To ask how so many people can afford to spend 1 million+ on a house (SE)

[BettyBoopBetty]

That’s it really. Where we live most houses go for sale in the region of a million and more and many of the buyers are young families. I don’t get how so many people can afford that sort of money on a house!? If you do, what is the secret? Very highly paid jobs? Family inheritance? What’s the norm?

I know 3 couples who recently-ish paid circa £1mil for their homes. All 3 couples have one thing in common - they all met their partners and bought their first property in their v. early 20s. They've all made very good profits on these properties.

One couple have a millionaire dad, they had a gifted deposit, i think, of around £250k for the first property. The house was worth about £350k at that time. I suspect they've had further financial help (I can have a rough stab at their income and the figures with future properties/renovations wouldn't make sense otherwise). But even without the dad's money they probably could have afforded the first house at the time.

One couple now earn probably £150-200k combined. The £1.3 mil house was their 6th property in just under 15 years. All their properties have sold for significantly more than they paid. The last property sold for £400k more than they purchased it for despite only living in it for <5 years and only decorating.

One couple just made a huge profit by buying a flat in London in the early 2000s with a 100% mortgage, stayed there for 15 years and the area gentrified.

We both degrees, I've done 2 part time postgrads and we're both in tech so good salaries. After we graduated we really lived below our means by renting 1 room (whilst lots of grad friends upgraded to rent apartments or houses). But that enabled to save enough for a deposit for a small house. Then we upgraded the house a couple of times. We both wanted to get a good property so have worked for it and we've saved hard for it.

Agreed with those saying when you bought makes a massive difference

100%. When I came out of uni in the early-mid 00s my local houses were about 600/700k. Obviously that's not cheap but ten yrs later those houses were1,5m. And of course anyone who bought then had yrs of low rates.

One of my colleagues bought a house for around 100k in late 90s in Hackney. 95% mortgage & interest only & due then had flatmates. She had a retail job. Those houses are 2.5m plus today.

& mortgage lending is much tighter.

Also without significant equity stamp duty costs make moving ££££

https://www.telegraph.co.uk/property/buy/london-upsize-property-house-prices-england-cities/

Meanwhile a lot of hotspots outside London now have very similar property prices so a lot of ex Londoners can't afford the house they want in the best areas outside London. I certainly found this to be the case when I was buying my first flat with a budget of 400k, i could only afford a small 2 bed terraced in most commuter towns and decided it wasn't worth leaving the capital for that and paying to commute. Now in places like St Albans, the prices of a flat there is the same as my zone 3 london flat.

Give it 10 more years and many decent sized houses in the SW and the Midlands and good parts of Manchester would be well over a million.

Inheritance. Good jobs to bridge the gap.

The vast majority of people cannot afford at that level without inheritance or family help.

It's not most people, first of all. You clearly live in a wealthier area.

Most people can't afford homes for that price.

And where exactly did you pluck the £20k from at 19?

It's not just the cost of the houses, it's the cost of the renovations they do that amazes me.

I received a letter yesterday about a development near us (thankfully not too near, although close enough for the council to write). The house was bought in March 2022 for £850,000 and the new owners want to effectively rebuild it, or at least parts of it. It will about twice the size! I am sure it will cost £100,000+ to do (probably way more).

I live in London on my own on a modest salary. 'Just save up' is laughable. Not buying a coffee once a week isn't going to get me 40k for a deposit on a 1 bed flat, let alone all the other costs on top of it.

The out of control rental market and increasing bills (that I pay on my own) mean that most of my salary goes on that and there's not much left over.

Choose to work in a sector where they pay you shit loads of money, in a nutshell.

Many of my peers are working in IT, finance, law etc and get paid a high wage.
They're not any more qualified than me, I however work in a sector where the wages are very poor, so I don't have an expensive house or fancy holidays.

We are a pretty high-earning household, but mostly we were lucky enough to snag a starter property 10 years ago which appreciated massively, and we traded up from there.

And where exactly did you pluck the £20k from at 19?

that's approx 35k in todays money which is significant.

Did you starter property appreciate more than your next property(s)?

The reason you did okay is because you paid off a mortgage at low interest rates, rather than paying rent. Not because house prices increased.

We bought on our own with no help at the bottom of the market in 2012 before mortgage rules changed in ROI so only 10% deposit and I think 4 times our salary. We sold during Covid when supply was scarce and bought our new house in a higher bracket with mortgage, equity and a very decent inheritance. So we were very fortunate with timing. We took advantage of it - I'll give us that credit.

....okaaaaay. Paying a mortgage instead of rent certainly helped, but the biggest factor was that we had the pure dumb luck to buy in an area which appreciated well above the market generally in that time period.

For us, we bought a terraced house in London 30 years ago for 114k. Sold it a few years later for 375k and came into an inheritance which allowed us 18 years ago to buy (with a mortgage!) a house costing 614k. It's now worth around 1.5 mill, the mortgage is paid off and we will downsize to a house worth around 800k.

How anyone under 50 does this is a bit of a mystery to me, but it has to involve some capital from my generation or my parents generation. My parents bought a London house for 30k (yes, two figures) and sold it for three quarters of a million. They did nothing to it. It just increased in value due to the obscene rise in house prices.

Not in the SE but same thing really. Education, high paying jobs. Stupid frugality in the early years (I still kick myself that on a foreign posting we didn't rent a house with a pool, preferring to take the extra cash). Latterly an inheritance. But I'd rather that hadn't happened.
Also luck at when and where we bought. Timing really can be everything

Luck I think: we bought our first house in 2018 when we could barely barely afford to - DH was just starting his business and I was/am a SAHM so it was probably actually incredibly stupid of us - but we sold it for a significant profit a few years later and have just continued to switch up to our dream house. Can easily afford it now with just his income but would’ve been harder to get the initial mortgage etc without the cushion from selling other houses.

We had help from In-laws of
£150k and made a few hundred thousand on our first and second house as we turned them over.
We then extended ourselves as far as we could to buy our house. We have large mortgage payments to make but always grateful we had the help in first place.
And realise how lucky we are.

The houses you traded up to increased in value less than the house you initially bought?

I don't know anyone who had family help. We all made our own money, delayed kids and all bought as soon as we'd scraped together that first deposit. Having a STEM or finance degree with the right personality is the key bit.

We don’t have a £1m+ house but could at the next move due to luck with the property market, decent salaries and 30k from my parents to buy our first flat.

We bought a flat in zone 3 in 2014 for 340, spent 12k on it and sold for 450k in 2019. In 2020 we bought a house for 570k, have totally renovated and are in the process of converting our loft. Will have spent 140k. It’s worth 850k. With the equity in the house + a bigger mortgage it would be possible to trade up again. I know we’ve been very lucky.

Put £340k with a £30k deposit into a mortgage calculator on Rightmove. It’s fun.