Faced with the question, “Can I afford to buy a house?” the answer staring back at many young people is a big, fat "No". We are on the renting-for-life rails and even have the honest-to-God worst nickname in history: Generation Rent. Basically, we’re known for nothing other than giving our landlords lots of money and our complete inability to get on the housing ladder. And it's not even our fault. Not our fault at all.
The average price of a house in the UK is an eye-wateringly expensive £215,847 (in London it pushes £500,000), and is projected to rise to £270,000 in the next few years, which means the number of people able to buy is reducing quickly. In 2016, housing charity Shelter released information stating that by 2020, first-time buyers will need a household income of at least £64,000, along with a £46,000 deposit, just to buy an “average home”. For most people, this is nigh on impossible.
The truth is that the way to buy a house is to save, and save hard, and even then, many of us will remain renters. Some will struggle to get a mortgage because they’re one of the UK’s 1.9 million freelancers; yet more know that the most they’ll ever earn is £30,000 – making that necessary household income of £64,000 pretty damn laughable.
Here's how the millennials who are buying houses are managing to do it.
Winning at auction
Auctions are where hard-to-sell houses go on the market. They tend to be real wrecks, or places where a renovation job became too expensive and the house is missing a ceiling. Occasionally, auction properties might be hard to sell because they only have a few years left on the lease, or because something awful happened there. Whatever the reason, if you don’t mind weird backstories or strange cosmetic details, and have your eyes firmly on getting a bargain, then for some people, trying an auction can be a good move.
Omar Hadi, a conveyancer at Gorvins, says that yes, for those with a deposit, it’s absolutely possible to snatch a bargain at auction. He offers a word of warning, though: “It’s easy to get your hopes up when the guide price for the property is much lower than the market average. But the reality is very few places go for the guide price, so stick to your guns and don’t get caught in a bidding war.
“If you purchase the property well beyond your budget and you can’t front the deposit upfront, you may even find yourself being sued by the vendor.”
To buy property, you’ll need to put down at least 10% of the total cost of the property if your offer is accepted.
However, getting a mortgage for a seriously run-down place can be super-hard, so you might be asked to buy it all at once. This works well if you have a very small income but a large deposit. Erm, which we've all got stashed away for a rainy day. Right, guys? Right.
Rightmove has a list of properties at auction, while Auction House is more specialised.
Buying with friends
Nancy Parker knew she couldn’t afford to buy a house. “I was living in London, renting, and earned £27,000 a year. Anywhere else, I might have a shot at somewhere really small but in London, no chance.” Out of the £1,650 she took home each month, more than 60% of her salary went on rent. “All my friends used to get really excited about payday. Payday was just the day I sent £950 to my landlord and British Gas, and my monthly budgeting started again. I felt like I couldn’t catch a break.”
But then Nancy’s best friend Lily said she’d been saving and had enough for a deposit. However, she also earned less than £30,000, and was single. Together, they pooled their savings and, thanks to their joint income, were able to afford a £250,000 two-bedroom flat in New Cross, southeast London.
“Obviously, it’s a bit more risky if one of us gets a boyfriend and we decide to move in or out with him. But honestly, she’s my best friend, and we’ve both been through lots together, so I’m fully prepared for us to work it out if that happens.” Any tips? “You need to be really honest about your intentions from the start, and about how much you’ll split the price of the house by when you come to sell so there are no nasty surprises.”
Nancy only spends £650 on her mortgage each month. “Finally it feels like I’m making an investment in my future.”
They're buying with Mum or Dad
You know this is happening. We all know this is happening. A recent report found that parents will lend their adult children £6.5bn in 2017. If the Bank of Mum and Dad were a real bank, it would be among the top 10 mortgage lenders in the country.
This is how it works: Remember at university, when you needed to convince your new landlord that you weren’t going to trash the place and you had to get your parents to reluctantly sign a form that said if you set the house on fire, they’d be liable? Well, you can do that when you buy a house, too.
Being self-employed can make it hard to get a mortgage, which is where the guarantor mortgage comes in. Cilla Dugdale agreed to be the guarantor for her daughter: “I took a bit of convincing, but ultimately I trust my daughter to pay me back. She freelances and works in a badly paid profession, so she’ll never earn more than £40,000 in one year, but she’s managed to save her deposit. I know I can rely on her to always make the mortgage repayments no matter what, and we have a good relationship, so it felt like a good idea.”
Sounds like the dream, so how does it work? For many guarantor loans, the borrower (you) still needs a deposit but, in some cases, banks offer 100% guarantor mortgages where, instead of you giving the bank all your hard-earned cash, the guarantor (mum and dad) uses their house as the deposit. The only downside to this, obviously, is that if you default or something goes tits-up, your parents could end up homeless. Which would be a bummer. Nationwide and Leeds Building Society both have reputable guarantor options.
They're living in communes
Co-housing, or commune-living, grew in popularity with the 1971 founding of Christiania, Denmark. Synonymous with hippy vibes and squats, where everyone pitched in with cooking, it was a symbol of free love and happiness. Sadly, as many people in big cities already share seven-bedroom houses and cook together as a matter of course, the romance of house-sharing at 30 may well be dead.
However, living in a commune when you all own the house you’re living in is a bit different. On the off-chance you live with friends and all six of you want to buy (with boyfriends or girlfriends), you could have a pool of £100,000 each year to play with (going off the average UK salary of £27,000).
Communal living is tough in an expensive city but if you’re keen to leave the rat race and get onto the property ladder, buying a countryside wreck might be just the bohemian lifestyle you were looking for. Diggers and Dreamers has all the information you need to get your very own Bloomsbury Group vibe going.
Steven, a PhD based in California, thinks the cooperative movement can be really positive. He thinks the best thing with regards to his co-op was the division of labour and the pooling of resources. "Everyone had a house position that would change every few months and a number of weekly chores that would change every couple weeks. I didn't really grocery shop for a year, and didn't do a lot of cooking since I preferred to sign up for positions and chores that were less time-sensitive and I could do when I had some unexpected free time during the week (lots of bathroom-cleaning, sweeping, and mopping). By pooling of resources I mean that the cooperative was able to negotiate bulk discounts with the local health food store, with which we were able to buy a large diversity of good quality foods."
It could be a workable model, especially as individual housing stock depletes or becomes too expensive. However, Steven warns that societal values would probably have to change before cooperative living became completely feasible. "There are a lot of demands on time, interpersonal demands, and a loss of autonomy that might be frustrating to many. For the self-selecting group that were interested in co-op culture, it seemed like a largely sustainable option."