Average house price now seven times average wage! How do we fix this?

[moley]

? What's the point in buying anyway.

If you buy a house you don't have to pay rent when you retire and you're on a pension.

[Llanigraham]

? What's the point in buying anyway, yes I own my own but I sometimes wish I did not,I pay over the odds every year for the privilege and when you get old and need care which I in 3 will I understand, They take your house off you leaving you with nowt. Those that are sensible or could not be bothered get it for free or should I say you and i pay for it. Sorry it's going off topic but buying is not the best option any more in fact if we all did not buy the care system would collapse completely.

 

Not any more. The rules have now been changed to stop that happening so often. And to be honest it was remarkably easy to stop it happening anyway.

[Dr Zoidberg]

Not any more. The rules have now been changed to stop that happening so often. And to be honest it was remarkably easy to stop it happening anyway.

Yes, as long as you had the foresight to transfer ownership in advance it was possible to protect your house.

Definitely worth getting proper financial advice.

[Llanigraham]

I know: we did it with the mother in laws 4 bedroomed bungalow in Surrey. Made a nice difference to the Death Duties too!

[M12MKD]

That's what my father is already planning on doing. He really doesn't want the government to get anymore money to pay for the "freeloaders".

[mdon]

That's what my father is already planning on doing. He really doesn't want the government to get anymore money to pay for the "freeloaders".

Tbh when they take the house of an elderly resident for when they go into care, it's paying for that resident, not the 'freeloaders' as you put it.

We are facing this same predicament with my grandmother who looks like she'll end up in a home soon, I don't agree with seizing their assets and taking the house but if that's what's needed then that's what's needed.

[theezenutz]

Yes, if there are more houses being built then those doing so will make a profit - nothing wrong with that. They will also employ plenty of workers to do the work and everyone will pay taxes as well helping the economy all round.

As there are more houses available this will help to keep prices down to a more affordable level.

 

This really is fairly basic economics that you don't seem to understand. It's why housing in London is even more expensive than everywhere else - the highly constrained supply and very high demand.

Yes on the surface I agree that's how it's supposed to work but it's not always like that.

 

Example the energy sector. British gas ect announce record profits, so you would imagine the cost to the consumer would go down, but it doesn't they announce increase after increase. Not only that, when they need to upgrade the infrastructure so that they can make more profit, they often ask for subsidy's from the government or they raise the prices yet again. Rather than taking the money out of their huge and ever increasing profits

 

It's not that I don't understand so much I just don't really see it in action. Greed consumes almost everyone and everything in it's path.

Edited 6 April, 2014 by theezenutz

[lol-lol]

Yes on the surface I agree that's how it's supposed to work but it's not always like that.

 

Example the energy sector. British gas ect announce record profits, so you would imagine the cost to the consumer would go down, but it doesn't they announce increase after increase. Not only that, when they need to upgrade the infrastructure so that they can make more profit, they often ask for subsidy's from the government or they raise the prices yet again. Rather than taking the money out of their huge and ever increasing profits

 

It's not that I don't understand so much I just don't really see it in action. Greed consumes almost everyone and everything in it's path.

 

But all these things are cyclic.

 

House prices do rise and fall in relative terms and they are being fuelled massiely by super low interest rates, olack of new house biulding and foreign buyers buying on London to hide money from other tax authorities.  But things will change after then next election, which every party or parties get in because they are going to have to raise interest rates and them rising to 3% base and %pus for consumers will reverse prices rises especially if wages keep falling in real terms to RPI.

 

No doubt Centrica/BG will complain about bif profit falls due to the mild winter and use it as an excuse to raise prices to invest in infrastructure.

 

Just hope people are not caught out llike many off were in the early and mid nineties when prices fell by about a quarter and a million or two people were paying mortgages on properties worth less than the loan but did not want to default and get a bad credit history.

 

Always found that using a biulding society was better than a bank as there is no third party shareholder demanding a "decent" profit when times are tough.   

[Aspman]

Yes, as long as you had the foresight to transfer ownership in advance it was possible to protect your house.

Definitely worth getting proper financial advice.

 

 

You do have to do it a long way in advance or the local authority can see to get the cash back. Saying that I've now owned my parents house for about 10yr now. I charge them £1 rent a year.

[Llanigraham]

Has to be done 7 years before the death.

See the Death Duty Regulations

['daiking']

Not quite sure what you mean by 'your cheapness'?

I bought my first house 9 years ago just before the height of the boom.

House prices today around where I live are pretty much the same as when I bought

mine.

Sorry, I'm describing the effect you mention where the 'payments are now peanuts' . That doesn't come for free, its a consequence of a nation trying to avoid their liabilities with monetary inflation for a very long time. And for people of certain ages it worked. Well it looked like it worked.

Organised labour organisations got panned for it but they tried to keep worker's pay in line with costs. Our elected representatives tried to gloss over problems by spending our North Sea oil and gas windfall. They sold off infrastructure that had been paid for by generations of people. Public utilites and companies may have been poorly run but was it right to cheaply sell off all the infrasturcture that we owned? Housing is the same. Is it just coincidence that people's living standards increased massively during a time of mass social housing provision? And now that stopped and the things were sold off, living standards are retreating for a bigger and bigger section of the population?

The piper has to be paid but nobody wants to and its even, latterly, on this thread. People are rich, far beyond their abilities to accumulate capital (get rich) just because they bought a house and the UK government was determined to destroy the value of the currency over many decades. And yet, people think that they 'earned' it and don't want to use it to pay for their old age care. So the younger generations are denied the same opportunities to get rich and are at the wrong end of the demographic spectrum so they'll have to provide pensions and healthcare for a greater number of old people than at anytime in history whilst at the same time being denied any of the benefits of productivity that technology brings.

Its very wrong.

['daiking']

No, I said the hjouse was ten times my salary. I think you deliberately missed the part where I mentioned saving up for things we wanted.

I actually borrowed about 70% of the cost, but also having to pay fees up-front from savings - no mortgage lender then would lend money to pay for anything other than the property.

Edit:

(Just realised that that means i borrowed roughly 7 times my annual salary - in other words the same relative percentage that lulu in the original post seems to think is so impossible for todays youngsters to match.)

This is not typical and if it were, it would not be affordable or sustainable for any length of time. Houses are currently very expensive and their affordability is at the top range of where it has been for many years. And even that is clouded by the fact that buyers seem to be far wealthier than the vast majority of people.

As to saving, what is the point when speculative gains on leveraged assets are outstripping typical gains in savings by 100 to 1? Additionally it always akes me chauckle when older people tell me about how hard they saved but neglect to mention that over the last 40 years, our governements have spent the North Sea money rather than invest it, sold lots of infrastructure, sold millions of houses.

[lol-lol]

.......The piper has to be paid but nobody wants to and its even, latterly, on this thread. People are rich, far beyond their abilities to accumulate capital (get rich) just because they bought a house and the UK government was determined to destroy the value of the currency over many decades. And yet, people think that they 'earned' it and don't want to use it to pay for their old age care. So the younger generations are denied the same opportunities to get rich and are at the wrong end of the demographic spectrum so they'll have to provide pensions and healthcare for a greater number of old people than at anytime in history whilst at the same time being denied any of the benefits of productivity that technology brings.

Its very wrong.

 

It is very embaressing to be part of this greedy generation.  Best I can suggest to do is to help the siblings to get on that housing ladder so they are the right side of the divide as it opens up.  Mnd you they are gonig to be left with an extra tax for their degree if they took that path and it might be best that they work abroad for a good few years to avoid being hit by the extra 9% clawback.

 

Also a shame that clearly the coalition government's first priority is to stay in power and not deal with the rapidly rising UK national debt now approaching £1.5T.   As you say the piper will need to be paid soon.

[Clunkclick]

A report on RT yesterday, which was presented with the aid of an Oxford academic, made reference to a number of third party academic studies which stated that there is in fact a massive surplus of rooms in the UK in relation (Something in the order of 1 million plus rooms). The problem according to RT was that the utilisation of capacity was poor. Amongst the causes of this poor utilisation, they listed the following:-. there were lots of old people occupying 4 bedroom properties that they didn't strictly need, lots of pensioners occupying smaller properties located within inland urban conurbations, ex-patriate/non-resident landlords keeping property unoccupied just for capital gain etc.

 

They concluded that a re-distribution would solve the housing shortage and that further building was not really required. But they would say that wouldn't they . . . ?

 

 

Nick

[mdon]

Redistribution of housing? So that's take from people who saved and bought a house they were proud of and give it to those who haven't.

I also don't agree that people are rich beyond their means because they bought a house. I bought my first house which is a large town house only 5 years ago, I did this despite both me and my wife being paid well below the national average at the time, we just saved for it which a lot of people these days don't seem to want to do. Perhaps if they didn't spend their money on new cars they can't afford then they'd be able to save for a house deposit.

[FUBAR]

I left school at 16 got a job and moved out of parents within months and rented. I went where the work was, worked hard and moved several times. I had a fairly low to average income and house prices seemed dauntingly high and beyond my reach. Then the prices went nucking futs in 'the boom'. I kept changing cars had a couple of personal loans starting out, paid those off and started saving. I have bought everything since outright inc 5 motorbikes (1 brand new) and 23 cars (1 brand new the Octy). I had a couple of mortgages in place for house purchases that fell through unfortunately having saved up for a good deposit. I kept saving and never did like the prospect of paying for a house twice with a mortgage, so I went into mega saving for the last few years and finally bought my current house outright too. I sold my vRS as it's dash light fault was annoying me so much, I could go out and order a new one tomorrow but I don't need one and am just finished in work and looking for a new job, so would be foolish to do so when I have a fairly comfortable safety net and no rent/mortgage to pay now. Plus the MG I got as a run around is awesome! 

 

 

When I was younger some of the many things I said I wanted to do before I was 30:

• Buy a new car = done
• Buy a fast bike = done and in style! 
• Buy a house = done
• Travel the world = seen enough of it for now

 

I was lucky it seems as I came from a upbringing where we had it all! No TV until the mid 90's, no home telephone, no latest games console etc as my parents had to live within their means and renting a house they just couldn't afford it. To get on the property ladder my mothers solution to lack of employment in the area was to get up at 4:30am to get 3 buses to work and not have lunch to enable her to make it home by 6pm for a sub 10K salary for over 10 years until she finally got a transfer to her own area. They now own 2 houses and from what they had, seem to be set pretty well for a comfortable retirement, certainly far better than I think they could have hoped. I do whole heartedly mean to be slightly sarcastic as it does grip me to see 'kept' young adults complaining about their lack chances in life. I have friends who always had plenty of cash on them and the latest things growing up, yet who still have nothing other than a car they don't own (finance) and a pile of old expensive iphones etc in the bedroom they have lived in their entire life. I don't see myself as being some success story having had less of a chance or anything like that, as it is simply not true. But there is no way they could say I had it easier.

 

Still, it must suck to be them right now 

 

We all make our own decisions in life and in respect of any person being born in the UK, have a fairly equal footing to make a start in life in whatever way we choose to do so. Some make good decisions, some make poor ones, some become epic success stories and end up coming from nothing and being among the richest. Just life!  

[lol-lol]

The big problem as I see and have experienced is that new buyers often do not fully realise the cylic nature of the housing market and this is not made aas clear as it should be to buyers.

 

The level of interest rates on mortgages and the value of average house prices fluctuates more than new buyers propbably realise..

 

Those of who lived through the turmoil of the push in the 1980s to own your own home followed by the mess of the early nineties of house prices falling by about a third and morgage rates gonig to our 10% and being caught in a debt trap and paying over the odds for something that is declining in value.

 

Governments manipulate interest rates to match the political reelection cycle rather than what is best for the economy and threfore make economiic downturn in house prices and upturn in interest rates worse and more dramatic than it would be if they put the UK economy before their political future.

 

Buyer's beware.  In 2015, judging by the value of Gilts/Bonds interest rates will rise from 2015 through to 2017 at least indexing upwards at around quarter percent per quarter for several years and clearly the postive feedback loop (which is a bad thing and not good as many assume by its name) is clearly at play here and should be curtailed now but along with biulding of home for the young and the older UK residences. 

[tempra007]

We all make our own decisions in life and in respect of any person being born in the UK, have a fairly equal footing to make a start in life in whatever way we choose to do so. Some make good decisions, some make poor ones, some become epic success stories and end up coming from nothing and being among the richest. Just life!  

I couldn't agree more with this, I have made some VERY bad decisions in my life but when i focused and worked (the only time I haven't worked is when I was in a secure mental ward), I have gone without the outward trappings and perceived necessities of life (sky, holidays,  keeping up the Jones cars) and achieved everything I've set out to do. Unlike some of the students I teach, I don't feel that life 'owes me something' and have gotten to where I am by hard work, yes I am a landlord of 5 houses and I charge a reasonable price for them, but this is to give my son a good education and a life I didn't have. I feel some of the youth of today have an attitude that means they will never work and expect us to fund their lifestyle.

 

I'm not going to apologise because I've saved, gone without and have become successful, yes house prices are bad but like has been mentioned there are places where you can buy a nice fairly modern (less that 10 years old) semi detached for less than £150k. When I bought my first house aged 21 I cycled to work, sold my car until I could afford to run it again and budgeted my life, after 10 years I was mortgage free and have been so ever since. It can be done

['daiking']

Redistribution of housing? So that's take from people who saved and bought a house they were proud of and give it to those who haven't.

I also don't agree that people are rich beyond their means because they bought a house. I bought my first house which is a large town house only 5 years ago, I did this despite both me and my wife being paid well below the national average at the time, we just saved for it which a lot of people these days don't seem to want to do. Perhaps if they didn't spend their money on new cars they can't afford then they'd be able to save for a house deposit.

You've got the wrong end of the stick. I'm not going to tune into RT but the Oxford Prof doing the rounds at the minute is Danny Dorling. I think he's advocating taxes to encourage more efficient use of land although I don't think he's come out fully in favour of a land value tax.

There already exist mechanisms to distribute larger housing from older couple to younger families. Its called the housing market. ExcepT that in getting where we are today. The economy has kept the nominal value of property too high (because their wealth is tied up in this value) and crushed peoples ability to buy (stagnant wages).

Similar for old people in urban locations part. The economy (and they only really care about London) is urbanising and yet there is a shortage of property in places where workers need to be. Because of historic policies we have (now elderly) people in these locations in secure tenancies. The "bedroom tax" debacle is one very poor way to deal with this. There needs to be greater supply before you start punishing demand (taxing).

As for there being enough housing without building more. Building more quality housing of secure tenure without chasing prices upwards (hello help to buy) cannot hurt. I think the bedroom figures do not fully reflect the social consequences of converting properties to HMOs. Which is leading to more accommodation but reduced standards of living.

If you click on this link of a tweet you should be able to see what is happening:

Henry Pryor (@HenryPryor) tweeted at 0:20 pm on Sat, Apr 12, 2014:

Although we think of ourselves as a nation of homeowners there’s been no growth in rate of ownership for last 20 yrs http://t.co/Ye9oGUymVg

(https://twitter.com/HenryPryor/status/454942038115373056)

[lol-lol]

Redistribution of housing? So that's take from people who saved and bought a house they were proud of and give it to those who haven't.

I also don't agree that people are rich beyond their means because they bought a house. I bought my first house which is a large town house only 5 years ago, I did this despite both me and my wife being paid well below the national average at the time, we just saved for it which a lot of people these days don't seem to want to do. Perhaps if they didn't spend their money on new cars they can't afford then they'd be able to save for a house deposit.

 

The old generation, of which I am slipping relentllessly in to, are having it way to easy by many having mortgages which they pay penuts for ie a couple of hundred quid per month, for living in an asset which is gaining £1K a month whilst the younger generation have to pay £1k a month for something that may only be gaining £500 a month and looks likely to fall by £20-£40K in a couple of years time.   Match that with a Student debt staring at £40K which will be £80-100K by the time the pay it back when we the older generation had it for free, sounds very unfair to me. 

[aolt]

I've been looking to buy a house at some point. I have made the tough decision of moving from Surrey to Bristol, where prices are about a third cheaper.

 

The lucky thing about this plan is that my dad lives in Bristol, so I have somewhere to stay before actually buying, but also I could prove to future employers that I had somewhere to live. I'm only 25, so I have everything ahead of me, and it has all been about planning.

 

I know that being in a new job, that I will have to wait before I can consider a mortgage, however that time gives me a chance to understand what area I want to live in, whether I want to consider being close to the city, or live a bit further out.

 

In my opinion Bristol has everything that Surrey has, wages are about the same, generally cheaper and easier to get to places by car in general.

[mdon]

The old generation, of which I am slipping relentllessly in to, are having it way to easy by many having mortgages which they pay penuts for ie a couple of hundred quid per month, for living in an asset which is gaining £1K a month whilst the younger generation have to pay £1k a month for something that may only be gaining £500 a month and looks likely to fall by £20-£40K in a couple of years time. Match that with a Student debt staring at £40K which will be £80-100K by the time the pay it back when we the older generation had it for free, sounds very unfair to me.

The but when they first bought the house they would have been paying more (mortgage v income in real terms) than what a lot of young people are paying now. Btw I'm only 30 and my mortgage is less that 10% of our net wages per month. The reason being is because I saved and worked for my lifestyle. As for student debt etc well that's their problem, if you want to go to uni then you should pay for it. Everyone I know who went to uni spent all their money on drink and partying and are either the same or worse of than me. It's all about life choices!

[Clunkclick]

Reference the RT report, there is, at the moment,  a serious block to people downsizing, a lack of small/affordable accommodation.

 

My experience of North-west London in the two previous housing price booms of the mid- eighties and late 1990s and early 2000s was that, early-on a lot of single person accommodation was constructed on brown-field sites i.e. sold-off utility company sites, NHS land, converted 1960s office blocks, re-developed private estates where excess garden space was utilised and latterly on sold-off service stations and pub land. .And this coincided with the large expansion in housing need expressed by the baby boomer generation. Nevertheless, this extra provision wasn't enough to deal with the demand and prices rose substantially. Housing built in this already developed are at this time was a 50/50 mix of 3-4 bedroom stuff and single person accommodation.

 

Since then, urban populations have swollen considerably (Particularly London) by immigration. Most of the migrants are looking for "starter accommodation" . Local "Incomer" developers are being prosecuted at the moment for illegally converting big unused houses into flats or converting their end-of-garden garages into flats. There are hoards of migrants sleeping under motorway and railway bridges, in "Cardboard-cities" on sites awaiting re-devlopement (One infamous one at Hendon).

 

Meanwhile mainstream developers have been hoarding brown-field sites in land-banks and accordingly cut-back on the development of small housing, waiting for the peak of the economic cycle and this has sent the prices of non-family accommodation through the roof. Add to that, the dire employment issues in the provinces have meant that London becomes a mecca for indigenous young migrants looking for work. This adds to the starter property price explosion. Yet the only new  properties being built en-masse round here at the moment are luxury flats, three to five bedroom  house stuff being built on released MOD land (RAF Uxbridge, West Ruislip and Eastcote) and luxury flats built on released NHS land. There seems to be virtually nothing being built as single person/two person accommodation. And I personally am being deluged with Estate Agents marketing material and other less reputable tactics.

 

From the late 1990s to 2008, it seems that a large part of the new housing development was larger semis and  detached property in large estates on  green field provincial sites e.g. Bicester, Bristol, Swindon, Exeter, Newton Abbot, Dorchester.

 

The one thing that the "Bedroom Tax" has proved is that people can't downsize, move out or "On", even when there is a substantial financial  and "Other" penalties for not moving, if the appropriately sized accommodation is not there.

 

 

Nick

Edited 13 April, 2014 by Clunkclick

[lol-lol]

The but when they first bought the house they would have been paying more (mortgage v income in real terms) than what a lot of young people are paying now. Btw I'm only 30 and my mortgage is less that 10% of our net wages per month. The reason being is because I saved and worked for my lifestyle. As for student debt etc well that's their problem, if you want to go to uni then you should pay for it. Everyone I know who went to uni spent all their money on drink and partying and are either the same or worse of than me. It's all about life choices!

 

Not necessarily as it all depends on interest rates available from the banks and biullding societies at the time and this is the root of the problem in the UK in that they do not tend to offer long term ie 10 to 25 length deals so you end up with a short term deal of 2 to 5 years where the interest rates could be double or triple when you go back to the market to re-mortgage.

 

The long term deals are common in many other countries ie maninland Europe, US.  I was lucky and took out a 25 year tracker at 0.18% over base also bought this house in 1997 when prices were hallf of what they are now but housing, people's most important purchase, should not be a roller coaster ride with no safety that you can stay in your seat.

 

 Also I would say that getting a degree can help job prospects as it is difficult to say precesily but I think it probably helped me in trebling my salary since getting it in 1998.  Getting a degree through the OU, Harold Wilson's legacy, was a good way to do it without all the student lief pitfalls as you only did summer schools an otherwise distance learnt while still working for HMRC in my case.

 

Hope you are others are ready for when interest rates do rise in the not so near future and house prices have a more gentle fall than we had in the early nineties under the last Conservative government.  

[eccleshill]

In 1972 the first house I bought was 10 times my annual salary, for a 2 up 2 down + kitchen & bathroom mid Victorian terrace with no central heating and no damp course.

 

Most young COULD afford to buy if they saved up, like we had to to raise a 10% deposit

 

 

Wow!  Really?  Either houses in your neck of the woods were exorbitantly expensive or you were in slavery. 

When I bought my first house in 1974 it cost £4250 for a mid terrace of vintage 1901.  Pretty much like the one you describe - it had living room that opened to the street and a dining kitchen downstairs.  Upstairs 2 bedrooms and a bathroom. 

My salary at the time was £1100 per year.

Back then the building societies imposed a mortgage limit of 3x the main salary (ie mine)  plus 1x the 2nd salary (ie my wife's).  A 10% deposit meant a mortgage of £3825 - just in the limits.   So unless you were very wealthy the average house was pretty much pegged at 3-4x average salary.  Mind you that is up here in the frozen impoverished north not the leafy suburbs of the affluent south.

 

Even so, you must have been able to pull some strings to get a mortgage 9-10x your salary!