The property portals say the government’s plan could work, and I have been saving for six years, so I worked out how far I still am from a front door of my own

First-Time Buyers in London: The Arithmetic

I have a savings account with a name. It is called “Door.” As in, one day, my own front one.

I opened it six years ago when I moved to London. I pay in on the first of every month, straight after the rent goes out and the Welsh word has been said. I try not to look at the balance too often, because looking at it invites comparison with what a flat costs, and that way lies the sofa and a blanket.

This week I looked.

Why I Looked

A property trade site ran a round-up of housing news on 2 October. Among the headlines listed alongside its main story was one that caught my eye: a major property portal says the Prime Minister’s first-time buyer scheme could succeed.

I have only the headline. I do not know the details of the scheme or why the portal thinks it could work. I shall find out and report back.

But “first-time buyer scheme” are four words that make a person like me sit up. I have been through several. Each one arrived with a fanfare. Each one, when I read the small print, turned out to help someone slightly better off than me.

So before getting excited, I did the sums.

The Sums

I earn a little under forty thousand pounds. I am thirty-one. I share a flat in Leyton.

My share of the rent is about a thousand and fifty a month. The average rent for a whole property in London, as I wrote in the spring, reached 2,290 pounds a month in April. I am doing better than average by having a flatmate and living at the end of the Central line.

After rent, bills, travel, food and a life of sorts, I put three hundred pounds a month into Door. In a good month three fifty. In December, nothing.

Six years of that, with a bit of interest and the government bonus I shall come to, has produced a sum I am not going to print, because my mother reads this. It is five figures. The first of those figures is not large.

What I Would Need

A one-bedroom flat in my bit of east London is somewhere around three hundred and fifty thousand pounds. A studio or an ex-council place, a little less.

A lender will typically want a deposit of at least five per cent and will lend, as a rule of thumb, about four and a half times your salary.

Four and a half times mine is roughly a hundred and seventy-five thousand. So to buy a three-hundred-and-fifty-thousand-pound flat on my own, I would need a deposit of a hundred and seventy-five thousand pounds.

At three hundred a month that is forty-eight years. I would be seventy-nine.

I had the lie down at this point.

The Real Problem

Notice what the sum shows. The obstacle is not the five per cent deposit that schemes usually help with. I could find five per cent of that flat. I very nearly have it.

The obstacle is the gap between what a bank will lend on one ordinary salary and what a flat costs. In most of Britain that gap is manageable. In London it is a chasm.

That is why almost everyone I know who has bought did so with a partner, so that there were two salaries, or with help from parents, or both. The single buyer on a normal wage without family money has more or less ceased to exist in this city.

So when a scheme is announced, the question I ask is: does it address the gap, or only the deposit?

What Has Been Tried

I am an expert by now.

The savings bonus. The government adds twenty-five per cent to what you save, up to a limit each year, if you use it for a first home. I have one. It is the best deal going and I recommend it. But there is a cap on the price of the property you can buy with it, and in London a good many flats are above the cap. It also does nothing about the lending gap.

Shared ownership. You buy a quarter or a half and pay rent on the rest. It gets you through the door with a smaller mortgage. But you pay a mortgage, and rent, and a service charge, and you are responsible for all the repairs on a home you only part own. Friends who have done it describe it as the worst of both.

Government equity loans, now closed. The state lent you part of the price. It helped people buy. It is also widely thought to have pushed up the price of the new-build flats it applied to, so some of the help went to the developer.

Mortgage guarantees. The government stands behind part of the loan so that banks will lend with a small deposit. Useful if the deposit is your problem. See above.

The Awkward Truth About Schemes

There is a criticism that economists make of nearly all of these, and I think they are right.

If you give buyers more money to spend on a fixed number of homes, the price goes up. The help is swallowed. The seller ends up with it. You have run to stand still.

The only thing that brings prices within reach is more homes, of the kind people can afford, where they want to live. That takes years and annoys everyone who already has one.

The defence of schemes is that people like me cannot wait for years. A scheme that helps this cohort buy, even if it nudges prices, changes real lives now. I feel the force of that. I am the cohort.

The Other Thing in the Report

The main story on that property site was about interest rates. It quoted a lender’s economist saying that financial markets increasingly expect the Bank of England to raise rates, because of energy prices.

For a would-be buyer that cuts two ways. Higher rates mean a bigger monthly payment on any mortgage I could get. They may also cool prices. The same site reported demand cooling in the expensive parts of London.

Whether that ever filters down to a one-bed in E10 is another matter.

What I Am Going to Do

Keep paying into Door. It is the only part of this I control.

Find out what the new scheme actually is, and whether it touches the gap.

Keep an open mind about leaving. I love this city. But there are places an hour away by train where my sum would be a deposit tomorrow. I have a spreadsheet. I have not shown it to anyone.

And stop treating renting as failure. Half of London rents. With the new law I can no longer be turned out on a whim. It is a perfectly respectable way to live, and I should like one day to believe that.

The London Prat has watched several generations try to buy in this city and writes about it in its English satirical news on first-time buyers and its UK satirical news about saving for a deposit. Bohiney Magazine covers a country where they still think a house should have a garage.

SOURCE: https://bohiney.com/