Home ownership Issue 17

Buying your first home

The idea of getting my foot onto the first rung of the property ladder seemed an impossibility just a year ago. And that is the same feeling a lot of people my age (early ’30s) feel when they think about owning a property at some point in their lives. Why? Because house prices are higher than they once were. The cost of living is continuously increasing. We’re paying extortionate rental prices (£900 for a two-bed house in Southampton!) and we’re struggling to save a large sum of money required for a deposit. 

“The chances of a young adult on a middle income owning a home in the UK have more than halved in the past two decades. Middle-income young adults born in the late 1980s are now no more likely than those lower down the pay scale to own their own homes. Those born in the 1970s were almost as likely as their peers on higher wages to have bought their own home during young adulthood.”

The Guardian

To rub some salt to the wound, we’re paying our landlords an amount that would happily cover our own mortgages, sometimes twice over! (If we were able to have one.) And our bank statements prove that we can afford our bills, that we always pay on time and that we are sensational at living on a budget to accommodate all of the costs that come part and parcel of living life! We’re also pretty savvy with keeping our credit score rating at fair, good or excellent! 

“The Institute for Fiscal Studies said house prices in England have risen by 173% over two decades. But average pay for 25-34 year-olds has grown by just 19% over the same period.”

BBC

Some of the top struggles when it comes to homeownership

Rising property prices

Over the last few decades, house prices have risen astronomically. Over the last 20 years, the average house price in the UK has increased by more than £150,000. According to the House Price Index ‘In December 1998, the average property house price was £72,469, two decades later it stands at £230,630.’

When you then compare wage growth to house prices, it’s obvious to see why so many of us are stuck as renters. The average salary stands at £27,000 meaning that the average worker would have to borrow more than 8 times their salary to get on the property ladder. Ludicrous!

Deposit

The first stumbling block for many (myself included) is the large deposit required to get onto the property ladder, and naturally, as property prices have risen, so has the amount of deposit required. 

Even with the new ability to secure a home for just a 5% deposit, £10 – £12,000 is still a large sum of money for someone to get together.

The positive spin? There are now several helpful mortgage options to help with this problem, some of which don’t require a deposit at all. 

Rental Prices

And then there is the problem of rising rental prices. Over the last decade, rental costs have increased and this has made it a lot harder for tenants to put money away to build up a deposit or savings for their own property. According to the Homelet Rental Index “In 2018, average rent across the UK increased by 1.5%. The average monthly rent now stands at £921 per month, though the amount varies geographically.”

Mortgage prices may be cheaper than rent, but tenants cannot make the change from renting to ownership, leaving them trapped.

Going Solo

And lastly, one that cropped up a lot in my discussions with friends and colleagues about this subject, what about those wanting to go it alone? That aren’t in a relationship or married? 

Having two people contributing to a deposit, mortgage, utilities and bills makes it a lot more manageable and feasible. Leaving those going solo out in the cold. Shared ownership options, getting on the property ladder with friends or housemates or taking on tenants of your own could be the answer. But it doesn’t make the whole process any easier. 

So how do you become a homeowner for the first time in this day and age?

I asked my Instagram followers this very question because I was intrigued. How are people my age doing it? And are there ANY people doing it on their own without financial assistance? 

Most of the people that got involved in the conversation answered NO to ‘Do you currently own your own property.’ 100% of those people answered NO to ‘Do you think you will get onto the property ladder in the near future?’ 

Those that answered YES to owning their own property went through to the next question. ‘Did you get financial help?’ The majority answered YES. How help was acquired included family/friends gifting money for a deposit, coming into inheritance money, or by moving in with parents/friends and living rent-free whilst they saved for the deposit amount. And those that answered NO to ‘Did you get financial help?’ – They told me stories of their tough years of saving, scrimping and scraping, budgeting and living without a social life. Not exactly the easiest way to go about it. 

All quite extreme ways to get onto the property ladder don’t you think?

  • 57% of aspiring first-time buyers feel ‘hopeful and confident about their chances of getting on the property ladder, with the majority of respondents planning to buy their first home within the next four years (by 2021)
  • However, for 90% of respondents, this means that by the time they buy their first home they’ll be years older than they expected to be, creating a missed generation of first-time buyers who are now into their mid-40s
  • 72% of all aspiring first-time buyers expect they’ll need additional support through gifted deposits and the Government’s Help-to-Buy schemes, on top of years of saving, in order to afford their first home.

Stats provided by myhomemove.com

Taking those tentative steps with the help of the 5% deposit scheme

When I read about the possibility of only needing a 5% deposit to get onto the property ladder I felt hopeful. For the £253,000 house I had my eye on, my husband and I only needed £12,600 to stump up for a deposit. Not a small amount of money, don’t get me wrong, but much more manageable than £50K plus. Working together with our family, we got assistance pulling the deposit amount together, and thanks to their generosity at the age of 31 I am about to be a homeowner for the first time. The ££££’s don’t just stop there though. We also needed to use our savings to cover the extra thousands of pounds required to cover the reservation fee, legal costs, customisations on our new build, moving costs and lots more. 

In order to get on the property ladder yourself, it’s worth taking a look at the checklist of items in the link below. This way you won’t be faced with any ‘hidden’ costs or costs you hadn’t been aware of or thought about.

Below I also share links with information about the help to buy scheme. 

As a final note, some of you may have decided that owning a house just isn’t on your tick list or you may have come to terms that it just isn’t a possibility. And that’s okay, you’re not alone. The idea that we have to have marriage, kids, car, house… all ticked off our list in our lifetime or by a certain age isn’t something you have to live your life by. And not everyone is in the position where they can ask for financial help or support. That being said, there is a lot more that the government could be doing to help people onto the property ladder; or at least tackle the issue of rental costs.

Useful Links

moneyhelper.org

Help to buy scheme

Affordable home ownership schemes

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: