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FTB1

3.5x Average Salary

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I have seen a lot on the site about how the right time to buy will be when the average house price is 3.5x the average local salary.

Is this based on single or joint salaries?

The reason that I ask is that in some areas, I don't think that the average house has ever been 3.5x the average single salary.

For example, I live in a moderately priced SW London suburb. When I first started looking at prices in the area (1997), the average house (3 bed semi in reasonable suburban road, or 2 bed terrace in sought-after location) cost about £150k-£170k. (£320k-£400k today)

Even if the average salary in the area at the time was £25k, then 3.5x would only have been £87.5k. This would have been 2 bed flat money at the time, and not a particularly good one at that.

3.5x joint income would have been £175k.

I realise that prices would have been a bit cheaper in 1994-5, but I think that actual average wage would have been lower than I have stated.

Obviously, things are different in the north, but I would imagine this would be the same in most parts of the SE.

Edited by FTB1

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Guest muttley

In the 1997 example given the average house would typically have been bought by someone who had built up equity from a previous house.It is possible to be on an average salary and own an above average pricwd home.

When I bought my first house in 1987 I could borrow 3.5x my salary or 3x my salary plus partners salary (if I'd had a partner,that is)

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In the 1997 example given the average house would typically have been bought by someone who had built up equity from a previous house.It is possible to be on an average salary and own an above average pricwd home.

This is exactly what I was wondering. A lot of the posts on here seem to elude to the fact that an FTB should be able to go out and buy the average house for 3.5x his/her average salary.

It would have to be a spectacular crash in some areas!

Edited by FTB1

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Good question,

I don't know about everyone else on here. In my case this makes no difference as we are a one-income family.

My better half used to earn low wages (not much more than minimum wage) thus child-care costs would consume all of her wages. So there is no point in her working.

Additionally there is no way we would leave our child with anyone else however good his or her credentials appeared to be.

When I consider the golden mortgage amount of 3.5x, I always see it as in relation to a single income.

For me to borrow any more than that would be tomfoolery outside the crowning imaginings of the chuckle-brothers.

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A lot of the posts on here seem to elude to the fact that an FTB should be able to go out and buy the average house for 3.5x his/her average salary.

When the average FTB is in their mid-30s, that's absolutely correct. There's no way they're going to be doing much 'trading up' if they start buying houses at that age.

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This is exactly what I was wondering. A lot of the posts on here seem to elude to the fact that an FTB should be able to go out and buy the average house for 3.5x his/her average salary.

It would have to be a spectacular crash in some areas!

A typical FTB has never been able to afford an average house and I find it really strange that so many people think that it will ever be possible. FTBs traditionally join the property ladder on the first rung, not half way up! I think a lot of people who are genuinely priced out of the housing market, lose a lot of the strength in their argument when they argue that the market won't have righted itself until they can afford an average priced property on one wage. I still can't afford that, and I bought my first place 9 years ago!

Edited by Scarecrow

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When the average FTB is in their mid-30s, that's absolutely correct. There's no way they're going to be doing much 'trading up' if they start buying houses at that age.

Exactly the reason for my question! Building on the example above, if the average salary is now £35k in this area, the average house would have to come down to £122.5k. Since that house is now about £350k, is the general expectation that the crash will yield falls of 65%.

As I mentioned above, this is an average priced area, the expensive suburbs (Richmond etc) would need to come down by 75%+

Just trying to work out how long I should wait after prices come down.

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Since that house is now about £350k, is the general expectation that the crash will yield falls of 65%.

It's not the general expectation, but it's certainly my expectation... a lot depends on whether the Bank of England decide to trash Sterling or not, if they do then prices may drop less in pound terms even while they drop that much in real terms.

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Up in the north there were plenty of periods when the ratio of 3 times one salary (plus 1 times a second if applicable) more or less got you either a decent terrace or a small semi detached.

Back in 1994 I was in my early thirties and bought my first house, a 3 bed detached for £75,000 in a fairly good area. Salary was £25,000, which at the time was very good (right time, right place, which was lucky). I would say at that time £10,000 to £12,000 salary was probably average, and three times that would have easily got you a pretty good terraced or a small semi. At the time the house market was quiet, and in that area there hadn't really been a major boom and bust at the end of the eighties.

Incidentally, that house is now on sale for £182,500, semis in the area price at £120,000 and up, and terraces are 90k to 100k. That is way off the scale in my book - nuff said.

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First we need to asertain what a starter home is. Any suggestions?

Currently a starter home (not an average property) in my area is 6 times my salary.

Or has the culture changed so that educated & high tax paying FTBs should only be able to afford studio flats in places such as Asboton, Crimeford & Rapemouth.

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Exactly the reason for my question! Building on the example above, if the average salary is now £35k in this area, the average house would have to come down to £122.5k. Since that house is now about £350k, is the general expectation that the crash will yield falls of 65%.

As I mentioned above, this is an average priced area, the expensive suburbs (Richmond etc) would need to come down by 75%+

Just trying to work out how long I should wait after prices come down.

Average salary in SW London is nowhere near £35K. More likely to be £25K tops.

Richmond was in the Metro a few weeks ago as having the highest average house price to average earnings multiple of 17. Average earnings there were quoted as being in the low 20's

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2 Bedroom newbuild flat in chafford hundred range from £135-150.

This isnt even in london, but a suburb outside.

My wage is £18,000. go figure :(

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First we need to asertain what a starter home is. Any suggestions?

Currently a starter home (not an average property) in my area is 6 times my salary.

Or has the culture changed so that educated & high tax paying FTBs should only be able to afford studio flats in places such as Asboton, Crimeford & Rapemouth.

My friends and I all bought our first homes about the same time, 9 years ago. We all bought one bedroom flats, apart from one person who bought a two bedroom flat in a pretty dodgy area. These would probably all go for about 4 times average salary now, instead of about 2.5 times then. Interest rates were so high that I'm not convinced that it would cost more as a % of takehome pay than it does now. None of us would ever have an expectation to afford a 3 bed semi, so I think it is important not to get carried away about what people could afford a decade ago.

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First we need to asertain what a starter home is. Any suggestions?

Currently a starter home (not an average property) in my area is 6 times my salary.

Or has the culture changed so that educated & high tax paying FTBs should only be able to afford studio flats in places such as Asboton, Crimeford & Rapemouth.

A 1-bed flat where I live is over 7 X average salary (assuming £25K is average for area)

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Thanks for all of the replies - very interesting.

The summary view of the replies so far seems to be that although the average price in cheaper places has been and should come down to around 3.5x the single average local income, this is less likely to happen in moderate or more expensive areas.

I guess that this makes sense, as the crash is likely to hit harder in the areas that have grown fastest in the last couple of years.

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Average salary in SW London is nowhere near £35K. More likely to be £25K tops.

I don't think you can take London as a whole. The average price for a 3-bed semi in Kensington is probably near £1m... there's no way that's coming down to 3.5x average London salaries. What's the average salary for people living there? £50k+?

There's a graph I'd like to see.... I wonder whether anybody has access to this data:

Average salary per age group

vs

Average price of house bought per age group

The first line, I imagine, shows that salaries increase the most during your 20's (as you move more frequently between jobs) but then settle down as you 'max out' your earning potential, mid to late 30's. Does that match the expectations of others here?

Meanwhile, the second line shows growth further into the 40's as, with time, people are able to build up more equity. Perhaps the line drops off again as the kids leave home when people downsize.

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I find this very hard to believe. If you bought property nine years ago and you are unable to afford the average price home today, then you are either being paid very little or have suffered a major 'economic incident' of some sort in the intervening period.

Whatever the case, I suspect you are not typical of most who bought nine years ago.

I suppose the key word in my post is 'afford'. I could get a mortage which would allow me to buy an average priced house, but would not feel happy paying so much of my wage out in mortgage payments. As house prices go up, the gap between each rung grows and so the fact that I have built up equity doesn't help me a great deal.

The reality is that the housing market relies on the majority of households having 2 wages coming in, like it or not. I think it is naive to expect the market to right itself to allow single FTBs to be able to afford an average priced house, when historically few FTBs have been able to do so.

Also, many people do not fund their houses through salaries alone. Inheritances must pay for many steps up the housing ladder.

Edited by Scarecrow

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Fair enough. However, if everyone had your attitude to debt (which I agree with) then prices would never have got to where they are today.

I'm not sure that inheritance is a particularly significant factor - at least not yet. My parents will probably still be around when I'm 60, long after I've bought my largest property. And even when they do go, there's no guarantee I'll receive anything.

I will receive no inheritance money, ever, but a lot of people do. Perhaps more people are inheriting money from their grandparents? Put it this way - few people who own an average priced home have, or ever have had, a 100% mortgage, so the deposit either comes from equity, inherited money, gifts from family, or saved deposit. I doubt that many are able to save enough though.

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I find this very hard to believe. If you bought property nine years ago and you are unable to afford the average price home today, then you are either being paid very little or have suffered a major 'economic incident' of some sort in the intervening period.

Whatever the case, I suspect you are not typical of most who bought nine years ago.

Again, this must surely depend on the area. If I had bought a 1 bed flat in 1996 for £60k, worked hard and paid the mortgage off in 9 years, I could sell it on in 2005 for about £180k.

This would leave me about £180k to find through a mortgage to afford my £350k 2/3 bed 'average' house. To achieve this I would have to earn more than £50k, and that is assuming I was able to pay my mortgage off that early in the first place.

I realise that this is the way the traditional housing ladder works, but it is a long way from average, and assumes that I am not an FTB.

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As a single FTB myself a few months back I bought a small studio appartment to get on the housing ladder. It was 85k and I earn 30k. I live in one of the most expensive towns outside london. This ratio of earnings to property price seemed quite resonable to me at the time.

If I was with a partner it would be alot easier, but it just shows it is possible to do it on your own even with todays high prices.

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The first line, I imagine, shows that salaries increase the most during your 20's (as you move more frequently between jobs) but then settle down as you 'max out' your earning potential, mid to late 30's. Does that match the expectations of others here?

I'd say that %age rises might be highest in your mid to late 20s and early 30s, but actual rises are probably greatest in your late 30s and 40s (and 50s once you reach Executive/Board level).

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my dad sold 3 flats in 1986

one sold for 17k

next for 12k

and the next sold for 18k

these were in a small town in scotland.

he also bought and sold an old manse right beside glamis castle it had 10 bedrooms and about an acre of land. bought this for 35k !!!! spent about 10k doing it up and sold on a year later for 60k, this place now must be worth 600k

This i think is the diffrence

prices have gone astronomical in areas, when he sold they flats i think about 100/120 pounds a week was the working mans wage.

It is right at the bottom of the ladder where the real rises have been, its because the bottom of the ladder is where the btl moved in, btl dont buy 400k houses they buy cheap flats and cheap houses, the very properties that ftb.s usually bought.Its at the bottom the real problem is.

We haved moved away in the last few years from a wage earning society to a investment society, only people with the money to invest over and above the local wage have been able for a few years now to buy the houses, its this thats the root problem of the housing market.And as long as there is money in buying/selling/renovating/letting property this will continue.

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I'd say that %age rises might be highest in your mid to late 20s and early 30s, but actual rises are probably greatest in your late 30s and 40s (and 50s once you reach Executive/Board level).

True for those that make it. But the number of positions open at each level decreases... the 'average white collar worker' probably ends up in middle-management during their late 30's and stays there for the rest of their career.

It's simply not possible for everybody to progress to board level as they get older.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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