all right all those predicting a crash, how about today's headline "houses to cost 10x salary"?

[RanToTheHills]

Discuss.
What do you reckon then?

Having followed some of the house price threads on here, was interested to see today's headline. It fits in wiht my view that although house prices are inflated, a a dire shortage of housing will continue to drive up prices in hte medium/long-term.

Could do wiht the reassurance as about to take on a huge mortgage!

Its amazing really. Our mortgage is about 2.5 times dh salary and that is a bit less than what it was when we took out first mortgage as new buyers many many years ago. I think it was 3X at the time. We are lucky and live in a good area of central london in a flat worth considerably more than our mortgage on it. But i cannot understand how other people around here afford it unless they are earning over £100,000 a year. And even then they would be on mortages over 4-5X salary which is incredibly worrying to me.

I am selling a business at the moment and will be lucky enough to pay off my mortage at the end of it. We could conceivably move to a bigger place and take out another mortgage but there is NO WAY i would do it. INterest rates are scary and I will be so pleased not to worry about it anymore. I just don't understnad how some people can stretch themselves so far.

In any location where supply greater than demand the prices will go up - London no different than Tokyo and Hong Kong and Manhatten and Singapore - if there is a finite supply it will happen, result is that lower-paid end up commuting from miles around and their demand for more pay to justify extra commuting effort means salaries go up relative to same supply/demand argument until there is a balance where people happy to commute in if salaries justify it. That's all basic economics and crashes in these instances will only happen when there is an associated employment crisis - either downturn in market as a whole leading to job losses, or when increase in interest rates and suchlike force employers to demand payrises to match extra cost of living and there is no 'room' for payrises to occur (but that cannot sustain over long term as people will then switch jobs, so equilibrium will happen after a bit). There will also possibly be blips relating to desirability of one 'hot spot' compared to another and stuff like that (9/11 would have created such a blip if it hadn't been for offsetting effects such as very low interest rates creating domestic demand to counter the drop in overseas people's demand for property that happened after 9/11 in London). IF there were tax hikes for the very high paid city epople as is being hinted at every now and then this could affect desirability of London on international market which could cause such a blip. If all the rich bankers lived in Luxembourg/Zurich (as they did 15 years ago) then London could get a little bit sick on the house price front.

Outside of the hot spots I think long-term there will be problems because the argument that parents will release equity for their kids to use as deposits just doesn't stack up when you factor in (a) shortfall in pensions and (b) cost of long-term care for the elderly and (c) increases in expected life span. Unless we can persuade Mum & Dad to do the Logans' run thing and thoughtfully expire at 70 we are in for very rough ride medium-term, especially for idiots (like my brothers) who've splashed out via interest-only mortgages on assumption that money will come from 'somewhere'....

The more interesting question is why the hell everybody has spent the past 4/5 years celebrating the growth of value in their homes.... that one always floors me. Have sat next to people at dinner parties who bask in the value of their houses even though all of them are aspirational and plan to scale upwards. Now that is crazy.

hippo, I doubt you can actually get 10x from a bank, mabye if you lie-to-buy, but officially??

I thought around x6 was the most.

Even x6 shocks me where do how can people afford it?

As my DHs salary is around £20k, surely a £200k house is already 10x salary. For people on less than 'average' salary, which is actually a lot of people, or those that weren't able to, or in our case, weren't old enough, to buy a house before now, yes they are out of our reach! Even shared ownership 50/50 is costing us more than a whole house would have a few years ago.

Six times the average salary (24K) is £144K which mean a mortage repayment of about £900.

But somone earning £24K will only be taking home about £1500 which after council tax leaves about £450 a month total to live on for all bills, food and everything.

If my maths is correct and it may not be thatis 60% of your salary after tax.

As I type in a morgage of £144K I am sure even by the house prices here in Lancashire that there are people here paying that on that salary. But it must be very hard particulary if you have kids.

But if you earn £20K surely you would not attempt to buy a £200K house.

Exactly the point. This is why so many people can't afford to buy. You can't get a house below £150k here suitable for a family, and why should people be forced from areas they grew up in? There is no social housing to speak of, it was all sold off in the 80's.

yes sorry have had a glass of wine and it has gone to my head.

Might join you now kids are in bed. Got a nice white chilling for tomorrow night, could just have a small glass....

I am about to send dp out for more!

And what of areas where the average wage is only between £13-20k? Where I live (West Lothian near Edinburgh) that is the average wage and the average house price for a 3-bed (or should that be 2-bed plus boxroom) family home is £150k+.

It is impossible and what matters if your house is worth x-amount, if you sell it you won't get a bargain anymore. Whatever happened to people buying homes, it is all now property investments.

And the buy-to-let brigade are the worst, there is a street in Edinburgh with at least 5 properties lying empty because it makes more profit than having short-term lets. They buy, don't let, sell for profit.

Houses for homes not profit!

that is ridiculous! Calls to mind a S Times article on how the baby boomer generation (our parents I suppose for thsoe of us mid-30s+) have knackered the economy for the next generations- housing market/inflation/pensions etc etc. They can continue to reap the benefits now, relatively speaking, whilst we;ll all likely be in penury in our middle/old age- little/no pension, on-gogin high housing costs/university fees etc etc.

layman - if a hose is 10x average salary then presumably a couple living together 'only' needs 5x joint salary for the mortgage. Where I live the average selling price is £240K and the average salary is around £23K.

layman - that is just it - they cant! so they get huge long-term mortgages, loans to pay deposit, borrow from parents and one friend even got her employer to write a letter to the mortgage company detailing the proposed payrises she would be getting in the future, just to get on the property ladder.

we could not afford to buy now. we bought 10 years ago when we were both earning. now only dh earns, and moving (if we wanted to) is out of the question.

And another thing...

when the 'baby boomer generation' dies off they will be leaving houses worth hundreds of thousands to their families, so the 'haves' will continue to be able to afford property whilst the 'have nots' with parents who rent will continue to struggle.

x10 is just not sustainable, inflation is rearing it's ugly head - hence the interst rate rises

sorry to go off topic, but have you noticed your food shopping costs more?

Finances are very pressured for your average middle class now.

If you are middle class but don't own your home are you still? If you're a 'working-class' builders wife living like Joan Collins what strata are you now?

The have and have-nots.

Am off to bed now cos i have a baby.

plus, I think the average salary is a poor indication for affordability

The 'average' salary is actually a 'mean' figure, so is higher than it should be because obviously every person earning £1 million has a far greater effect on the figure than those at the bottom of the scale.

If you remember your mathematical terms, a 'median' or 'mode' figure would tell a different story.

average salary for people in my part of devon is about 12000, if u are lucky.

flats atart at about 150 000

most houses are £250 plus

what a load of old shite

250 grand i mean lol

There will not be a crash, just a very slow decline IMO.

People think it's so great to live in the West country, but don't realise that employment prospects are so poor, do they?

OH and if the figures are correct, there are 7000 plus people migrating to this country every year, not including the unincluded ( illegal people).

So the only way is to stop people holding on to their council houses. Why should my BIL & SIL hold on to their family home now everyone has left, they have only lived there for 20 years, but they have 3 bedrooms, so someone needs their house other than them. At least that is what they are being told. In fact they have a letter saying that people from war torn countries need their house more than they do.

Their response..............

SO what was DC saying? I am too tired to assimilate.