To think that house prices will ever fall to affordable levels?

[MumNWLondon]

I saw this in the Daily Mail:

link

For those that know me, I have been a property bear (ie I think that house prices will fall) for a while now; I think its very sad that its no longer possible to buy an average family house for three times family income, and ever sadder that many bought in at the peak and now face negative equity in small properties and hence will not be able to easily move to a family home.

So am I being unreasonable to hope that house prices will decline to sensible levels and do you think its likely?

That's a bit defeatist, Riven. They might surprise you

70% of the population roughly are owner-occupiers. The love affair with homeownership will continue.

Graduate at 22/23, work a couple of years, save a few thousand (doubtless through living a longer time at home), get a £150k mortgage to be repaid over 40 years or interest only or whatever ...

I think people will move to owning their own flats a little bit later than we did as a generation, but people will continue to buy

Save a few thousand and you're talking about a house at 160k? 16 grand is more than a few thousand in my book and that's the absolute minimum they'd want as a deposit

Work through university (we both did) and minimize debts - then live in crappy accomodation and save like crazy. It's not easy, but if you're lucky to have two graduate salarys (say 25K) then it's entirely possible. Even at 2x20K would work if you were really responsible with cash. The problem is many of us aren't. We had four lovely years while I did my PhD and DH worked and we rented and enjoyed ourselves. Now we realize that we should have been saving - but most people don't think about that in their early 20s.

I strongly encourage mine to emigrate.

I would if I were on my own.

"Graduate at 22/23, work a couple of years, save a few thousand (doubtless through living a longer time at home), get a £150k mortgage to be repaid over 40 years or interest only or whatever ... "

In London a graduate salary is around £25k, and a starter flat is £250k. In 1997 the same flat was £70k and the graduate salary £16k.

Assuming you need to save a 10% deposit, thats a whole years salary so you'd probably have to live with parents (for free) for a couple of years to have any chance of saving this. Then there is the problem if needing a mortgage for a very large multiple of salary. And problem of repaying over 40 years is that it wouldn't be big enough to bring up a family in.

Riven - even earning £50k (which is realistic in London even 5 years post uni) wouldn't enable the purchase of more than a 2 bedroom flat. 3 bedroom semis cost £500k!

I hate what has happened to our country over the past 10 years - the rich have got richer and the poor poorer, and social mobility is really difficult...

I won't be able to keep mine at home for free because I'll have to play catch up with my pension.

They'll have to pay me rent and board.

Plus, we need to downsize so we can afford to pay off debt and save for pension.

Not everyone can live at home for free.

I agree thats the problem - only the well off could keep their adult children at home for free. As everyone has said makes the gap between rich and poor bigger.

As soon as interest rates rise I think we will see more problems with the housing market but different areas of the country may move in opposite directions according to employment in the area.

I think property will continue to rise in economically bouyant areas - in my area housing is in short supply and prices trending steeply upwards - up by a massive 17.3% in the previous quarter and by over 21% in the last 12 months.

In contrast nationally we are down 23.8% over the last 12 months but up 2.2% last quarter.

If you want to check your own area check this bbc link

Suprising, isn't it, Riven?!

Don't read too much into the numbers - could be that they are not mix adjusted so only bigger houses are selling (because FTB have no money)

expatinscotland - your last 3 posts ring so many bells.

Me and DW look at big houses round us and occassionally view and make offers. We are gobsmacked at going to see houses with 1970s decor and with wash hand basins in bedrooms. Many of the houses are stunning outside but pub decor inside and not even in good condition.

We are indeed emigrating and most especially to give our children age 8 and 10 a real option of a different kind of life without paying university fees and a good school education. Problem is it is to New Zealand and a lot of the older houses there seem to be 197Os pub as well and they have had exactly the same housing boom as UK. The recent budget there did change tax on housing though as they realised it has ruined their economy and tax base.

whomoved - my parents too are living in a house which is rapidly becoming unoccuppiable. They only bought it 6 years ago but it has 6 beds, outbuildings and 6 acres and miles from anywhere. I implored them not to but they would not listen.

There is a mind set of owner occupation in thsi county that is cemente dby tax benefits of owning a priperty earn tax free invetsmnt gains. It will take the deflationary dperession and appalling losses and repossessions to change that mind set.

A lot of people are going to be made very poor by their house.

I seriously thing that the only choice for first time buyers in areas where average house prices are knocking £200,000 (i.e. bloody Harrogate and Knaresborough where I live), and taking into the fact that you can only get a decent interest rate with a 25% mortgage is inheritance.

A lot of middle-aged people made a lot of money on the property market one way or other, and now they moan that their kid's can't get on the ladder (I hold my hand up, my parents are the same!). Unfortunately, the only way we are ever going to be able to afford the £50,000 deposit to buy an ok house and not a total shed (because where I live there is very little under £150,000) is through inheritance or our parents helping us out. My partner and I have fairly decent jobs and still are scraping to put away £250 between us each month after paying extortionate rent costs, bills and food. At this rate we'll get there in approximate 17 years time. Not much incentive there.

Have been out viewing today and all agents without fail say prices have slowed and are falling againn in some places.lots of BTL landlords selling up rather than pay 40 or 50 % CGT next year.Houses in the same street one a private seller 325 the same house 4 doors away previously let 255! If you are thinking of buying def wait.

MumNWLondon I don't agree when you say "Well, no, the way it works and always has is that you start with a one bed flat or a share in a one bed flat, then a two bed flat, then maybe a two bed flat with a garden, then into a small two bed house ... etc etc." I think this is how it used to work but things have changed and no longer work this way so I think you are out of date with your comment and a bit out of touch.

For most people they have 2 full time salaries before they have kids, which typically drops to 1 full time salary and a part time salary - ie less income plus more expenses for bringing up kids. So how should people expect to trade up once they have kids? Trading down would be more commensurate with falling income and rising costs!!!!

There is no housing ladder for most people now. In my parents' days of raging inflation there was effectively a housing escalator. Once you got one foot on you rode upwards automatically. Not now. I have a lovely 2 bed property in a great area but no chance of ever affording a bigger place in this area. Dp and I both earn more than the average wage; I work part time but even going back to full time when my child is at secondary school - which would boost our income by £17k pa with no extra childcare - would not afford us a 3 bed property.

The only way for most people to move to a bigger house now is to move to a cheaper area.

I just searched Harrogate on Rightmove, and searched for houses costing less than £150k and came up with 22 pages of them!

There are houses there - it's just your expectations that might need adjusting.

Certainly I think my children will have to move into a house that is not as nice as the one they live in now. But that's normal, isn't it? They won't be able to have it all as soon as they graduate - they're going to have to work for it. Possibly for years.

Sorry yes I agree maybe I didn't make my post clear - I said it doesn't work that way because the ladder isn't really a ladder anymore the gaps between the rungs are too big to reach.

If you bought in 1996 it was more like an escalator - you bought waited for it to go up and then used your equity as deposit for new bigger place.

I was just responding to someone else saying that a bit unreasonable to expect to buy family house as first home.

I said that the other model only worked when you could buy start home in mid 20s on one salary and then perhaps made some property equity plus got a payrise, plus maybe had paid down some debt. It clearly doesn't work at all if you can't buy at all until you have children - when as you say you have less money and more expenses than before.

Here it costs £250k for a 2 bedroom flat - not even in a nice suburb... my brother (in late 20s) said, its ok we can afford - basically 2 salaries say at £25k-£30k x 4 means its possible - (and this was interest only so not even paying down any capital) but its less affordable once you have kids, after all its only a 2 bedroom flat and now its 6 x salary and there is childcare costs.

My sister started in 1996 (2 bed flat - around £80k), moved in 1999 (3 bed house) and 2004 (5 bedroom house) and emigrated in 2006 selling 3rd property for £1m. They only ever had interest only mortgages and they had made £600k just from rising prices over 10 years. That was a one off and its mad that the government let it happen. Permanently increasing the gap between rich and poor.

Why do I have so much higher expectations for my chldren than the some other mothers have for them though.. that is a really interesting point. Why is Xenia child 1 on her starting salary of £37k etc May be they're brighter. Or is it just parental expectations? Thou must earn no more than the average £20k perhaps is drummed into children in the lesser state schools across the land whilst others schools say no reason you can't be another Elena Ambrosiadou or Scardino etc. Do some parents expect their daughter would always be the nurse and never the leading surgeon?
Obviousyl most people are only average an d most have an average 100 IQ or even less but that is not the whole story. I had no family help with housing although I bought young with my children's father. I doubt my children will have help either but I'm sure they will if they choose buy somewhere but that's because they have picked careers which mean they can. No one owes you a house in a capitalist economy. You make your choices and live with the consequences.

Quattrocento, this is not just a website, though. It aggregates bearish news. Yes, it is explicitly as a corrective to housepricewheeee.co.uk and housepricesforever.co.uk, but it is interesting that there is still a lot of bearish news to be aggregated and blogged on HPC!

I hear you, Beta.

I don't know where my own children will end up, but I doubt it will be here.

I know quite a few people who've moved on, and several more who are in the process, one family on their way to NZ as well.

Yes but not everyone's child can earn an above average income, Xenia

Your expectations for your children are likely to be higher than average, and as long as your DCs are happy living up to those expectations, that's fine. But it doesn't make the problem go away though.

I reckon people just have to adjust to homeownership later, to having smaller properties, to saving more etc.

Really don't want my DCs to expect me to fork out for their properties though. I mean I expect them to work hard and save, not to expect mega-handouts as adults.

The property market has always gone up over time. If you're going to own somewhere for 50 years or more you can be pretty sure over that period prices will go up. If you look back to the 1920s market crash, to the 1970s crash, 90s etc yes people suffered badly, prices went down (we sold 2 flats at a third less than we paid for them) but over time they do go up. They have never ever in the UK gone down and stayed down- we have never ever had a permanent correction have we? No graph will show after any of those crashes I mention above price remaining below the level they dropped to even after allowances for inflation. Doesn't of course mean it couldn't happen and for some people timing their entry matters but if you're going to be in the market for 50 years until you die I'm not sure getting the market entry exactly right much matters. Being able to enter at all is the thing. If 30% of p[eople used to own their own place in the 30s or whatever someone said and if renting is better than not renting (I don't agree with that but our continental counsins seem to lolve squishing children into tiny rented flats) then it may not matter if home ownership returns to historic levels