How are first time buyers going to be able to afford houses in 20 years when average price is £500k?

Answer 1

1) Salaries will increase approx. with inflation (2-3% in developed countries) over the next years, especially for graduates and young people.
2) House price will not increase by much more than that. However there will ocal markets that are under- over overperforming that rate.
3) Interest rates (and thus opportunity costs) are rising over the next years.

Pls. be aware that real estate has a a long-term (150 yr) return of inflation + 2%. The house price increases of the last 10-15 years just cannot and will not continue. The return levels will fall to their long-term level just as the stock market crashed in 2000/2001.

In summary house prices will be much less than 500K in 20 years and also people will earn more than now.

Answer 2

It may well be that wages will increase in line with the price increases enabling us to afford the mortgage repayments.

My parents house cost £16,000 when they bought it several years ago. At the time, this was a huge amount of money to spend because the wages were so much lower.

My grandparents bought a four bedroom house many years ago for about £900. This sounds dirt cheap now but the annual wage at the time was only around £100 a year so it was expensive when they spent the money.

Imagine having a 25 year mortgage for £900 today? The repayments would be about 50p per month!!!!!

Answer 3

Prices will come down - or at least stop going up faster than earnings.

In the past, average house prices have fluctuated between about 3.5 and 5 times average earnings. Currently that figure is around 6, and that's a function of the fact that we are currently enjoying a long period of relatively low interest rates and inflation. Even then, it is only currently being sustained by artifical measures such as shared equity schemes and interest-only mortgages (which are piling up trouble for when those mortgages mature).

Nothing lasts for ever, least of all a housing boom, and all it would need is a smallish rise in interest rates - maybe only 0.5 to 0.75% - and that figure will have to correct down to below 5 times earnings again.

Answer 4

The laws of supply and demand will work itself to a new equilibrium.

I can foresee it may become more and more expected and 'the norm' for parents to help with buying a house (more than just a deposit). Another scenario would mean that a lot of people won't be able to buy a house until their parents pass away and the inheritance will provide this capital.

Answer 5

Cos they will have higher wages... Your basing a mortgage cost 20 years from now with our wages today.

Its the same as asking as: (imagine your living in 1980's) "How will people afford to buy a can of coke when today its just 5 cents and in 20 years it will be a dollar?"

get the idea?

Jed Baguio
Webmaster
http://www.PickWellRealEstate.com

Answer 6

A Good question.Now a days Home loans and Insurance go hand in hand.It is always better to have 20 years terms.If Home loans are taken with the Insurance then it would not be difficult to move on.

Answer 7

depends on the rate of inflation & therefore salaries payable in 20 years time.Also type of job & rate of interest on mortages then.
My 1st house in 1968 cost £5750 & I earned I think about £1200!!Therefore,it follows that my income has risen relatively at about the same rate as my house price,though I have to qualify that by saying that I am semi-retired .If I were still working,my salary would be reasonably proportionate.

Answer 8

I think that we will change to a more continental system, where letting rather than buying is the main way to live.

The prices will also have to correct themselves to some extent eventually.

Answer 9

I think the banks are going to have to introduce 50 year mortgages.