To think it just gets harder for first time buyers?

[chatterbug22]

We rent a new build 2 bed and are lucky to do so cheaply, we have landed on our feet with it really as properties on this government scheme are cheap and we have two very decent sized rooms with a nice big secure garden.

The goal is to buy in the next 18 months, and we are lucky enough to be able to save quite well. We have good jobs, both on the average salary for people in the UK and we’re not yet even mid 20s. We are up north. The help to buy scheme in our area is capped at £228,100. A year ago you would get a 3 bed semi for that. 6 months ago you’d probably get a 2 bed for it. I have just browsed today out of curiosity and there is absolutely NOTHING that falls under the scheme, apart from a 2 bed terraced smaller than our current house in a not very nice area?!

How is anyone supposed to do this? Demand seems crazy at the moment. Are we best to compete with it all or just stay out until it crashes (which I’m guessing it inevitably will).
I don’t want to needlessly be paying rent that we will never see again but nor do I want us in a situation where we are priced out of our depth.

Boggles my brain!

This.

I was a FTB in the 80s and then, like now, a first home had one bedroom and a box room. I don't know anyone who started with a 3 bed house.

If you wait for the mythical crash op you will be renting for the rest of your life

It's so hard atm!
We live in the north west and just moved I to our first house. We paid 230k for a 3 bed semi. The clincher though... we made massive compromises! It need completely gutting in every way, it much further out than we wanted and is on a mixed private owned and council estate.
We saved for years for deposit and fees. When we started looking we couldn't find anything and in the meantime house prices we spiraling. By Oct last year we were spending every spare evening and weekends viewing houses. We put sooo many offers in. We were really lucky to get this house as they has a lot of offers. However, we only managed to get it by going 10k over the asking price and had to up our deposit to 16%! This took every penny we saved and were literally scrabbling to save for fees as the sale was going through... but that's how most ppl start out.
It was really hard but looking back now, well worth it.
Keep at it, decided your absolute no compromise areas, through everything you have at the deposit... and just look at everything you can. Good luck. 🤞

I bought my first tiny flat in a crappy area when I was in my 30s. There was no way I could have afforded one in the area I was renting in. Or indeed anything close to the size I was renting.

You're getting onto the property ladder.

I was a FTB in the 80s

exactly, things have changed!

@Tiredalwaystired this is what im struggling with. Good salaries, equity, moving out of area but the next rung is getting further away. We just lost out on one we offered 20k more on.

Echoing what PP said about FTB buying smaller properties. This is in London but London was a lot cheaper then.

My MIL bought her 1 bed flat in London in 1989 at age 27 with her ex (in his 30s). Had 3 kids in the flat before moving onto 3 bed terraced house in same area in 1997. DH and I bought our 2 bed flat in 2019 also in Zone 3 London at age 27 and age 29 respectively.

I don't actually know anyone in London who would start off in a 3 bed house and I doubt it was the case even in my MIL's time. As prices rise outside London, this may be the case as well. In London, even the people who bought 2 bed houses tend to buy them in not so nice areas.

So you are in your 20s both working in good jobs so presumably on a decent trajectory, but you are seemingly are only considering buying with a government scheme and want a large house. Perhaps it is getting harder for first time buyers because expectations are so high these days.

I did the whole starter home thing and would recommend avoiding it if you can. I agree with previous posters that its an outdated concept. Buy the best home you can afford and that you can see yourself staying in if moving isn't possible in the future.

I have friends raising families in tiny appartments because it's impossible for them to move up the ladder now. I bought a 3 bed older home that we luckily have been able to extend and improve on but I still wish we'd stretched for our preferred house type back when we bought. My house value has increased by over 100k since we bought but that's no good to us when the houses we want have increased by 250k+.

@InvincibleInvisibility

I started out with a 2 bed flat in London, now saving to upgrade to a big 3 bed flat like you...interestingly when my MIL was looking to upgrade from her 1 bed flat in London in 1997 she looked at big flats too but found they were too expensive, and the 100 sq metre run down Victorian terrace was more economical (she still lives there). It's weird but even though houses have gone up in value more than flats, I find that big flats still aren't much cheaper than the smaller terraces but overall are better value as they have more internal space...

The help to buy caps are ridiculous. They’re around £400K where we are but houses on new estates are into the £500-£600K bracket, so people are excluded from the get-go.

The fact is though that for many now, a ‘starter home’ is the best thing they can afford. And waiting until you can afford better means pricing yourself out of the market.

Please can you tell me what the government rental scheme is.

When DH and I bought, we each bought a flat. When we met each other and got married, we then sold them to buy a small three bedroom house (actually two plus boxroom). We then sold that to buy a larger three bedroom house and haven't moved since.

I agree compromises have to be made. There are lots of houses out there, but possibly not where you want them. Then you have to decide if location or size of house is more important. Or whether you want to be near good schools or a railway station for commuting etc.

I also think it's better to buy an older house, even with maintenance. New builds are often leasehold or have service charges for unadopted roads etc.

Just a thought- someone who isn't even mid 20s is unlikely to know what she wants from her 'forever home'. How many DC, how many bedrooms, catchment areas for schools? those may be premature questions. I had no idea when I bought at 27, all I thought I needed was 2 bedrooms (1 for only child DC and in a good school catchment). post covid, I think I need a home office and a larger kitchen... maybe you get a clearer idea when you are in your 30s, I will report back when I am in my 30s.

She is likely to want to move anyway and given her salary is likely to increase, she would probably be in a better position to get a larger mortgage. In fact even if she was in a good position to buy the 3 bed, I think it highly unlikely she would stay in it for the rest of her life.

Overthebow · 25/04/2022 20:13
Our first house 5 years 7 years ago was the small two bed. You go for what you can afford then work up the ladder. Most first time buyers, even 20 years ago, don't start off with a three bed house.

Exactly this..my first house was a 2 up 2 down...£240 mortgage per month on a £860/month wage. It cost £20 per week for coal for the boiler.
We weren't any better off then.
We didn't have to have sky or netflix, Internet, iphones a car, meals out and holidays..

@Notreallyhappy if I didn't have internet, we would both be unemployed! Hybrid working lol. Ditto for my £135 Xiaomi smartphone, I need it to login to work as the system sends a verification to my phone! My first property bought 3 years ago is a 2 bed flat in London and I can tell you the 60k deposit was not saved by scrimping on meals out!

Actually we saved it by living at home and not paying London rent! We are saving to move onto the next flat and paying an extra £1k in mortgage overpayments to facilitate that but at a certain point, it's about earnings/inheritance more than scrimping! It is the case in London and increasingly the SE, this would soon be the case all over the UK. The prices might not increase but inflation would mean that it is harder to save so the only solution is to earn more.

I agree with this - buy the best thing you can afford now do you can if needed stay there longer.

@shivawn if your current property has increased by £100k surely you can use that as a deposit on your next house which has increased by £250k? I think the moving to the next ladder works deposit wise but probably not earnings/repayments.

eg near me
5 years ago 2 bed terraced £100k, now £200k
3 bed semi £200k, now £400k

do the people who bought the 2 bed now have £100 equity plus their original £10k deposit plus other capital monthly repayments say £120k equity.

this is a 25% deposit on the £400k house plus legals and sdlt.

the deposit is doable, but the limiting factor is actually wages haven’t increased.

You have unrealistic expectations. You are in your early 20s, have never owned a property and want to rely on government schemes but won't consider less a smaller property in less desirable area. Absolute majority of people won't be buying large nice properties anywhere in the world at your age.
You need to assess the market and make an assumption on the prices projections. You either assume they will crash and sit still in your rented property or if you come to the conclusion prices will continue to rise then you buy whatever you can afford.

I wonder if all the people saying they sacrificed and got smaller houses could afford that house now on the equivilant of that jobs wages today.

Anyone that's not bought in the last few years doesn't get it unless they deliberately keep an eye on the markets. We had a hell of a time getting on the market this year and friends were making similar comments to those above. 2 of them have now attempted to relocate and suddenly are much more sympathetic, admitting they thought we were being fussy at first

I agree with this - buy the best thing you can afford now do you can if needed stay there longer.

absolutely agree, future proof as much as possible. The days of making 200k in 2 years are over for most.

The problem is people don't recognise how much things have changed. People even in their mid thirties who struggled and bought 10 years ago struggle to see how much has changed and assume if they could do it others can

In 2011 for example a bottom band 5 nurse earning 21,176 and a minimum wage partner earning about 12k roughly had the buying power of 148.95 thousand.

They could buy the small 2 bed house pictured its gone from 144 to 285 in 2021, next door is currently on for 315. It's a small terrace house in the bad part of town, no parking on street and is a very much ftb house. No garden

Ten years later you would need a household income of 63k for that same house. The couple would now earn 25,665 and 16k and only have a buying power of 187k. Even if they somehow managed to get a mortgage for same small perfect first time buyer house theyd need to save an extra 14,000

If the couple in 2011 saved 20% of their wage they'd have over the deposit in 2.5 years. The couple in 2021 need to save 20% for 3.5 years.

the deposit is doable, but the limiting factor is actually wages haven’t increased.

absolutely

And interest rates are adding more expensive repayments.

I wonder if all the people saying they sacrificed and got smaller houses could afford that house now on the equivilant of that jobs wages today

Well if they couldn’t afford that house now, they certainly couldn’t afford anything better! In my case, the answer is a definite yes because lenders take into account more multiples of salary than when I bought my first place. It was 2.5 times salary back then.

Agree with this. You get what you can afford and compromise on it. Our first house, 10 years ago, was 90k. I think it's worth about 150k now. It was a three bed but we compromised massively on postcode. We then moved to a lovely area, a smaller 3 bed but the house was twice as much as the first (excluding three years worth of inflation) and the house earned more than we could save in those three years.