Earlier this month, luxury property developer Tim Gurner advised millennials that in order to be able to afford to buy their own home, they should stop buying smashed avocado and overpriced coffee.
Tim, who is from Melbourne, stated, “When I was trying to buy my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each. We’re at a point now where the expectations of younger people are very, very high.”
Now first things first, $19 Australian dollars equates to just over £11; and in London alone, you’d be hard pushed to find an eatery that charges you over £10 for avocado toast.
Secondly, here in the UK, there are further factors that are acting as a preventative when it comes to young people and couples from buying their first home. The recent data from the ONS hold some key statistics all leading to increases in living costs that are making a dent in our ability to save.
UK private rental prices have increased by 1.8% since March this year, England exclusively rose by 2.0%.
Around 50% of people aged between 25-34 now rent privately, ten years ago, this figure was just 24%, and this time the proportion of young people buying with a mortgage has decreased to 34% from 54%.
With current rent prices increasing, the likelihood of being able to change this statistics looks bleak; UK private rental houses have already increased by 1.8% since March 2017, with England specially, rising by 2.0%. Of course, we are seeing fluctuation across the country, with, perhaps unsurprisingly, the South East (3.1%), East Anglia (2.7%) and South West (2.5%) rising at the fastest rates.
This year has also seen the biggest annual increase in Council Tax since 2007 at 3.8% – meaning that our monthly outgoings just got a whole lot more expensive, pre-avocado snack that is.
Although, we are pleased to announce that it’s not all doom and gloom on the housing front, with the increase of construction of new build properties and the influx of buy to let investors in the UK’s capital, rental space has increased by 18%, driving down the prices of private rental across the country.
This decrease in prices in London is the first recorded annual drop for six years, having decreased by 4.3% over the last 12 months to around £1246 per month.
While we can look forward to being able to save some pennies for a house deposit (or copious amounts of avocado toast if you are so inclined), there are other elements that are still going to mean we feel the pinch.
Unfortunately, the Consumer Price Index 12-month inflation rate has increased by 2.3% since March. The main contributors for this was the increases in car tax, electricity and clothing; now, a rise in car tax and electricity is unwelcome, but on some levels expected – but now clothing too? The UK bore witness to its highest monthly increase in the cost of womenswear since 2011, of 1.1%
The Vehicle Excise Duty (car tax to you and I) changed on April 1st so that all cars are subject to £140 per year. That is of course, unless you are driving a zero-emissions car, then you will be required to pay nothing – saving yourself money straight away!
Electricity prices have risen by 2.5% over the past twelve months and suppliers are putting this down to wholesale costs, the installation of smart meters and Government fees. This is one area where it’s a case of picking the lesser of the evils, however you may be surprised to find that you are probably over paying each month anyway! It might be a bit more time consuming, but it really does pay to submit your monthly readings rather than letting your supplier charge you on their estimations.
This year has also seen the biggest annual increase in Council Tax since 2007 at 3.8% – meaning that our monthly outgoings just got a whole lot more expensive, pre-avocado snack that is. However, its good practice to ring your local council office to ensure that you are in the correct band for your home, and enquire as to whether you can split your payments over 12 months rather than the standard 10, making the figure slightly more manageable. Lucky enough to live alone? You are eligible for a discounted rate, so ensure all of your details are up to date.
These are just some of the current average figures of weekly expenditure for a two-person household in the UK:
Transport – £120 per week
Recreation – £103.30
Housing Fuel & Power – £89.00
Household Goods & Services (Furniture and Furnishings) – £49.20
Clothing & Footwear – £29.20
Alcohol – £11.50
So, don’t let Tim Gurner and his anti-avocado stance defeat you, these are just some of the increases in living costs that could be having an impact on your ability to save for your first home; however, on the plus side, it also provides you with some of the areas that you can aim to save in.
If you are on the cusp of entering into home-owner territory, it’s worth exploring the mortgage options available to you, as this will provide you with an idea of the size of the deposit that you should save, allowing you to budget accordingly within a realistic timeframe.
To maximise your saving efforts, research into the saving schemes and accounts that are going to provide you with the best returns, you won’t find many accounts that offer you enormous interest rates, but every little helps.
You might consider this to be too far in advance, but it’s worth also considering the stamp duty and fees you will be charged when the time comes to buying your first home; stamp duty begins at 2% for properties over £125,000 and fees can run into the thousands. Being aware of these from the moment you begin saving could prevent you from having to turn to alternative methods of funding later down the line.
While we take great umbrage to Tim Gurners flippant comment, the underlying message may bear some good advice. Following the last financial crash, lenders apply far tougher affordability checks before granting applications. Be prepared to have your spending habits forensically analysed, from utility bills, to monthly food budgets and personal spending – if you can cut down on the ‘wants’ – i.e. furniture and furnishings and recreation, this will put you in good stead for getting your foot on the housing ladder.
Written by: Andrew Wayland
Andrew Wayland is the Head of Marketing at Everyday Loans. The team at Everyday Loans offer everyday loans for everyday life from £1,000 to £15,000 over 24 to 60 months (for almost any purpose).