The First Time Buyer - How do they have it really?

thedalmeny

There seems to be allot of articles about on how the typical first time buyer is essentially screwed, left with only the bank of mum and dad and decades saving for their first property..... Personally, i think people have got it pretty good in general...

I set out to find out the following information

Based on the average salary for a region;

• Considering rent and cost of living of their region, how much could they typically save per month
• How long would it take to save for a 10% deposit for either a flat or terrace property in their region
• At an average interest rate of 5%, what would the mortgage repayment be as a percentage of their net income

In order to achieve this, i used the following sources;

• ONS Annual Survery of Hours and Earnings - 2012 (http://www.ons.gov.uk/ons/rel/ashe/annual-survey-of-hours-and-earnings/2012-provisional-results/stb-ashe-statistical-bulletin-2012.html#tab-Regional-earnings)
• LSL Buy To Let Index - June 2013 (http://www.lslps.co.uk/documents/buy_to_let_index_jun13.pdf)
• JRF Standard Of Living Report - June 2013 (http://www.jrf.org.uk/publications/MIS-2013)
• Land Registry Average Price - June 2013 (http://www.landregistry.gov.uk/public/house-prices-and-sales/search-the-index)

Base Data Extracted;

• Excel Sheet (http://www.filedropper.com/analysis_2)

Charts (Only Flat shows in example, as terrace prices in all regions are pretty similar).;







Conclusion;

• It is relatively easy to achieve the deposit required in all areas with the exception of London and the South West.
• A mortgage is perfectly affordable in all areas with exception of London, the South West could narrowly be considered affordable.

somethingcorporate

Nice analysis, those graphs did give me a bit of a chuckle for london - only 17 years to save for a deposit and then after that it takes only 85% of your net monthly income! Bargain

thedalmeny

somethingcorporate wrote: »

Nice analysis, those graphs did give me a bit of a chuckle for london - only 17 years to save for a deposit and then after that it takes only 85% of your net monthly income! Bargain

Hehe, there seems to be literally no advantage in life to living in London or the South West on average.

There used to be a vague myth that living in London brings higher earnings, which would it turn offset the higher cost of living to the point where you'd essentially be better off.

In reality though it appears the average Londoner comes out with the same disposable income as everyone else when renting, yet has an absolute mountain to climb in terms of home ownership.

ukcarper

thedalmeny wrote: »

Hehe, there seems to be literally no advantage in life to living in London or the South West on average.

There used to be a vague myth that living in London brings higher earnings, which would it turn offset the higher cost of living.

I suppose the answer is to live in the South East and commute into London as thousands of people have done for the last 50 years

[Deleted User]

Any analysis that says it's going to take more than 5 years to save for a deposit is intrinsically incorrect as it can't take account for changes in salary or the housing market

So i have to laugh at the analysis that firstly - someone would be aiming at a 345k flat as a FTBer, and also that it would ever take 17 years to be able to save for that.

the_flying_pig

i'm not going to gripe too much since the OP has done some very good research, but:

thedalmeny wrote: »

... Personally, i think people have got it pretty good in general...

the big, big, problem with this, and it's the exact same problem that blights all the usual suspects' posting of links to a whole bunch of supposedly decent pwoperdees that are supposedly affordable at today's prices is as follows:

• In a nutshell, you're answering the wrong question.
• You're basically comparing how difficult it is to buy against, well, what you're basically trying to do is see if it's feasible or not given certain assumptions.
• But the only points that people complaining about the cost of housing are really making, really, is that it's a lot more expensive than it used to be in this country* and it's a lot more expensive than in other countries.
• And if, by your analysis, it's feasible now in the UK then by definition it used to be a lot more feasible in this country and it's currently a lot more feasible in other countries. Many people, me amongst them, think that this matters.
• No-one's saying that it's impossible if you earn well, live frugally, and save for a long time, but that's not the point. In a society that expects increasing or at least static living standards, complaints about the cost of housing make a lot of sense.

* - doing something other than taking a 'snapshot' that only considers the ultra-short term cost of servicing a mortgage given the anomalously low interest rates that prevail today. we're talking about the total amount of debt that a person needs to get into.

thedalmeny

ringo_24601 wrote: »

Any analysis that says it's going to take more than 5 years to save for a deposit is intrinsically incorrect as it can't take account for changes in salary or the housing market

So i have to laugh at the analysis that firstly - someone would be aiming at a 345k flat as a FTBer, and also that it would ever take 17 years to be able to save for that.

I choose not to include any form of inflation in the analysis, mainly as house prices are likely to outstrip wage inflation over the coming years.. It seemed almost pointless.

[Deleted User]

thedalmeny wrote: »

I choose not to include any form of inflation in the analysis, mainly as house prices are likely to outstrip wage inflation over the coming years.. It seemed almost pointless.

Don't forget the 11k of stamp duty that the Londoner would also need to spend 5 years (@175 a month) saving for.

LT;DR - places with high population density have higher house prices. Genius!

thedalmeny

the_flying_pig wrote: »

:

• In a nutshell, you're answering the wrong question.
• You're basically comparing how difficult it is to buy against, well, what you're basically trying to do is see if it's feasible or not given certain assumptions.
• But the only points that people complaining about the cost of housing are really making, really, is that it's a lot more expensive than it used to be in this country* and it's a lot more expensive than in other countries.
• And if, by your analysis, it's feasible now in the UK then by definition it used to be a lot more feasible in this country and it's currently a lot more feasible in other countries. Many people, me amongst them, think that this matters.
• No-one's saying that it's impossible if you earn well, live frugally, and save for a long time, but that's not the point. In a society that expects increasing or at least static living standards, complaints about the cost of housing make a lot of sense.

* - doing something other than taking a 'snapshot' that only considers the ultra-short term cost of servicing a mortgage given the anomalously low interest rates that prevail today. we're talking about the total amount of debt that a person needs to get into.

I can see some of your points however;

• The interest rate used in my analysis is 5%, historically an average.
• If you look the countries Price to Income ratio for property but then really drive into the details you'll see that London massively unbalances the statistics.

If you take away Greater London and parts of the South West then the U.K compare to other European countries in terms of Price to Income, isn't to bad

The problem we have is London is the second most city to buy property in the world, this in turn has a disproportion affect on any statistic that views the U.K as a whole. I think my analysis shows that also.

Loughton_Monkey

Basically, what I glean from this is that if I were a single person, living rent free at home, and earning £60K, I could probably rustle up the deposit for a house in a couple of years.

If, on the other hand, you were married with 2 kids, living in rented accommodation, earning £30K, it might take you 99 years to save for a deposit.

On average, therefore, it takes us both 50 years.

Far better to say "Some people can afford to buy. Some people can't."

chewmylegoff

thedalmeny wrote: »

Hehe, there seems to be literally no advantage in life to living in London or the South West on average.

There used to be a vague myth that living in London brings higher earnings, which would it turn offset the higher cost of living to the point where you'd essentially be better off.

In reality though it appears the average Londoner comes out with the same disposable income as everyone else when renting, yet has an absolute mountain to climb in terms of home ownership.

The London figures hide a massive divide between professionals earning loads and low paid workers living in borderline slums. Basically if you are in the first bracket then the "vague myth" you refer to is absolutely true (I earn at least double what I could anywhere else in the country for instance) but if you fall into the latter group then you are screwed and probably earning NMW.

Because home ownership in London is so low (only about 1/3 of properties in inner London are owner occupied for instance) and large swathes of inner London residents are unemployed or on low incomes living in housing benefit sponsored rentals, it skews the figures significantly. If it was possible to get more granular detail then I expect the stats would show it is more like 6-8 years of saving for anyone who actually has the potential to ever own a house in London (I.e. the first group in the example above) and infinity years for the second group.