A recent post on the My Nairn blog:
"Nairn Property Still Relatively Cheap" generated 9 comments and set me thinking, 'who can really afford to buy property?'
For a quick snapshot of prices and availability I looked at the latest HSPC property paper and discovered that in Nairn there are:
3 properties between 75K and 100K
14 between 100k and 150K
13 in the range 150-200K
17 in the range 200-250K
7 in the range 250-300K
2 in the range 300-400K
2 in the range 400-500K
But,
In a world where two incomes are generally needed to service a mortgage household sizes are decreasing which is given as one of the main reasons why we need to build more property.
For mortgage payments to be affordable they should take up no more than 25% disposable income.
First time buyers are a vital part of the housing market.
As an exercise I visited a few sites with mortgage calculators to see just how a single first time buyer on a salary of £21,500 per annum would fair and came up with an interesting combination of results:
It seems that many mortgage deals now have product fees and early repayment charges
It seems that large deposits are required - at least a significant percentage of the amount of loan required.
Other outstanding debts are taken into consideration - not good news for anyone with student loans etc - when determining the amount of the loan
One site offered to lend my fictitious first time buyer 100K on a £658 per month 25 year repayment mortgage but didn't ask me how much the buyer earned.
Another said on the basis of earned income they would be prepared to lend only £45,993
So how can this person afford to buy in Nairn with only 3 properties less than 100K and a 2 bed terrace costing 110k?
Just where do we go from here?
No wonder the market is very slow - it was being fuelled by unrealistic lending which has now been completely withdrawn.
Over to you
If people need to sell, then market forces indicate that a 'price correction' (i.e. a price reduction) may be mecessary, both to permit the person wishing to sell to achieve a sale and the person wishing to buy to be able to finace the purchase.
ReplyDeleteThe 'value' of a piece of real estate is nothing more than a matter of what the market will bear. If people don't need to sell, then they will sit on property, specially in a falling market.
The price falls in the property market in most of Scotland are, from what I can gather, relatively minor so far when compared with some major cities in England, possibly because markets here did not become quite so 'heated' as down south, probably also for a number other other reasons.
More generally, the current recession/depression requires a 'correction' in the people's standard of living - political parties have now begun (at long last) to talk about reductions in public spending, but the economic consequences for individuals standards of living are being glossed over as yet, because it is political dynamite. But it is what will have to happen, sooner or later - the country can no longer finance the standard of living it has become accustomed to and the lenders to UK PLC wil sooner or later extract a price, probably by increasing the cost of borrowing. Inflation will not be far behind.
APTSec responds
ReplyDeleteIt never seems to come down to simple arithmetic; just how much do you need to earn to finance things like:
Mortgage / rent
Home / buildings Insurance
Council tax
(Car finance
Road tax
Car insurance
Servicing / MOT
Repairs and parts)
Cost of travel on public transport or cycling
Food
Clothing
Gas / Oil / Electricity
Telephone line rental
Broadband connection
Mobile phone costs
White goods
Home furnishings
Donations to charities
Life insurance
Owning a pet
Hobbies / educational classes
Dental care / eye care / foot care
Repairs and servicing of items such as boilers / washing machines etc
Papers / magazines / books
Holidays / day trips
I could go on and on
Absolutely agree that affordability is a core issue - and house prices have seen a price bubble that is deflating in the south of England, but is not yet impacting Scotland so much .
ReplyDelete(I've long thought of the UK property market as like a rubber mat, and anything that happens in London tends to ripple out - so I would expect us to see price declines here over the next couple of years, but remain lagging behind south of the border.)
The surprise is that Nairn is relatively more affordable than the surrounding area - the point of my original post - as you would think that with Nairn's general amenities and location that property prices here would be relative high.
So, property prices are still very high - probably quite over-valued, actually - but that when it comes to affordability, the issue is less of one in Nairn than in other nearby property markets.
2c.
- Brian, MyNairn.com.
A reduction in real standards of living will mean, APTSec, that many of the things in your list will become unaffordable - and hard choices will have to be made. It is NOT going to be pretty.
ReplyDeleteLet's hope once the present government is turfed out of power at the next General Election that the British electorate will have learned its lesson once and for all about Labour. The danger is that the Conservatives will have to do some hard things when they enter government so their popularity is going to plummet quickly - just like it did in the early 80s before the Falklands rescued it in terms of popularity.
Nairn seems relatively affordable, and it is, but that is only provided your income allows you to finance purchasing something here - and a lot of local people simply don't have the incomes to do that at current price levels, however 'reasonable' they may be.
Since many reports indicate that the gap between the wealthiest and poorest in our society has grown then hard choices will not be made by all. There was nothing 'luxurious' on that list. For some owning a car is a necessity, for others owning a pet can be life affirming. Keeping a roof over your head, heating it, maintaining it, eating and keeping clean (with some clothes on our backs in this climate) are not things that anyone should have to choose between. Some items on that list were taxes, and then there was medical care.
ReplyDeleteIf we are to function as a society I would also argue that we should all have access to communication via telephone and broadband and what about reading books and having hobbies and going to classes as a means of moving towards a 'knowledge economy'.
I suppose in terms of affordablility of property we should take a small selection of 'typical' properties and look at the costs across the country and then see how much an ambulance driver or a radiographer or a teacher or a chef or a chambermaid earns in those areas. I do not suppose salary changes much but housing costs will.
Someone I know worked over 50 years, long hours for relatively little pay in a job that would have enabled executives to travel to work. He lived and saved within his means. Is his contribution and the contribution of many others like him to society not valid? As recent (and many other reports before that have shown) his working class children were at a disadvantage when it came to access to the top jobs. Even if they worked hard to get qualifications and got to university, success in life is about much more than a certificate.
It would be intolerable if these hard choices further perpetuated inequalities.