How To Survive When Housing Costs So Much?

[worldwindow]

Due to changing circumstances, I might be taking up a full time job on a salary of £20,000 pa, which is about £1300 per month take-home pay.

Rental prices seem to start at £500 pcm for a studio / 1 bed. With bills, I reckon this would come to about £650 per month, just to put a roof over my head - half my take home pay.

This seems scarily high to me - leaves me just £650 a month to pay for everything....... Am I missing something? How do people make this work?

Ok, I could share a house, but at late thirties, this isn't very appealing and certainly not long-term. Or I could get partnered-up - but that's not always so easy! Or I could get a better paid job - ok, I could, but this isn't an option for everyone and £20k isn't so far below the UK average.

So my questions are -

Shouldn't it be possible to have a reasonable standard of living on a full time salary of £20k? (The IFS put this almost exactly in the middle of UK household income distribution.)

Shouldn't I expect to be able to afford a 2 bedroom flat?

Has it always been this expensive in the UK, or is it a recent phenomenon? And is it the same in other European countries?

Or should I just accept my lot, shut up and run up some huge credit card bills like everyone else?

[worried1]

Due to changing circumstances, I might be taking up a full time job on a salary of £20,000 pa, which is about £1300 per month take-home pay.

Rental prices seem to start at £500 pcm for a studio / 1 bed. With bills, I reckon this would come to about £650 per month, just to put a roof over my head - half my take home pay.

This seems scarily high to me - leaves me just £650 a month to pay for everything....... Am I missing something? How do people make this work?

Ok, I could share a house, but at late thirties, this isn't very appealing and certainly not long-term. Or I could get partnered-up - but that's not always so easy! Or I could get a better paid job - ok, I could, but this isn't an option for everyone and £20k isn't so far below the UK average.

So my questions are -

Shouldn't it be possible to have a reasonable standard of living on a full time salary of £20k? (The IFS put this almost exactly in the middle of UK household income distribution.)

Shouldn't I expect to be able to afford a 2 bedroom flat?

Has it always been this expensive in the UK, or is it a recent phenomenon? And is it the same in other European countries?

Or should I just accept my lot, shut up and run up some huge credit card bills like everyone else?

It is an interesting question. The cost of buying houses has rocketed in the past 12 years, but in my area at least, the cost of renting hasn't gone up that much.

In 1998, I could have got a decent 1 bed flat for £600 per month, now it is more like £800. That is a 33% increase in nominal terms - probably not that far above inflation over that time and much less than the 250% that the cost to buy the same flat has increased in that time.

So, I think it has always been like this to a certain extent - renting in a reasonably expensive area on a £20k single salary will be tight. What has changed enormously is the cost of buying property. That would have been possible on £20k in 1998, but is impossible now for someone earning £50k!

[sbn]

Write to your MP, encouraging them to penalise Buy-to-let via taxation.

[Guest_FaFa!_*]

Due to changing circumstances, I might be taking up a full time job on a salary of £20,000 pa, which is about £1300 per month take-home pay.

Rental prices seem to start at £500 pcm for a studio / 1 bed. With bills, I reckon this would come to about £650 per month, just to put a roof over my head - half my take home pay.

This seems scarily high to me - leaves me just £650 a month to pay for everything....... Am I missing something? How do people make this work?

When I started my current job 3 years ago I was on about that salary and renting a small 2 bedder. However I was also supporting my wife who was out of work so obviously my bills were easily double (wife at home all day) and I couldn't get a council tax discount. Basically you can live on that salary but there is little left over at the end of the month. Nights out are rare. Not a good life.

Edited for typo and clarity

Edited May 18, 2010 by Baby Eating Boomer

[miko]

Due to changing circumstances, I might be taking up a full time job on a salary of £20,000 pa, which is about £1300 per month take-home pay.

Rental prices seem to start at £500 pcm for a studio / 1 bed. With bills, I reckon this would come to about £650 per month, just to put a roof over my head - half my take home pay.

This seems scarily high to me - leaves me just £650 a month to pay for everything....... Am I missing something? How do people make this work?

Ok, I could share a house, but at late thirties, this isn't very appealing and certainly not long-term. Or I could get partnered-up - but that's not always so easy! Or I could get a better paid job - ok, I could, but this isn't an option for everyone and £20k isn't so far below the UK average.

So my questions are -

Shouldn't it be possible to have a reasonable standard of living on a full time salary of £20k? (The IFS put this almost exactly in the middle of UK household income distribution.)

Shouldn't I expect to be able to afford a 2 bedroom flat?

Has it always been this expensive in the UK, or is it a recent phenomenon? And is it the same in other European countries?

Or should I just accept my lot, shut up and run up some huge credit card bills like everyone else?

Its grim !!

If you pay £500 rent , i think your total will be more than £650 with bills, council tax, electricity, phone , tv licence , insurance, think it will come to more than £150 .

Then from what you have got left you need to eat , travel, run a car if you have one, save some for a rainy day. It will not leave much for fun. To be honest in this country you need two full time wages to make it work , and one of those needs to more than the average £25k if not things are tough .

Im lucky , i earn about as much as you but have no mortgage , i STR'd and bought a small place outright , when i bought my first property a new two bed flat it cost £34,500 and i was earning £13,000 , then inflation kicked in and my mortgage got small, have earned some very good money over the years just wish i had been more carefull with it during the good times , even without rent or mortgage £20k gross is not a lot to live on in this high price country.

But whatever you do do not run up credit cards or any other debt , at some point it has to be paid back with interest or it will chase you for ever.

[Dorkins]

Welcome to the priced out generation, if you figure out an escape route from slavery expensive, alternativeless renting then do let us know.

[porca misèria]

Has it always been this expensive in the UK, or is it a recent phenomenon? And is it the same in other European countries?

No, it hasn't always been this expensive. A generation ago, it was vastly more expensive!

As a young graduate on average pay in 1983, my rent was two thirds of my after-tax income, and what that got me was a room in a flatshare, without luxuries like hot water. The remaining one third was approximately the same as the level of the dole at the time, and rather less if you factor in the costs of working - like travel, and lunch from the sandwich shop.

Other European countries? A couple of years later in Germany I was able to afford a very nice flat, and it was just under 25% of my after-tax income. What a contrast! The key difference is that the germans don't have the British fetish for low-cost housing. Instead they've built high quality since 1945, so there isn't such pressure on anything half-decent in their housing stock.

[miko]

No, it hasn't always been this expensive. A generation ago, it was vastly more expensive!

As a young graduate on average pay in 1983, my rent was two thirds of my after-tax income, and what that got me was a room in a flatshare, without luxuries like hot water. The remaining one third was approximately the same as the level of the dole at the time, and rather less if you factor in the costs of working - like travel, and lunch from the sandwich shop.

Other European countries? A couple of years later in Germany I was able to afford a very nice flat, and it was just under 25% of my after-tax income. What a contrast! The key difference is that the germans don't have the British fetish for low-cost housing. Instead they've built high quality since 1945, so there isn't such pressure on anything half-decent in their housing stock.

No i think your wrong 1983 my brother and his wife bought a one bed flat in london £14000 k and they bought it taking only his wifes wages for mortgage purposes as my brothers job was a bit shakey. His wife was a traffic warden ( there is no way a traffic warden could afford a one bed flat in london now )

You say you paid two thirds of your take home pay in rent must have been a very low take home pay, not because the rents back then were higher than they are now.

[Snugglybear]

I left university in 1975 and have never lived on my own. I could never afford to even rent on my own, never mind buy. I shared rented flats/house with other people until I shacked up with my boyfriend, later my husband. The first property I ever owned is the house I live in now, which we bought together.

I have known friends buy flats/houses with a mortgage in their name only, but always either with an inheritance or by supplementing their income with a lodger. In 35 years no-one I've known (well) has been able to afford to buy or rent a two bedroomed property for sole occupation with a single income.

For people like me, therefore, your situation has been the norm.

Edit: spelling, again

Edited May 18, 2010 by Snugglybear

[evictee]

Due to changing circumstances, I might be taking up a full time job on a salary of £20,000 pa, which is about £1300 per month take-home pay.

Rental prices seem to start at £500 pcm for a studio / 1 bed. With bills, I reckon this would come to about £650 per month, just to put a roof over my head - half my take home pay.

£500 rent is just the start. I'm finding that power + council tax + water rates is now coming in at about two thirds of rent, so with a rent of £500 which is not far off what I'm on, you're looking at £833 just to keep a warm roof over your head for a month. Second rule of thumb: your take home pay is two thirds the gross, so before tax you have to earn £833 x 1.5 = £1250 to cover this. Fifteen grand gross per annum gone before you you start looking at luxuries like food and transport. What you're supposed to save for a deposit with I do not know. I'm struggling on a decent wage, and I'm completely baffled how most people are managing at all, I really don't understand it.

Edited May 18, 2010 by evictee

[osbaldwick]

I left university in 1975 and have never lived on my own. I could never afford to even rent on my own, never mind buy. I shared rented flats/house with other people until I shacked up with my boyfriend, later my husband. The first property I ever owned is the house I live in now, which we bought together.

I have known friends buy flats/houses with a mortgage in their name only, but always either with an inheritance or by supplementing their income with a lodger. In 35 years no-one I've known (well) has been able to afford to buy or rent a two bedroomed property for sole occupation with a single income.

For people like me, therefore, your situation has been the norm.

Edit: spelling, again

In answer to the original question.... no you haven't missed anything. This is the reality of 2010. Some would say that with a salary of £20k you are rather lucky...

[Guest_FaFa!_*]

In 35 years no-one I've known (well) has been able to afford to buy or rent a two bedroomed property for sole occupation with a single income.

For people like me, therefore, your situation has been the norm.

Really? I am surprised. I don't think it would be possible in London but north of the Watford Gap 20k should get you a 2 bed property for circa 500-600 a month (assuming you want something decent). It's doable certainly, but you'd be better off in a houseshare.

[Si1]

it's the occupancy ratio don'tyaknow. demographics will lead to long term falls in renting and buying costs, over and above influence of the current cycle

house-share

or rent a 2 bed flat and sublet spare room (take the smallest room for yourself and cleverly furnish it to maximise use of space, leave the bigger room to sub let and the flatmate will stay out of your way - I did this and it worked a treat)

[ImA20SomethingGetMeOutOfHere]

If you want to know why the rent for a 1 bed flat is so high, try having a look at housing benefit for your area. What you'll find is that rents at the bottom end of the market track housing benefit very closely.

Bear this in mind when you're paying £150 a month or so in council tax to get a nice warm, fuzzy feeling inside.

[miko]

I left university in 1975 and have never lived on my own. I could never afford to even rent on my own, never mind buy. I shared rented flats/house with other people until I shacked up with my boyfriend, later my husband. The first property I ever owned is the house I live in now, which we bought together.

I have known friends buy flats/houses with a mortgage in their name only, but always either with an inheritance or by supplementing their income with a lodger. In 35 years no-one I've known (well) has been able to afford to buy or rent a two bedroomed property for sole occupation with a single income.

For people like me, therefore, your situation has been the norm.

Edit: spelling, again

It depends on what people were/are earning and when they were ready. In the mid ninties property had got very cheap and mortgage rates had come right down , I knew many people who bought on their own, but it was a very small window before things got out of hand and headed towards what we have now, which is people with two salaries struggling to buy a small place.

[OnlyMe]

Do what the migrants do.

Rent 8-10 to a house but be prepared to move frequently.

[huw]

No i think your wrong 1983 my brother and his wife bought a one bed flat in london £14000 k and they bought it taking only his wifes wages for mortgage purposes as my brothers job was a bit shakey. His wife was a traffic warden ( there is no way a traffic warden could afford a one bed flat in london now )

You say you paid two thirds of your take home pay in rent must have been a very low take home pay, not because the rents back then were higher than they are now.

In 1982 I was on 6k gross (came to 300-odd a month) and was paying £35/week for a grotty 1-bed flat in Didsbury. The rule of thumb people used to mention was 1/3 of gross salary going on housing, which is about where I was. Luckily I soon got some decent pay rises, because that existence wasn't pleasant!

What was different then IMO was rental yields, i.e. houses were cheaper, rental was more expensive.

[winkie]

In 1982 you could buy a double fronted bay windowed 4 bed house for £40k in North London...but interest rates were 12% to 15%, interest only mortgages were rare an endowment had to be taken out with them and the policy was assigned to the loan, so no cancelling it at a later date, a min 10% deposit was required......there was not such a demand for houses because of the running costs and other investments were far more lucrative, savings received a very healthy rate of interest that covered inflation. People could then live on the credit interest of their life savings, so why buy a BTL and all the hassle that goes with it.

[miko]

In 1982 I was on 6k gross (came to 300-odd a month) and was paying £35/week for a grotty 1-bed flat in Didsbury. The rule of thumb people used to mention was 1/3 of gross salary going on housing, which is about where I was. Luckily I soon got some decent pay rises, because that existence wasn't pleasant!

What was different then IMO was rental yields, i.e. houses were cheaper, rental was more expensive.

Yes buying was cheaper back then, 6k gross I think i was on about that living at home and paying £15pw all in worked in a pub 3-4 nights a week in order to run a car and go on holiday , like you i got some good pay rises thank god and was able to buy , the people starting out today have not got a chance with the prices and poor wages.

[miko]

In 1982 you could buy a double fronted bay windowed 4 bed house for £40k in North London...but interest rates were 12% to 15%, interest only mortgages were rare an endowment had to be taken out with them and the policy was assigned to the loan, so no cancelling it at a later date, a min 10% deposit was required......there was not such a demand for houses because of the running costs and other investments were far more lucrative, savings received a very healthy rate of interest that covered inflation. People could then live on the credit interest of their life savings, so why buy a BTL and all the hassle that goes with it.

Yes but the ones that did buy with a £36 k 90 % mortgage were soon laughing . Mortgage rates averaged about 12% during the eighties the 15% was a blip for a very short time at the begging and the end of the decade. So if you take 12% and then take off the tax relief miras that you got on the first 30k almost all of that mortgage the interest rate went down to 9% so not that high considering the way inflation was back then , a few years later anyone who could have affored a 36k mortgage would have been laughing as inflation in their wages would have reduced the burden in a big way. It was hard to start off but only for a few years there was always light at the end of the tunnel. What do those houses you describe sell for today ?

[Mikhail Liebenstein]

No, it hasn't always been this expensive.  A generation ago, it was vastly more expensive!

As a young graduate on average pay in 1983, my rent was two thirds of my after-tax income, and what that got me was a room in a flatshare, without luxuries like hot water.  The remaining one third was approximately the same as the level of the dole at the time, and rather less if you factor in the costs of working - like travel, and lunch from the sandwich shop.

Other European countries?  A couple of years later in Germany I was able to afford a very nice flat, and it was just under 25% of my after-tax income.  What a contrast!  The key difference is that the germans don't have the British fetish for low-cost housing.  Instead they've built high quality since 1945, so there isn't such pressure on anything half-decent in their housing stock.

But the key difference then was people could buy, feel poor for a few years and then watch as the mortgage became insignificant due to inflation.

Right now the prices continue to rise having already gone up stupidly in the last 13 years, but wages haven't risen anywhere near as  much.

Something will have to give, and its either massive long run deflation which will eventually hit housing or else its inflation which will eventually hit wages.

[miko]

But the key difference then was people could buy, feel poor for a few years and then watch as the mortgage became insignificant due to inflation.

Right now the prices continue to rise having already gone up stupidly in the last 13 years, but wages haven't risen anywhere near as  much.

Something will have to give, and its either massive long run deflation which will eventually hit housing or else its inflation which will eventually hit wages.

Yes

Was at a wedding a few weeks back and looking around at the mid late forties people , I saw two things that struck me

1. Most had left school at 16 and all had their own homes that they had bought in mid twenties .

2. Their offspring had all gone on to higher education "A" levels or uni but were earning very little and i could see no way that unless inflation in wages or deflation in houses happens none of them are going to be able to buy a house.

[bomberbrown]

The startling thing about the OP's position, is if he/she didn't bother to go to work, they would only be £56 a week (net) better off than claiming JSA and other numerous benefits. You could easily make that up on the black market.

http://www.turn2us.entitledto.co.uk/calcresults.aspx?sid=13&cid=0b25b357-f5fb-46b7-8205-be4da926db44

[porca misèria]

No i think your wrong 1983 my brother and his wife bought a one bed flat in london £14000 k and they bought it taking only his wifes wages for mortgage purposes as my brothers job was a bit shakey. His wife was a traffic warden ( there is no way a traffic warden could afford a one bed flat in london now )

You say you paid two thirds of your take home pay in rent must have been a very low take home pay, not because the rents back then were higher than they are now.

£14k? Was that council or something? Or maybe that was just the mortgage and they had a good deposit?

No agent I tried showed me details of *anything* below low-20s, and believe me, I trawled many of them before changing tack to a move away from London! And a year later, when I got a pay review and 20% rise, house prices were up 20% too.

Of course rents were lower in £ terms, but they were much higher relative to salaries or house prices.

FWIW, my pay at the time was £6660. Many of my contemporaries from Cambridge were on under £6k, but a good degree in Maths and a job in IT in central London paid rather more than some.

[winkie]

Yes but the ones that did buy with a £36 k 90 % mortgage were soon laughing . Mortgage rates averaged about 12% during the eighties the 15% was a blip for a very short time at the begging and the end of the decade. So if you take 12% and then take off the tax relief miras that you got on the first 30k almost all of that mortgage the interest rate went down to 9% so not that high considering the way inflation was back then , a few years later anyone who could have affored a 36k mortgage would have been laughing as inflation in their wages would have reduced the burden in a big way. It was hard to start off but only for a few years there was always light at the end of the tunnel. What do those houses you describe sell for today ?

Had a look, same road but terraced rather than semi was £474k....what I am saying is when there are better safer places to invest money people will do so.....in those days the rich had large portfolios of stocks & shares growing and earning very nice dividends.

IMO Housing will not be especially attractive where prices are already high...investors need to identify markets that lag behind...property is in a bubble, bubbles can stay inflated for a while, just a matter of time...the triggers will be higher interest rates/continuating recession/central bank tightening due to inflation/regulation.