Super savers
What it really takes to be a first-time buyer
Is it really that tough for first-time buyers to clamber on to the bottom rungs of Britain’s housing ladder? Or is it just that today’s mollycoddled youngsters refuse to knuckle down and (like older generations before them) go without a daily £4 coffee and an upgrade to the latest £1,000 iphone?
Those questions take you straight to the heart of one of the most divisive and politically powerful issues of the day: housing affordability – and what needs to be done to improve it.
It’s not a problem peculiar to Britain. In Australia, which has also experienced runaway house price inflation, the social controversy is uncannily familiar. Last May Tim Gurner, the millionaire luxury property developer in Melbourne, said if only young people abstained from “smashed avocado” they’d be able to buy a house.
Back in London, upmarket estate agency Strutt & Parker attracted ridicule and anger in November after suggesting that couples could rustle up a £33,000 deposit in five years if they “just” gave up on holidays, coffees, takeaways and phone upgrades.
The punishment meted out to the estate agent via Twitter was quick and brutal.
So what are the facts? As you would expect, there is a range of statistics from which to choose.
It currently takes the average person eight years to save a 20pc deposit if they saved 15pc of their take-home pay, according to Nationwide, the building society. In the South East it would take nine years.
In London, where the average deposit is £80,000, a typical buyer would need to save for almost a decade, Nationwide reckons.
But Countrylife, the house builder, put the figure at a far greater 19 years for the average first-time buyer. This compared with three years for the previous generation. The difference between its calculations and Nationwide’s arises partly because it makes different assumptions about how much can be reasonably saved.
Government initiatives such as Help to Buy have without doubt assisted some buyers. But not all measures have moved the dial. The current Government’s flagship autumn Budget policy to cut stamp duty for first-time buyers has resulted in little increased demand.
Nearly nine in 10 housing surveyors said they had seen no rise in interest from first-time buyers following the cut.
Elisha Marsland and Mike Kirkham, who have been together for seven years, managed to save £14,000 to put towards their first home in just eight months.
But the couple had to give up more than their morning Starbucks to do it.
Goodbye freedom, hello spreadsheets
The couple’s original plan was to prioritise saving for their wedding this November but they had a change of heart in December 2016.
“I just had this panic that once we were married we’d want to be settled in a home so we could start a family,” said Ms Marsland, 26. “We were already saving £500 a month towards the wedding and we knew we’d have to make some significant changes if we were to buy a house first.”
Ms Marsland earns £26,000 plus a further bonus of around £5,000 in her role as a recruiter for a tech company. Mr Kirkham, an IT analyst, earns £24,500. At the time Ms Marsland and Mr Kirkham, 31, were spending £1,100 a month on rent and bills between them, around £100 per month on takeaways and £200 per month on “evenings out”.
Ms Marsland also admitted to having a “bit of a shopping addiction” and spent between £150 and £200 a month on clothes. All this stopped when the couple, from Manchester, moved in with Mr Kirkham’s parents in February last year.
They agreed to pay £500 a month between them to Mr Kirkham’s parents, which included their meals. But this became difficult to manage as they didn’t all eat the same things. So the couple reduced the payments to £300 and began buying their own food.
Ms Marsland’s shopping trips stopped and the couple no longer went out for meals or bought takeaways. Ms Marsland said “date night” became “a night in with pizza and a bottle of wine from Sainsbury’s”. Savings spreadsheets were introduced.
Quite what Mr Kirkham’s parents thought of the situation is not known, but it is likely that
– as Ms Marsland admitted – there were a “good few moans” all round.
“We weren’t used to living with people telling us how to do things and all I wanted to do was go out and enjoy ourselves,” she said.
“Mike’s much more laid back then me and would say, ‘It’s six months, it’s just a splash in our lives’.”
By September that year the couple had saved £14,000. They put down a 5pc deposit of £8,750 for a three-bed new-build house in Stockport, south east Manchester, which they haggled down from £184,500 to £174,500. The rest was used to cover other costs including solicitor fees.
They took out a £131,213 standard mortgage and also used a Help to Buy equity
loan (see box, above). This allows qualifying buyers to borrow 20pc of the cost of a newly built home interest-free for five years.
And did the savings habit stick? The couple – now living in their new property – have continued with their spreadsheet to help them manage their £530 monthly mortgage repayments and other costs. They have now increased the amount they are saving towards their wedding to £1,000 a month.
The helping hand of Mr Kirkham’s parents is far from uncommon.
More than one in five aspiring first-time buyers are currently living with their parents, according to lender Aldermore Bank, and 26pc say they will have to stay at home for five or more years to save for a deposit.
Parents supporting their offspring will spend an extra £4,966 a year in food, electricity and petrol, according to the bank’s research.