Probably even more if you count the commute cost.
If you commute to London you can expect yearly ticket costs to be easily £5000 (that is if you can afford to buy a 12 month pass, if you do not you can pay as much as double, train pass loans are very common in the U.K.) for even a relatively short commute (Oxford or Luton to London for example).
£5000 is 1/4-1/5th of the median salary in the U.K.
If there is anything more depressing than U.K. rent it's its seasonal ticket rates:
Larger employers typically offer season ticket loans, repaid pre-tax through a salary sacrifice arrangement, so you can effectively discount the cost by your marginal tax rate.
Higher rate (40%) tax payers therefore only pay £3,000 for a £5,000 season ticket (less if you include NI and other deductions)
Indeed, most employers however offer it only after 6 months of employment and you have to maintain your employment for 12 months if not, you have to repay the loan in full which often means you cannot benefit from the offset tax liability.
It's also a case where those who can afford it more easily and can also afford London rent get discounts while people that earn less do not.
They aren't pre-tax, which is a major reason I work from home - when I took my current job I refused to work in their office as it would be £2500 a year, which means I'd have to earn about £6500 more just to pay for the commute, add the extra 2 unpaid hours a day and the commute would mean I'd want an extra £20k pre-tax (that's £100 post-tax per week for the time, or £10 an hour)
My effective marginal tax rate because of this (income between £50k and £60k) is 60% -- 40% income, 2% NI, 18% reduction in child benefits. The company has to pay employer NI too. That means for every £1138 they spend on a payrise for me, I get £400.
While my income is in the top 10%, our household income is pretty average for people with 2 children because my wife only works on occasional freelancing projects to keep fingers in the pie (say 10 days a year), and I work from home the majority of the time - we don't want to outsource the upbringing of children. If we do pay for child minding, it's an inlaw, which means petrol costs and a bottle of wine - which all comes out post-tax, so doubles in price compared to sending kids to a factory tax free (or "childcare").
Last year I did a 1,5 hour commute to London daily.
The biggest cost is not the ticket fare, but the time you waste being in a crowded train/underground for ~3 hours every day.
Yeah, tube is always full and unpleasant to travel on. If you are into music, buy UK's novation Circuit and do some song sketches while in tube, it gets you in creative mood, you forget you commute and it might raise your happiness if you find nice chords ;-) Another idea is to do some world-class MOOC or online MS while commuting (not via car ofc). Then you might land a position that would help you to escape this insanity.
You decided to exchange money for time, which is pretty good solution! As for daily MOOCs, music dabbling etc. it's about making the best of bad situation - if you are stuck commuting and don't have money to move closer, at least you aren't wasting all that time looking around, feeling miserable about your life and getting depressed ;-)
You don't really exchange money for your time, the rent difference in a good place outside of London (e.g. Cambridge, Oxford etc.) will cost you about as much in rent than it would be in London (you'll likely to get more space wise).
Buying is cheaper, but not considerably so than in the outer zones of London, but again you'll get more.
The commute costs offset and even can make it more expensive than paying London rent for properties below 2000 GBP a
month.
Many people commute because they own properties outside of London, often through inheritance or other familial ties.
Sure you have the outliers like Luton but frankly you wouldn't want to live in any of the areas in places like Luton where rent is cheap and available.
For the most part if you live in places like Richmond, Oxford, Cambridge etc. you are more than well established financially and can afford London rent, and possibly even property prices. Those who chose to commute do it because they chose the quality of life that living in a nice suburban lush area just a spitting distance from London often because they have or starting a family.
Those who do it for financial reasons often cannot rent in London to begin with they either do not have a steady job, or they do not earn enough to pass a credit check when renting in London.
What some people mentioned before is correct, most landlords will not accept tenants (especially single tenants) if the rent more than 1/3rd of their post tax salary since it's a risk, renting a flat share from property management companies comes at a pretty high administrative costs, entering or leaving a managed flatshare can easily cost you 400-500 GBP each time.
I have been kind of struggling with this question lately. As a rule of thumb, what percentage of your income would/should be spend on rent? I can totally understand there are many variables but I'm assuming the cost of buying a new house could be one on that list.
The rule of thumb is 1/4 of gross income before tax, 1/3rd of net income after tax - reasoning that 25% of your income is lost to taxes.
Another approach is to take your salary, max out your pre-tax retirement contributions, find out what dollar amount you need to maintain your current lifestyle in non-accommodation costs, set aside at least a few hundred $ monthly buffer, then whatever's left will be your budget for housing.
I've found it useful to consider transportation + housing in aggregate. It can cost the same to have a centrally located apartment vs. a suburban apartment + car. Also, your commute time and sanity (avoiding transit, avoiding rommmates) may be worth some sacrifices to lifestyle/entertainment expenses.
In theory it should be between 1/5 and 1/4 of your net income, to be increased to a maximum of 1/3, as DaiPlusPlus stated, in "high density" or "high value" cities or areas.
These "rules of the thumb" have been accurate for decades, lately the numbers "went crazy", partially because of the increase of costs for new houses, partially because of the lowering (or stagnating) of income, partially because of increases in taxation (either on personal income or house related taxation).
The phenomenon is not restricted to the UK, or to the London metropolitan area, here is a data point about Italy (the article is in Italian but the leading graphic is clear enough):
The three bars are respectively employees (dipendenti), independent professionals (autonomi) and retired people (pensionati) which represent roughly three different levels of income, average, high and low.
I'm currently converting a van to a campervan, in part to escape this money drain, in part to give me more freedom of where to live. It's not an option for everyone but I'm glad it's been working out so far (I should point out that wild camping is of dubious legality in many parts of the UK).
An alternate option is living on a boat (narrowboat, Dutch barge, etc...) on the UK canals, which even with mooring fees can be more affordable than renting.
The main challenge is getting a place, as moorings spots are fairly limited.
I have heard of people making alternative arrangements. For example, paying a farmer whose land is next to a canal to moor there. Costs would most likely lower but there's also likely to be less in the way of on-land facilities.
No thanks. There's no reason cities can't expand upwards. Besides that, there's plenty of brownfield sites that could be converted to housing if the desire to do so was there.
The best option in reducing prices would be to invest more heavily in transport infrastructure so that towns on the periphery of cities became more attractive to live in, and therefore develop in. Investments are being made in national rail infrastructure, but less so on the local level. It's a real shame that the UK lost so much of its railway infrastructure during the push towards automotive transportation.
Or upwards. London has a very low population density because of building height restrictions (now considered archaic, I understand). London has very few tall buildings and Canary Wharf is is closer to downtown Bellevue, WA than it is to Manhatten in terms of scale.
Brits are somewhat opposed to "tower blocks" because they were a poorly-planned top-down social engineering experiment in the postwar years to deal with rehousing the residents of slums and other deprived areas. Modern "high-end living" flats in much taller, aesthetically pleasing, and most importantly: safer, structures are being built, but not at a sufficient pace.
A reasons there hasn't been a total crash yet is because lovely, lower-density houses (think: 3 and 4 story spacious townhouses, not working-class 2-up/2-down terrace houses) are bought up for millions then internally gutted and remodelled into individual, modestly-sized flats to rent - sometimes barely larger than the size of a living room.
I think it's already happening — the bad commutes are incentive enough.
I've been at startup-like tech companies in Shoreditch where it's acceptable to swan into work any time before 11. Another anecdata is the large bank I worked at where it was expected that you would work from home 1-2 days per week.
>Do you think the transport system can handle increased density of upward building?
Depends if the rate of take up of cycling increases IMO. The year on year increases have been pretty consistent and don't seem to be slowing down. Sadiq putting on 'hold' (read cancelled) any new cycling infrastructure is likely to put an end to that though.
Don't forget we've got Crossrail coming later this year as well. That should take some strain off the central line in the mornings at least. Quicker Crossrail 2 get's off the ground the better though as the Northern line is a living hell in the morning. Getting on at Clapham (anywhere) and going north just is a 5 to 15 minute wait.
Crossrail is a massive, very expensive, 15 year project and it will 'take some strain off the central line in the morning'. Crossrail2 may help relieve the northern and Victoria too, but that's with normal growth rates.
The soil beneath London isn't a infinite resource either, Crossrail 1 was threaded in between other underground services, with a margin of about 30cm in one case I believe.
Mayors seem to have pet transport projects, Ken had buses, Boris had bikes, What's Sadiq's?
I like the green belts. There are other options - upwards in London or allow more building outside of the belt. Personally I think tall residential buildings in London could work quite well. In places like HCMC, and China they are throwing up 30 story blocks like nobodies business - I think only planning restrictions stop that here. I live in a 5 story block in London and think no one would be much inconvenienced if it had 45 stories instead. Prince Charles might moan but who cares.
You shouldn't invest increased housing density without an increased investment in other types of infrastructure, including transport. Transport in London is already uncomfortable at peak times. It could be argued that having more people living in London would mean more people could walk / cycle to work, reducing the strain on public transportation, but it's not a gamble I'd be willing to make.
Wouldn't you rather have parks and green space inside cities, than wrapped around them? Green belts create an artificial pressure to turn green space inside cities into residential and commercial land.
The green belts are a scam. They claim to protect something that doesn't need protecting (England is dominated by rural land that is not part of a green belt), at the cost of something that does (the quality of life for those inside the cities).
> Personally I think tall residential buildings in London could work quite well
They don't have a good reputation at the moment. I know that modern towers are far better than Grenfell, but public and press opinion will be quite low for the next few months, may get issues with planning applications.
I'd like to highlight your word "cities", because every comment seems to suggest that there is only one - London. Why not expand the others before trying to make London even more dehumanising?
The rent prices around the world in big cities are absolute perverse. And it will only get worse I fear. Partially due to rich foreigners and partially due to AirBNB & Co. Good example there is Prague, no normal Czech citizen can afford to live there anymore, the rent prices are ridiculous even compared to some German Cities.
How can it be any other way more people than ever want to live in cities and cities are Naturally constrained buy pre existing infrastructure and land area? People just need to get used to the idea that they can only afford to live in a second or third tier city.
Take the report with a grain of salt. It appears to be sourced by an investment firm with an interest in selling real estate securities. There are no details given about how their sample of 10,000 renters was created; the data also seems self reported by the renters, so I would have accuracy concerns.
The figure seems dubious given most landlords would balk at extending a lease to a tenant who's major share of income would be going to rent (high credit risk).
As opposed to media organizations with an interest in selling capturing and selling reader attention. The implication that unbiased reporting exists is ridiculous; this isn't critical thinking.
> As opposed to media organizations with an interest in selling capturing and selling reader attention. The implication that unbiased reporting exists is ridiculous; this isn't critical thinking.
There's a jump required to get from the parents comment to yours.
Readers should still take the source with a grain of salt, like most sources. It helps to consider what biases the article/report/whatever is likely to have.
Couldn't this be a predictable result of deflation in other expense categories, i.e. as "stuff" becomes cheaper consumers will just reallocate the savings to competitive markets where demand outstrips supply (e.g. housing near good jobs)?
> renters across the UK spend an average of 62 per cent of their income on rent
> 40 per cent of renters pay more than 50 per cent of their incomes on rent
If 60% of renters pay less than 50% of their income, that leaves an infeasibly high number of renters paying at least 80% of their income, to make an average of 62%.
Much as I think the high cost of housing and woeful tenancy rights are an absolute disgrace in the UK, I can't take these figures at all seriously.
After some digging around gov.uk and looking for the back of an envelope, median income seems to be around £24k, and median rent/mth differs wildly between London (£1500) and the rest of England (~£750); can't seem to find a recent source for median income (London) and median income (rest of England).
After tax I shouldn't suppose median income across the UK exceeds £20k. An educated guess would suggest most people spend 40% of income on rent alone. Given the decline in real wages I would imagine living costs in total soak as high as 80% of after-tax income for many. No comment on the content of the article itself since others have critiqued it so nicely - the above is mildly informed speculation.
Something changed in the global economic system in the 1990's that has led to asset inflation in nearly all major global cities.
People buying are indebted for decades for more than 50% of their usually dual incomes and renters have equally large monthly outflows.
This is global economic rent seeking in action. Wealth is not used for investment as economists insist but speculation and asset inflation led by banks being the main beneficiaries. The consistency and pattern of sharp increases across global cities cannot simply be a coincidence.
One in three UK politicians has a significant percentage of their wealth dependent on rising house prices and rising rents which is why:
1. Help to buy schemes increase demand but not supply therefore increasing prices.
2. Large scale bulk buying of properties by dirty offshore money where apartments are not being rented out hasn't been stopped - its better to buy London property than pay for gold storage:
3. Train prices in London are the most expensive in the world, so many will decide to spend more on rent and have the extra hours per day back than travel and pay almost the same price once train costs are factored in:
6. One in six Baby Boomers (who are the generation that has caused the property problem) intend on spending the inheritance their children could use on a deposit or buying their home, and therefore may remain renting:
The most depressing thing is that its starting elsewhere in the UK now because people see the UK as a good place to invest, and its gone crazy in the best cities in other English speaking countries - Sydney, Melbourne, Toronto etc.
> 1. Help to buy schemes increase demand but not supply therefore increasing prices.
The biggest obstacle to buying a house is the requirement for a 10%, or even 5% deposit. 5% on a £300k house is £15k, which takes many years of trying to save while paying really high rents and seeing prices continue to increase.
Once you get that deposit, you'll be paying far less on the mortgage.
Many people buy using the 'bank of mum and dad' to get them out of the rent trap, or by living with mum and dad while they save for a deposit. This serves to increase wealth amongst the wealthy. Your daily mail link is blocked by my firewall, but if baby boomers are spending their money, that would be a good thing.
> Train prices in London are the most expensive in the world
And the most crowded. Any cheaper they'd be even more crowded. That said, a season ticket from Hastings is £448 a month, for 21 days of commuting on a 140 mile round trip, 15p/mile, not an unreasonable charge. From Tonbridge it's 18p/mile, reflecting the increased demand.
> The most depressing thing is that its starting elsewhere in the UK now because people see the UK as a good place to invest, and its gone crazy in the best cities in other English speaking countries - Sydney, Melbourne, Toronto etc.
Aukland's real estate prices was one of the factors that stopped us emmigrating.
> 4. Increased population growth into London due to political focus on the South East - 100,000 extra per year increasing demand :
The funny thing is many (not in London) people in the UK think 'immigration' is terrible, but don't even consider internal migration in the UK.
61 comments
[ 164 ms ] story [ 1503 ms ] threadIf there is anything more depressing than U.K. rent it's its seasonal ticket rates:
http://vt.nationalrail.co.uk/service/seasonticket/search
Higher rate (40%) tax payers therefore only pay £3,000 for a £5,000 season ticket (less if you include NI and other deductions)
It's also a case where those who can afford it more easily and can also afford London rent get discounts while people that earn less do not.
At least, in none of the companies I've worked for has it been pre-tax
My effective marginal tax rate because of this (income between £50k and £60k) is 60% -- 40% income, 2% NI, 18% reduction in child benefits. The company has to pay employer NI too. That means for every £1138 they spend on a payrise for me, I get £400.
While my income is in the top 10%, our household income is pretty average for people with 2 children because my wife only works on occasional freelancing projects to keep fingers in the pie (say 10 days a year), and I work from home the majority of the time - we don't want to outsource the upbringing of children. If we do pay for child minding, it's an inlaw, which means petrol costs and a bottle of wine - which all comes out post-tax, so doubles in price compared to sending kids to a factory tax free (or "childcare").
Of course I tried many ways to use that time, but after a while it's just a burden. And it's making your day more exhausting.
I'm moving now to the City, I'll pay the high rent, but I'll walk/cycle to work in 5-10 mins. F* that train commute.
( and it seems like Brexit will force me to leave London for good anyway )
I'd say just don't do the long commute at all :) Pay the rent to be close to where you work or go live/work somewhere else, that's my solution.
I'll live another year in the centre of London, and then go to an EU country that's accepting my passport.
Buying is cheaper, but not considerably so than in the outer zones of London, but again you'll get more.
The commute costs offset and even can make it more expensive than paying London rent for properties below 2000 GBP a month.
Many people commute because they own properties outside of London, often through inheritance or other familial ties.
Sure you have the outliers like Luton but frankly you wouldn't want to live in any of the areas in places like Luton where rent is cheap and available.
For the most part if you live in places like Richmond, Oxford, Cambridge etc. you are more than well established financially and can afford London rent, and possibly even property prices. Those who chose to commute do it because they chose the quality of life that living in a nice suburban lush area just a spitting distance from London often because they have or starting a family.
Those who do it for financial reasons often cannot rent in London to begin with they either do not have a steady job, or they do not earn enough to pass a credit check when renting in London.
What some people mentioned before is correct, most landlords will not accept tenants (especially single tenants) if the rent more than 1/3rd of their post tax salary since it's a risk, renting a flat share from property management companies comes at a pretty high administrative costs, entering or leaving a managed flatshare can easily cost you 400-500 GBP each time.
So even if you can save up, you still can't buy a house.
Another approach is to take your salary, max out your pre-tax retirement contributions, find out what dollar amount you need to maintain your current lifestyle in non-accommodation costs, set aside at least a few hundred $ monthly buffer, then whatever's left will be your budget for housing.
These "rules of the thumb" have been accurate for decades, lately the numbers "went crazy", partially because of the increase of costs for new houses, partially because of the lowering (or stagnating) of income, partially because of increases in taxation (either on personal income or house related taxation).
The phenomenon is not restricted to the UK, or to the London metropolitan area, here is a data point about Italy (the article is in Italian but the leading graphic is clear enough):
https://www.idealista.it/news/immobiliare/residenziale/2017/...
which is not that bad in Google translate.
The three bars are respectively employees (dipendenti), independent professionals (autonomi) and retired people (pensionati) which represent roughly three different levels of income, average, high and low.
An alternate option is living on a boat (narrowboat, Dutch barge, etc...) on the UK canals, which even with mooring fees can be more affordable than renting.
https://bwml.co.uk/bath-marina/moorings/
The main challenge is getting a place, as moorings spots are fairly limited.
I have heard of people making alternative arrangements. For example, paying a farmer whose land is next to a canal to moor there. Costs would most likely lower but there's also likely to be less in the way of on-land facilities.
The best option in reducing prices would be to invest more heavily in transport infrastructure so that towns on the periphery of cities became more attractive to live in, and therefore develop in. Investments are being made in national rail infrastructure, but less so on the local level. It's a real shame that the UK lost so much of its railway infrastructure during the push towards automotive transportation.
Brits are somewhat opposed to "tower blocks" because they were a poorly-planned top-down social engineering experiment in the postwar years to deal with rehousing the residents of slums and other deprived areas. Modern "high-end living" flats in much taller, aesthetically pleasing, and most importantly: safer, structures are being built, but not at a sufficient pace.
A reasons there hasn't been a total crash yet is because lovely, lower-density houses (think: 3 and 4 story spacious townhouses, not working-class 2-up/2-down terrace houses) are bought up for millions then internally gutted and remodelled into individual, modestly-sized flats to rent - sometimes barely larger than the size of a living room.
An alternative solution worth investigating would be to ease rush-hour by incentivising, or even restricting, companies from starting at 9am.
I've been at startup-like tech companies in Shoreditch where it's acceptable to swan into work any time before 11. Another anecdata is the large bank I worked at where it was expected that you would work from home 1-2 days per week.
Depends if the rate of take up of cycling increases IMO. The year on year increases have been pretty consistent and don't seem to be slowing down. Sadiq putting on 'hold' (read cancelled) any new cycling infrastructure is likely to put an end to that though.
Don't forget we've got Crossrail coming later this year as well. That should take some strain off the central line in the mornings at least. Quicker Crossrail 2 get's off the ground the better though as the Northern line is a living hell in the morning. Getting on at Clapham (anywhere) and going north just is a 5 to 15 minute wait.
The soil beneath London isn't a infinite resource either, Crossrail 1 was threaded in between other underground services, with a margin of about 30cm in one case I believe.
Mayors seem to have pet transport projects, Ken had buses, Boris had bikes, What's Sadiq's?
Worryingly he doesn't have one.
http://static.thanhniennews.com/Uploaded/thuyhang/2016_01_06...
You shouldn't invest increased housing density without an increased investment in other types of infrastructure, including transport. Transport in London is already uncomfortable at peak times. It could be argued that having more people living in London would mean more people could walk / cycle to work, reducing the strain on public transportation, but it's not a gamble I'd be willing to make.
The stuff you linked is what they got from low rise sprawl and roads.
The green belts are a scam. They claim to protect something that doesn't need protecting (England is dominated by rural land that is not part of a green belt), at the cost of something that does (the quality of life for those inside the cities).
They don't have a good reputation at the moment. I know that modern towers are far better than Grenfell, but public and press opinion will be quite low for the next few months, may get issues with planning applications.
This feels much more telling than the title of this article.
The figure seems dubious given most landlords would balk at extending a lease to a tenant who's major share of income would be going to rent (high credit risk).
There's a jump required to get from the parents comment to yours.
Readers should still take the source with a grain of salt, like most sources. It helps to consider what biases the article/report/whatever is likely to have.
> 40 per cent of renters pay more than 50 per cent of their incomes on rent
If 60% of renters pay less than 50% of their income, that leaves an infeasibly high number of renters paying at least 80% of their income, to make an average of 62%.
Much as I think the high cost of housing and woeful tenancy rights are an absolute disgrace in the UK, I can't take these figures at all seriously.
After tax I shouldn't suppose median income across the UK exceeds £20k. An educated guess would suggest most people spend 40% of income on rent alone. Given the decline in real wages I would imagine living costs in total soak as high as 80% of after-tax income for many. No comment on the content of the article itself since others have critiqued it so nicely - the above is mildly informed speculation.
People buying are indebted for decades for more than 50% of their usually dual incomes and renters have equally large monthly outflows.
This is global economic rent seeking in action. Wealth is not used for investment as economists insist but speculation and asset inflation led by banks being the main beneficiaries. The consistency and pattern of sharp increases across global cities cannot simply be a coincidence.
This is only going to get worse because the politicians are beneficiaries.
One in three UK politicians are landlords:
https://www.theguardian.com/housing-network/2016/jan/14/mp-l...
One in three UK politicians has a significant percentage of their wealth dependent on rising house prices and rising rents which is why:
1. Help to buy schemes increase demand but not supply therefore increasing prices.
2. Large scale bulk buying of properties by dirty offshore money where apartments are not being rented out hasn't been stopped - its better to buy London property than pay for gold storage:
https://www.theguardian.com/society/2014/jan/31/inside-londo... https://www.theguardian.com/society/2017/jun/13/foreign-inve...
3. Train prices in London are the most expensive in the world, so many will decide to spend more on rent and have the extra hours per day back than travel and pay almost the same price once train costs are factored in:
http://www.bbc.co.uk/news/uk-england-london-39806865
4. Increased population growth into London due to political focus on the South East - 100,000 extra per year increasing demand :
http://www.dailymail.co.uk/news/article-3834825/London-s-pop...
5. Not enough homes are being built to satisfy a single year's needs let alone the cumulative shortage:
http://www.telegraph.co.uk/finance/property/news/12127141/Fe...
6. One in six Baby Boomers (who are the generation that has caused the property problem) intend on spending the inheritance their children could use on a deposit or buying their home, and therefore may remain renting:
http://www.dailymail.co.uk/news/article-3818803/The-baby-boo...
The most depressing thing is that its starting elsewhere in the UK now because people see the UK as a good place to invest, and its gone crazy in the best cities in other English speaking countries - Sydney, Melbourne, Toronto etc.
The biggest obstacle to buying a house is the requirement for a 10%, or even 5% deposit. 5% on a £300k house is £15k, which takes many years of trying to save while paying really high rents and seeing prices continue to increase.
Once you get that deposit, you'll be paying far less on the mortgage.
Many people buy using the 'bank of mum and dad' to get them out of the rent trap, or by living with mum and dad while they save for a deposit. This serves to increase wealth amongst the wealthy. Your daily mail link is blocked by my firewall, but if baby boomers are spending their money, that would be a good thing.
> Train prices in London are the most expensive in the world
And the most crowded. Any cheaper they'd be even more crowded. That said, a season ticket from Hastings is £448 a month, for 21 days of commuting on a 140 mile round trip, 15p/mile, not an unreasonable charge. From Tonbridge it's 18p/mile, reflecting the increased demand.
> The most depressing thing is that its starting elsewhere in the UK now because people see the UK as a good place to invest, and its gone crazy in the best cities in other English speaking countries - Sydney, Melbourne, Toronto etc.
Aukland's real estate prices was one of the factors that stopped us emmigrating.
> 4. Increased population growth into London due to political focus on the South East - 100,000 extra per year increasing demand :
The funny thing is many (not in London) people in the UK think 'immigration' is terrible, but don't even consider internal migration in the UK.