Edited September 2, 2009 by wealthy