- Thomas Marsh
Why buying a home is a bad idea with the future of remote work
Updated: Jan 22
We are all told to save to buy a home but why? We hate paying expensive rent to a greedy landlord for a spareroom so much that we have become a first time buyer?
But we are stuck as the average first time buyer deposit in London is £110,000 and 65% of them had a salary above £60,000 and £80,000+.
We want to share what we previously learned through trying to solve home ownership for first time buyers by providing a deposit under £10,000 and why we changed our business model (solution at bottom):-
Why the Government wants you to buy
Why the amazing house price growth since the 1950’s is running out of steam
Why the home ownership democracy could even collapse losing you all your hard-earned savings
Our home ownership democracy
Home ownership peaked with 71% of the population owning in 2003 but is now falling sitting at 63% currently.
In 1923, a Conservative thinker, Noel Skelton said ‘to make democracy stable,’ the government should promote ‘a property-owning democracy.’
House prices have been protected by the Government because more than 50% of people are home owners but if this is less than 50%, and the future voters of the country are among them, then there is an incentive to support rental products causing a collapse in house prices.
Will the guard dog get a new owner (or renter)?
What has caused the price of new homes to multiply by 118x (183x in London) since 1952?
The year Queen Elizabeth II started her reign in 1952, you could buy the average new home in the UK for £2,107 (£2,605 in London) in comparison to £250,000 (£477,000 in London) today.
The three main factors to house price growth have been:
The governments push for a nation of home owners from 1964 and especially from 1979 with the introduction of Right to Buy, selling off the majority of our affordable housing that the Government had built.
Governments deregulation of mortgage finance from the early 1970’s, banks properly lending in 1986 as well as innovation in finance in early 2000’s.
The buy to let boom from 1996 with the introduction of buy to let mortgages to allow private landlord to convert family accommodation into shared accommodation (homes in multiple occupation).
Will house prices run out of helium? Or will they pop?
Well, its supply and demand, so clearly we are not building enough homes?
MoneyWeek columnist Dominic Frisby points out, between 1997 and 2007, for every four new people added to the population, three new homes were built. Yet during this time, UK house prices more than tripled.
We do have a urban supply problem as everyone wants to live in desirable areas close to work with amenities and experiences that meet their needs.
Less than 6 per cent of the entire island of Britain - and 10 per cent of England - is urban.
In London, the ‘location premium’ is a whopping 216% more than the cost of the building on its own.
In other words, it costs approximately £205,000 to rebuild a three-bed semi-detached home from scratch in the capital, but you are paying for the quality of local amenities, transport links and schools which take the value of such a property to £647,571.
Brighton, Bristol and Edinburgh all had ‘location premiums’ in excess of 60% of rebuild values and the average is 40% across the UK.
Le(ts) go build an experience and community elsewhere
What’s next for house prices?
Mortgage interest rates and loan to values cannot make property any easier to buy to increase demand
Government incentives are maxed out
House prices have increased 42% since Help to Buy was introduced in April 2013
The next two Government incentive schemes to maintain demand for home ownership will create some demand but will continue to push the housing market to breaking point.
For Shared Ownership you will be able to buy a 10% share instead of buying a minimum of 25%
The new help to buy for first time buyers will be a 30% discount
When will the stairs to home ownership become too costly
The conclusion
By buying a home (flat) in the city, you are paying a high price to compete for the proximity to your work, the nearby urban experience, and the community.
The years of strong house price increases are behind us and breaking point could be near with the number of those excluded from ownership rising and current demand incentives to maintain ownership levels reaching desperation.
Remote working could cause a brain drain out of cities reducing demand and values of not only offices but homes too.
The background story - we had a solution, now we have a better one.
Through a previous business, First Time Buyers Club, we were trying to create a flexible home ownership as a service product with a deposit under £10,000 and the lowest cost to live in cities with the best living experience and social community.
Albeit home ownership for single first time buyers in London is never affordable and the only product you can buy is a flat which does not provide great living experience or social life.
The new solution - Shuffle Life
It is all about lowering the cost to live to maximise our lifestyle…
You can now escape the city by working remotely to reduce your rent by up to 50% and increase your lifestyle by 100%
Aspiring to be a homeowner should not be the future. Freedom to live, work and explore anywhere in beautiful countryside and seaside locations should be.
We are a co-working and co-living provider that activate spaces that foster human connection and enable remote workers to lead more fulfilling lives closer to nature.
Purpose built coliving - an en-suit private studio with beautifully designed communal spaces - think cinema, coworking, library, gym, games room.
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Or drop us an email at tom@shufflelife.com
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