On the UK Housing Market – Part One

There follows three posts on my experience of the UK housing market. I wrote it all out and then realised it was quite long for one post so I’ve split it out into three – the houses I grew up in, the houses I bought, and my thoughts on the current UK housing market and strategies to make the most of it.

My parents bought a house in Ashtead, Surrey back in the late 1970s and I was born there in 1984 – a home birth. My mum told me recently that they couldn’t really afford the house, my dad had only recently finished his PhD in medical engineering and she was a physiotherapist in the NHS. Fortunately in those days bank managers had a lot more freedom to make decisions and didn’t have computers to check things on, so the mortgage paperwork all went through.

It also helped that house prices were comparatively cheap back then, ridiculously cheap by today’s standards. Before I was born my parent’s added a second floor to the house. We had a long garden that backed onto some woods and farming land. When I think about it, it was idyllic really. Here’s the house I lived in for the formative years of my life (thanks to the magic of Google maps):

first home
We used to have a big tree out front that I remember climbing – the current owners must have cut it down – boooo!

I checked on Zoopla today and this house is currently valued around £750k. When I was 6 years old we sold that house for £180k and moved to a bigger house. It was next to a park and had a long garden (my parents like gardens). At some point in the 1990s (I forget exactly when) we had an extension done which made the new house even bigger. I lived in this house until I went to university in 2004. Here it is:

second home
This is a recent pic courtesy of google maps – our car wasn’t nearly as fancy as this BMW!

Eventually, in late 2011, my parents sold the house. It had more than tripled (almost quadrupled in fact) in value over 22 years and they sold it for £875k. They moved to a similar sized but much cheaper house down in Dorset, releasing about £200k of equity as they did so. All this on the salary of a phyiotherapist and a medical engineer. My parents also ran a little business from home in addition to their day jobs and constantly worked late into the night and over weekends to help pay for everything. Even so it’s incredible when you think about it.

A couple of years back my mum showed me one of her yearly budgets – it had a month by month breakdown of our spending as a family, in categories such as bills, food, holidays and so on. It turns out they regularly spent more money than they had each year, despite always making fairly frugal decisions.

It ties in with my experience – I remember growing up that money was always tight and I didn’t get all the perks that my friends got. I got hand-me-down jumpers (with sewn in arm patches) from my older brothers. I didn’t get much pocket money (it was always my age multiplied by 10p, so when I was 10 years old I got a pound a week). We went on caravan holidays (which I loved). We did all our food shopping in a monthly shop, buying long life food mostly. We never ate out. This spreadsheet brought all that home to me – my parents were living on the edge, financially speaking.

Of course it all worked out for them (and by extension, me) but it so easily could have turned out differently – if one of them had been made redundant for example. They protected me from that knowledge – if I’d known how close we were to being unable to pay the mortgage it would probably have frightened me as a child.

‘Your house is the most important investment you can make’

This is what my dad told me when I was about sixteen years old. He also told me I should always buy the biggest house (well, most valuable house) I could possibly buy. This seems to have become conventional wisdom in the UK. And in my dad’s experience it was true, my parents gained massive wealth by always buying the biggest house they could possibly afford given their salaries and watching the value double and double again. None of this buy-to-let malarkey, they just concentrated on adding value to their own house over the years and sat back to watch inflation do the rest.

They had interest-only mortgages for a lot of that time, only really paying the mortgage down in the final years, but it worked out well for them because this is what the average house price did in the UK between 1967 and 2014:

uk house prices

This story has a happy ending but I have to say it was a risky tactic and there was a huge helping of luck for my parents in terms of house price gains. They couldn’t possibly have known how much the house would go up in value and how much their close proximity to London would help, though I suppose they had an idea.

Furthermore I’m not convinced the same tactic will work in today’s housing market – it seems inconceivable that house values can continue to keep rising the way they have been, especially given how stagnant average wage growth has been over the last 10 years. Also these days mortgage conditions are a lot stricter, higher deposits are needed, and interest-only mortgages are non-existent.

Even so I have to give a lot of respect to my parents – they played the game hard and they won. They made sacrifices along the way, took their chances, and now they’re living comfortably in a lovely house with a two acre, private garden and a view to die for. Here it is, hidden behind all the foliage:

third home

In my next post I plan to document my foray into the UK housing market. It’s a little different to my parent’s experience that’s for sure!

As always, thanks for reading,

Wephway

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