Thursday, Nov 12, 2009

“To be fair, it isn’t the property prices, it’s the mortgage market. We do need more flexibility.

Reading Post: Average home costs 10 times your wages

According to the National Housing Federation (NHF), the average house price in Reading is £221,459 while the average individual salary is £22,506. It is an even bleaker picture for homebuyers in West Berkshire where the average house price (£281,255) stands at nearly 12 times the median income (£23,920).
Gary Waite, head of Woodley estate agents Whiteknights, said
“I don’t think affordability is much of a problem,” he said. “We get lots of young couples buying houses, although we don’t get many single people buying these days.
“To be fair, it isn’t the property prices, it’s the mortgage market. We do need more flexibility."

Posted by nohpc @ 09:07 AM (1597 views)
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1. str 2007 said...

I shouldn't be surprised that an estate agent thinks the prices aren't a problem. The problem lies with mortgage flexibility.

Having said that the point stands that because the banks lend fully against 2 incomes, that is where house prices will go to. Not sure how they lay a calculation for the extra cost of child care when a family comes along, or the strange event of a mother staying at home and actually looking after her own children 'til they're all at school.

Anyway to summarize : if you're thinking of buying on your own the banks have decided that you'll either need to earn double what most people do and that will get you an average place or you're f##ked.

Thursday, November 12, 2009 10:35AM Report Comment

2. mark wadsworth said...

Exactly. Round my way (Essex/East London), bog-standard houses (1930s semi, Victorian terrace) start at about £300,000 in the not-so-nice bit and bigger houses in the nice bit are around £600,000.

If that's not ten times average salaries, I don't know what is.

Thursday, November 12, 2009 11:04AM Report Comment

3. timmy t said...

I live in the area and know all the houses that White Knights are selling. There's a few of them close to me that I might be interested in, and the only reason I'm not is PRICE. I could buy tomorrow if I wanted but I won't BECAUSE THE PRICE IS TOO HIGH. MORTGAGE - NO PROBLEM. PRICE - BIG PROBLEM. GARY, I'M NOT BUYING BECAUSE THE PRICE IS TOO HIGH. ARE YOU GETTING IT YET GARY - IT'S THE PRICE. THE PRICE GARY, IT'S NOT MY ABILITY TO BUY, IT'S MY WILLINGNESS. I HAVE NONE BECAUSE THE PRICE IS TOO HIGH...

Sorry - too much coffee...

Thursday, November 12, 2009 11:43AM Report Comment

4. 51ck-6-51x said...

The comparisons made are almost always quoted as being between average wage and average house price. Often the average house price used is from a lender's analysis, which is not mean or median but "typical" ( a classification weighted average ). furthermore average wage here is pretty meaningless. Median wage would be better ( which they state they have used here ), but the comparison should then be to median house price. Better would be typical to typical as this will leave out biases such as those who work but do not intend to make a house purchase ( which may paint a worse picture since there are a raft of high earners who are non-resident renters - I don't know about Reading in particular, but there certainly are in London ).

In short the analysis here is harder than it looks on the surface I think.

Saying that however, it does seem that the ratio is out of line, which would make sense with all of the policies which are in favour of home owners.

So I wouldn't expect such a number to come down to 4 or 4.5 - maybe something like 7 ( wild stab )?

Thursday, November 12, 2009 11:55AM Report Comment

5. 51ck-6-51x said...

timmy t
- sounds the same as me. I recently viewed a flat which requires modernisation. I consider it's asking as about 22.5% over; but it's under a very recent new instruction which dropped the price by just over 14%, so my offer now would not only be 22.5% less than asking but would also be seen as 43% less than their previous asking. I may well do it anyway but I don't fancy my chances as I imagine they'll be looking for near their new asking ( but maybe they are desperate and no one made a "ridiculously low offer" on their previous asking, you never know ).

Thursday, November 12, 2009 12:10PM Report Comment

6. timmy t said...

6's - sounds familiar. There are several properties in that situation near me, some of which are nearing 12 months on the market. I won't lose any sleep if agents go out business waiting for buyers - if they aren't able to make their vendors see sense then they're in the wrong job. They need to learn that the value of a house is what someone is able and prepared to pay for it, not what a vendor wants to sell it for.

Thursday, November 12, 2009 12:18PM Report Comment

7. kruador said...

I live in Reading, renting a flat. I am single and have no dependents. I'm earning 95th percentile salary (national basis).

If the housing market were to be remotely fair, I should be able to buy a 90th percentile house, surely. Say, at least four bedrooms, detached? shows that even a basic one-bedroom flat in the RG postcode area averages 3.5x my salary (in my specific postcode, 3.8x). It's completely absurd. If I were to stop renting and buy, I'd want to buy something I could live in for a while.

I suppose I could go and live in Blackburn. There, I could spend less for a 3-bed house. Bit of a long commute, though.

Thursday, November 12, 2009 12:22PM Report Comment

8. Lukeskywalker said...

@kruador - completely agree. I often wonder what my neighbours in this cramped 2-up 2-down no-gardened terrace would say if I admitted that I earn 3x their total income, and whether they become jealours or realise how much a decade of 12-hour days in a glamorous skyscraper, studying and IQ>147 hasn't gotten me. Very depressing. I've become much more interested in people's opinions of life in Melbourne and San Francisco these days.

Thursday, November 12, 2009 12:46PM Report Comment

9. housebear said...

Totally agree with you timmy t.
I’ve been saving for so long now that I am nearly at the point were I could be a cash buyer in the Midlands area, fingers crossed eh!

But you are absolutely bang on, it is THE BL**DY PRICE!!

@ 10 times salary over 25 years, not withstanding marriage, divorce, kids, death or unemployment, how do these people SLEEP at night?
It’s not even close to what my definition of home ownership is.

Lots of my friends, all home owners, keep asking when me and the missus are going to buy a place, now is a good time to buy etc, they say!
I really have to hold back, because I get the feeling we are being looked at as almost 2nd class citizens for not taking part in this folly.

Imagine a dinner party, I sure we have all been there, oh we paid this for our house now it is worth this etc bla bla!
Perfectly acceptable, polite dinner table conversation (for some people).
If I piped up and said, don’t have a house at the moment and have got no intention of buying till prices come down, but I’ve got £xxx in the bank!
I think there would be an embarrassing silence for a while and I would be regarded as a bit vulgar. Even though in real wealth terms I think I am on at least an equal footing as most of my peer group.
The sheeple just don’t think you can loose, EVER on houses, even though history proves time and time again, the opposite.

WHY WONT THE PRICES GO DOWN (A rhetorical question I know, I read this site every day, but comment with much less frequency these days)

That’s my rant over now folks, apologies for all bad spelling and grammar, have a nice day everybody.

Thursday, November 12, 2009 12:51PM Report Comment

10. yoyo1 said...

I'm beginning to think that credit has been given out in such an unprecedented way over the last 2 decades that it is now not possible to go back to the old fashioned 3x salary. Somehow, maybe 10x salary mortgages will be here to stay. We are for sure in very deep uncharted water! Do we turn around and go back? Or press on to find new ground? I'm beginning to think that there will be no going back.

Thursday, November 12, 2009 12:58PM Report Comment

11. jackas said...

How are we ever going to pay for the baby boomers to live to be 100 if we don't pretend their houses are worth the cost of their healthcare?

It's not like we could earn the money is it?

Timmy t - I'm in the same boat. Could buy a house for cash tomorrow, but the present vale of my labour is more precious than that. I'll wait till the guy on half my salary can't afford to borrow 3 times as much as I would find prudent on double his salary. It'll come.

Thursday, November 12, 2009 01:26PM Report Comment

12. letthemfall said...

Credit expansion has been unprecented, but all loans have to be eventually paid back. V high mortgages can only last as long as interest rates stay low. Borrowing cannot increase to arbitrarily large values, and houses cannot absorb ever growing proportions of wealth indefinitely. So some return to mean values will happen. The question is how long will it take? The only possible way for house prices to stay high in relation to mean incomes, is by partitioning the population into the very wealthy and the very poor, in which the wealthy own most of the property, and the poor have next to nothing. This was the situation in the 19th century. The return of such gross inequalities is a feature of the globalisation years, helped along by the housing boom. We're not back to Dickensian times, but one could half imagine it happening.

Thursday, November 12, 2009 02:08PM Report Comment

13. letthemfall said...

I can foresee more inequality in future years based on the economic arguments we're hearing today.

Assuming the Conservatives gain power, public expenditure will be cut, putting many more out of work (as in 1979/80). Companies will decide they need to cut labour costs, reducing wages (for the ordinary employee), farming out work overseas (Chinese manufacturing, Indian call centres, etc), while continuing, as we've seen, to increase salaries of the high paid.

In other words, gains will continue to accrue to capital at the expense of those without capital. Banks in particular will benefit. So an individual's wealth will have less and less to do with their value than their position in the capital hierarchy.

Quite what will happen I cannot predict, but I note that attitudes amongst the population with regard to housing and wealth, what constitutes value, and public services, exemplified by a good few comments here, leaves me feeling rather pessimistic.

Thursday, November 12, 2009 02:20PM Report Comment

14. cat and canary said...


a sad but perhaps true reflection on those at the bottom of the ladder. From the BBC today:

> based on the results of a survey of 275 people who came to Cas with a debt enquiry in December 2008....

> " clients aged over 60 had the highest average level of debt, owing an average of £26,010, an increase of almost 50% in the past two years."

> "Two in five of those people surveyed said they had to go without food or fuel to pay debts"

> "The average level of debt for 16-24-year olds has almost doubled since 2004"

> "Lone parents had an average debt of £19 for every £1 they earned, up from £14 five years ago."

Thursday, November 12, 2009 02:41PM Report Comment

15. drewster said...


"but all loans have to be eventually paid back"

No they don't. You can just keep on making minimum payments, or paying off one debt while taking on another. Some people live their whole lives with credit card bills that are never fully paid off.
It's this indefinite credit which is (partly) responsible for higher house prices.

Thursday, November 12, 2009 02:50PM Report Comment

16. letthemfall said...

The operative word is 'eventually'. The extent to which they can be 'indefinite' depends on the flow of credit. But, yes, this easy credit is the reason for excessive prices. I'm saying there is a limit to that. I'd thought we'd hit that limit hard, but it seems it's drawn another breath. We can only hope it is the last.

Thursday, November 12, 2009 02:58PM Report Comment

17. marcus b said...

I think housebear hit the proverbial nail on the head when he said '@ 10 times salary over 25 years, not withstanding marriage, divorce, kids, death or unemployment, how do these people SLEEP at night?' A couple of years ago house buyers at least had the excuse of thinking Gordon had abolished boom and bust, interest rates were as likely to fall as rise, there were 1,000 different mortgage deals available, taxation seemed to be topping out as the government realised the public wouldn't stand for much more, jobs were plentiful, the economy was likely to continue to grown into the future etc etc etc. Now, in 2009 things look very, very different even if house prices have managed to deft gravity (for now). Today everyone must recognise busts are inevitable, work is hard to find and, for the first time in 15 odd years, will soon become next to impossible to find in the public sector, taxes will be going up, up, up, mortgage deals, while there might be more of them, will just be a pale reflection of what was available during 'the madness' - no more 125% specials, interest rates CAN ONLY GO UP FROM HERE etc etc. So in 2007 people buyers could at least say it was a fair bet the good times would continue. Today it's impossible to know how bad things will get (and here I am thinking about information possibilities) while at the time same time it should be obvious to most people than things can't get much better for a long time to come on even the most optimistic scenario. So to come back to housebear's point - there's never been a more uncertain time to tie yourself into a 20 year mortgage.

Thursday, November 12, 2009 03:01PM Report Comment

18. letthemfall said...

cat and canary

Interesting to note the figures for the over-60s - the baby boomers (the younger anywy), whom are held by some hpcers to represent the money and house-grabbing generation who are throttling the outlook for the young.

Thursday, November 12, 2009 03:02PM Report Comment

19. 51ck-6-51x said...

drewster / LTF.

"but all loans have to be eventually paid back"
should probably read
"but all loans have to be eventually paid off"
- Whether this is by the debtor or not is besides the point :)

Thursday, November 12, 2009 03:35PM Report Comment

20. timmy t said...

6's - exactly!

Tw@ts take loans they can't afford, don't pay them back, banks go t1ts up, tax payers bail them out and get stung for the next 20 years in higher taxes. So who loses out? Those that took out the loans? No. The banks? No. The prudent? Yep - you got it! Then Smugdog and the like wonder why we are p1ssed off...

Thursday, November 12, 2009 03:48PM Report Comment

21. shipbuilder said...

This thread looks just like one from about this time in 2006, it's as if the crash never happened. The thing to remember is that prices started to crash before the credit crunch, not after, so it seems clear that the 2007 peak was literally the highest that the market could stand. Given that it seems incredible that prices could be heading back there given the current economic conditions.
The conclusion has to be that the indices are being skewed by the few people currently buying and it cannot continue. Unfortunately the indices seem to rule the general sentiment and therefore seller's expectations.

Thursday, November 12, 2009 05:09PM Report Comment

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