Christmas Property Cheer
Just one last dose of Christmas property cheer for 2024. The source of this cheer? That we have beaten that horrible old scrooge of a notion that for young people the dream of home ownership is gone and they will rent forever and even then they have to accompany their monthly rental payments with a donated organ of the landlord’s choosing.
Ho, Ho, How The Bloody Hell Do FTBs Afford Anywhere?
Here’s how. Let’s take a fictional couple, Bob & Emily Cratchit.
They left school at 18 in 2021 and have since been working various jobs whilst living at home with their parents. They have been fairly careful and both saved £4,000 into the government Lifetime ISA each year. The government tops this up to £5,000 and they have been getting 5% interest on their savings. After this 3 years, they each have £16,500 and together £33,000. They plan to use this for a deposit for house as soon as possible.
But the poor old Cratchits are just on the minimum wage, the fools how can they possibly afford a house?
Here’s how…
Minimum wage from April 2025 is £12.21 per hour and they are both diligent and work 40 hours full-time. Therefore, they have a combined annual income of £50,800.
For their mortgage, some banks are tempting them with lending of 6 times their income but the Cratchits are sensible and stick with the usual 4.5 times. Therefore, they get a mortgage in principle for £228,000. Together with their deposit they have around £260,000 to buy a house. They start looking, knowing that houses are often selling for around 10% off the initial asking price at the moment so they go on Rightmove with their target up to £285,000 (ie a 21 year old couple on minimum wage can afford the average UK house price, let that sink in…).
This is what they find around the country (click the pictures for Rightmove links):
A lovely end to this Christmas story then. The UK property market is not the over-priced nightmare all the scrooges keep saying it is. Two 21 year olds on minimum wage can afford roughly the average priced house in UK, thereby jumping the lower levels of the ladder and get straight into a 2-4 bed house in most parts of the country. Plenty of room for a tiny Tim or two in the future. Even in London they get space to swing their cat. How lovely. The UK property market we all play in is not dead and buried.
Happy Christmas property people. Look out for the end of 2024 Q4 “Buy, Sell or Hold” early in Jan.