Getting into buy to let property business

cm1179 said:
but these are surely balanced out a little with the cost of electrical goods?

it's 1983! you want a toaster? that's £85 please! (ok i may be off a little there ....... or am i?)
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Balanced a little perhaps, but people didn't have need/want for the latest TV, console, phone, laptop then... Plus I think my parents held bread over a fire... :D

Toasters may well have cost £85 then (I don't know) but you can still buy a toaster for that and more now. My parents bought a lot of white goods in the 80s that are still going strong today. Most newer stuff is built in obsolescence, a new fridge now probably won't last 25 years, a £3 kettle won't last 2 years (in my experience anyway). It's cheaper to replace the entire unit than repair it now.
 
dowie said:
current mortgages represent about the same % of income as they did in 1985
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Greebo said:
1975
average house price £10,388
average wage £3,161.60
Average Mortgage rate 12.1%

Mortgage cost: £1333.56 per annum (100% loan)
Proportion of average wage = 42%

2012

average house price £246,235
average wage £26,000
Interest rate 5% (best figure I could find as an average)

Mortgage cost: £17,470.92 per annum (100% loan)
Propotion of average wage = 67%
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How'd you figure that one out dowie? 25% increase if you go by Fox's calculations. *1975 ja ja ja
 
Greebo said:
You have to remember that after 1978 interest rates started dropping substantially except for a blip in 1989.
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No, you don't have to remember that at all as to do so would be completely false. Infact I'm amazed you've even said that. It's almost as if you've no knowledge of what the interest rate was at all?! Dropping substantially after 1978?!

It was above 10% for the majority of the 80's - infact often as high as 15% and once 17%. And thats the base rate, the mortage rate was even higher.

We've got it better now than they had it in the early 80's for sure. But lets continue to look at average house prices in the 80's and pretend things were easier then...
 
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dowie said:
its quite a key point really - the average % of income spent on mortgage payments in 1985 was around 20%... it was just over 10% in 2003... houses became more affordable thus prices rose.... its now back at circa 20%... there was a peak of 27% in 1990 - you'll find there was a housing slump then...
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Maybe I'm misunderstanding but I dunno how you work that one out. Most people who have mortgages I know are pay far more than 20% of the household income on mortgage repayments.

For someone to be paying 20% of their earning on mortgage repayments on a £1000 a month mortgage (like they are in my area) would mean they'd have to take home (i.e after income tax) £60,000 a year which isn't the norm for most people in my area.
 
estebanrey said:
Maybe I'm misunderstanding but I dunno how you work that one out. Most people who have mortgages I know are pay far more than 20% of the household income on mortgage repayments.
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because I'm looking at the actual data and you're just guessing/making silly statements like 'most people I know'.

http://www.mortgageguideuk.co.uk/mortgage-rates/mortgage-payments-perc-income.html

1985 19.2%
2008 19.6%

Interest rates are key here - yes house prices have increased, but the cost of a mortagage for house buyers isn't much different...

In particular look at the % from 1996 to 2008... its not hard to see why higher house prices were affordable...
 
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dowie said:
the other poster was just looking at average wages and doing a bit of guess work...
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What would you base it off if not average wage? Perhaps you should do some calculations to back up your opinion, otherwise we'd do well to just ignore what you're saying.

*Edit just seen your link, those stats are for first time buyers, which only represents a really small proportion of the market.

*Edit 2 FYI I pay nearly 50% of my income on rent. Would be the same on a mortgage. I'd need to be earning nearly 60k to bring it down to a 20% mark.
 
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bloodiedathame said:
What would you base it off if not average wage? Perhaps you should do some calculations to back up your opinion, otherwise we'd do well to just ignore what you're saying.

*Edit just seen your link, those stats are for first time buyers, which only represents a really small proportion of the market.
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well no one else has provided any meaningful data...

frankly if people can't see that low interest rates have allowed house prices to increase significantly then they're more than a bit silly
 
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dowie said:
because I'm looking at the actual data and you're just guessing/making silly statements like 'most people I know'.

http://www.mortgageguideuk.co.uk/mortgage-rates/mortgage-payments-perc-income.html

1985 19.2%
2008 19.6%

Interest rates are key here - yes house prices have increased, but the cost of a mortagage for house buyers isn't much different...
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Cherry picking much?

That;s first time buyers and secondly you have picked the two years which are the same.

If you look at the trend, it;s increasing all the time.

1977 13.3%
2003 11.8%

However, I will agree that nowadays first time buyers it's 20% of their income. What that chart doesn;t factor in though is that in 1985 and 2008 you could get 96% mortgages whereas as nowadays it might be 75% for first time buyers.

Obviously a 75% mortgage is going to take much less of your disposable income than a 95% mortgage did yet the trend is for this percentage to increase.
 
Greebo said:
If you look at the trend, it;s increasing all the time.

1977 13.3%
2003 11.8%
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LOL wat?

13.33% in 1977 compared to 11.8% in 2003 is 'increasing all the time' ?? the idea of a trend is silly in the first place and can only be looked at retrospectively - prices/rates could go in either direction don't fall into the fallacy of thinking you can draw a line on a graph and predict the future

also you'll note I compared 1996 to 2008.. as the % steadily increased... also a period where house prices increased to a peak..

reality is - unless the % increases significantly above 20%... say closer to 30% then you're not going to see a significant drop... key point here is interest rates
 
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dowie said:
LOL wat?

13.33% in 1977 compared to 11.8% in 2003 is 'increasing all the time' ??

also you'll not I compared 1996 to 2008.. as the % steadily increased... also a period where house prices increased to a peak..

reality is - unless the % increases significantly above 20%... say closer to 30% then you're not going to see a significant drop... key point here is interest rates
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Well that was comparable and you can see the chart yourself. My point is that it wasn't much more for 1st time buyers in 2003 to buy as it was in 1997.

Since 2003 it has gone up every year from 11.8 to over 20% before falling back slightly. That was the point I was trying to make.

9 years of rises makes it more and more less affordable for people to buy houses.
 
Greebo said:
Well that was comparable and you can see the chart yourself. My point is that it wasn't much more for 1st time buyers in 2003 to buy as it was in 1997.
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yes exactly the point I was making... as per now and 1985... despite the massive increases in price over the past few decades...


Since 2003 it has gone up every year from 11.8 to over 20% before falling back slightly. That was the point I was trying to make.

9 years of rises makes it more and more less affordable for people to buy houses.
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yes exactly my point... it became even more affordable to buy - prices increased/rates dropped... as prices have increased the % cost to mortgage payers has increased till we've got to where we are now at just below 20% which is where we were in 1985

despite the fact that prices have increased significantly current interest rates still allow those prices to be maintained... between 10 - 20% of income is obviously affordable.. above that (as per 1990) people get into trouble. If we have a big hike in interest rates then you'd see prices fall otherwise claims that prices are massively inflated at the moment aren't entirely true.
 
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[TW]Fox;22479848 said:
No, you don't have to remember that at all as to do so would be completely false. Infact I'm amazed you've even said that. It's almost as if you've no knowledge of what the interest rate was at all?! Dropping substantially after 1978?!

It was above 10% for the majority of the 80's - infact often as high as 15% and once 17%. And thats the base rate, the mortage rate was even higher.

We've got it better now than they had it in the early 80's for sure. But lets continue to look at average house prices in the 80's and pretend things were easier then...
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Should have said 1979 sorry. That;s when it reached its peak of 17% but most of the 80's it was around 10 to 12% except for the 1989 when it shot back up to 15% but that had all disappered by 1993 when it was back to 5.5%

So since 1993 when interest rates (and mortgage rates) have been at a historical low all that has happened is that the multiple of house cost to salaries has shot up and the percentage of your income needed to buy a house (which accounts for mortgage rates) has shot up as well.

I am not saying we are any better off than the housing boom of the 80's when house prices got way out of control but we are (were) getting not far off reaching those peaks again where people can;t afford to buy houses.

Hence, it;s time house prices dropped slightly or at the very least stayed stagnant for a few years to allow wages to catch up. We don;t want another housing crash.bubble burst.
 
dowie said:
despite the fact that prices have increased significantly current interest rates still allow those prices to be maintained... between 10 - 20% of income is obviously affordable.. above that (as per 1990) people get into trouble. If we have a big hike in interest rates then you'd see prices fall otherwise claims that prices are massively inflated at the moment aren't entirely true.
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You are still not factoring how much the extra 10 to 20% people need to put in as a deposit now compared to 1985 and other earlier years.

If people still got 95 and 100% mortgages I suspect that percentage of income would be more than 25% now.

Still no getting away that for average house prices and not 1st time buyers the cost of a mortage on a house is 67% of a the average wage.

Surely those kind of house prices can;t be sustained?

That;s why house prices are falling for the fastest rate sionce the last house market crash. 0.7% per month is a big drop.
 
Greebo said:
Hence, it;s time house prices dropped slightly or at the very least stayed stagnant for a few years to allow wages to catch up. We don;t want another housing crash.bubble burst.
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they did drop a bit... at the end of 2007 and in 2008... the link only goes up to 2008 since then 2010 we were back to 15% and currently we're at 19%...
 
Greebo said:
You are still not factoring how much the extra 10 to 20% people need to put in as a deposit now compared to 1985 and other earlier years.

If people still got 95 and 100% mortgages I suspect that percentage of income would be more than 25% now.
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yes and we know how that would end... btw they were introduced in the later part of the 1990s during the housing boom and its probably not a good thing to bring them back...

sits not really hard to understand - so long as mortgage payments are affordable (which they are currently) you're not going to see a massive drop in prices... despite the fact that people have been getting butt hurt over property prices over the past decade you're not going to see a big crash in the price unless interest rates go through the roof - and if that happens you'll have a bit more to worry about anyway...
 
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[TW]Fox;22480101 said:
Really?

So it wasn't 17% in 1980?
15% at the end of 81?
14% in 85?
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Peak in 1979 and started falling

Stop nit picking, I am fully aware of the rates :p

Most of 81 was at 12% and it shot back up to 15% at the end of 81 before dropping back down again. it was 13.88% again by January.

These are the maximums for each year

1980 17%
81 15%
82 13.88%
83 11%
84 12%
85 13.88%
86 12.38%
87 9.88%
88 12.88%
89 14.79%

some months in some years it was lower than 10% and twice dropped below 8%
 
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