To not understand how people afford next house up?

[evilnaggingwife]

We purchased our first house about 3 years ago. A 3 bed terraced house with a tiny garden for around 230k. As first time buyers, we only saved a 5percent deposit and got a mortgage with a high rate! That will end next year when I hope we can get a more sensible rate.

Our house has probably gone up to around 280-300k I'd imagine based on local prices.

dh and I earn around £60k combined (although he is self employed so always tricky to prove income). We have saved enough to pay cost of moving and stamp duty and fees etc of next move.

I keep looking on right move and houses that I would consider next one up are stupid money. I'm talking 3 bed semi with a drive and larger garden... £400-500k!!!! How on earth do people manage this? Are we stuck here forever?

I go to a mortgage calculator online, it tells me how much I can borrow and when I do a search on right move the same types as our house come up... Terraced, not in town, no drive, small garden, small 3rd bedroom.

*shrank not shark!

Yes sorry Martha increase in housing costs.

We're in a 3 bed semi in a nice area of an expensive city but NOT the SE on England and ours was £315k last year.

I assume you're in the SE OP? I don't think there's any hope for housing ever being reasonable there (one of the reasons I left).

Martha, I wish I had done that but at the time it seemed too big a risk to take on such a huge mortgage.

A pp said that politicians don't know how to cope with prices being so high. I think they encourage it. It helps the rich get richer.

My parents' 3 bed semi with drive and garden was £160k when they bought it last year. Lovely area in the suburbs of a large cheap city.

I cannot imagine living anywhere where the housing is that expensive unless I was a millionaire! Utter robbery just for a postcode.

When was he born

I would say early 70's so would have been house buying age around the early 90's.

We will be in a position to afford a "next house up" this is because:

a) my parents gave us a large deposit for our first house
b) our house has gone up massively in value - we chose a house in an area of London that had a lot of potential
c) we both had big promotions after buying the house - went from a household income of 70k to 110k
d) we have been overpaying the mortgage quite substantially
e) we have no interest in a large garden, which means the sort of house that we want is cheaper
f) partly from choice and partly due to infertility, we won't be having a large family so we don't need a massive house
g) for a "next house up" we will be prepared to move to a cheaper area

So, a mix of luck and choices, for us.

That makes sense; it was good financial advice for most of the postwar period to buy the most expensive house you could afford as soon as you could, because inflation and wage increases gradually shrank the value of the debt and you ended up with an asset. If he was born in the early 70s that would have been the advice his parents and older generations passed on to him.

It worked great to be honest up until the long boom started to take off in about 2001-2. Pretty much anyone buying after the mid-2000s has been stuffed, to be frank, unless they expect to have huge rises in income/inherit/gain a windfall in some other way. The rest of us...

Sadly the rise in prices means the gap between a two bed starter and a three bed family home is growing. We have a two bed flat valued around £350k. A three bed semi is £600k - run down with a tiny third bedroom and one reception room. We have about £300k to put down as a deposit and it's still not going to happen. I'm hoping to return to work which may help if I go for a career type job rather than part time mum job. Otherwise our only hope is a windfall, lottery win or inheritance. Most parents in this area are older and so were further in their careers, bought at a better time or in a more expensive area before selling and buying here. Although we are more fortunate than many with a small mortgage so we can save and without needing to do without. We may also be able to extend to a similar size to the £600k semi for a fraction of the cost to move up.

The inlaws can't understand why we don't have a four bed detached in the Home Counties like them, they afforded it with one good but not very high salary and a lower secretarial salary. My husband is probably earning more in relative terms but feels far poorer. My family on the other hand have a three bed semi, just as we'd love to have, it's up north so we could buy two of them for the price of our flat.

we'll never move up as we cant afford it

tbh you have to learn to be happy with what you've got, of course I could write a list of stuff I'd like, we all could, but if you can't afford it and wont be coming into money then you just have to get on with it and be happy with what you have

Martha, How would you like me to link to my eyes
Very few mothers worked when I had ds1 there wasn't the childcare for a start, and those that were able to find the little that was on offer didn't want to lose money by paying for it.
I told you, I saw the change.
I heard young girls at school being told they could have it all, a career, husband and children. My sons were taught this at school.
They are the mid twenties now, trying to have it all

Anyway, back to house prices, who knows what will happen, maybe there will be a huge crash, maybe there won't and it will get worse.
As long as people are buying them at the current prices there won't be any need for the market to change.

I agree with newlifeforme, I've seen the change at the school gates too, ours are rammed with grannies now, mums and dads dont seem to be the main carers anymore and I think thats a sad indication of the way society is moving

I told you, I saw the change.

Newlife - I also saw the change in 2001-2, when central bankers across the West threw interest rates down to near zero in response to 9/11 to prevent an economic crash; and all the hot money coming out of the technology stocks crash went directly into credit derivatives based on the property market. Alan Greenspan admitted quite happily that what he did then was designed to create a housing bubble to prop up Western economies. I saw the direct jump in real terms housing prices immediately afterwards. They were at pretty average historical values around 2000 (and women had been "having it all" for a few years then....

The bubble partially collapsed in 2008, but not in this country, where there were frantic efforts to prop it up with everything from quantitative easing to Help To Buy.

Any effect from trends in dual income is only a sideshow to the real causes.

Georgette, I'm interrested to know if you think the avoidance of a crash has just kicked the can down the road.

I don't know, op. Our family income has increased by 150% since we bought our current property but if we wanted to move to a bigger house we would have to move to a much cheaper area. Rapidly rising house prices are a blight on everyone, except those wanting to cash in.

Write, oh yes, definitely. There was an opportunity to deflate it a bit more gently when prices started to drift downwards in 2009-10, but after the election of course the new govt was desperate to prop it all up and not have a crash on their hands, so they pulled out all the stops. Result - it just got much worse: London is now stratospherically crazy with another bubble on top of the bubble!

The whole UK economy and the banks are so dependent on asset prices that they are desperate to do anything to stop it falling. How it will end, I have no idea

Someone I know had kids and kept working which was unusual then, must've been mid to late 70s in London. She had to have a nanny because there wasn't as many nurseries and childminders as there are now. That implies more women work now than back in the 1970s and 1980, or at least they are working during the day rather than around kids in the evening etc. Plus far more women go to uni and have proper career jobs in professional previously dominated by men. So increased income per household must be higher relatively than back then which contributes to higher house prices. Although it's a pretty fabulous thing to happen and wasn't in isolation, it must have an impact.

The recent affordability criteria stuff is not helping those of us who want to move up either. We almost got a new mortgage in 2012 and they were throwing money at us, suggesting we rent our flat, £100k outstanding, and buy a house for £325k. We'd barely be able to borrow £150 now.

As for overpaying, it's not worth it now due to low rates, you can earn more by saving the money in a high interest account - we earn between 3-6% (tax free) on savings and only pay 2.5% on the mortgage. And if you overpay you can't easily get it back due to the affordability rules.

The bottom line is that the fundamentals of our economy, and our population demographics in particular, simply don't adequately support asset prices at this level. Anyone who thinks they do is totally deluded, but you will get tons of people who want to say that this time it's somehow different.

When you've got real terms house prices at nearly four times their historical mean value when interest rates are close to zero and there is no wage inflation....well, you know something is very very wrong.

Martha, How would you like me to link to my eyes

Oh right, you spoke like it was fact. You meant just what you had noticed around you. Thats different.

Pasta - where are you getting 3-6% taxfree on savings?

Part of the reason we overpay is that, as higher rate taxpayers, it's virtually impossible for us to get savings interest that good.

Haven't read all pages but in terms of living better than previous generation I wonder if do people with comparatively smaller housing have better standard of living better all/more outgoings? Better decorated and furnished homes, more gadgets, better and more frequent holidays, fancier car or perhaps 2 instead of 1 car, eat out more often, do more leisure activities, buy more expensive clothes more often etc?

Re ^ I mean in comparison with their parents when they were younger.

A poster below mentioned that we are due to have quite a lot of older people selling property, and i think it is true that Over the next 20 years a lot of property will come onto the market as people downsize as they get older. But equally, quite a lot of the sale proceeds will go straight back into the housing market as inheritors use it to upsize or go into buy to let (if that maintains its popularity - which it may not, depending on tax changes). Not all the proceeds will be spent on property though - a chunk will be paid in inheritance tax, and some on care home fees. So what the overall impact will be is anyone's guess.

This time last year it was predicted that the new pension rules would mean people cashing in pensions to do buy to let - i haven't seen any figures about what has actually happened.

Georgette' interesting, that's how I feel. I'd be interested to know if you have any view on London in particular. The idea of spending my whole life in a small fly doesn't thrill me but although I could retire early, buy a house outside etc I imagine I'd be even less keen to leave friends and family and start again at 60.

If I did fork out a stupid amount for a bit of extra space, a crash would make me regret it, but with government so keen to keep prices rising, perhaps I have to think of a crash as impossible.