To wonder how the next generation will afford a house?

[Housepricewoes]

DH and I want to move to what will hopefully be our family home, in 2 years. Work commitments means we can't do it sooner but I'm stressing about how much house prices might rise in that time.

That got me thinking about how today's children will ever be able to buy a home.

I know it's a very British thing to aspire to home ownership but rightly or wrongly it is the norm.

Many of my friends and extended family have only been able to get on the property ladder with a significant hand out from the bank of mum and dad, but unless their circumstances drastically change, they are not going to be in a position to do the same for their children.

What do you think will happen about houses with the next generation?

Did anyone see that Evan Davis programme a month or two ago about London and the rest of the country? They interviewed businesses who are moving to London despite the high costs, because of the sense of critical mass in creative and financial industries, and talked about the best way to create that critical mass elsewhere: rather than pick on a specific second city they talked about the concept of a northern megacity, a big corridor across the north: Leeds, Manchester, Liverpool, etc. So rather than invest money in transport links that simply cut down the time it takes to get from Birmingham to London, the argument was that the money would be better invested by improving transport links within the north - upgrading the god-awful TransPennine Express, for instance.

Governments have been trying to limit London's growth for a very long time. The new towns for example - Slough, Guildford, Watford etc were apparently developed in efforts to get people and jobs out of London.

Lots of civil service jobs were moved out of London in the 90s , presumably because unemployment was higher in other areas, and recruits woudn't get paid London weighting.

That said, it seems to be assumed that the UK's economy is dependent on London, and I don't think that's really true. The South East as a whole is very productive, and London's position as the centre of it perhaps also explains its importance. The UK remains one of the world's leading manufacturing exporters by value, and the vast majority of that is outside London.

It would be intersting comparing the UK to France, which also has one mammoth city (Paris) and various smaller ones.

I work for £3 an hour, and my SO doesn't work. £3 an hour is minimum wage for an apprentice u19. I cannot afford to move out yet. Won't for aout 5 years of putting £20 a week away and hoping my So does the same.

mizu, you'll get that deposit in no time if you're saving £500 a month. That's 6k a year. I'm guessing you've already saved some anyway, so maybe another couple of years if that. Your situation sounds very similar to ours. I wish you all the best

If anyone's interested in the situation in France: yes, Paris is like London in that about a sixth of the population live there. However, it is very rare for your average person to buy a property in central Paris, as the prices are astronomical. If they do, it'll be a tiny apartment, certainly not a house with a garden, for which you have to commute miles away. Lots of people rent.

And are Paris rents astronomical too, like London?

I guess i am in an unusual position of being in the same job as my parents (civil servant) and therefore able to draw a direct comparison between 40 years ago and now.

my dad grew up in a flat over his parents greasy spoon in London, where he shared a bed with his three brothers, yet all the children ended up owning substantial properties. He bought a bungalow in Essex for c. 17k in the 70s and commuted to london. Both my parents were HEO by the time they retired, so would have been much more junior at that time, say an EO and and an AO for anyone who knows the grading system. They moved a number of times, pocketing large amounts of equity, and are now worth over a million.

now i do not dispute that the initial years of home ownership were tough and that they scrimped and made sacrifices to get there. However, i an certain that they had it easier than future generations. My mum didn't work for at least seven years while we were small and my dad got early retirement at 50, by which point they were mortgage free.

now an AO and EO couple today might earn 45k between them in London. The bungalow in Essex, which was modest compared to their current mansion, gad a 100ft garden in a nice area and would now be £450k. Ten times the gross COMBINED salary. it would take all their working lives to even scrape together a £45k deposit of ten per cent, by the time they had to pay rent, pension contributions(previously 0 for them, now up to 9%) food and commuting costs.

Interesting thread in AIBU on a house that has gone DOWN in value by £30K.

Oh and they would also need to scrape together an additional at least £15k for stamp duty and moving costs. So save £60k upfront, but they wouldn't be able to get mortgage anyway

It must depend on the area then. My daughter and I have the same career and the zone 5 London house the ratios are not too different between then (30 years ago). Pay 7500k and £40k the salary now for that job. Bought £40k then. High interest rates 8 - 12% at times. Price of that house now as I said above £275k.
£7500 x 2 x 3 = £45k
£40k x 2 x 3 = £240k

So I suppose we are saying Essex has gone up in value a lot more than outer London OR the crucial difference is the 1970s which were before my time - we had massive massive inflation. It was dreadful for those with savings. We had 3 years with a total 60% inflation and a property crash.
And perhaps civil servant salaries have not kept pace with inflation as much as other professionals.

Yes, either Essex has gotten disproportionately more expensive to other places ( this would be end of zone 6) or the Daily Mail is lying when it makes out the public sector is well paid!

it also may be because you are talking about a better paying professional career (£40k) whereas i am looking at lower salaried roles (£40-45k between them). It may be that more professional salaries have increased faster than more basic ones.

maria, can you not comprehend the fact that not everyone is a 'professional'?

£40k per year is significantly more than the average salary (about £26k)

£275k for a house isn't much more than the national average (approaching £250k)

If people on salaries which are well in excess of the average are buying up houses which are only marginally over the national average house price then surely you can see there is a problem?

I think Gideon's plan to allow people not to have to buy annuities with their pension pot but spend it how they wish is his way of enabling the bank of mum and dad to help the next generation buy a house. Or put another way, for children to try to charm or bully their parents into helping them.

Buying in the 70's.

We moved from a 2 bed maisonette, inner London borough, to a 4 bed Edwardian semi, outer London, in 1972. There was the same sort of feeding frenzy then as now. If the house was still for sale when you turned up to view, you bought it and thought yourself lucky. Then we were immediately hit by skyrocketing interest rates. As I recall, it was paying the mortgage that was the problem, not finding the 10% deposit.

Was going to reply to Bedraggled about her parents having it easier, evidenced by the fact that her mother didn't work for 7 years. In the 70's, there was practically no childcare, just playgroup at 3 for 3 mornings a week. I had 3 under 6, and I remember those times as a real struggle financially. My dp worked long erratic hours. There was no way I could have worked. And we were v hard up. Had to hand-wash for a year because we couldn't afford to replace my twin tub. Fortunately the spindryer still worked.

Yes, at the moment, in London, it is difficult. Not denying that. But we're still suffering from major global banking crisis. No knowing what the long-term effects will be. Atm, they are obviously vary hugely from one part of the country to another.

Forallthesaints It's more likely that people will use their pension money for a btl property. They will need an income from the lump sum. So there will be more competition for would-be owner occupiers.

I think in the future it will be more a question of the Bank of Dead Grannies. My children have already benefited from inheritance I've passed through a deed of variation because the value of my property, nothing grand, is getting too close to the IHT threshold.

Hi thymeout I am absolutely in agreement that it has always been difficult, and that it wasn't easy for people to get on the housing ladder and required scrimping, saving and hardship then too. The thing is that it was a short term hardship for long term gain if you managed to, hence all the sayings about bricks and mortar, etc. As ten years later said property was worth ten times as much, making the mortgage percentage compared to the equity negligible. Obviously there were peaks and troughs, but that general theory of the house prices rising far beyond inflation is gone now. You might make a small profit or loss but you don't take out a 80k mortgage on a £100k property thinking that in ten years time it will be worth a million and the £50k you have left to pay will be peanuts in comparison! In ten years time you hope that it is still worth the same and that you will ever pay it off.

the part about my mum being a sahm was just an aside, as by the eighties they were financially stable enough to have children and go onto one salary.

my point really was that future junior civil servant couples in the same position would be physically incapable of buying that property, both in terms of saving a deposit, and in terms of getting the mortgage at all, as wage inflation hasn't anywhere near kept up with house prices.

We could not afford to buy in Surrey near family (parents and sister still live there), so we moved put West. I got a transfer with my then current job (no paycut as I was working & renting in Sussex so no London weighting. After ML I was made redundant but got a better paying job despite the fact my specialism is very much a 'City' one and I moved into the Financial Services industry (again very London centric).
I really struggle to see how quite SO many people can claim they can only do their job in London.

We a graph on here really. The period in the 70s with 60% inflation over 3 years DID mean house prices shot up and to an extent wages, although there was also the 3 day week, power cuts and we had kerosene lamps at home. Upper tax rates went up to 98% - it was just ridiculous. The nation was on its knees until we were saved by a change of Government. People who bought in say the early 70s or 60s benefited longer term from those rises although lost out if they had savings as they in effect became halved.

I certainly agree that in only a few stages in British history have ordinary workers on average pay been able to buy. 30 years ago I remember my midwife on a home visit being very very surprised we owned our house (as presumably most people she visited did not or not at our age - under 30).

Anyway I am not saying it's easy, just that it's not impossible if you are prepared to slum it out in outer London and both have reasonable careers or move away from London.

It has not always been short term hardship for long term gain. There were property crashes in the 70s and 90s and we sold two buy to let flats at 50% less than we paid for them. Property is not always a sure fire winner or has not been in the past. At the moment we have more state interference in the free market relating to interest rates and housing I can ever remember. The state never used to feather bed mortgage holders in the way it now does. It let loose the free market on it with at one point 12% interest rates. Now instead it interferes and look what a mess marketing interference has made.

I think that is part of the issue here- that between Right to Buy and inflation, there was a period where ordinary workers were able to buy, and do very nicely for themselves as a result. Unfortunately that changes the playing field as the assumption is that the next generation will be able to do the same, for the same effort/risk/reward, when actually its not possible for many to get on the ladder regardless of the sacrifices they make, as the risk appetite of the banks rules them out, especially with the new rules coming in.

my father certainly doesn't realise this disparity- partially my fault as me and DH are doing very well for ourselves ( I'm three grades higher than he was when he retired) and have bought a nice semi. But it doesn't live up to his standards, and i don't think he registers that we are doing extremely well for ourselves professionally, and are still in the same place he was in a junior job.

Yes bedraggled. It's probably the first time that the next generation can't expect to better their parents'. But I think people would be happier about renting if they weren't paying more in rent than mortgage holders and had better security of tenure.

The fact is that we simply haven't built enough houses to cope with a rising population. Whenever there's a bit of a slump, developers simply sit on their land and wait for prices to rise.

When council houses were sold off, and councils weren't allowed to replace them, people were forced into the rental market. Rent controls were removed, tenants' rights eroded, making btl a very attractive proposition. Even more so now when interest rates are so low that it's difficult to get anywhere near as good a return on capital. 10% on btl v 3% on a fixed rate bond.

Maria - I'm not sure about your free market principle. There has to be some sort of safety net, in the form of social housing, for the casualties of the free market, who end up costing the state, and society, a lot more money in the long run.

To the person asking about Paris rents - hard for me to say as it's over ten years ago that I lived there, but when I did, I was on a teaching salary (so not poverty stricken but not great riches either) and I rented a studio (so one room, with separate kitchen and bathroom) in central Paris for 500 euros at the time. It was 5 floors up with no lift, but in good nick and certainly wasn't a dive. It was small though - about 25 square metres. Rent may be expensive, but increases are strictly controlled.

One thing the new mortgage affordability rules will make more difficult is moving further out from London to take advantage of cheaper prices as commuting costs will be taken into account reducing the value of the mortgage available.