Crosswords4 mins ago
Are Uk House Prices Based On Affordability Or Fantasy Economics?
27 Answers
My local Estate Agent has told me that my house is worth £360,000.
I bought it 15 years ago for £120,000. During that period of time, my salary has increased by ten percent which seems to be consistent with most other people.
So I don't understand how someone in my income bracket will be able to afford to pay 3 times what I paid 15 years ago.
I earn about £37,000 a year before taxes.
By my reckoning, the buyer of my house will need to be earning at least £100,000 a year.
I don't know anyone in my area who makes that kind of money.
So is this valuation just pure fantasy?
I bought it 15 years ago for £120,000. During that period of time, my salary has increased by ten percent which seems to be consistent with most other people.
So I don't understand how someone in my income bracket will be able to afford to pay 3 times what I paid 15 years ago.
I earn about £37,000 a year before taxes.
By my reckoning, the buyer of my house will need to be earning at least £100,000 a year.
I don't know anyone in my area who makes that kind of money.
So is this valuation just pure fantasy?
Answers
Best Answer
No best answer has yet been selected by Truthteller88. Once a best answer has been selected, it will be shown here.
For more on marking an answer as the "Best Answer", please visit our FAQ.
The gap is a real one and causing problems for many I've no doubt.
https:/
https:/
To check out if the ball park figure is reasonable, have a look on Zoopla:-
https:/
or Right Move:-
http://
https:/
or Right Move:-
http://
I did type a long reply but lost it/ So here's a short version.
Price is probably not fantasy although if demand is weak in your area you may get offers nearer £300,000, but if it's strong yo may get offers at this price.
Mortgage rates are very low compared to 15 years ago.
I think a lot of buyers now in areas such as London are combining joint incomes and putting down large deposits helped by mum and dad/grandpaents (no such luck for me) and some may be prepare dto pay extra as they plan to rent them out
Price is probably not fantasy although if demand is weak in your area you may get offers nearer £300,000, but if it's strong yo may get offers at this price.
Mortgage rates are very low compared to 15 years ago.
I think a lot of buyers now in areas such as London are combining joint incomes and putting down large deposits helped by mum and dad/grandpaents (no such luck for me) and some may be prepare dto pay extra as they plan to rent them out
No it is not fantasy.
Houses are worth what people will pay for them. In the UK there is a shortage of houses (well, actually there is a surfeit of people, but the effect is the same). As with any commodity, when there is a shortage the price will rise. This, of course applies not only to buyers but sellers. So you could sell your house now for £360k and buy another similar one for the same amount. Or you could get a small-ish mortgage and upgrade. The problem of course is that first time buyers now enter the market at hugely inflated levels.
Also bear in mind that when you bought your house fifteen years ago mortgage interest rates were considerably higher than they are now. The last ten years have seen interest rates at ridiculously low levels and personal debt (including mortgages) has increased dramatically. These low rates have also cause massive inflation in the housing market with people being able to afford ever-increasing prices. The excrement will hit the air conditioning eventually as the country seems to have learned nothing from the banking crisis ten years ago. But meantime, despite the odd downturn here and there, house prices will continue to rise.
Houses are worth what people will pay for them. In the UK there is a shortage of houses (well, actually there is a surfeit of people, but the effect is the same). As with any commodity, when there is a shortage the price will rise. This, of course applies not only to buyers but sellers. So you could sell your house now for £360k and buy another similar one for the same amount. Or you could get a small-ish mortgage and upgrade. The problem of course is that first time buyers now enter the market at hugely inflated levels.
Also bear in mind that when you bought your house fifteen years ago mortgage interest rates were considerably higher than they are now. The last ten years have seen interest rates at ridiculously low levels and personal debt (including mortgages) has increased dramatically. These low rates have also cause massive inflation in the housing market with people being able to afford ever-increasing prices. The excrement will hit the air conditioning eventually as the country seems to have learned nothing from the banking crisis ten years ago. But meantime, despite the odd downturn here and there, house prices will continue to rise.
As everything, they are based on what the market will bear. If a building doesn't get sold it tends to be reduced in price.'
People can earn less and get longer mortgages, or hope for a windfall at some point. Or they may have a larger deposit because they saved for longer, or was left money in a will.
People can earn less and get longer mortgages, or hope for a windfall at some point. Or they may have a larger deposit because they saved for longer, or was left money in a will.
@ Old Geezer.
I think the point of this Q is being over-looked.
If someone pays the full asking price of £360k, they are paying at least 200k more than the property is worth. When this crazy market finally stabilises, the losses that current buyers will endure will be catastrophic.
I'm finding many of the answers on this thread to be dangerously naive and apathetic.
I think the point of this Q is being over-looked.
If someone pays the full asking price of £360k, they are paying at least 200k more than the property is worth. When this crazy market finally stabilises, the losses that current buyers will endure will be catastrophic.
I'm finding many of the answers on this thread to be dangerously naive and apathetic.
The relationship between what people earn and the value of their house has long been lost. And that is why there is such a huge housing problem.
As long as your house has the right location, there is probably no limit on what you can sell it for. You say your house is valued at £360,000 but if you ask £460,000 and you eventually get that price, then its worth that.
I can't think of any other commodity that has risen in value by such a large amount. Its crazy.
As long as your house has the right location, there is probably no limit on what you can sell it for. You say your house is valued at £360,000 but if you ask £460,000 and you eventually get that price, then its worth that.
I can't think of any other commodity that has risen in value by such a large amount. Its crazy.
Only that much more than it is worth in your opinion. If the estate agents show a property at a particular value then that's what they expect (more or less) which, by definition is the property's value.
Prices go up and down, and I held off for years before opting to buy my present place in anticipation of a market correction downwards, which didn't really happen.
Obviously it is best to buy low and sell high, but in the longer term prices will continue to rise, and after sufficient time everyone who didn't overstretch themselves realises they made a good decision to buy. They end up with a property that they just need to pay to maintain, rather than have rental costs forever. And what with inflation, whatever they paid seems ok.
Prices go up and down, and I held off for years before opting to buy my present place in anticipation of a market correction downwards, which didn't really happen.
Obviously it is best to buy low and sell high, but in the longer term prices will continue to rise, and after sufficient time everyone who didn't overstretch themselves realises they made a good decision to buy. They end up with a property that they just need to pay to maintain, rather than have rental costs forever. And what with inflation, whatever they paid seems ok.
//I think the point of this Q is being over-looked.
If someone pays the full asking price of £360k, they are paying at least 200k more than the property is worth. When this crazy market finally stabilises, the losses that current buyers will endure will be catastrophic. //
Maybe it is being overlooked because that doesn't seem to be the point from the OP. It reads as though you are doubting that the agent could get the price quoted, not that you are concerned that the buyer might lose a lot of money if they paid that price.
If someone pays the full asking price of £360k, they are paying at least 200k more than the property is worth. When this crazy market finally stabilises, the losses that current buyers will endure will be catastrophic. //
Maybe it is being overlooked because that doesn't seem to be the point from the OP. It reads as though you are doubting that the agent could get the price quoted, not that you are concerned that the buyer might lose a lot of money if they paid that price.
Guys, I'm talking about the link between what we earn, our salary, our income versus what we are being asked to pay for our homes.
If interest rates go back to a more normal 5-8%, who has the available funds to pay that dramatic hike in repayments?
So if everyone suddenly has to sell, what happens to those ridiculous valuations then?
@TTT: with all due respect, you cannot make the assumption that you would make a huge profit on a buy and re-sale because to accomplish both transactions could easily take as long as 6 months and right now, no one can guarantee the price tomorrow.
If interest rates go back to a more normal 5-8%, who has the available funds to pay that dramatic hike in repayments?
So if everyone suddenly has to sell, what happens to those ridiculous valuations then?
@TTT: with all due respect, you cannot make the assumption that you would make a huge profit on a buy and re-sale because to accomplish both transactions could easily take as long as 6 months and right now, no one can guarantee the price tomorrow.
About thirty-five years or so ago there was a “financial guru” called Bob Beckman who had regular radio slots:
https:/
At that time I had owned my house for about five years and since I’d bought it (with the aid of some double-digit inflation) I had seen its value (OK, in price if you don’t like the term value) increase by about 2.5-fold. Mr Beckman, although worth a shedload of cash, told us he owned no property. He continually prophesised the collapse of house prices in the UK as he could see no way that the continued price increases could be sustained. There was no way, he said, he would invest his cash in something which was bound to crash.
Fast forward to the end of my mortgage about fifteen years ago. I had taken an endowment mortgage (because mortgages were hard to come by when I needed one). I was lucky enough to avoid the endowment shortfalls that many suffered and in fact had about twice the cost of my mortgage repayment to cover the debt. In fact, so great was the decrease in the relative cost of my house that I could have almost repaid my mortgage on my credit card.
Fast forward another fifteen years. If I sold my house now I would easily get around thirty times what I paid for it, probably more. So to address your latest post, there is no real relationship between house values and earnings. And indeed, if interest rates did return to a proper level many people would be in severe difficulty. But that is most unlikely. At times during my mortgage I was paying 15% and as far as I can recall, never paid less than about 6% or 7%. Those levels are unlikely to be seen again in the foreseeable future though a modest increase is likely and desirable. I agree that the current price levels seem unsustainable but I can only see modest corrections being likely. But it will not be a catastrophic crash such as Mr Beckman forecast and I too would gladly take you up on the offer to buy your house at around half the going rate.
https:/
At that time I had owned my house for about five years and since I’d bought it (with the aid of some double-digit inflation) I had seen its value (OK, in price if you don’t like the term value) increase by about 2.5-fold. Mr Beckman, although worth a shedload of cash, told us he owned no property. He continually prophesised the collapse of house prices in the UK as he could see no way that the continued price increases could be sustained. There was no way, he said, he would invest his cash in something which was bound to crash.
Fast forward to the end of my mortgage about fifteen years ago. I had taken an endowment mortgage (because mortgages were hard to come by when I needed one). I was lucky enough to avoid the endowment shortfalls that many suffered and in fact had about twice the cost of my mortgage repayment to cover the debt. In fact, so great was the decrease in the relative cost of my house that I could have almost repaid my mortgage on my credit card.
Fast forward another fifteen years. If I sold my house now I would easily get around thirty times what I paid for it, probably more. So to address your latest post, there is no real relationship between house values and earnings. And indeed, if interest rates did return to a proper level many people would be in severe difficulty. But that is most unlikely. At times during my mortgage I was paying 15% and as far as I can recall, never paid less than about 6% or 7%. Those levels are unlikely to be seen again in the foreseeable future though a modest increase is likely and desirable. I agree that the current price levels seem unsustainable but I can only see modest corrections being likely. But it will not be a catastrophic crash such as Mr Beckman forecast and I too would gladly take you up on the offer to buy your house at around half the going rate.
Latest Posts
News8 mins ago
ChatterBank15 mins ago
Crosswords20 mins ago
More Attacks On Freedom Of Speech
News21 mins ago
Crosswords28 mins ago
Related Questions
Sorry, we can't find any related questions. Try using the search bar at the top of the page to search for some keywords, or choose a topic and submit your own question.