Can we afford to buy a home?

I had an email this week from Rebecca who wrote:

I'm about to turn 30 and I live in a rented smallholding in the UK. My husband and I live as simply as possible, rearing nearly all of our own food and spending as little as possible. We are very happpy and love our lives. We're both well educated and work in environmental jobs, which we both enjoy, feeling that they are worthwhile and really contribute something to society. They pay fairly poorly (as is the case with all environmental work) but we don't need much money as we live simply and money simply hasn't been too much of an issue for us in our way of life. The problem is more of a long term one. We are trying to start a family, which will inevitably involve a salary reduction. ... However, ideally we would like to buy a house at some point in the not too distance future. I hope this doesn't just sound a spoilt list of 'wants'. ... We live in a fantastic rural community which we are very much part of and never want to have to leave; but renting is by its nature insecure and obviously we never know when our landlords may want their house back. This is also coupled with the fact that we don't really want to be paying rent in our old age, and have to carry on paid jobs until we die, just to meet rent.

In the UK, as I'm sure is probably the case in Australia and many other countries, house prices have gone through the roof in the last ten years and salaries haven't. You need two reaosnable salaries for a bank to give you a mortgage on the average priced house. As I said, money hasn't been an issue because we live frugally, and have saved a big deposit, but how on earth do you get a round the mortgage issue? Even with a large deposit, it is the mortgage that makes up the bulk of the house value. We work hard, and quite a lot of hours as our work is seasonal, and hard work isn't an issue. However, I don't think moving to take a highly paid, corporate job is an option for either of us - there is no work like that in the area and I think it would go against what we believe in. 

I know that you can't have everything at once. If we want to start a family, we have to accept a reduced income. We can possibly cut back a small amount, but we live very frugally, preparing all our meals from scratch, making as many ingredients as possible and rearing all of our own food. We work form home as much as possible, use the car as little as we can and don't really buy anything.  I know that there are lots of people my age struggling with similar issues and I'm sure there's a sensible way ahead. I'd love to hear what you think.

Hello Rebecca.  Yes, it's a problem here too and probably in many countries.   I hate to keep harping back to the old days but I think we can learn a lesson from our past. Back in the 70s, I lived in Balmain, a suburb in Sydney right on the harbour.  It was definately working class then but now it's been gentrified and a house that would have cost $19,000 in 1970 would now cost between $1 and $2 million.  But back then, $19,000 was an awful lot of money and we didn't think about buying, we kept renting.  I eventually left Balmain but I have friends who stayed and bought a house.  The way they got around it was to buy in an area they liked but the cheapest house they could find.  They then spent the next few years fixing as much as they could on weekends and at night.  Eventually, when the house was in better condition, they sold it and bought another, better, house.  They did that a few times until they had the house they wanted and could afford.  It took a lot of work and time but it was the way it was done then and they were happy to be in their own home, working for their future together.

If you do that, you have to be prepared to work on the house and improve it as you live in it.  It's tough and I'm not sure many people would like doing it but it would be a real challenge and it's a way of getting into the housing market.  Don't aim for the top house, aim the worst house in the best street instead.  When we started out it was common practice to start at the bottom, buying whatever you could afford - that might be an apartment or an old house, and you'd renovate and paint and work your way up. I have heard quite a few young people complain about baby boomers having it all and keeping them out of the property market, but this is how we got what we have.  We didn't think of buying the top of the market, we always started at the bottom, or wherever we could fit in the housing market that was within our budgets. 

In Australia now, ordinary houses in Sydney are selling for $600,000 - $1 million, although here where I live they're half that.  In smaller towns you can get a good house for $150,00 - $200,000.  Can you move to an area where the house prices are lower?  Can you take in a boarder where you are now to help with the rent while you save for a house?

There is an interesting article here about the current over average housing prices in the UK.  Maybe you should keep and eye on this, hold off for a while and see if the prices come down in the next few years.  In Australia, the government pay a first home owner's grant of  $7,000.  Do you have something like that?

I wish I could offer you a definite direction Rebecca, but this is one of those problems that is not so easy to solve.  As you know, our readers offer excellent advice and so I'm hoping we might get some helpful suggestions for you to try.

And now it's over to you.  If you're young and have moved into your own home, how did you do it?  Please share your experiences and thoughts on this as I'm sure Rebecca will be one of many who will benefit.