Can owning a home by the time you’re 25 really be a reality? The good news is that, yes it can.
Despite a somewhat depressing picture painted by the government’s own figures on what it calls a “broken housing market”, the experience of real, first and second-time young house-hunters shows that home ownership in your mid-20s is no idle pipedream – it can be your reality too.
So, just what is it that prospective young homeowners are up against?
For one thing, there’s the statistics – and probably the most authoritative come from the government’s own White Paper “Fixing our broken housing market”, published at the beginning of 2017.
Just as the title suggests, this paints a pretty bleak prospect for the chances of any young person to own their first home.
In terms of that all-important deposit, for example, the figures suggest that as recently as the 1990’s, a young couple on low or middle income may have needed to save 5% of their monthly income for just three years in order to scrape together an average-sized deposit – today, that same couple is going to need 24 years of saving at the same rate.
Little wonder, therefore, that home ownership amongst the 25 to 34-year-old age group has fallen from the 59% it was ten years ago and the 37% that it is today.
A look at the more detailed indices published by the Office of National Statistics (ONS) shows how the figures speak for themselves when it comes to house price inflation – the average house price in the UK rose from around £150,000 in 2005 to £226,000 in July 2017.
Average UK house price, January 2005 to July 2017
Although there are, of course, month by month variations, the current rate of increase in average house prices is running at around 5% a year (the same as it was in 2016). Once again, ONS statistics illustrate the regional differences in the annual increase in average prices to July 2017.
All dwellings annual house price rates of change, year to July 2017: by English region
According to statistics published by Trading Economics, though, real wages during the period 2001 until July 2017 rose by an average of just 2.86%.
These figures alone suggest the challenge faced by anyone looking to make that first step on the housing ladder or to progress through its initial stages.
Beating the challenge
Despite the wealth of figures, however, some comfort may be taken from the adage that first appeared in the nineteenth century – “there are lies, damn lies and statistics”.
The truth of the matter – and a clear indication that it is possible to beat the challenge – come in the many stories from real 20-somethings who have nevertheless managed to own their own home:
- a report by the BBC in February 2017, for instance, carried a number of detailed interviews with various couples who became first-time homeowners in 2016
- the Mirror newspaper recounted the story of a single woman who also managed to buy her first home at the age of 25 (in one of the most expensive parts of the country, London’s commuter belt)
- on the 13th of October 2017, the financial correspondents for the Telegraph newspaper gave advice to a single 19 year-old man how he might save to buy his first property by time he reaches the age of 25
- and in February 2017, Vice magazine offered some more light-hearted tips on how to go about buying your own home in your 20s
In place of the broad sweep of dry statistics, of course, all these are stories of particular individuals – or advice pitched at particular individuals – on how to buck the apparent challenge of owning your house by the time you are 25.
But in those personal and highly individual accounts, there are a number of common suggestions, tips and pieces of advice:
Save, save and then save a little bit more – it may sound like fairly obvious advice, but there is really no way around the hard work of saving (unless you are lucky enough to win the lottery, of course).
Crucially, putting your every effort into saving means foregoing those everyday little luxuries – which might not seem to cost so very much at the time, but irresistibly mount up as the days, weeks and months go by.
How much you manage to save depends on your income or incomes, but a useful rule of thumb is to try to save the equivalent of the mortgage repayment you might expect to pay each month.
Budgeting means knowing where every penny of your income goes – it might mean a slight lifestyle switch, opting for the supermarket’s own branded goods, for example.
But, knowing where your money is going is a certain spur to making the savings you need.
Find a partner
It may be no coincidence that more of the reported success stories come from couples rather than single people.
With the advantage of two incomes, of course, you are not only able to save more, but may also demonstrate a higher combined income to any mortgage lender.
Ask the professionals
There are professionals whose business it is to help you find a home to purchase – whether you are 25 or 55 – and much of that advice is free of charge.
Talk to an independent financial adviser or a mortgage adviser, for example, for help in managing your finances and putting yourself in a favourable position with potential lenders.
Not all professional help comes free, though, so remember to include in your budget the cost of solicitor’s and surveyor’s fees, together with any Stamp Duty payable.
Help is available
Finally, don’t forget that there are a number of Government incentives you may be able to take advantage of too. The Government has already helped over 200,000 households to buy a new home through its package of Help to Buy products.
This includes the Help to Buy Equity Loan scheme which has helped more than 100,000 households - 81% of whom were first-time buyers - to purchase a new property, with a deposit as low as 5%.
In April 2017, the Government also introduced the Lifetime ISA which supports younger adults to save flexibly for the long term, giving them a 25% bonus on up to £4,000 of savings a year. Savings and the bonus can be put towards the purchase of a first home, or withdrawn once they reach the age of 60.
The course you chart for buying your first home by the time you are 25 of course depends on a whole host of personal factors. The good news, though, is that there are plenty examples of people who have defied the apparently dismal statistics and ended up buying their own home in their 20s. It is a reality – you can do it.
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