How do people today manage to get their foot on the property ladder today when soaring house prices far outstrip their salary and chances of a mortgage?
Take Cambridge, where average house prices are £277,812 – way beyond the means of the average worker.
One answer seems to be doubling up with a stranger to find your dream home, with co-buywithme placing ads along the same lines as a dating agency.
A couple of examples are Oliver, in his 20s, who has a deposit up to £30,000 and whose first choice is Cambridge, he is flexible and gets on with most people; then there is Kim in her 40s who is looking to buy a 3-bed house with her husband in Cambridgeshire, they have up to £5,000 deposit.
So even couples can’t afford a mortgage, they have to buy in with a stranger, what will happen in the next ten years? How will our kids be able to afford to buy somewhere?
Would you buy a property with a stranger? What would happen if you fell out, if you disagreed about the colour of a new carpet, sharing the housework? What other ways can you suggest for people to buy their first property, or should they not even think about it? What can government do to help people become home-owners?
Nathan’s experience is cited as a success story, he bought two properties this way, including one abroad with six co-buyers, and Steve tells how he bought a 3-bed flat in Crouch End with two co-buyers, and they are now buying other properties.
Schemes such as this one only address one side of the housing crisis and ironically make it more difficult for other people to get on the first rung of the property ladder as they support current house prices rather than help to drive them down!
The only long term solution is to build more properties on greenfield and brownfield sites.
Unfortunately, such policies penalise existing homeowners such as you Ellee whilst providing the next generation (including your children!) with homes to live in! Current policies transfer wealth from those without homes to those who do!
How many of the Bank of England’s Monetary Policy Committee are not homeowners!?!
Snafu makes some sound points. Although home-owning is a generally a social good, we do not have enough homes to won. Hence prices increase. It is the lack of supply at the moment that pushes house prices up.
We need to build more homes. Kate Barker’s report suggested we need north of 100,000 new homes each year; instead we are lcuky to get 20,000 built. So the planning laws need an overhaul.
Not to forget the reason we need these new homes is also becuase more people live alone and want their own place; this shift in behaviour in the last 10-15 years has had a huge impact on prices.
I agree that costs of home-ownership are now high; but it is not the government’s role to start subsidising people so I am glad the co-buying route they started down is failing.
A real government would build more homes and sell of council houses to release more property into the market.
CU
Re your quote: “A real government would build more homes and sell of council houses to release more property into the market.”
Where would people live who can’t afford to buy, are there enough rental homes, and aren’t they sky high prices too for those on limited incomes?
My son is getting married in April. He currently lives with his fiancee and her parents in their home in Twickenham. He is based in London, doing IT, but could be posted anywhere (he’s just returned from a year in Madrid). They want to buy a home but what chance? a flat is the best they can hope for around London. Further out, there’s the time and money for commuting. They’d love to come to Swansea but there are no decent jobs. It is horrendous. And that is the situation for a young man with a good salary. I have no idea what the answer is.
I know some people who have bought a house and then taken in lodgers to help pay the mortgage. That is preferable I would think to actually co-buying a house; that would raise no end of problems surely? But not ideal for a newly-married couple who need time and space to themselves.
One of the reasons that house prices are so high is that property is not allocated via proper market mechanisms. We are providing vast tracts of so-called ‘social’ housing for economically inactive people in precisely the areas where the economically active want to live. if these were available on the open market, they would be far more likely to go to the people who needed to live in that place most. I used to work in central London next door to a former nurses home, which had been sold off by the hospital. It is now a hostel for asylum seekers. These people are not working, cannot speak English and are unlikely to be economically active for several years. yet they are occupying prime central London real estate _ which could still be available to the nurses who now have to commute in over an hour to get to work. No wonder that many won’t accept permanent jobs at that hospital and it relies on expensive agency nurses, who never get to know their patients or other staff.
I could not buy a house with a stranger, even a very pretty stranger with similar interests, etc. I am a very private person in the sense that I value my solitude. I am gregarious and outgoing as well, but by my choice in terms of ‘when’. Just wouldn’t work for me. Otherwise, I can suggest no answers for home acquisition for younger people especially.
Ian
Depends, Ellee. Your other commenters have a point but it comes down to if it’s for you or if it’s an investment.
Buying a house with a stranger is only a little riskier than two unmarried people doing the same. They can fall out just as much.
I was going to leave a short answer, as in, No.
But then I remembered, Everyone does it.
Get a house with a girl you thought you knew, you discover the night after you moved in, it was a stranger.
Can everyone see what I can ?
This isn’t the 4th richest country in the world – utter nonsense.
The so called ‘housing boom’ has heralded an erosion in living standards for most people and this seems to prove it.
If I were starting out again on my wages (well above median) I would be unable to afford to buy the modest house I live in now; infact, a decent dual income would not even cover it.
I would remind any first time buyer that a house’s value can go up and down like any other commodity and would certainly feel nervous about entering into an arrangement with a stranger for a variety of reasons – LEAST of all the contractual complexity.
I am dubious about exponential growth in property values because:
– Lenders must surely be running out of new tricks to coax new buyers into the market. What next ? The 150 year mortgage ? (Yes this has been proposed*)
– with suppression of average wages (immigration/outsourcing), stealth taxation, energy costs, higher interest etc, there is a palpable contraction in liquidity and this must surely begin to impinge on domestic spending ergo employment.
What would I do ?
Probably stay at home with Mum & Dad if I could, make some sort of personal investment plan – encourage my parents to sign over their house to me as quid-pro-quo for my care of them in dotage. This certainly seems more surefire and honorable than passing on a debt to my kids.
I’d probably think long and hard about staying single and childless and living it up if I could.
It would seem a lot of people are doing exactly this. But make no mistake, this is a regression in living standard. The upside is that it may lead to more family cohesion.
Property and so called ‘low inflation’ has been Nu Labour’s biggest con-trick – a distraction while they were busy taking away our liberties.
I think our children are going to hate us. And I suspect the poor buggers having to consider this nonsense do already.
I only managed to buy my first house in Cambridge because it was a timber-framed Barrett house – a joke at the time, but remember location, location, location, and it was in a fantastic area. They lent me the deposit too and included fitted carpets, a washing machine, oven and fridge and paid my legal expenses. They made it so easy. So I took a lodger (no bad experiences to report there), I just don’t know how people manage today to buy a home. And I wasn’t on a high salary.
Jean-Luc and Joe are very cynical about women, oh dear. I think Kevin has summed up the position I would be in if I was starting out again today, my present salary would nowhere near be able to meet a mortgage on a house costing £270,000.
Joe would not be a cynic if he wasn’t talking from experience.
I learned the hard way. I settled down at 22 with a my then partner (described on your post yesterday) in a tiny two bedroomed house that cost us 49,000. I say two bedrooms, but one was a broom cupboard by rights. You know the rest already.
Five years on, I still rent, as do most of my close friends. Neither of us are poor. But unless you go joint- and I’ll never do that again- you’re priced out of the market. I also have the problem that around 30% of my earnings come from commission, which doesn’t count in a mortgage application. So I and people I know live like E-K would think long and hard about.
I pay my bills and spend the rest on recreational activities.
Nn, I wouldn’t buy a house with “another” who was a stranger to me or even someone who wasn’t but that is just me – I have come to value my private space too much! I can understand others doing so to get on the property ladder and good luck to them, but it is sad that they have to consider this.
This is the legacy of the lack of council housing. With council housing there was always an alternative to buying, and council housing set a base price for rentals.
Also the key worker schemes are not practical. They are all “small” properties, meaning key workers get a foot on the ladder, but the step up to a three of four bedroom house is too big a step, meaning they cannot afford to leave the key worker housing. Is it any wonder birth rates are falling ?
If there was a much greater supply of housing Ellee then prices would fall and people could afford to buy.
People queue up to tell you it’s a simply supply/demand thing the argue whether immigration, family break-up or lack of building is to blame. Yes, supply and demand are the fundamentals but let’s look a bit deeper into whats causing it.
DEMAND
1) Immigration
2) Family break-ups
3) Low confidence in the financial markets following the dotcom bust, 9/11, enron etc, war on terror, means small investors look elsewhere
4) Expectation created by people constantly jabbering on about the property market, ‘house porn’ on TV luring bored housewives into pestering their husbands into getting involved, generally people expect big returns and are willing to borrow well beyond the traditional 3x joint income to increase their market share
5) Low interest rates and self cert mortgages meant not long ago you could borrow a couple of hundred G’s at 6% and invest it in a market growing at 20-30% making more than you were from 9-5, no bank would have lent you an unsecured £1million at mortgage rates to whack in a hedge fund when the markets started falling and hedge funds were making up to 30% per annum, propety, YES SIR!
6) The spiral of more people getting into buy-to-let means less-to-buy and keeps people renting, plus more students every year keeping people wanting to buy to let.
7) Snazzy new property companies employing snazzy salesmen offering 10% discounts for investors to buy second investment homes before finished
8) Some investors, given the 20-30% rises and low interest rates, leave investments properties empty to avaoid spoiling them
9) New-Lab give a council tax discount on empty properties encouraging the cycle even more
SUPPLY
1) Lack of house building
2) Non-punative taxes on second home ownership.
SOLUTIONS?
All out war against Iran and $200 barrels of oil?
Screw human rights and the EU, round up all these immigrants and boot them?
ANYONE GOT A BETTER IDEA?
I dont find the idea of co-buying a house amusing. Home is something very personal and we would like to decorate and maintain it as per our personal tastes.
But if the house is the second one and purchased for commercial purpose then we can go for co-buying.
“Take Cambridge, where average house prices are £277,812 – way beyond the means of the average worker.”
I’m suprised it’s so *low*. Remove Abbey, Arbury, King’s Hedges and Romsey from the City and the price probably goes up to £7-800,000!
Stephen L puts together a pretty comprehensive list of factors – excessive immigration being the most notable. A great trick by Nu Lab to satisfy simultaneously big business AND ordinary householders through an influx of cheap labour and increased pressure on housing.
It’s of no wonder Nu Lab sat back and let it happen, they did so with a conspiratorial nod and wink to big backers whilst making fools of the house owner.
I don’t agree that house building should be encouraged to meet ‘demand’ especially when you look at SL’s list and see how much the problem has been affected by bad policy, hype and artificially generated need.
What does large scale house building do ? It changes the aesthetic character of our country entirely, therefore it must reflect a psycological change in our national character, neither is good in my reckonning. For example:
My local theatre group is being closed down as they can no longer afford to maintain costs (regardless of our support) – instead new flats are in prospect for its site. Same too for the local lido. Pray tell, on what level should I rejoice in that ? My positive equity ?
If I were so deluded as to be excited over the notional value of my house then perhaps I would be wise to think again:
– The character of my area is about to be diminished by over-building.
At the same time,
– my equity will be reduced because supply/demand factors will be tipped in favour of buyers.
I really wish that Nu Labour hadn’t happened.
Perhaps I could have summarised by saying rather simply that since 1997 this country no longer feels like home to me any more.
If interest rates rose to 10%, house prices would collapse to an affordable level! The lure of five times salary mortgages has driven the recent boom to unsustainable levels.
For many young people, it is actually cheaper to rent than to buy, especially if they are wishing to move again in a couple of years given stamp tax, solicitors fees etc.
I am a real estate auctioneer on weekends here ( Australia) and I can say that buying a home this way is full of pitfalls. Contracts, both in terms of property and loan MUST be drawn up carefully. How one determines what to do if the other person wishes to sell, etc.
A real estate investment is important, but perhaps to buyer cheaper and place tennants in whilst you rent somewhere, Or even consider buying OS.
Sydney is a similar market to those cities eg London,New York and Paris. Where demand outstrips supply, lack of land releases and new development.
We now have a rental shortage because investors have left the market to work the stock exchange.
Electro-Kevin said: “Perhaps I could have summarised by saying rather simply that since 1997 this country no longer feels like home to me any more.”
William Hague understood this when he said: “Come with me, and I will give you back your country.” _ unfortunately, people weren’t yet ready to hear it _ at least not from him. I knew exactly what he meant, but, having done a Conservative street stall on Tottenham High Road both the week before AND the week after he made that speech, I can tell you it went down very badly amongst black people. We need to find a vocabulary of Englishness which is not read as racist. (Sorry, Ellee, for going so far off-topic!)
I live in a totally white area – it doesn’t feel like home. It really isn’t our fault that our language is misconstrued often mischevously.
I remember the Hague campaign (I liked him) “Save the pound.” is all many heard.
Hello there, my name is Richard Cohn and I’m the founder of SharedSpaces.co.uk. We pioneered the co-buying sector in the UK and I have to say that you all have completely valid points.
We live in a society that tells us we should own a property as soon as possible and that’s allot of pressure to put on a population that is now less able to afford to buy than ever before. It is not right that we have to blow all of our savings and most of our monthly income just to own the roof over our heads, and there absolutely is so much more that the Government could and should be doing to help those who are struggling; the first time buyers and the key workers that support us in our lives (nurses and teachers, etc) but are not paid enough to afford the luxuries of the rest of us.
But then again we have to face some facts too. A property slump or correction would help the first time buyer, but hurt the rest of the population as they slipped rapidly into negative equity. The property market is a massive cog in the British economy, remove the momentum from it and the rest of the economy would suffer.
First time buyers today have to compete with buy-to-let investors, off-plan investors and couples looking to buy the same properties as them. We created the concept of the “Co-Buyer Network” to address this balance, to give those on their own at the bottom rung of the ladder the chance to compete by finding others like them to buy with to afford the home of their dreams. To those who have said that they would never buy with a stranger I’d say, “YOU’RE SO RIGHT”. Never ever consider buying with a stranger. If you meet someone through SharedSpaces.co.uk or any of the websites that have been launched since you need to take your time to get to know them, and by the time you decide to buy with them they should be either a friend or a business partner in the buying experience.
Also, never consider buying with anyone unless you have a “deed of trust” drawn up. It’s a simple legal document that’s as individual as the people it serves and sets out your legal responsibilities to one another as well as the percentage of the property that you each own.
There is so much more that you should consider but I wont bore you with that here. If you’re interested then have a look at our site. Co-buying is a valid option now and it could just be the difference between you owning a property and you spending the next five years wasting money paying off someone else’s with your rent.