All we hear nowadays is that we’re never going to get our foot on the property ladder, we’ll be trapped in the cycle of renting until we reach retirement. But has Britain really become an impossibly unaffordable property market, or do we have the power to control our luck? We’re delving into the details to find out if our dreams of becoming a homeowner are at all attainable.
As we all know, London and southeast rental and property prices are vastly higher than anywhere else in the UK, and although income is also higher, it’s not as relative as we may think. According to the BBC, 30% of your income should be spent on rent, however, in London, this figure is closer to 50%…bad luck for Londoners. And it’s no different when it comes to getting on the property ladder, with housing in this area consistently way above the national average of £229,431 (as of May 2019). Check out this UK property value heat map to discover the cheapest locations to get that first step onto the property ladder. Be prepared to make a big move!
Whilst Help to Buy ISAs are a positive and helpful initiative for first-time buyers, they do have their limits. For instance, the best of these accounts, recommended by the Money-Saving Expert himself, Martin Lewis, is the Lifetime ISA (LISA). This account provides you with a 25% bonus on your savings which sounds great, however you can only save a maximum of £4,000 per year (effectively £5,000 with the bonus), meaning that it would take you an average of nine years to save enough for a 20% deposit on a house (national average)! By the time we achieve our first graduate job and begin saving, say around the age of 22, we’ll be 31 before we can afford to set foot on the property ladder…
Not everyone is lucky enough for their talents to lie in high paying sectors, so the majority of entry-level grads find themselves earning a 23,000 or less salary. When you bear in mind that this equates to £1,917 per month and you’re having to fork out around 30% of this figure to pay rent and more for other living cost expenses, it doesn’t leave an awful lot to play with. In order to be able to buy a house within 5 years of saving, you’d need to be putting aside around £682 per month (with the LISA and additional savings) – a just about doable figure if you don’t live an extravagant life. So be ambitious in your work life because a high salary, along with a low renting and property price postcode, are the keys to making the leap from flat renting ground to the first rung on the property ladder.
Starting your professional life with an exciting new graduate job, of course, it would be ideal to have a pad to yourself to really feel as if you’re ‘adulting’. But the reality is that by sharing with just one or two other people, your rent will be practically halved according to this BBC article, meaning you can pop the remainder in your LISA! With lifestyle decisions such as this, you’re creating your own luck, as if it means you can rent for a shorter period of time but with companions, is it really that much of a sacrifice in the grand scheme of things? If you work the system right, it doesn’t seem all that impossible to be able to afford a house before you turn 30!
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