• Warrick

Just how much harder is it for a Millennial to buy a house

The facts and what we can do about it


It can be difficult to assess how things are for our millennial generation (born 1981-1996) compared to previous generations.


Yes houses did cost less but people also earned less.





Is it that we just don’t know how to save, or is it actually more difficult to buy a house nowadays.


I like to work on statistics rather than opinions and a nice article came out earlier this year that lays out a key piece of the information perfectly for us.


In a nutshell, the average person born in the 1950’s could buy a typical house in the UK for around £16,800 when they were in their 20’s. That person earned on average £4,200 a year.


This meant that a typical house was around 4 times a typical worker’s salary.


A millennial who was trying to buy a typical house in 2019 would have cost them £235,300. That person earned on average £29,000 a year.


This meant that a typical house was around 8 times a typical worker’s salary.


So focusing on this basis it is twice as difficult for a Millennial than someone born in the 1950’s.


Though there are many other aspects that determine the ease or difficulty of buying a house, it is quite clear from this piece of evidence alone that times have changed.


So now we know the facts, we are done complaining and need to focus our attention on what to do about it.


The costs of a typical house is something that is not under our control. That is down to the power of the housing market and those with their fingers in that pie.


We can only control what we think and do.


For those who are still after generating a deposit and buying their own home, there are pretty much 2 options available.


1. Have more money for a deposit on a typical house

2. Get a cheaper than typical house


(House hacking requires the house to already be purchased)


Having a larger deposit usually means saving for a longer time, borrowing money from elsewhere or relying on gifts/lottery wins.


The problem that saving for a longer time has had on people is that us cats end up chasing after a much faster mouse, as house prices have increased faster than salaries and savings interest rates.





Each year the task can get harder.


I want to spend the rest of our time on this post arguing the second point.


To not buy a typical house, at least not right away.


Looking for houses around 4 times the average salary of a Millennial last year would mean a house around £116,000 instead of £235,300.


If you earn more than the average £29,000, times that by 4 and see what you come out with.


In some areas of the UK this will be completely doable, others will be extremely challenging and this is something we would have to consider.


“This doesn’t seem fair”


Maybe, but we are dealing with the cards that have been handed to us.


What has calling the UK housing situations unfair done for us so far?


Let’s flip that way of thinking and highlight some key benefits to this plan


  • You get your foot in the housing market sooner

  • If houses do continue to go up over time you will now be part of that trend (down as well)

  • It will be easier to meet mortgage payments than in a more expensive house

  • If mortgage interest rates increase you won’t sweat as much

  • You could most probably take a shorter mortgage term, increasing your capital sooner and saving you a small fortune

  • Generally you will stress less

It doesn’t have to be exactly 4 times your salary either. This will just help set a guideline on how previous generations managed to buy houses earlier on in their lives.


My Wife and I purchased our first house in 2015 at around 5 times my salary, so just over the 4x but nowhere near 8x. It was a modest 2 bed semi detached and doing it as part of a couple did help. Two people putting their money into a deposit made it easier!


All situations are different but take this small nugget from my experience. When I moved house 4 years later, the capital that was in that house was more than I felt I could have saved in those 4 years if I had waited, or rented.


Yes, at the time other people had nicer houses and I wasn’t certain if I would ever make enough to have a house that was similar.





Once we move into somewhere, we make our houses our homes regardless of the size. These are our cards right now. Nothing stays the same and as our situations develop we can re-consider our house choices.


Housing has been a challenge for our generation and I hope this information brings some hope that a house could be yours sooner than you feared. For more professional advice you will need to mooch elsewhere.


For more information on using our houses to build our net worth read this.


GLHF


Warrick


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