Tag Archives: housing

Five ways to spend less than £263K on housing over the next 32 years

The average twenty something in the UK will spend £263K on housing over the next 32 years of their life, and many will spend considerably more.

What I find deeply offensive about this astronomical figure is the simple fact that the house below cost £3K and took only 10 days to build.

ST_roundhouse_1307_2982916b

 

Given this, I think normal housing strategies are in need of serious reconsideration.

The Housing Norm in the UK (which is just NUTS!)

According to this is money, a typical first-time buyer who buys a £151,000 home with a £121,000 repayment mortgage over 25 years will pay back £191,600,  calculated at 4% interest. This works out at £638 a month or £7664 a year, which is equivalent to 9 years worth of earnings on the median-salary. Of these repayments, interest accounts for £191, 600 – £121, 000 = £70, 000.

Previous to buying their first property,  A recent report by Santander found that the average person spends 7.4 years renting paying an average monthly rent of £474, totalling £42, 000,

Combined with the £191.6k loan repayment and the £30K assumed deposit in the scenario above this gives a total 32 year average spend on basic housing costs of £263 600. Obviously, if you are twenty-something, you have the choice to follow a similar path-to-property ownership and just settle for paying out an overall average of £600/ month for 32 years.

Obviously you have the choice to follow a similar path-to-property ownership and just settle for paying out an overall average of £600/ month for 32 years. Or, like me, you might think this is totally nuts and consider doing all, or any of the following in order to reduce this figure…

  1. Live with your parents for the rest of your life
  2. Squat someone else’s second (or third/ fourth/ fifth etc….) property
  3. Live in a van
  4. Buy some land and live on it without planning permission
  5. Set up a low impact eco-village

This post is really just an overview of some of these alternatives, to demonstrate that they are viable, even if challenging….

One –  Live with your parents – until they die.

According to the Office for National Statistics, A total of 3.3 million 20- to 34-year-olds lived with their parents in 2013, the highest number since it started keeping records in 1996.

While the prospect of a 34 year old still living with their parents may sound sad, it is good for your finances. Taking the average rent of £5688/ year, if someone were to live with their parents from the age of 20-34, they could potentially save £80 000, and that’s before accumulations on savings are factored in, and for the ultimate savings on housing costs, you could just live with your parents until they die, which is what 42% of current renters are waiting for in order to be able to get their foot on that first rung of the property ladder.

Two – Squat

Squatting means to unlawfully occupy an uninhabited building or settle on a piece of land.

Until recently squatting in England and Wales was generally a civil matter, not a criminal matter, However, in 2012  Squatting was technically criminalised by the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) 2012, section 144 of the LASPO made it a criminal offence to trespass in residential properties with the intention of living there.

However, a few test cases have revealed that if the police find you squatting a building, charge you with squatting and you plead not-guilty, it is actually nearly impossible for the prosecuters to prove that you were actually living in the building permanently.  Also, the law does not cover non-residential properties.

There are a few things you need to get right in order squat a property for any length of time –The squatter’s advisory service recommend the following –

  • You need to make sure you do not commit criminal damage to get into the property, and repair any such damage that someone else has done immediately after you take up occupation.
  • Always make sure somone is in the property, because if the property is vacant you can be evicted.
  • You should contact the utilities providors asap to prove that you intend to pay.
  • When the police turn up, do not give them entry, talk to them through the door, and finally research who the owner is so you know who you are up against when you go to court, and don’t expect them to be too happy about it the fact that you’re squatting their property.

It’s difficult to say exactly how many people squat in the UK exactly given that squatters don’t generally want to draw attention to themselves, but there are some high profile, political examples –  One of the most interesting being Grow Heathrow which was established in an abandoned market garden site in Sipson, one of the villages due to be completely tarmaced to make way for a third runway at Heathrow. Over the past four years the site has played host to a wide range of political gatherings for groups such as: UK Uncut, Climate Camp, Reclaim the Fields, and The Transition Network, so you would need a certain amount of subcultural capital to fit in to this network, but if you can embed yourself comfortably into that sort of thing, then the payback is free accomodation, and probably food too.

Also of interest is this site – Made Possible by Squatting which is an exhibition from  September 2013 documenting stories of how squatting has benefitted the lives of individuals and communities in London- against the backdrop of the government’s attempts to criminalise squatting.

Three – Live in a Van

Admitedly this doesn’t seem to be a very popular option here in the UK, so firstly to America for some inspiration….  To Simplify is a blog by someone called Glen, whose been living a mobile life for over 5 years in a heavily converted 1988 Volkswagen Vanagon, which he describes as the closest thing to a home he’s ever owned. The blog simply documents Glen’s life on the open road, and he also details his total van conversion, from totally gutting the original van and then installing a whole range of new features – not least of all the engine and a solar electricity system. I particularly like this picture in which Glen’s parked up with other, more typical American mobile home dwellers – it sort of sums up his philosophy.

van 1

Bringing it back across the Atlantic, El Pocito is a nice little blog which, among many other things of an alternative nature, outlines the experience of two art teachers, originally from the UK who spent 9 years travelling through Spain and Portugal in their converted van. The site offers some excellent advice on the realities of van-living on the continent.

Campervan Life is a web site devoted to providing advice on buying, converting and living in a camper van, set up by a guy called Darren who bought a cheap Mercedes Sprinter (£1000 in 2006), learnt how to convert it on-the-job with no prior experience or any significant background in DIY and then travelled around Europe in it for 9 months. He lists the ‘van-travel’ related costs of his trip at under £3K, and although he doesn’t appear to include costs of the conversion can’t imagine it would have cost more than £1000, which means that in total Darren had almost a year of comfortable living and travel for under £5K, which is cheaper than the average rent in the UK.

While there are no doubt hundreds of people who live in vans long-term in the UK, but hardly any of them document their experience, hardly surprising given the degree of prejudice against ‘travellers’. The only example I could find was of a guy (who, incidentally has a job!) who’s put a few videos up on youtube outlining aspects of his life in a converted ambulance. In this clip he’s talking about his ‘split charge relay’ while smoking a king size roll up (contents undisclosed)

Incidentally, living in a van may sound like it’s an extreme strategy for saving money, and possibly only for hippies, and you’d be forgiven for making this mistake given that one of the first search returns for ‘living in a van uk’ takes you to a forum called ‘UK HIPPY’, but there are even members of the relatively conservative caravan club who have lived in their caravans long-term, combining this with either owning a small no-frills apartment, or house-sitting.

Four – Buy some land and just build without planning permission

In eco-circles, the best known example of someone who has actually done this is Tony Wrench and his partner, who built their own low-impact roundhouse for about £3K in 10 days (picture above). Actually, this may be the only example of a couple who have managed to do this and get away with gaining retrospective planning permission, others, such as the couple who built the beautiful hobbit-house below don’t seem to have been so lucky.

Shortly to be torn down because local planners judged it to be 'out of touch with the countryside'
Shortly to be torn down because local planners judged it to be ‘out of touch with the countryside’

 

For this reason, although this particular strategy is the one I intend to adopt at some point in the future, you might be better off going for option five…..

Five  Set up a low-impact community

There aren’t very many low impact communities in the UK, this is a very emergent phenomeonon, but one example of a group who have managed to get temporary planning for their dwellings is Tinker’s Bubble, a community of 11 adults and 2 children based in Somerset who live on 28 acres of land in self-built houses, grow most of their own food and are fossil-fuel free. I don’t have too many about the economics of the place, but the dwellings most of them live in seem to be of Tony Wrench’s low impact design and the weekly contribution for food is only £20, so compared to the average mortgage-monkey, this represents a significant saving.

One of the most inspiring recent examples is that of Llammas. Based in Pembrokeshire, on about 75 acres of land, this is one of the few fully legitimate (in planning terms) eco-projects in the U.K. It combines the traditional smallholding model with the latest innovations in environmental design, green technology and permaculture. The ecovillage was granted planning permission in 2009 by the Welsh Government and is currently part-way through the construction phase. The dwellings being built here are more robust than those in Tinker’s Bubble, and thus more expensive, but over the course of a lifetime these individuals will save themselves well over a £100K per person compared to the average, and have a significantly higher quality of life into the bargain.

In conclusion

Although all of the above involve more hassle than the standard massive-mortgage route to home ownership, personally I think a little discomfort and risk is worth it given the injustice involved with said mortgage route – via which you pay tens of thousands of pounds to people who simply haven’t done anything to earn it.

Related Posts 

Live Without a Car and Retire Five Years Earlier 

If you like this sort of thing – then why not my book?

Early Retirement Strategies for the Average Income Earner, or A Critique of Curiously Ordinary Life of the Everyday Worker-Consumer

Available on iTunes, Kobo, and Barnes and Noble – Only £0.63 ($0.99)

Retirement Cover5

Also available on Amazon, but for £1.99 because I’d get a much lower cut if I charged less!

Your mortgage or your life?

Following on from my realisation that the average income earner could retire at 52, I’ve started to analyse the relative importance of various categories of expenditure in preventing early retirement. Here, I look at housing.

Given that housing represents the single largest life time expenditure item for most people in the U.K., getting your housing strategy correct is vitally important for early retirement. As far as I’m concerned, it is simply irrational to rent in the long term, so, if you can afford it, buying really is the only option. However, the average-consumer goes about this in the wrong way – i.e. by spreading their mortgage repayments over a relatively long, 25 year term and dragging the mortgage out even longer because of trading up to a larger property.

According to this is money, a typical first-time buyer who buys a £151,000 home with a £121,000 repayment mortgage over 25 years will pay back £212, 000, calculated at 5% interest. In my calculations I’ve been a little more optimistic, to reflect some of the better interest rates out there at the moment, and assumed an average life-time interest rate of 4%, so borrowing the same amount  (£121 000) at 4% over 25 years means paying back a total of £191,600, at £638 a month or £7664 a year, which is equivalent to 9 years worth of earnings on the median-salary. Of these repayments, interest accounts for £191, 600 – £121, 000 = £70, 000, which in itself is equivalent to almost 3 years of work earning the median salary. (See endnotes 8-12)

In my frugal-consumer model (Spread sheet ) the same figure is paid back over 11 years, which means paying back a total of £149, 764, at £1135 a month or £13, 620 a year,  equivalent to 7 years worth of earnings on the median salary. Compared to the average individual, the frugal-consumer saves themselves over £40, 000 or the equivalent of nearly 2 years worth of work earning the median salary.

The above scenario is actually extremely generous in its comparison – In the sense that while my 11 year pay-back model is, I think, reasonably achievable for the average income earner, my ‘average’ consumer model is in fact not realistic – If a couple chooses to ‘trade up’ to a house then their costs of housing almost double.

The Average house price is currently £264K – And if we apply the same payback-ratios as above, then a  4% mortgage over 25 years gives a total payback amount of £385K (5% gives  £424K).

(NB – Many people will pay back more than this – 30 years is rapidly becoming the norm for mortgage repayment periods – In 2012, the number of mortgages with more than 30 years on the term had risen to 27.8%, up from less than 3% ten years earlier, and the longer the mortgage term, the greater the interest!

So let’s just pause…. assuming that you stay in a one or two bed flat for the rest of your life and stick to the standard mortgage term, then that will cost you £250K over the course of your lifetime, but if you want a family-home, you are looking at something in the region of £400K. Looked at in starker terms, if we take the median salary, these figures represent approximately 12 and 20 years of work respectively. If you compare the later of these to my frugal-consumer model, you lose 9 additional years working to pay for property.

To make an even starker comparison, there are several people in the UK who have built their own houses for 10 times less than these figures both in terms of money and time, it becomes clear that most of the above years are basically years spent making someone else rich – A combination of the land owner, property developer, previous owner and/ or mortgage-lender – And I think anyone who is either considering getting on the property ladder or who is currently on it needs to urgently consider some of the available, cheaper, alternatives to housing.

Or look at it this way – If you walked in to work tomorrow and your boss offered you a year, or two, or ten off on full pay, that’d be pretty nice, wouldn’t it? Or if you won £100K on the lottery, that’d be at least Facebookable. These are the types of figures radical housing alternatives can save you…..And these are the figures you throw away by being a mortgage slave.

NB – The point of this post isn’t necessarily to criticise the injustice of a system based on debt, the aim is simply to raise awareness of the extreme savings that can be made in terms of your money and your life if you just pay that damn mortgage down as quickly as possible.

References

http://www.thisismoney.co.uk/money/mortgageshome/article-1633400/Mortgage-calculator-Compare-true-cost-rates-fees.html

Related Posts

1. How the Average Income Earner could retire at 52

My Life Analysed – The madness of my mortgage

I bought 25% of my lovely brand new, 2 bedroom flat in Surrey about 4 years ago now, and in that time I’ve saved £22000  ready to buy it outright. A recent valuation ‘valued’ the flat @ £190 000, so when I buy outright I will need to borrow about £120 000 to buy the 75% I don’t own, which, added to the roughly £20 000 I still owe on the bit I already own will mean an overall mortgage of £140 000….

Based on the best deal available (with The Post Officce according to Money Supermarket) if I take this mortgage out over a 15 year* period, I will pay £44 000 in interest, meaning I will pay back a total of about £184 000. Based on my take home pay which is just over £2400/ month, or about £29000/ year, this equates to about nearly six years of my life.

The only ‘rational’ response to this situation is one of anger. Anger at the fact that in this social system where land ownership is concentrated in the hands of the few and where a handful of financial institutions are given the right to generate money and thus interest out of thin air, I end up giving away 5 years of my life in order to make profit for the propertied elite and a further 1 or more years to pay the rentiers.

If I were given a quarter of an acre of land, some tools (which I could borrow not own), some people to work with occassionally, and the odd bit of expertise for the techy stuff, and I could build my own place for less than £10 000 – and do it in six months – so less than a year of total work-money-time.

Instead of this, however, restricted by Britain’s archaic planning regulations and the near certainty of not being gifted a quarter of an acre in a Tory heartland, I’m forced into a situation in which the only means** whereby I can meet my basic human needs results in my giving a further 5 years of my time to pay the profits of the various institutions surrounding the construction and financing of my flat – the original landowners, the construction company and the financiers.

Given all of this, I think people should not see ‘getting on the property ladder’ as something to be celebrated, not when our efforts to climb it are fast followed by the shaft-pole of capital.
To go a bit Baumanesque on this, housing is a basic human need, but the housing market in the UK is, I believe, a great example of one of those parts of the system that most of us have very little control over, and we are forced into accepting an extremely inefficient individualised solution to meeting this basic need – Renting in insecure accomodation for the first decade of our adult lives while we scrimp enough for a deposit, and then paying a hugely inflated sum when we finally purchase the property.

We never even imagine that we can change this system – And for many of us we think we’ve  ‘won’ when we ‘play hard ball and get 10k off the asking price, or we might feel smugly satisfied when we ‘save’ a few grand from shoppping around for a good mortage deal, failing to face up to the fact that a few grand is nothing compared to the £100K in interest we’re facing over the next two decades.

Having settled into our mortgage repayment schedule, our house then becomes part of our ontological security, and we go about filling it with our identity-markers to further make ourselves secure….We forget about the fact that this object which ties us to the system more so than any other object only does so if we allow those with more power than us to leech years of our lives from us.

What is really grim about this situation is that although the house, that locus of ultra-individualised privatism offers a very insecure security because the same system that ties us into the 25 year mortgage is also the same system that can generate both high unemployment in the interest of short term profits or high interest rates in the interest of long-term (relative) stability, not to mention the current issue with inflation.

Someone remind me again while I’m going along with this>>>????**Actually I am being somewhat melodramatic, there are alternatives… As I’ll outline later.

*Over the more standard 25 year term,  I would pay back £84 000 in interest – brining my total life-work up to about 7.5 years…..