To wonder where the money is coming from to buy houses?

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So, if houses used to be (say) 4-5x average annual salary back in the olden days of the boomers.

And now house prices are 10 X average salary... Bit they're still being bought, and people want to buy...

Where is this money coming from?

Are boomer parents artificially inflating house prices by giving huge sums of money by releasing equity etc?

Who is buying the expensive houses??

I also had to use the 20% help to buy scheme and you had to be quick to get it paid back before the price value increased. Some of my neighbours haven't paid it back.

@Seashor so it is a choice between owning a house and having children these days?! Sounds really progressive Think you may have lost your own argument there.

But all joking aside, I sincerely hope if they wanted children they will still be able to have them as fertility doesn’t wait around for people to get their finances in order.

nightwakingmoon - spot on!

[quote CharSiu]@Tilltheend99 a house on my very nice road was unoccupied due to a horrible divorce fight. It was empty for 8 years, the husband had removed the entire bathroom and kitchen. It went to auction and sold for 180k to developers for cash, it sold for almost 300k last spring. Just as an actual example regarding your post on developers.[/quote]
But that's because it would be unmortgagable. No kitchen and bathroom means uninhabitable so no mortgage, so it's either left to rot or sold to a cash buyer. Occasionally you can get development loans for such properties but they're not long term, are high cost and difficult to get.

@Baddit

People don't really talk about the impact of the increase in buy to let mortgages and people buying second homes.

There's not been any legislation to curb it - perhaps because a lot of MPs are also private landlords?

Most people can only buy when they inherit. It's like we're going back to a society of lords and serfs who never own property.

And that's if their parents had anything to leave them.

My parents lived in council housing, so left nothing for me and DB save for a few quid in the bank. Same for my late DP and my exH and his siblings, their mum is in council housing.

One friend, whose parents were very comfortably off, inherited very little because his mother had dementia and spent many years in a care home, the cost of which eroded the children's inheritance at an alarming rate.

Mortgage multiples used to be 3x main earner plus 1 x 2nd earner, now can get 5 x both earners.

It's not standard to borrow x5

And that's the problem. Buying a shitty 2 bed terrace or small flat as quickly as you possibly can and then going up the ladder is works better than trying to save for a deposit for a 3 bed house. You'll get further quicker. So the average age of a FTB will go down. I've seen it amongst my friends - those that buy early do better in terms of what house they have by 30.

The problem is the shitty property still needs an hefty deposit that people need time to save for. Of course it's better to buy early but most people aren't in the position too.

[quote forinborin]@VelvetChairGirl
And the purpose of me lying about it is....?
I know it as neither of them speaks English well so I helped them to understand some details about real estate process here. And I think you're stereotyping here.[/quote]
I didnt say you were lying, but the self employed cash in hand types can say whatever they like cant they, you dont know how much of their earnings are off the books.

@forinborin

The bare fact of the matter is that wages have not kept up with increase in property prices and in large parts of the country first time buyers, unless they have significant help have no chance whatsoever in both saving up a deposit and being able to afford and pass affordability checks (which are now MUCH stricter than they were 10 years ago) to get a mortgage. This is directly opposite to my experience. A couple on £20K each is able to afford a £200K-£250K starter property without any significant pain. Yes, they have to live for four or five years in a houseshare before that in order to put together a deposit, and have quite a frugal life generally. And no amount of saving a fiver a week on Starbucks is going to changes that. A fiver in Starbucks a week is £250 / year, and £1.25K over five years even not accounting for any interest.

200k won't get you anything in large parts of the country, and for a couple earning 40k between them that is at the utter limit of what a large number of banks will lend - so that's unrealistic for a lot of people.

Plus that's 20k they need to save for a deposit, on top of general living costs, assuming that house prices don't continue to increase in those 4-5 years.

On a monthly take home of less than 3k a month.

So yeah, good luck.

I've been thinking 'This isn't sustainable' since the 1980s. I just can;t fathom how prices keep on rising.

where I am in SW London prices haven't changed much since Brexit particularly once you factor in stamp duty.

@Baddit

People don't really talk about the impact of the increase in buy to let mortgages and people buying second homes.

There's not been any legislation to curb it - perhaps because a lot of MPs are also private landlords?

Most people can only buy when they inherit. It's like we're going back to a society of lords and serfs who never own property.

But this is a double edged sword. If the government put a curb on buy to let mortgages you decrease the number of rental properties and rents go up (the rental market is very susceptible to supply and demand where as, the buying market is driven more by other factors such as borrowing power, wages, inflation, employment). The government would need to invest more in social housing. There's always going to be a group of people who can't or don't want to buy. Can't- such as bad credit, unemployed, certain disabilities, moves around a lot for work, not been employed sufficiently long, students etc etc. Don't want to: new to an area, don't want the responsibility of home ownership, not planning on staying in the area long, can't find something they want to buy or are in-between purchases etc.

By reducing rentals, you make renting unaffordable to those who will never be able to buy - those reliant on housing benefit etc. So we would need to invest in social housing which comes at a cost as well. The government have chosen to meet the rental need through private investment and in areas where there's lots of benefits recipients, rents generally stay in line with the local housing allowance (see parts of Oldham and Salford for examples).

@nightwakingmoon excellent post, I don't know why so many don't see what's coming.

I gave an example of a small ftb house, that's a usual starter home. It's the kind people picture and is the same price as local 2 bed flats. It has no garden etc or parking, bad part of town

It was about 144k ten years ago so couples earning 34 ish k between them could buy it

Now it's 285k so not only would that couple need to save aprox 30k to get deposit and moving costs, you need a house hold income of 63k

The first rung of the housing ladder is now that much higher.

I agree that in hindsight I'd of bought a small home in my earlier 20's, and be now looking at a bigger house.

However not many early 20's have a joint income that high, or that deposit to do so now.

So like me they wait, and are then looking for bigger homes.

@Seashor

My son has just bought a house with his girlfriend. 70 thousand deposit. They worked their arses off, didn’t spend on false nails, hair, etc. They lived at home and they didn’t decide to have children and then bleat on about how the ‘Boomers’ had it so easy. They didn’t! They were also prepared to move to a cheaper area.

Seriously good for them, but realistically not many young couples can save this much money in a lifetime, let alone in a small number of years.

The context here is how long did it take them?

If they lived with parents for 5 years whilst being a couple and saving for a house, they would need to save £600 a month EACH .

That's a lot of false nails.

The reality is a normal couple will struggle to save £300 a month.

Lot's do not have the option of living with parents rent free or paying a token amount.

I would say it comes down to how much you earn as couple if you don't get ' extra' help, not how frivolous you are .

It’s all well and good to say ‘start with a small place’ or ‘snap up a shitty house’ but in our area these get grabbed by property developers. Shitty places especially get snapped up, gutted, and everything painted grey. Then they either become massively expensive private rentals or go on at a much higher price. I have friends who have decent deposits and have been approved for mortgages who literally can’t find even a shitty house to make their own.

One of my friends did H2B, they were fully aware that they were buying something overpriced. However the mortgage was cheaper then their rent, obviously more secure & crucially they needed a much smaller deposit.

Me and my bf talked about this yesterday. It's about how much of a sacrifice you're willing to make and personal choices. If property is a priority then move to wherever you can afford. It might mean you'll move far away from everything you know or even aroad and only see your loved ones every few years. It might mean you don't have anything fun that costs money for years. It might mean moving in with parents and hating it. It might mean retraining to a job you'll hate but pays well. Buying a complete sithole and hoping you know people who can work for free. Never having kids. I'm not willing to sacrifice this much therefore I rent cause owning property does not give me enough happiness to forego everything.

I think this really depends on where you live. I bought a 3 bed on my own in a very nice area of Yorkshire, without any help from anyone.
Managed to save a deposit while renting.

House prices where I am are above the national average, but still considerably cheaper than the south east. Contrary to popular belief, there are plenty of decently paid jobs up here, and it's only a couple of hours on the train to London. If I'd stayed where I grew up on commuter belt to London, then I would only have been able to afford a 1 bed flat.

I understand that not everyone is able to move, but there are also a lot of people who simply don't want to. That's perfectly fine and reasonable, but personally I think that the sacrifice of never owning a home is too great. Quality of life up here is far better IMO.

Having said all this, I do think that houses will become more unaffordable in the future. The wealth distribution is simply too unequal. Since property values are so high, lots of people are being left with huge sums of money when parents or grandparents die, while others are left with nothing. Buying a home is becoming increasingly dependent on inheritance rather than wages.

[quote Tilltheend99]@Seashor so it is a choice between owning a house and having children these days?! Sounds really progressive Think you may have lost your own argument there.

But all joking aside, I sincerely hope if they wanted children they will still be able to have them as fertility doesn’t wait around for people to get their finances in order.[/quote]
I think it has always been the case.

The other thing about telling people to start small is that if it takes them until they are in their 30s to be able to afford a one bed flat, how are they supposed to afford a home big enough for children before they've left it too late to have children?

@Baddit

People don't really talk about the impact of the increase in buy to let mortgages and people buying second homes.

There's not been any legislation to curb it - perhaps because a lot of MPs are also private landlords?

Most people can only buy when they inherit. It's like we're going back to a society of lords and serfs who never own property.

Actually I've been talking about it for years, and everyone I know who rents did too. It's just that no one gave a damn.

It's worth remembering dates. House prices quadrupled in 5 years over the early 2000s, at exactly the same time that buy-to-let suddenly became popular and was encouraged by the government. It only really affected those of us who came from working backgrounds at first: we were just told to shut up and go away by the older generation who were making money hand over fist with no work whatsoever. This was when generational inequality started.

Wages did not increase at all at that time. All we could do was watch as prices went up and up. The only people my age I knew who owned houses in their 20s and 30s were those whose baby boomer parents had bought them and supplied them at cheap or free rent. I had one landlord who must have only paid £25k for the terrace we had to rent at increasing prices; after 10 years he kicked us out and gave the house we had paid for in rent twice over to his daughter. That is how some are still buying.

It can be deceptive when you look at right move
A search for flats under 200k near me shows 92 results but by the time you remove the ones you cant mortgage, caravans, auctions, multiple listings for the same property and retirement homes, its actually about 17

I think a lot of this is driven by London money I.e people moving from London and other big cities to other areas after the start of lockdown. It’s certainly the case where I live. And quite often if they have elderly parents they will move to the same area too.

@nightwakingmoon, don’t forget that the buy to let boom, which really took off under Labour, after Gordon Brown diminished people’s faith in pensions (so bricks and mortar seemed a better bet) and was also fuelled by his grossly unfair removal of mortgage interest relief for owner occupiers, while retaining it for landlords.

More recently, IMO the Help to Buy scheme has inflated prices of new builds, while whacking up builders’ bonuses.
When HTB was first introduced, I wrote to my then MP to say that I was afraid it was going to inflate new build prices.

He forwarded it to the then housing minister - Grant Shapps IIRC - who replied that there was ‘no evidence’ that this would happen.
Well of course there bloody wasn’t, when the scheme had yet to start! 🤬

@INeedNewShoes

Seriously, the lenders must see you coming. Do you know how compound interest works? The longer the term you borrow over, the more the lender makes from you.

Yes but does it matter in terms of this poster's expenditure?

I took out a 32 year mortgage to buy my house. Due to pay off at 65.

My mortgage repayments are £450 pcm. To rent the same house would be £1100 pcm. Yes the banks win by charging plenty of interest but it's still the better course of action financially for me to own my house with a long term mortgage than to rent, surely?

Yes, it does. She will pay back a shedload more interest, damaging her future wealth.

I see that you are personally invested in the ‘long mortgage’ thing. Your 32 year mortgage might be cheaper than renting at the moment (although I’m not convinced that the monthly differential is as large as you say), but that’s at rock bottom interest rates. What happens when rates go up, which has already begun? The monthly repayments get more expensive, yes, but because you are borrowing over such a long period you will pay loads more for servicing that 40 (or 32) year debt.

Remember those adverts that Carol Vorderman used to front on TV? Home consolidation loans. Carol kindly informed us that homeowners could reduce their monthly repayments on unsecured debt (credit cards, personal loans etc) by consolidating them into a loan secured on their house, alongside the mortgage.

Genius! What could go wrong? Well, what went wrong was that a debt that might have taken 5 years to clear would now take 25 years to clear, and the lender would collect tons more in interest because of the effect of compounding. And, bonus, the lender could take your house if you defaulted because you’d swapped an unsecured debt for a secured debt. But the real advantage to the lender was having you on the hook paying interest for longer.

It’s always better to borrow over a shorter period, and if you’re having to mortgage yourself up to the eyeballs for 40 years to buy a very ordinary house, or to fulfil some fantasy of moving up a non-existent ladder because you have a bit of equity from your first house and are clamouring to take on a new, long term mortgage for an extra bedroom and bifold doors, ask yourself whether you’re buying into an asset bubble.