They live in a house, a very big house in the suburbs

I’ve never been that interested in financial matters. When the Chancellor announces the budget, for example, I may take a quick look at one of those handy “How might this affect you” summary reports but even then I’m scanning through for any big headlines (has beer gone up?!?) rather than reading with any interest. I guess this is probably because I don’t need to pinch every penny and, unless I lose my job tomorrow, I am fairly comfortable at the moment (for which I feel very lucky). However, talking to the 3 couples I know who are in the process of buying and/or selling a property got me thinking about something this morning on the way to work. In particular it was a conversation with Tim and his wife Loz where she was incredulously asking how anyone could afford to buy a £400k house. My immediate reaction to this was that I’m pretty sure my parents and almost all of my friends’ parents have houses worth £400k and generally speaking they bought them when they were significantly younger than I am and a good 10+ years younger than Tim and Loz are. Not only that but in quite a few instances, certainly in the case of my parents, at the time that they bought the house only one person in the couple was working full time while the other brought up the children.

A quick check on Zoopla proved me right about the price. In fact the average price for a house on Oaklands Avenue is more than £500k and number 57, the nearest one to my Dad’s that is listed, is valued at £450k. Now, I’m not an idiot and I realise that they didn’t cost even a quarter of that when my parents bought it 30 years ago, but then my Dad’s pay has increased significantly over the last 3 decades too. Would he be able to afford to buy it now? Who knows, I haven’t got a clue what he earns or whether he has any savings. Anyway, my point is that there is no way on Earth that I could afford to buy a similar house and I can’t even envisage a point in my life when I would be able to. My current flat is worth less than a third of that which, taking a very simplistic view, means my salary needs to increase threefold whilst house prices stay the same. Even if I were to one day get married to someone with a similar salary and we decided not to have any kids and both keep working it still seems somehow out of reach.

So where does this leave us? It seems to me that we’re going to end up with as a situation where older generations are living in large houses with big gardens whilst each successive younger generation will be living in smaller and smaller places. I thought it was tough for me to get my flat but if I had to save up a 20% deposit I’d have been living with my Dad for a further 2 years before I could have bought. However at some point, and I apologise for being slightly morbid here, the older generations will no longer be with us and their assets will presumably be passed down the generations. The thing is, with the advances in medicine and a little bit of luck our parents will be around for another 25-30 years or more so by the time we come to inherit from them we’ll be approaching retirement ourselves and will (hopefully) not need another house. Therefore it seems logical to me that these valuable properties would skip a generation and go straight to the Elliots and Edwards of this world. We’ll then be in a situation where all the younger people will be living in big houses while their parent (i.e. us) are in more modest homes. But then I realised that could have been what it was like for our Grandparents’ generation. Certainly my Dad’s Dad always lived in a much smaller house than my Dad does. So are we just in a continuous cycle where each successive generation switches around? Will this continue ad infinitum and, if so, will this cycle get gradually longer and longer as life expectancy and working lives increase? I have this image in my head of a graph with age along the x-axis and house value on the y-axis and an oscillating sine wave showing the relationship.

Of course, this may just be something that applies to middle class people like ourselves. Maybe both the parents and children in rich families will always live in massive houses while the poorer families will always be confined to council houses? I don’t know the answer, but it certainly gave me something to think about on the long, wet, passenger-free journey into work today.

Posted by Si

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Published in: on 18/11/2010 at 11:42 am  Comments (6)  
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  1. Interesting question. Let’s try to break it down. Our parents definitely lived through some economically unique times of the 70s and 80s. The mid 70s saw a huge boom in people buying their own houses. In about 3 years, princes doubled and people got excited. Then they dropped through the floor and they suffered from negative equity. Enter Mrs T and there was a big push for buying houses. WE then hit huge inflation and pay was increased massively just for people to pay their mortgages (I simplify, but I think that is a reasonable summary of the times). So…on that front I guess that there is little to say that economic times led to making things more or less affordable. There are weird random cycles, but the people in the know will tell you that property prices typically double every 7 years. So, how come our parents generation tend to find themselves in fantastically large houses. I think it comes down to the fact that when we first buy we stretch ourselves. If we do not move, then things become much more affordable over time. This is because we pay off more capital over time and mortgage repayments become more and more affordable. They key is that we buy as soon as we can. I was lucky enough to dip into property fairly early on and it set me up quite nicely in terms of putting down deposits going forward. Make your money on your current house and you will be able to afford a more expensive pad next time out. On your grandparent point: you have come across a very good one. I suspect our parents will tend to stump up for our own kids rather than us and good luck to them I guess. I, for one, am planning to set up a retirement home for all of us. I’m taking bookings now…!

    • You’ve got to love double Princes.

      I was talking to my friend Jen and her husband Simon about this last night and they said the same thing as you about people stretching themselves when first buying. They’ve just had their first baby and, along with the dog Lola, things are starting to get a bit cramped in their little house. They would like to move but, having bought the flat 4.5 years ago (at the same time that I did) and despite doing some rennovations, it is only worth the same as as it was then. Ideally they would like to move down to Brighton to be near where Simon works (plus it’s nicer than Croydon) but are faced with the prospect of having to downsize of they did! Obviously not what they were hoping. Plus they’re down to 1.5 salaries instead of 2. But they were saying they might just have to take the hit and do it because it’s not likely to get any easier in the future.

      I like the idea of the retirment home for all of us, would you be paying the bills?

      • I can pay the bills. The rent will be high though : )

  2. It’s an interesting point, but you have overlooked a couple of significant factors. As you say house prices rise, but they also fall for non-economic factors. My parents bought the house they live in, at the time it was a financial stretch for them, but one reason they were able to do so was because the house had been owned by a very elderly lady and had had little work done to it for many years. It needed new plumbing, new wiring, it had old carpets (and few wall-to-wall carpets) and many other problems. My dad spent years doing it up and improving it. They also extended it (in fact I think alot of our parents have extended their properties). All of which has led to the house they live in going up in value (or going up in value as it should). Obviously house prices rise regardless due to demand and inflation. But there will be some properties that will be neglected and will lose value. It is therefore possible to move into a larger property or one in a nicer area, even if your budget doesn’t allow for a perfect property from the start.

    Not everyone does diy, so that helps those that do, but also helps those looking for a bargain. Whilst you may not be able to afford a shiny new house, you may, instead, be able to afford one that needs work and then, in addition to paying the mortgage, either do improvements yourself, or save up for them.

    The other thing though is that recent house price rises have been far too fast (for pretty much everyone). Ok, if you are on the housing ladder that can seem like a good thing, but it’s all relative and the properties you are after are also rising too fast. Now, with the current economic climate wages for most people (those not in the banking industry 😉 ) are not increasing much at all. This has yet to be reflected in house prices and recent studies show that there is a sizeable gap between what people are selling properties for and what people can afford. Eventually the market will reflect this and this will help more people to purchase properties.

    Counterbalancing this, though, is the fact that the number of properties are not increasing fast enough to meet demand, there will be an increase when the housing market and economy stabilise, but even still, with current planning laws there are still not sufficient properties being built. This though goes into another issue that may affect the size of property we live in. And that is that with more and more people and a finite amount of space (especially if we protect the countryside and green spaces) we will live in higher densities. You could also argue that the suburbs may decline as people live nearer to the cities due to changes in transport. Perhaps (and this is yet another issue) we may move in our parents large houses so that we can care for them in their old age (what with the public health system struggling to provide adequate care at present and with an increasing number of elderly putting more and more burden on it).

    Anyway, as you can see from this comment, its a quite a complex issue and there are alot of variables to consider.

    • Thanks for that. 🙂

      • Was that a sarcastic thanks or genuine? I didn’t mean to ramble!


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