Tuesday, Oct 20, 2015

"London is unaffordable for all but the rich or fortunate"

Yorkshire Evening Post: Priced out: Average earners face 100 year wait to save mortgage deposit

Buyers are being priced out of their home towns - with average earners in some parts of the country looking at saving for more than 100 years to afford an average priced property where they live. An average worker in Brighton, taking home £23,488, would need to save for 104.2 years to have a large enough deposit for an average priced property in the area - £350,222.

Posted by jack c @ 05:29 PM (5761 views)
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1. icarus said...

Oxford is top of the unaffordability league - average house prices are x16 average salaries.

A nimby argument might be that the Oxford council built no affordable homes in the past year and that it is speculators and owners of land in Oxford who are filling their boots and driving people further out of the city, thereby making 'pretty villages' a part of the resultant sprawl. Interesting way to get nimbys on board any policy that puts downward pressure on urban land prices.

Tuesday, October 20, 2015 05:56PM Report Comment

2. libertas said...

This article is total b.s. First time buyers NEVER on average purchase the average priced home, and that should be completely understood!

In London, y can still get one bedroom flats for circa 150k. Yes, you have to look at outer zones, but will retain access to London's lucrative job market. Furthermore, most Brighton first time buyers purchase in places like Haywards Heath, Lewis or other cheaper places along the coast before sizing up to Brighton proper.

For the average 150k first time buy, even in London, an individual on an average wage of 25k or so could save the 7.5k deposit needed for help to buy in one year living in their parents spare room. That is the reality, but these so called journalists do not accept reality and would rather make rediculous sweeping statements.

Furthermore, most get parental support for deposits and most first time buyers are couples, who have deposit help from two sets of parents, backed up by two sets of savings and two salaries. And if that system was broke, there would be no market, but there is, so you had better understand and come to terms with it rather than make nonsense up to fit your ideology of how you wish ready were and is not in fact.

Tuesday, October 20, 2015 08:09PM Report Comment

3. Markp said...

Libertas, the vast majority of first time buyers you are referring to would not actually earn the average wage yet either so your theory is flawed.

Regardless of who is buying, the average wage to the average house price for the area is the best gauge of affordability and above mean and below mean prices. If you think multiples of 6X salary for a 1 bed flat is sensible you are a complete idiot. You should never borrow more than 3-4 x your earnings and the simple fact that you mentioned help to buy proves that your an economic illiterate.

Tuesday, October 20, 2015 08:38PM Report Comment

4. jack c said...

libertas (Tuesday, October 20, 2015 08:09PM)

Lets just re-run the critical elements of your comments in relation to this article

You refer to a 5% FTB deposit (7.5K on 150K purchase) plus utilisation of 'help to buy' scheme on top of which the deposit is assisted by both sets of parents coupled with two sets of savings and two salaries all to purchase a one bed room flat. "if that system was broke, there would be no market" - I rather think this tells us all we need to know !

Wednesday, October 21, 2015 08:27AM Report Comment

5. icarus said...

jack c - you could have added that the couple who are buying needs to live and work near the parents with the spare room so that the former can live rent-free and thus save the deposit.

Wednesday, October 21, 2015 09:00AM Report Comment

6. jack c said...

icarus- not to mention near to Grandma who does the child minding 5 days per week for free ! (we could go on)

Wednesday, October 21, 2015 10:33AM Report Comment

7. icarus said...

jack c - I was staying within the libertas' parameters, which included couples saving for the deposit by 'living in their parents' spare room'. He seems to be assuming no kids, since they're aiming for a one-bedroomed flat (and living in a spare room). In sum, it's welcome to dinkys with nearby, accommodating parents with spare rooms, Nobody else need apply.

Wednesday, October 21, 2015 12:49PM Report Comment

8. sibley's b'stard child said...

Brilliant satire there Libby, you should contribute to the Daily Mash.

Wednesday, October 21, 2015 03:57PM Report Comment

9. cyril said...

I like the precision in the article but there is a flaw in theior logic. A lot of things might happen over the next 104.2 years

Wednesday, October 21, 2015 04:36PM Report Comment

10. libertas said...

The reality is, that people are saving up, say, 20k deposits. Often you have a couple on their first time buy, many don't have kids because they have been saving. They do purchase flats for circa 150k if they are not spoilt brats who can put up with the cheaper side of town. They then pay off, say, 25% of the principle in 5yrs time plus capital growth to move out just as they are ready to start a family.

Many others jump straight to a larger place with help from parents.

Those who do not are fuelling the buy to let craze through their idiocy, and folk like you are spreading myths that are destroying the ability of an entire generation to gain independence, dignity and an affordable retirement.

Wednesday, October 21, 2015 04:48PM Report Comment

11. quiet guy said...

"The reality is, that people are saving up, say, 20k deposits."

I'm glad you said that because the 5% deposit is really on the edge and will make some lenders pretty reluctant to proceed. 5% is the absolute minimum.


20K sounds more like it for a 150,000 mortgage but even then you may be competing competing against BTLers who possibly don't need mortgages and can make their purchase more quickly - I have seen this first hand.

"Those who do not are fuelling the buy to let craze through their idiocy"

Making friends again? I'm sure some readers won't appreciate that tone. For some, it's not possible. We talk about average salaries but there have to be loads of people below average salary, probably on housing benefit. Competing against BTL buyers for isn't realistic for the less well off.

Remember that BTL is a relatively new phenomenon that has benefited from new financial products that favour wealth. Blaming the poorer sections of our society for being priced out is kinda lame.

Wednesday, October 21, 2015 07:00PM Report Comment

12. icarus said...

@9 - "folk like you are spreading myths". Which folk? Which myths? The main point anyone has made in this thread is that as house prices increase faster than wages houses become increasingly unaffordable. Your arguing that it is still possible for people in certain circumstances to buy at the bottom end doesn't belie that point. And making the point doesn't ' destroy the ability' to buy, since potential buyers know their own circumstances and can make informed decisions based on them.

Thursday, October 22, 2015 07:59AM Report Comment

13. letthemfall said...

"First time buyers NEVER on average purchase the average priced home, and that should be completely understood!"

Specious argument libertas. Average price to average income has always been a useful indicator. Just because someone can afford a hovel somewhere does not mean prices are in general "affordable"

Thursday, October 22, 2015 11:50AM Report Comment

14. mombers said...

As a first time buyer, I bought a 3 bed flat and intend to downsize from there when my kids move out. And I certainly will not be advising my kids to make all of their decisions in their twenties geared towards tying themselves down with buying a home as soon as possible

Thursday, October 22, 2015 12:32PM Report Comment

15. Jimbobington said...

I recently purchased a flat in SE London zone 5 for 190k. I spent just over 2 years lodging with a family for 500 a month (fairly pokey single room in Whitton) I earn 39k (which is pretty standard for a 32 year old graduate in London of ten years' experience) and I put aside 700 a month. It really wasn't that difficult.

Prices have shot up recently (as sometimes happens) but not out of site and they'll probably flatline for a while whilst wages catch up.

Thursday, October 22, 2015 04:15PM Report Comment

16. libertas said...

Average price to average wage is a good indicator, but not of what first time buyers purchase. A buddy of mine just bought a 155k flat in Bexley area, with a 25k, with parents topping it up another 25k. 70% mortgage with 1.7% interest rate. He will end up paying less than 500 quid a month on the mortgage. This is in London. He is on way under the average wage.

For most people who are on the average wage, purchasing as a couple, with deposit top up or help to buy, houses are available in these parts of town. So these statistics are totally bogus.

Thursday, October 22, 2015 07:54PM Report Comment

17. mister ed said...

"So these statistics are totally bogus"

Ah yes, just like a worldview where everyone has parents rich enough to hand them 25K, and the housebuyer never needs to trade up. And never needs to worry about his children attending a dire school in dire part of town.

I think its time to revist that old Libbyballs:


Libby's Economic Theory of HPI

Annual wage rises of 3.5% creates annual house price inflation of 10.5%

Price of small apartment in slummy part of town = 150,000
Purchased on 3.5x salary of approx 37,000
After 15 years mortgage is paid off
Apartment is now worth 670,000

Occupant now has deposit of 670,000 and looks to move

Price of house in good part of town 15 years earlier = 350,000
House is now worth 2,235,000
Mortgage needed to trade up: 1,565,000
After wage rises of 3.5% over 15 years, salary now = 61,000
Salary multiple of mortgage now needed = 25x

Economics Fail.


I would give your post a troll score of about 4/10, so not bad.

Thursday, October 22, 2015 08:01PM Report Comment

18. jack c said...

Second steppers are turning to family: Lloyds Bank

Nearly a fifth of people wanting to step up on the housing ladder will have to turn to friends and family to fund the purchase, research from Lloyds Bank has found.

Andrew Mason, Lloyds Bank mortgages director, said: Parental support has been playing an important role in helping young people get on the property ladder for decades but this is being stretched further, with many second steppers continuing to be reliant on the bank of mum and dad to help them make the next move.

The research showed first-time movers typically needed to find an extra 125,694 to fund the move to their preferred next home of a detached property.

Almost one in five required financial assistance from family or friends to help bridge this gap, asking for more than 22,000, and half of these second steppers felt they could not make the next move on the property ladder without this help.

The size of the deposit required is the biggest barrier to moving home, according to 44 per cent of the sample. Almost three in four (71 per cent) intend to raise the deposit required for their next property purchase from equity in their current home, and over half (57 per cent) will raid their savings.

But some 14 per cent said they were considering approaching family members for help typically asking for 22,480. This is up from 21,080 in 2014 and 21,273 in 2013.

The report also found that the past 12 months has seen second steppers taking concerted action to help afford their move. More than a third (37 per cent) have increased monthly savings, compared to 29 per cent in 2012, while 37 per cent have been overpaying mortgage repayments compared to 27 per cent in 2012.

Adviser view

Ray Boulger, senior technical manager at London-based mortgage broker John Charcol, said: I suspect there is much greater variation around the country than is apparent in such average figures as supplied by Lloyds Bank.

For instance, I imagine there are some borrowers who bought pre-credit crunch who may have 100 per cent mortgages and who live in areas without significant house price inflation. They may have little or no equity to use to trade up.

But looking at this realistically, there is the opportunity for families to get together and perhaps grandparents may have a lot on deposit earning little, which they could lend and get a better return on in an agreement with grandchildren.

SOURCE www.ftadviser.com/2015/10/22/mortgages/mortgage-data/second-steppers-are-turning-to-family-lloyds-bank-8CWNpfhkt7dhKPj8dSEM1H/article.html

Friday, October 23, 2015 08:10AM Report Comment

19. icarus said...

Last para. of Boulger quote@16 should continue...."since house prices only ever move upwards".

Friday, October 23, 2015 08:58AM Report Comment

20. mombers said...

@16 excellent example of how rising house prices screw everyone except those downsizing and those with multiple residential properties

Friday, October 23, 2015 10:00AM Report Comment

21. libertas said...

Mister Ed, your Baldrick'esque cunning plan forgets one major fact, that house prices ARE RISING at about 10% in many parts of London, and you completely ignore that the sorts of moves people tend to make are, from a 1 to a 2 bed or half a mile down the road to a slightly better neighbourhood. Furthermore, you ignore home improvements, i.e. we can spend 30k on a loft extension to add 50k of value.

If home owners cannot trade up, why do they trade up?

If reality does not fit your theory, is reality wrong?

Friday, October 23, 2015 10:15AM Report Comment

22. mister ed said...

Many of them don't trade up. That's the reality. They find themselves stuck in a cramped space in a terrible neighbourhood, fretting about how they can get their kids into a decent school.

That's why 150,000 skilled professionals leave the UK each year. No sensible person cares one jot about how high house prices go when the quality of life is so dire.

Friday, October 23, 2015 11:43AM Report Comment

23. letthemfall said...

1st time buyers are not in a separate market. Price to income is not different for them. They may buy the cheaper houses, but they are still very expensive compared to their incomes, which will be typically lower than average.

Friday, October 23, 2015 03:52PM Report Comment

24. Nickyg2000 said...

Oxfords very odd. My girlfriend and I bought 2 years ago and we have low salerys but had a 60k deposit from parents. At the time everyone was worried about prices falling. Our 1 bed flats gone up from 200k to 325k in 2 years. We've sold it to amateur Btl who live locally need to get a return on their savings. We are buying in a village 5 miles out and for the same money getting a huge 3 bed.

Monday, October 26, 2015 09:06PM Report Comment

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