How do people afford expensive houses

Baxter100

Right place, right time.

Look at this house for example - sold for £62,000 in 1997 and is now worth £350,000+ less than 20 years later. It's value has increased x6 in 20 years.

Whoever bought that house probably saved 1/2 years to get a 10% deposit (or maybe didn't even have to). If they had stayed there they would now benefit from having a tiny mortgage on a £350,000+ house, and given that interest rates are so low the monthly mortgage repayments would have been fraction of what they were when the house was first bought.

Compare that to someone trying to buy the house now, who would need to save £40,000 to get a deposit and take out an enormous mortgage. Interest rates can only go in one direction, and when they do the value of the house will be coming down and the monthly repayments going up. Just can't do it...

Ithaca

For us it was a combination of luck, hard work, sensible decisions, sacrifices and (significantly) parents in a position to help us get on the ladder (which they were able to do via a similar combination of luck, hard work, sensible decisions and sacrifice).

We bought our (hopefully) "forever" house for £470k last summer at age 37.

Our first house was a two-bed terrace in the midlands which we bought in 2007 for £172k at age 30. We needed a £20k gift from my parents and paid £750/month on a £152k mortgage after buying just before the crash. Our household income was £32k and we paid £800/month childcare from 2009.

So no foreign holidays, no new cars, TV was an old 32" CRT etc. But we still had lots of fun.

In the intervening eight years our household income has increased from £32k to £95k (due to my wife qualifying as a doctor and my career progressing reasonably well), although our childcare costs have gone up to £1100/month since child #2 arrived in 2013. We also paid down a £152k mortgage to £137k and the house rose in value by £60k once the market picked back up (although the house we bought had a similar percentage increase).

The new house cost £470k and we have a mortgage of £350k with a low-ish interest rate so between that and childcare we pay out £2300/month before we can even think about any other bills. We had approx £94k equity and savings made up the rest.

So still no foreign holidays, no new cars, TV is still the same ancient 32" CRT. But we still have lots of fun.

We made some good choices - I chose a career in IT, my wife retrained as a doctor, we moved away from the south east. We worked hard - trying to juggle small children and a medical degree / hospital work patterns was horribly tough but we got there. We made (and still make) sacrifices - camping holidays rather than flights to Spain, a larger-than-originally-hoped-for gap between child #1 and child #2, that ancient 32" CRT TV. But without parental help we probably wouldn't have got onto that first rung of the ladder.

I honestly think that the flow of money from the Bank of Mum & Dad is such a key divider for people trying to buy houses, esp. in their 20s and early 30s. Almost all of my peers have had some form of financial help and without it we would have really struggled to be where we are now.

ukcarper

saverbuyer wrote: »

only doubled?

Yes and they double between 72 and 76 in fact they more than quadrupled in the 70s, but there was high inflation including earnings inflation so it's not as bad as it looks.

[Deleted User]

For us, the key was progressing through a career. My salary has pushed up by £35k since we bought our first home 9 years ago. The wife has risen a bit too even though she's now part time. We're both mid-30s.

So, combine salary rises with the increase in house prices then we've managed to move from a house that cost £200k in 2006, sold up, moved to a bigger house, and now this one is worth about £420k. That's a jump from £20k equity to about £190k.

When the interest rates dived initially, we saved a massive amount of money by not re-mortgaging and staying on the SVR until it was time to move house. I wouldn't be surprised if a lot of people are still benefiting from this.

We haven't scrimped and saved much. Had quite a few holidays and brought up two little boys. Our biggest sacrifice is only having 1 car. Out biggest saving is on childcare; since we moved intentionally near my wife's parents. We've got it down to about £440 a month now and it'll vanish in a few months.

Most people buying a £400k house are either selling another house to get there or have had an inheritance. A £400k house isn't even an expensive one here (SE, within M25 but not in London)

onlyroz

Luck is a big factor. My husband bought a flat in west London for £45k in 1995. We sold it in 2007 for £200k and then moved out of London and bought a 3-bed semi for £250k. After doing a loft conversion, and after house-price inflation, we reckon it's now worth about £400k.


If we were starting out today, even on good salaries, I don't think we'd be able to afford our own house.

ukcarper

saverbuyer wrote: »

This helps immensely.


A few trips to Prague and a 600 mobile phone pale in comparison to the massive deposit required and average house prices moving 10% in one year. If the house you want to buy has gone up 2k in a month, the £30 gym membership isn't going to make that much of a dent. Especially when average salaries only go up 2%.


Well done, you bought. Some people do have the folks to help. Not everyone in London makes good money and really if you were born in the 50/60s you were really really lucky. Good pensions and cheap houses.

Prices to earning in the early 2000s were similar to those of the 70s and 80s in fact they were higher in parts of the 70s and 80s so I would say the people effected are those born in 80s and 90s.

johannalf88

I am guessing it is just work hard, save hard!

We are hopefully exchanging soon on a house over the threshold, first time buyers in London. My husband is a city solicitor, and I work for what used to be Probation, (so a government type salary for me!) Both 28, no help from parents, or inheritance. Had to save for ages to afford a 5% deposit and stamp duty. Currently we pay our rent, then put over our rent again in savings. If it wasn't for my husband's larger salary there would be no way we could afford anywhere in London.

moneyistooshorttomention

PasturesNew wrote: »

Sleep with somebody rich. You do have to be attractive to get a house this way though, so that can be a problem for most.

:rotfl::rotfl::rotfl:and minus any ideas about doing things like "marrying for lurve"....:cool: (or, as I would phrase it, "All the right reasons").

moneyistooshorttomention

lippy1923 wrote: »

I would say living within your means. It will get you an expensive house in the end if that's what you want to achieve in life.

I wish....

I guess there is still time to go though - I'm in my 60s. Wondering if "living within my means" will mean choice available to buy better house in my 70s/80s????

So - no I would disagree with that. Things like low salary and/or dear city and/or being single mean that no amount of "living within means" will achieve an expensive house and it can still be downright difficult to even get a (comparatively speaking) cheap one...

Person_one

mumps wrote: »

My DD is about to buy her first house with her partner, she is regretting alot of what she has spent money on. e.g. She is on her 3rd iphone, she has had 4 laptops, decided to rent a flat in her last year at uni rather than share, she has had holidays to India, Africa, Australia, Russia, Egypt, Morocco, Italy, New Zealand, Czech Republic, Poland, Austria, France and I can't remember the rest. She has so many clothes she struggles to get them in 3 large wardrobes. She learned to drive at 17 and bought herself a car while doing A levels. All her choice, all perfectly valid choices but she would have tens of thousands more for her deposit if she hadn't made those choices. She is mid 20s by the way. She has also had the gym memberships and never actually used them and spends what seems huge amounts of takeaways as she doesn't want to cook.

At her age I obviously hadn't had a laptop or mobile, they hadn't been invented. I had been on one foreign holiday, didn't have takeaways, hadn't learned to drive let alone had my own car but I did have a house.

Owning a house isn't everything. If I were her I definitely wouldn't regret any of that travel, that has its own value that doesn't have a monetary value. Learning to drive at a young age is pretty sensible too, and if she's only in her mid twenties she still has plenty of time ahead of her.