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Lower Your Expectations: Your First Home Should Be Below Average

February 11, 2017 by

Another day, another depressing story about the devastating state of the UK’s property market. On Thursday, Cosmopolitan published a story called ‘This is how much you should be saving each month if you ever want to buy a house in England’. The article looks at each region in England and suggests how much first time buyers need to save.

Here are the stats which originate from a study by the National Housing Federation. Further down the post, I’m going to explain why I think Cosmo’s article’s an unhelpful pile of crap.

LONDON

Average house price: £563,000

Average income: £34,000

You need to be saving: £2,300 per month

NORTH EAST

Average house price: £153,189

Average income: £24,409

You need to be saving: £638.28 per month

NORTH WEST

Average house price: £173,705

Average income: £25,000

You need to be saving: £723.77 per month

YORKSHIRE & HUMBER

Average house price:£174,171

Average income:£24,284

You need to be saving: £725.71 per month

EAST MIDLANDS

Average house price:£189,000

Average income:£26,000

You need to be saving: £787.50 per month

WEST MIDLANDS

Average house price: £197,600

Average income: £25,000

You need to be saving: £823.33 per month

EAST OF ENGLAND

Average house price:£288,000

Average income:£28,000

You need to be saving: £1,200 per month

SOUTH EAST

Average house price: £338,444

Average income: £30,113

You need to be saving: £1,410.18 per month

SOUTH WEST

Average house price:£256,054

Average income:£24,934

You need to be saving: £1,000.89 per month


Although the figures above are certainly depressing to see, personally, I think they paint the picture to be even worse than it actually is. Trust me, it’s bad. The property market is pretty fucking bad. We’re in the middle of a housing crisis and far too many people across the country will never be able to buy their own home. No matter how many lattes or nights out they give up.

But I’m sick of reading articles that suggest home ownership is out of reach for absolutely every non-rich 20-something. It’s just scaremongering. There are plenty of people across the country who do have the potential to buy their own place but they don’t even try because the news is filled with slightly misleading horror stories like the one above.

I have several friends who would love to buy their own homes but they watch the news and read stories like Cosmopolitan’s and think “I could NEVER save that much each month so I won’t bother saving anything.”

Considering many of these friends of mine earn upwards of £22,000+ a year and rent spare rooms in Manchester with bills included for £400 a month, they could probably save for a home if they really wanted to. This is why I enjoy articles like this one by the BBC about 20-somethings on modest incomes who have successfully managed to buy their own homes. Sure, not everyone can do this, but there are people out there who can and they should be encouraged.

Here are just a few reasons I think Cosmo’s article is misleading:

You don’t have to put down a 20% deposit

The stats we see in this article are based on a 20% deposit. Putting down a deposit of 20% or more is ideal but not essential. It’s usually possible to purchase a home with 10% or even 5% of the property’s value, but you’ll have access to less mortgage deals and the interest rate on your loan will be higher.

Because you’ll be taking on such a large amount of debt, you’ll probably have to take out a loan for a very long period of time such as 30 years or more. Thankfully, if at some point you run into some money (a wealthy relative dies or you win big on Deal or No Deal) you can usually make overpayments on your mortgage to reduce the interest rate and become debt-free quicker. You might also choose to overpay on your mortgage if you get a pay rise or a second job.

You don’t have to save at quite the extreme rate Cosmo suggests

Not only do the stats about focus on saving a higher deposit than is technically necessary, they also focus on saving it really quickly – within four years. Although four years may seem like a long time, in the deposit-saving scheme of things, it’s really not. Saving a deposit in four years can be a huge challenge, especially if you’re renting and unable to get any help from your parents. Lower your expectations. You don’t have to save the money this quickly.

Let’s take another look at the Manchester stats. If you were to save the recommended £723.77 a month, you’d have £34,740.96 within four years – enough for a 20% deposit on a house worth £173,705. However, you could take this at a slower pace and save £500 a month for just over five and a half years.

Obviously, saving £500 a month is pretty damn difficult impossible for most people, but if you’re buying a home as part of a couple, already you only have to save half this figure each.

And remember how I said you don’t necessarily have to save such a high percentage of the home’s value for the deposit anyway? Well, assuming you are able to save £500 a month you could have a 10% deposit (£17,370.48) saved in less than three years. You could save £361.88 a month and have that 10% deposit in four years. You could save £289.50 a month and have 10% in five years.

Of course, these are still pretty large figures and there’s bound to be plenty of people who are still priced out (pretty much every millennial wishing to buy a place in London without wealthy parents), but I’m sure you’ll agree that my calculations are far less terrifying than the data presented to us by Cosmo.

You can (and should) lower your expectations

First time buyers should not be buying properties that are considered to be an ‘average’ price – especially if they’re buying their first home alone. The fact the house prices in the above study are averages proves you can buy places for much cheaper. So why live a life of misery saving for a deposit on a £189,000 house in Newcastle when you could lower your expectations and get one for £140,000?

Your first house is unlikely to be your dream home. It might not be as big as you’d hoped, it might be in a rough area, and the carpets might look as though they were ripped up from the set of The Shining by a crazed Kubrick fan. Someone might have been murdered there! If you can find yourself a murder house, you could be in for a really great deal. You need to start from the bottom and gradually work your way up, like Drake.

So, let’s lower our expectations because come on, this is 2017 and we’re leaving the EU, Trump is POTUS and the whole world is turning against us. Now, with your expectations, self respect and dignity at rock bottom, have a little Zoopla session and see if you can find something that’s below average.

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  • Great article, Jenni. Whenever I see press reports which quote average figures for saving towards a home or retirement, it’s a big concern that the numbers are just plain scary; it’s better to encourage people to save something towards the future than give up in total despair and save nothing at all!

    One comment though about the rate of saving part. One of the reasons I encourage people to save as quickly as possible (3-5 years) for a deposit if they want to buy property is rising house prices.

    When saving for a percentage of the purchase price, you’re saving towards a moving target. If recent trends continue, that target is moving upwards at quite a pace. The faster you can save towards the goal, the faster you can stop the target moving.

    There’s also some psychology at play here, as we tend to focus better on short term goals than long-term goals, the latter feeling somehow less real.

    • Hi Martin. Glad you liked the post. This is a great point & I forgot to mention the risk of house prices increasing further. Do you mind if I quote part of your comment within the article? Can link to your Twitter if you like.