The Folly of Youth

[OLTB]

The mid-90s was another sweet spot of historically-affordable housing when one might expect to buy young (sadly I missed it by being out of the country).

I bought my first house in 1996 and it was a lovely 3 bed terraced cottage in Somerset (approx. 2.5 x my earnings at £44k). Sold it 9 years later for £165k to buy a new home with the new Mrs OLTB who also had a house she had bought in the early 90s and had sold.

Pure and simple luck that I decided to buy at that time (1996) and the area I bought in became a desirable area for out of townies!

Cheers, OLTB.

[didds]

Surely if so few people can afford mortgages, the market will eventually stagnate and prices will fall.
Supply and demand innit?

presumablky the demand is not coming from those on NMW - whether young or otherwise. Seeing as they cant get a mortgage to start with.

Possibly by those buying properties to rent - reducing the available stock, keeping the demand high, and thus the prices up.

Only when the rental market crashes will - possibly - demand drop. and thus prices.

demand and supply innit?

didds

[Howyoudoin]

If you can afford the monthly rent, then you can afford the monthly mortgage.

The problem these days is the deposit.

I'm led to believe that the first time buyer National average deposit is about £35k. The average in London is >£100k.

I have no idea how the first of those figures is doable for most people, never mind the latter. I bought in 2001 with a deposit £8.5k.

HYD

[didds]

If you can afford the monthly rent, then you can afford the monthly mortgage.

The problem these days is the deposit.

Indeed... but its also getting the mortgage in the first place based on a multiple of annual income. MSE as an indication suggests somebody on 13.75K (21 year old NMW * 37.5 hr week) may get a mortgage of 44.7-62K Add a deposit of 5K (minimum for a 100K property) and that gives maybe 67K

the cheapest property (searching online) in our town is 90K.

reversing that calculation, for a 90K property with a deposit of 4.5K (5%) the resulting mortgage of 85.5K would require an income of 19K at the max likely available mortgage. for a "guaranteed" 85.5K annual income would need to be around £25,500. Almost double the income...

didds

[tjh290633]

This is going back a long way, and so is of limited relevance. In 1957 I started work and was in digs in Sheffield, paying £3.10.0d for dinner bed and breakfast. I was getting £4.18.0d lodging allowance. A year later got married and lived with my wife's parents, as a move to Scotland might be imminent. I was paying for a new car on HP at the time, but getting mileage payments for the travel I did for work.

In 1959 that job came to an end and I found a new job in Sheffield, continuing to live with the in-laws. Looking for a home of our own, we rejected 2-bed bungalows in Rotherham at £1,650 eventually settling on a 3-bed semi outside Bakewell at £2,600. We had been saving the wife's pay and so had £1,000 for the deposit. I can't recall the rate of interest on our mortgage, but the monthly payments were about £11.10.0d. As I recall, my take home pay was just over £60 per month and our furnishings came gradually from the wife's pay.

At that time the labouring rate was about 4 shillings an hour, and the working week was about 44 hours, including Saturday morning. So without overtime, a labourer would get £8.16.0 a week before deductions. If he bought one of those bungalows, his mortgage might have been £1,500, costing about £11 per month but offsettable against tax. I reckon that anyone working on that level of pay could have managed to buy at the bottom of the ladder.

It is not the cost of housing that has risen so much, it is the cost of the land on which it sits which has risen out of proportion. The reason lies in the planning laws and regulations.

TJH

[sg31]

I bought my first house in 1975, it was a 2 bed detached with tiny rooms and a tiny garden. I wasn't on a great wage but my employers did offer a subsidised mortgage at 3 to 5%. It varied but was always cheaper than normal rates by a substantial margin.

I was lucky in that my girlfriends father had a furniture shop and needed someone to deliver beds and 3 piece suites in the evening and at weekends. Sometimes I worked on deliveries 5 night per week sometimes until 11pm and all day Saturday and Sunday. It was hard work but I got £1 for a bed and £2 for a suite which was a good deal as he supplied the van. Some weeks I earned a lot more doing deliveries than in the day job. At times there were few deliveries but it was manic in the lead up to Christmas. The tips were generous as well.

The girlfriend and I split up after 4 years but by then inflationary increases in wages meant I could cope. I sold the house after 5 years for £17k.

I was fortunate that house prices in Sheffield were very low, it was possible in 1975 to buy a terraced house for £4500. 5 years before that my parents bought a good 4 bed detached in a modest area for the same money.

They were strange times, Inflation was high and wages went up dramatically each year only to lose their buying power rapidly. It was awful in some ways but it did reduce the real cost of mortgages quickly. The other side of the coin is that it was very difficult to save enough for a deposit, the amount you needed went up faster than you could save.

[UncleEbenezer]

If you can afford the monthly rent, then you can afford the monthly mortgage.

The problem these days is the deposit.

I'm led to believe that the first time buyer National average deposit is about £35k. The average in London is >£100k.

I have no idea how the first of those figures is doable for most people, never mind the latter. I bought in 2001 with a deposit £8.5k.

HYD

QE. Lots of money sloshing around. I've found it much easier to save £100k in the post-2008 world[1] than £1k in the 1980s:

- Much lower taxes. 1983, PAYE of £2280 on gross pay of £6660. At today's tax rates I'd have to be on a gross salary of over £100k for them to take the same proportion of it. Or - for what may be[2] a fairer comparison with today's young folks - about £75k if also paying the Graduate Tax.
- Much lower rent. Transplant the house for which I now pay £700/month into my experience of the 1980s before I fled abroad, and it would be filled with 7 people sharing, and each paying 60% of a supposedly-decent graduate salary in rent. And the present house offers extra luxuries from fantastic views to hot water on tap, not to mention a garage and gardens.

[1] In my case that's quite an easy measure, because 2008 is when I suddenly had a high income and opened a portfolio. The package worth about £ninetysomething grand lasted two and a half years, which was ample to build a portfolio. With the QE pouring in, that portfolio is now valued much higher than my total gross (let alone net) income over those ten years. Trouble is of course, that's only true when measured in a much-devalued £currency.
[2] Student finance seems horribly murky today, but add up all the scholarships and bursaries and it looks surprisingly generous at least for some. When I talked to my nephew (now in his second year) a couple of months back, he told me he's got a £16k/year package without loans(!) Couple of years back his older brother was on not quite that much, but still a pretty good package!

[Clariman]

My graduate salary in 1983 was £6660. Totally insufficient either to buy or to rent in London at a time a soft floor on rent[1] was £130/week

Really? I graduated in 1981 on around £4600 and rented in London in a flat-share with one other for about a year. I then moved to a house-share on the outskirts of London (but nearer work) to save money.
I bought my first property in the London area the following year. At that time I was married but I think my other half didn't have a job at the time we got the mortgage, so IIRC it was based on my salary alone.

C

[bungeejumper]

I bought my first house in 1975, it was a 2 bed detached …. I was fortunate that house prices in Sheffield were very low, it was possible in 1975 to buy a terraced house for £4500. 5 years before that my parents bought a good 4 bed detached in a modest area for the same money.

My then gf and I bought our first house in 1974, a grotty two bed terraced in Birmingham which needed total restoration - no heating, dodgy electrics, outside toilet. It cost five times what I was earning as a new teacher, but fortunately there were two of us, so we managed it. It was barely habitable, but it was what we had to accept if we were to get onto the housing ladder.

Fast forward 44 years, and the same type of house in the same road can be bought for six times a new teacher's salary (spot the difference), but with central heating, double glazing, everything fully fitted, and a proper bathroom as well.

I hate to sound all Monty-Python-four-Yorkshiremen, but I don't think most millennials would have been prepared to even consider the squalid wreck that we started out with. No car, no proper holidays, definitely no eating out for the first four years. Mind you, we at least had the rudimentary building skills to fix the place up. I seem to know so many young'uns who can't handle a screwdriver.

That said, I'll echo didds's lament about house prices. In my village, not so very far away from Mr d, £250K gets you a single storey cottage with one bedroom and a boxroom. The only reason we were able to afford Bungee Towers was....

….that the big old pile was in a semi-uninhabitable state at the time, with rotted floors, a hole in the roof and four collapsed ceilings. Right, we said, pass the hammer and saw and we'll get it sorted out. And in three years we did. Old habits die hard.

BJ

[Howyoudoin]

One of my friends has just told me that they have helped their 25 year old son get on the housing ladder in the last month.

One bedroom flat in Woolwich [expletive deleted]. £330k. Concierge etc. They are paying 75% of the monthly mortgage, him 25%.

These are not rich people. At least I didn't think they were. They live near me and talk like me.

The World has gone mad. Mad I tells ya.

HYD

[AleisterCrowley]

It is mad, particularly in the South East
If you're a higher rate taxpayer (and therefore considered 'well off' by the government) you'll be earning more than £46k pa - I think
Ignoring the deposit, at a sensible 3.5 x earnings that would enable you to purchase property worth £161k
Which means that London and most of the home counties area is probably not affordable

[Clariman]

Another example of youthful folly, perhaps. I've just seen a young man/boy selling a pair of second-hand shoes online that cost £750 new and is looking for over £100 for them. £750?!!! Flipping heck - who spends that kind of money on shoes? Fair enough if you've got the money. It is a free world but goodness me. I think carefully about spending a tenth of that on a pair of shoes, but I am a tight git.

[Alaric]

boy selling a pair of second-hand shoes online that cost £750 new and is looking for over £100 for them.

Perhaps there's a need for a separate RPI or CPI index for the prices of "luxury" or just "posh" items. Along with house prices, hotel and restaurant costs, some prices seem to have gone through the roof. Price inflation of supermarket items is constrained by the competition from Aldi and Lidl, although that doesn't always stop Waitrose if they think they can get away with it.

[didds]

Another example of youthful folly, perhaps. I've just seen a young man/boy selling a pair of second-hand shoes online that cost £750 new and is looking for over £100 for them.

I don't think tat is just youthful folly. I'd agree £750 on a singe pair of shoes is ridiculous I've bought cars in the lat three years for less!) but the example of buying something for X that doesn't get used much and sold on at Y (where Y < X) is pretty standard.
Especially of you include the "take it to the charity shop/chuck it in the bin" approaches i.e. exchange it for £0.

How else can one buy shoes with soles that are not scuffed or scratched for a fraction of their high street cost (I'm talking standard stuff not just £750 shoes!), and other items of clothing ? As a bloke the bargains are fewer., but my wife often picks up items at charity shops for a tenner that are (via google search!) are £150+ to buy brand new (and they are in "brand new condition" I hasten to add). Back to shoes , I've picked up unworn (no signs of wear anyway) italian full leather shoes for a tenner.


Summary: Its endemic.

didds

[Clariman]

Another example of youthful folly, perhaps. I've just seen a young man/boy selling a pair of second-hand shoes online that cost £750 new and is looking for over £100 for them.

I don't think tat is just youthful folly. I'd agree £750 on a singe pair of shoes is ridiculous I've bought cars in the lat three years for less!) but the example of buying something for X that doesn't get used much and sold on at Y (where Y < X) is pretty standard.
Especially of you include the "take it to the charity shop/chuck it in the bin" approaches i.e. exchange it for £0.
didds

I wasn't complaining that he was trying to get some money back for selling them - good on him for that. It is the idea of £750 for a pair of shoes that I was gobsmacked at. And the idea of buying a worn, second hand pair of shoes for £150 amazed me. I'd prefer to buy a new pair of non-branded shoes for half the price.

[redsturgeon]

Another example of youthful folly, perhaps. I've just seen a young man/boy selling a pair of second-hand shoes online that cost £750 new and is looking for over £100 for them.

I don't think tat is just youthful folly. I'd agree £750 on a singe pair of shoes is ridiculous I've bought cars in the lat three years for less!) but the example of buying something for X that doesn't get used much and sold on at Y (where Y < X) is pretty standard.
Especially of you include the "take it to the charity shop/chuck it in the bin" approaches i.e. exchange it for £0.
didds

I wasn't complaining that he was trying to get some money back for selling them - good on him for that. It is the idea of £750 for a pair of shoes that I was gobsmacked at. And the idea of buying a worn, second hand pair of shoes for £150 amazed me. I'd prefer to buy a new pair of non-branded shoes for half the price.

I'd agree that £750 for shoes is ridiculous but I am a fam of buying decent shoes. The thing is that I only wear "posh" shoes about three or four times a year these day and my black oxfords from Loake are well made and comfortable and will probably last me out. I have a smart pair of brown penny loafers by Bass that I bought ten years ago in the USA at half the UK price and again they get worn about twice a year and I can't see me needed another pair.

Every day wear is a pair of Timberland boat shoes that are tough, comfortable smart enough for casual wear and usually worn with no socks most of the year. I buy a pair of these once every three years or so when I go to the US again at half UK price, about £35.

For walking the dog I have Northface approach shoes and for the gym and running I have whatever is on sale by Nike or Asics.

Thats it for shoes but I'd never buy non branded stuff since it would be difficult to predict the quality.

John

[Clariman]

Thats it for shoes but I'd never buy non branded stuff since it would be difficult to predict the quality.
John

I should probably have said non-"designer" branded rather than non-branded. I used to buy Loake shoes for work because of the extra-wide fit and the quality. Similarly I tend to buy Clarks shoes for their H width fitting. Loake are excellent quality and the most expensive shoes I have ever bought ... but nowhere near £750!

[didds]

... And the idea of buying a worn, second hand pair of shoes for £150 amazed me. I'd prefer to buy a new pair of non-branded shoes for half the price.

£75 for a pair of shoes? Ye Gods!

didds

[wheypat]

To take a slightly contrary stance on the house price issues

I graduated in '96 and got a job on £15K. I then bought a house with a 5% deposit that cost me 51K. In a not too pleasant part of Manchester.

That same house sold earlier this year for £263K. The area hasn't improved that much (somewhat, but I wouldn't want to live there). A decent grad starting salary now is what, 25 to 30K? True interest rates have dropped but would you lend a grad 250K on a 30K salary?