Jump to content
House Price Crash Forum
Optobear

ONS salaries - income multiples - makes no sense

Recommended Posts

The Guardian is reporting salaries by profession from ONS data

https://www.theguardian.com/money/2016/oct/31/highest-paid-jobs-2016-ons-annual-survey-hours-earnings

Take doctors, Median is £75k, 90th percentiles is £132k

It is the 8th highest paid profession. The top is for financial traders / brokers - but too few reported to allow proper statistics. They had an average of £132k.

The BoE are looking at mortgages multiples of 4.5 times...

So median doctor can borrow £337k, top paid 10% of doctors can borrow £594k

So how can house prices be where they are? 

Either mortgages are all much bigger than let on, or most people are committing tax fraud?

 

Share this post


Link to post
Share on other sites

MrsLTS role is officially at #3 with additional responsibility taking her basic pay into #2. With bonuses and car allowance she'll likely be an additional rate tax payer for the first time next year but the pace and work load will make this a 5-10 year path either leading to a MD role, consultancy or giving it up completely and entering another profession. Burn out is very real. For us to take out a mortgage for £500-600k over 25 years would be financial suicide. How others manage or afford this level of servitude I do not know.

anecdotal: my boiler broke down this week and is getting replaced on Saturday. The engineer charges £500 to install and commission a new one and told me he had four to do that day. That's a lot of money.

Share this post


Link to post
Share on other sites

Interesting data. In the SE though, I still think house prices are supported mainly by BOMAD on the FTB end, and up until recently IO BTL on the 'investor' (spiv) end.

Our pay has changed by whatever the lowest inflation figure is i.e. the function

min(CPI, RPI, Average Earnings growth)

for that year for years.

 

Edited by Frugal Git

Share this post


Link to post
Share on other sites
9 hours ago, longtomsilver said:

MrsLTS role is officially at #3 with additional responsibility taking her basic pay into #2. With bonuses and car allowance she'll likely be an additional rate tax payer for the first time next year but the pace and work load will make this a 5-10 year path either leading to a MD role, consultancy or giving it up completely and entering another profession. Burn out is very real. For us to take out a mortgage for £500-600k over 25 years would be financial suicide. How others manage or afford this level of servitude I do not know.

anecdotal: my boiler broke down this week and is getting replaced on Saturday. The engineer charges £500 to install and commission a new one and told me he had four to do that day. That's a lot of money.

An experienced heating engineer might manage 2 installs and commissions in a long day . New high energy efficient boilers require additional pipe work and sometimes wiring. I suspect that he might be commissioning and checking other non qualified people boiler installs........quite common to have 1 gas safe engineer over seeing others but 4 is pushing it. £500 is about right though.

Share this post


Link to post
Share on other sites
21 minutes ago, chicker said:

An experienced heating engineer might manage 2 installs and commissions in a long day . New high energy efficient boilers require additional pipe work and sometimes wiring. I suspect that he might be commissioning and checking other non qualified people boiler installs........quite common to have 1 gas safe engineer over seeing others but 4 is pushing it. £500 is about right though.

My GasSafe guy took a day to replace my boiler, a little pipework was required and the controller/valves etc remained in place from the previous install. He needed two trips to the wholesaler for bits. This was the second install day after a different guy from the company turned up with the wrong boiler on the first one.

Maybe my guy was just disorganised :)

Share this post


Link to post
Share on other sites
9 minutes ago, frozen_out said:

Erroneous assumption in the OP that everyone is a first time buyer.

True - but don't forget many second steppers of today will have been on an IO mortgage and are therefore permanent first time buyers.

Share this post


Link to post
Share on other sites
36 minutes ago, Northern Welsh Midlander said:

My GasSafe guy took a day to replace my boiler, a little pipework was required and the controller/valves etc remained in place from the previous install. He needed two trips to the wholesaler for bits. This was the second install day after a different guy from the company turned up with the wrong boiler on the first one.

Maybe my guy was just disorganised :)

Your experience is the norm ! nothing is usually that straight forward on a replacement.

Share this post


Link to post
Share on other sites
32 minutes ago, CunningPlan said:

True - but don't forget many second steppers of today will have been on an IO mortgage and are therefore permanent first time buyers.

A majority of homes are owned outright.

Lot of equity there.

Share this post


Link to post
Share on other sites
12 hours ago, Optobear said:

The Guardian is reporting salaries by profession from ONS data

https://www.theguardian.com/money/2016/oct/31/highest-paid-jobs-2016-ons-annual-survey-hours-earnings

Take doctors, Median is £75k, 90th percentiles is £132k

It is the 8th highest paid profession. The top is for financial traders / brokers - but too few reported to allow proper statistics. They had an average of £132k.

The BoE are looking at mortgages multiples of 4.5 times...

So median doctor can borrow £337k, top paid 10% of doctors can borrow £594k

So how can house prices be where they are? 

Either mortgages are all much bigger than let on, or most people are committing tax fraud?

 

 

It's called an investment scam.

A pyramid scam as it were, were you get people to pay more and more for smaller and smaller houses which pushes up the house prices of the doctors/bankers etc who bought in at the start of the scam.

Pyramid scams are illegal in the UK...except the housing one it seems.

 

Share this post


Link to post
Share on other sites
1 hour ago, frozen_out said:

A majority of homes are owned outright.

Lot of equity there.

4.8 trillion apparently as at January 2016   (1.2 trillion borrowed on 6 trillion of equity). Private borrowing has not actually moved much for a decade, government has taken up the slack adding half a trillion or so to  the public debt to keep the GDP positive.

Yep very few first time buyers, virtually nobody has had to pay for this fantasy equity that has been the creation of Central Banks. Those who own can play fantasy swaperama. In fact they are pretty much the only players left.

 

http://www.savills.co.uk/_news/article/72418/198296-0/1/2016/total-value-of-uk-homes-passes-£6-trillion-mark

 

Share this post


Link to post
Share on other sites
6 minutes ago, crashmonitor said:

4.8 trillion apparently as at January 2016   (1.2 trillion borrowed on 6 trillion of equity). Private borrowing has not actually moved much for a decade, government has taken up the slack adding half a trillion or so to  the public debt to keep the GDP positive.

Yep very few first time buyers, virtually nobody has had to pay for this fantasy equity that has been the creation of Central Banks. Those who own can play fantasy swaperama. In fact they are pretty much the only players left.

 

http://www.savills.co.uk/_news/article/72418/198296-0/1/2016/total-value-of-uk-homes-passes-£6-trillion-mark

 

Actually even for owners moving is not that easy (which might explain why the market is so volatile) on a £1million home is £43K.  I wouldn't be surprised if in London there are homes where the stamp duty is the same as the cost in real terms 20+ years ago.

You do wonder why new medical graduates stay in the UK. 

Edited by iamnumerate

Share this post


Link to post
Share on other sites
9 minutes ago, iamnumerate said:

Actually even for owners moving is not that easy (which might explain why the market is so volatile) on a £1million home is £43K.  I wouldn't be surprised if in London there are homes where the stamp duty is the same as the cost in real terms 20+ years ago.

You do wonder why new medical graduates stay in the UK. 

Agree, Bankers should do what they should have done in 2008, bite the bullet and allow price discovery of assets, otherwise the market will be permanently dysfunctional. Eight years on, it is time to stop protecting debtors, who by and large are carrying enormous Equity anyway. Recent First time buyers make up a tiny fraction of the population, and to achieve normality going forward somebody has got to take a hit.

Share this post


Link to post
Share on other sites
Just now, crashmonitor said:

Agree, Bankers should do what they should have done in 2008, bite the bullet and allow price discovery of assets, otherwise the market will be permanently dysfunctional. Eight years on, it is time to stop protecting debtors, who by and large are carrying enormous Equity anyway. Recent First time buyers make up a tiny fraction of the population, and to achieve normality going forward somebody has got to take a hit.

Possibly true, if I had the correct skills, I would have left years ago.  I fear my daughter will emmigrate when she is an adult or become a pro single parent.

Share this post


Link to post
Share on other sites
14 hours ago, Optobear said:

 

Either mortgages are all much bigger than let on, or most people are committing tax fraud?

 

I think the simple explanation is that most people could not afford the houses that they live in at today's prices, or if they hadn't purchased them using equity gained from previous HPI. How long such a situation can persist, I have no idea. I am quite certain that there are whole streets in surburban London where not a single household could afford to buy their own home if they had to start out again.

Share this post


Link to post
Share on other sites
4 minutes ago, mattyboy1973 said:

I think the simple explanation is that most people could not afford the houses that they live in at today's prices, or if they hadn't purchased them using equity gained from previous HPI. How long such a situation can persist, I have no idea. I am quite certain that there are whole streets in surburban London where not a single household could afford to buy their own home if they had to start out again.

I bought in the wonderfully cheap(?) days of 2006 and my salary has gone up since then by more than inflation and I wouldn't be able to do the same move that I did then.

Which even I can't believe and I know it is true.

Edited by iamnumerate

Share this post


Link to post
Share on other sites
14 hours ago, longtomsilver said:

MrsLTS role is officially at #3 with additional responsibility taking her basic pay into #2. With bonuses and car allowance she'll likely be an additional rate tax payer for the first time next year but the pace and work load will make this a 5-10 year path either leading to a MD role, consultancy or giving it up completely and entering another profession. Burn out is very real. For us to take out a mortgage for £500-600k over 25 years would be financial suicide. How others manage or afford this level of servitude I do not know.

anecdotal: my boiler broke down this week and is getting replaced on Saturday. The engineer charges £500 to install and commission a new one and told me he had four to do that day. That's a lot of money.

If he is doing 4 per day he is cutting corners - suggest you find another

Share this post


Link to post
Share on other sites
13 minutes ago, Gribble said:

If he is doing 4 per day he is cutting corners - suggest you find another

He's in today and doing a temporary fix. It's my misunderstanding and he's doing the four over two days (Saturday and Sunday). 

Share this post


Link to post
Share on other sites

As in the Guardian comments, I believe many of these incomes are not exactly what you think.  These people at the top are not paid straightforwardly by PAYE.

Many of these incomes are fiddled downward for tax purposes.  The ones that are not are probably the air traffic controllers who will be paid by PAYE and maybe the airline pilots.  GPs are self-employed.

Share this post


Link to post
Share on other sites

Also, that is assuming single income. The doctors I know married other doctors. Then bankers etc, well  they don't need a partner that contributes to the mortgage. . . 

Share this post


Link to post
Share on other sites

I have posted on other HPC threads about some of this.

The fundamental change that created the whole house price bubble since 1999 or thereabouts was a change in the amount banks will lend as a multiple of salaries.  In the mid-1990s it was 3 x single salary or for a joint application it was a choice of 3 x largest salary plus 1 x smallest, or 2.5 x joint.

During the bubble this was changed to much higher multiples and, based on many friend / colleague discussions (we have not moved since buying in the 1990s), this appears to continue to be the case, at least in London, with 4.5 x joint being the norm, and 5-5.5 x joint not unheard of.  

Factor in London salaries (there are loads of relatively junior 50k+ jobs around), BOMAD and ZIRP and its not hard to see how quite a few FTBs, combined with BTL speculators, are sustaining crazy prices.

And at the second stepper level, it is equity playing a huge part - virtually all those 3-4 bed terraces with those green shutter blind type things and farrow & ball painted front doors, in crappy parts of London, are being bought for 700-800k by couples who typically had the equity of one, if not two, flats bought in the early to mid 2000s, to add to the 4.5+ x joint mortgage. 

E..g. friends of ours (arty types, late 40s, probably around £100k joint income max.) just bought a 4-bed house in Tufnell Park, not-bad-north-London, for 1.4m, which they were able to do because they sold their 1-bed flat in Primrose Hill, very-nice-north-London, which they bought in 1996 for around 140k, for 1.1m.

Of course, some of these drivers are now disappearing e.g. less BTL speculation because of s24, less new equity as London price growth stalls (and then starts reversing), and older equity being used up to fund new purchases, as above.  But others appear to remain in place - lending staying at 4.5+ x joint income, ZIRP, etc.  

 

 

          

 

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   26 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.