who has all this money to spend? everywhere everything is so expensive. i make a ton, and this doesn't add up. nothing about home prices seems to add up.
A quick google suggests that a £100K income is in the top 3% in this country, and top 1% is about £176K.
Sure, there's a few hundred football players averaging maybe £3M a year who can thus buy maybe a £15M palace, but if you go on a property site they could each buy one and still have pages and pages of places left on the market.
Similarly there's a bunch of finance/media/law people who've climbed to the top of the greasy pole and could afford a £3M house. But how many can we really be talking about? A few thousand? Ten thousand? Are there really that many MDs and law partners in London?
Average income is still well under 6 figures in this country, and I know a load of doctors who are only just scraping into that category in their 30s. So if you're just scraping into 6 figs as a highly trained and rare specialist, how can there be so many houses that cost 7 figures?
Even if you add parental help, how many people who are splitting inheritance between 2/3 kids is it actually going to help?
I suspect a lot of people have actually drawn on all reserves: found a high income partner, got help from the parents, got a max leveraged mortgage, and possibly some have lied about their income.
I get the feeling it will end badly.
The sort of person who could afford a nice house 3+ decades ago and spent the intervening years living in London isn't likely to move to somewhere more rural just because they can realise an investment.
But in London these houses do sell, normally very quickly (and bullshit apartments in shiny new blocks that are in same price bracket I guess same, generally they do seem to sell, but I assume that's just parking money for tax purposes so not quite same thing).
Agreed.
As to the question of who has that kind of money: you're talking about income from employment, not assets. Maybe there are a lot of people with assets that put them in reach of £2-3M homes. And of course there are foreigners who don't work in the U.K., like Saudis, Russians, and Chinese.
Yes, it will. When people get shoved into tiny homes with their parents and children and have zero hope for any future on their own, you will see the people say enough is enough. They will march. They will protest. They will vote. They will clean house.
If brexit didn't end this, then it's probably a pretty stable system. It sucks for locals, but there are far worse places to over extend yourself on housing than in London.
I make 5x the median wage in my county and my county has the second highest wage in the US.
I see all these $M houses being sold left and right and I'd never feel comfortable buying a $M plus house. What gives?
Prices seem silly to me here too (Australia) but a lot of it seems to be a combination of the perception that house prices just always go up, so you have to "get on the ladder" as they say and trade your way along. Each step doesn't seem to be a huge investment in itself. If you don't hop on, then you get left behind.
But tax law here also makes loss-making investment properties attractive to people, and borrowing against equity is another thing. Interest-only loans (as interest is a deductible investment expense), plus other expenses (all the better if it's in a nice holiday destination so flights and hotels to "inspect the property" are deductible), resulting in a minor loss on rent, which is offset against your primary salary and other investments.
Negative gearing like this allows people to basically zero out a house on the balance sheet and move on to buying another. Let it appreciate for a few years and you're ahead. Be a major voting base and politicians won't dare ruin your gravy train.
Reality will disagree at some point.
If you don't have significant capital in investments, you're getting hosed.
If prices on an investment rise more than inflation 90% of the time why wouldn't you buy it?
https://lginform.local.gov.uk/reports/lgastandard?mod-metric...
According to the estimate-o-matic tools, the house I'm in is worth about 425k. There's basicaly nowhere in this market I could take 425k and get a house meaningfully bigger or better. Not in the new-developed neighbourhoods where the maps say "eventually a grocery store is planned, but until then it's a 10km drive", not in old neighbourhoods where it was built in the 70s and the floorplans top out at 1500 square feet.
I've been trying to sell my family on the Rust Belt, but so far no dice.
There are those who sold at a higher price and got spring-boarded into a higher priced house but these are the exceptions.
In Australia, we had a royal comission into banking a few years ago, and the outcome was much tighter rules on lending, equity from assets, etc. We also don't allow people to invest in their own or family property from their superannuation (retirement fund). Yet our market has grown and grown, rising 17% or so in the last 12 months and almost 7% this quarter.
Yes we have a very low interest rate currently, however the median wage to house price gap is growing bigger daily. Yet the demand still far outpaces supply.
> nobody around to tell me what to do
Presumably you wouldn't both mention her participation and dismiss her presence in the same breath...
Not sure what you're trying to say about this reflecting on me, it's just an amusing contradiction. I think it reflects well on my sense of humor.
Why are you failing so hard at seeing your choice of wording through a humorous lens?
As written, your statement reads like "there's nobody around, and as a result, nobody is here to tell me what to do."
In the same breath you mention there being someone else around, but apparently your wife doesn't count as somebody.
It's funny, and judging from the +27 of my comment illustrating the amusing self-contradiction, I'm not alone in finding the humor.
There aren't that many people above you, but 1% of the US population is still millions, and they have an outsized influence and visibility.
Property also suffers from "pigeonhole" effects; a few foreign millionaires parking their money in empty properties at the top end causes everyone to move along one.
Am I jumping to make this particular financial decision? Nah. But it’s not wildly out of reach.
There was a question why people want to move to Munich even though it is the most expensive city in germany.
Answer : because it is a city! Disco, cinema, stuff to do in your free time.
And more and more people are willing to sacrifice 2/3 (or more) of their income just to live in the city. (also part of the first question)
So, i dont see rent going down anytime soon.
And if there will be a recession, even more people are willing to sacrifice everything, just to move to the city.
Exactly this. Somewhere along the lines in the past decade or so, it became completely normal to lend people 10x their income to buy a home, when historically that figure was 3.5x.
You do need to start at 20% capitalization though, which at current prices means they need to own assets already (market risk), or have bonkers amounts of currency sitting around (inflation risk). I understand the FOMO some people must have.
I wonder if ultimately there is a cascade happening, where increased valuations lead previous owners to either take new mortgages, or sell their old house, and pay more for a new one. Which creates a cycle of ever increasing prices? I've never read anything though whether such an effect exists.
Napkin math suggests that it’s a reasonable payment for those >=$170k annual income, which is very common in software in the USA.
Assuming taxes and insurance correspond with a % of home value, a 1 million mortgage would be about $4,800 a month.
Or about $4,000 a month if talking about a $1 million dollar house with 80% financed.
I mean basically where is there yield? Crypto + NFTs (yuck to the latter), real estate and equities. Even just running correlation analysis on these various assets over the last 20 years showed that crypto was super underpriced (despite only 12/13 year track record) while real estate is tremendously overvalued and equities were the only thing to react in a reasonable way to both (1) the initial realization covid was serious and (2) the Fed stepping in with 2 novel revolvers for SMB and for corporate credit. Treasury even threw in a bit into the bowl and performed stimulus. The last 1.5 years likely minted more "wealth" than in the previous 100 years combined (hand waving a bit) - a framework was laid to make much more money than what you put in provided you were looking at what was to come based on what was spoken.
care to elaborate?
When people talk more and more about how lower taxes on the rich boost investment you already know that private investment is dead and won't recover no matter what you do.
You do!
Most people, when they get a mortgage, they're going deep into debt. You have about that much in liquid assets. You can definitely afford it.
Land depends on where you go, no comment there, but keeping up payment on your current place during construction just means you end up paying for 21 years of housing on a 20 year mortgage, or 31 years of housing on a 30 year mortgage, not a big deal.
What dropping interest rates does is not prop up the price of housing, it's increasing the resale value of the housing you already pay for.
This sounds familiar…