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?

We did the ladder.

I bought my first flat in my late 20s in the early 2000s. Had a 95% mortgage on a 4.6% interest rate. I had to rent out the spare bedroom to a lodger to make ends meet. That flat cost £250k in an untrendy part of London.

I then bought a small 3 bed semi in an up and coming area and my then boyfriend moved in. That place was £450k.

Married my boyfriend and he sold his flat - he made about 30k from that.

Had a baby and bought a family home on the outskirts of London for 860k in our late 30s.

Made our last move in our mid-40s to a place that cost £1.2m. If all goes to plan we will overpay the mortgage and be mortgage free by our mid-50s.

No family money, no inheritances. But two professional jobs in London.

Saying that both the house we live in and houses we could afford to trade up to nearby are basically shitty Victorian terraces that would cost about £200K in my home city, so it's hardly luxury living.

This! Almost all the people on this thread have bought and sold in London. They are all probably living in the same level of housing as the rest of the UK, but just at ridiculously inflated prices.

That's your answer I think OP.

^^ this

buying anything, no matter how small or shit in London before Brexit and Grenfell is mostly the answer

Well a family home is quite tax efficient in the sense you pay no capital gains tax when you sell... BTLs are heavily taxed and regulated these days and will continue to be so, meanwhile I doubt any government in the future would tax the family home heavily unless it is worth more than £3 million (that's the danger point for a wealth tax).

council tax on a modest terrace house in London is generally quite low relative to the value of the property. Band D in my borough is just shy of £2k..

We work in professional services so the bonus is non existent and there is no overtime. It’s still achievable but many people don’t want to put the graft in

I think parental help is more important than anything. There was a good article in the FT about London property being an inheritocracy now. The ladder doesn't really exist these days.

Interest rates. Parental help. Some high salaries.

But largely interest rates.

It's not hard to figure it out. Low rates mean you can borrow more money in an affordable way. So you have more money chasing the same amount of houses (or a very similar amount because the rate of house building is so crap relative to stuff like the amount of house buying net migration and BTL landlords). So prices go up.

Watch the increasing rates pull cheap money out of the market and house prices go whoosh downwards as affordability collapses.

As a famous financier says, as the tide (of cheap money) goes out, you find out who's been swimming naked.

I bought a flat first, then 3 bed house, then 4 bed house (Victorian terraces, not grand). When I had the 4 bed on the market for £750,000 most viewers were young first time buyers. That did surprise me as I expected to see second time buyers with a flat or small house to sell.
They mostly had very high salaries and the bank of Mum and Dad in comparison with older buyers like me who could only do it by slowly trading up. We hear a lot of how difficult it is for first time buyers now but obviously not for everyone.

Thanks all.
I just wanted to say one thing to some of those who wrote you have to work hard to get there, as they did. It is not about working hard only. It is also about wanting to work in a field that pays well (finance, tech, law, consulting etc). Lots of people work hard in uni and after but will never manage to easily land a 1 million house in life… teachers, nurses, academics, public sector employees and many more. It does not mean they haven’t worked hard to deserve a good home, but simply that not all professions pay in the same way. I think those who are immersed in well paying professions sometimes forget that the reality is very different for the majority of other people.

Agree @BettyBoopBetty working hard doesn't necessarily mean you will end up on six figures. Plus not everyone as the aptitude, intelligence or personality for some careers and there's no changing that.

But it's not just London that's now at crazy prices. That's the real problem. Someone earlier today posted a dreary 3 bed bungalow in need of total renovation, just outside Exeter for £900K!!!

There are terraced houses in central Newcastle going for well over 1 million.

It's insane. I don't know how it is sustainable.

Yep, lot of Londoners move out of London thinking they would get an amazing house for their money (which mostly is above £500k) but mostly they end up with an ordinary 3 bed semi detached (according to the telegraph article). And that is after London equity and years of London earnings! And actually there are still places in east london where you can get a house for 500-550k, its just that many people don't want to live there.

I do think it will equalize at some point. London will still be more expensive but maybe 30% more expensive. So an average flat in an average area in the Midlands would be £280k while its counterpart in London would be £400k. So for a single, the midlands would be 9 times average salary, of 30k and for london, average salary is 45k so the flat is also around 9 times average salary as well.

For the corresponding 3 bed semi detached house, i think it would eventually even out to £550k for an average area in England, while the corresponding house in London would stay at £700k (it currently is an average of £700k). I think the terraced houses that are currently £1 million (in expensive areas in London) may fall to 850k-900k.

@socialmedia23 terraced houses in expensive areas of London are £2-3m+! I live in a “cheap” area and they are £1m.

It would need a massive correction to bring prices even within 30% of each other because my house is 4x more expensive than my in laws’ in Yorkshire and basically the same footprint.

I guess 'expensive' is relative. I live in East Finchley and they are around ££1-1.3 million. I mean something like this: https://www.rightmove.co.uk/properties/131476742#/?channel=RES_BUY

And this was STC and in the suburb: https://www.rightmove.co.uk/properties/133019909#/?channel=RES_BUY

I think its above average in London for houses and average in London for flats.

Average price by property type for London
Property type March 2022 March 2021 Difference %
Detached £1,069,981 £968,148 10.5
Semi-detached £676,450 £625,379 8.2
Terraced £571,963 £538,252 6.3
Flat/maisonette £435,731 £426,489 2.2
All £523,666 £499,862 4.8

Properties in East Finchley had an overall average price of £1,225,411 over the last year.
The majority of sales in East Finchley during the last year were flats, selling for an average price of £594,165. Terraced properties sold for an average of £1,022,161, with semi-detached properties fetching £1,716,765.

I think the flat data is a bit off probably because a flat in bishops avenue sold of r£2 million, majority of flats in East Finchley are around £400k-550k, and more expensive for 3 beds (but not many of them!).

I put my 2 bed flat on the market for £415k. We bought it in 2019 for £392k so it hasn't really grown at all. My area hasn't actually gone up in price since 2019 really, and i think prices would stagnate in the long term.

I am not talking about PCL London which is a totally different market, but above average suburban areas where the majority are domestic buyers (just like everyone on this thread!).

A combination of the property ladder and 2x high salaries.

Flat 1: bought in 1995 for £45k, sold in 1999 for £75k
Flat 2: bought in 1999 for £140k, sold in 2001 for £195k
House 1: bought in 2001 for £370k, sold in 2007 for £635k
House 2: bought in 2007 for £915k, sold in 2015 for £1.37m
House 3: bought in 2015 for £1.5m. Still here!

The increases over the years earned us over £800k (albeit that some of that was down to our renovation works - on House 2 we barely turned a profit) and then of course you pay stamp duty and moving costs.

Nonetheless a massive leg up.

Moving up the ladder for us. When I moved to London in 2000, I rented a room in an ex Council flat in Zone 4. I bought a small property up North when I am from originally in 2002. Met my now DH in 2003. We bought our first house together in 2006, moved up the ladder in 2010 and then again in 2016 to our current house which cost £920k. We sold the house we bought together in 2016 and my property up North to be able to afford this.

Well paid jobs that allow them to save big deposits and big mortgages. Banks are allowed to lend 5.5x salary to certain professionals

A million quid is nothing for a house these days Just look at Rightmove

High salary, inheritance, big mortgage, family help, first bought a house 25 years ago when they were much cheaper v salary. One or more of the above.

Inlaws house is worth about £1.5 million - they would have bought it for a fraction of that 30 years ago.

I don't ascribe any of it to hard work on our part @BettyBoopBetty . In our case it's almost entirely the good fortune of being able to buy when prices were less insane v salary. Ours is worth about £700,000 but we don't have much left on the mortgage now. The building society reminded us we could have borrowed a lot more when we bought it in 2006, but we chose a more modest place and a smaller mortgage. You wouldn't even have than choice now in most cases.

@Muddle2000 might be nothing for you but it’s unachievable for the majority of the UK population unless you already have a massive equity or a lot of help from your family

You need to take a risk

This will hopefully be us with our next move. No family help at all and we're both public sector so modest salaried.

DH bought a flat in an uncool area in London in about 2005 which went up a fair bit with a saved up deposit- he's a great saver. Low mortgage rate then I moved in and he could overpay like mad. Next house we bought together with about 120k of equity in a very uncool area which in the last 10 years has become very fashionable. So the house has almost tripled in value, we had a low interest mortgage and overpaid by 50%. I don't think we've scrimped but we don't have a high rolling lifestyle, didn't have a car etc.

When we buy the next place we'll take out the equity and have a 200k ish mortgage.

So with us it was housing market luck and being willing to live somewhere no one had heard of. We also didn't have really expensive dinners constantly but had good social lives and travelled a lot- friends similar public sector and voluntary sector so no lifestyle to live up to. Definitely no parental money and there won't be any coming to us later either.

I suppose we're not that young but not ancient either! Kids are youngish.

Inheritance and gifts.

My grandfather bought a 6 bedroom house with outbuildings and a large garden in London in the 1930s.

My parents sold it for £5m, bought a house for £1m and gave money to me and my siblings. We all bought houses/flats.

Then when they died we sold the house for £1.5m.

I don't think that's true. A lot of twenty somethings (even students) spend AT LEAST £10 per day on lunch and drinks and £100 on going out at the weekend. They have nails and hair done/clothes and designer trainers etc so are easily spending £200-250 per week on "fripperies". Over three years, this could add up to a £30,000 deposit which in most parts of the country (and even some parts of London zone 4) will be 10% deposit on a two bed flat. If you buy somewhere that needs "doing up" you will realise a profit.