A starter home in your pocket

A starter home in your pocket

My wife and I, have two adult daughters living at home, both of whom are keen to get onto the property ladder and to live independently from mum and dad. That’s pretty normal.

We live in Hertfordshire and our daughters both work in London. We have all attended several ‘New Home’ days of varying kinds and have been tempted by Shared Ownership and Help to Buy schemes. However, the small print and the detail all conspire to make property unaffordable on a singleton budget. Hence the term ‘Generation Rent’.

Then we came across Pocket Living. This provided us all with a different benchmark – how much space are you actually paying for, in square feet/square metres? Most UK home buyers are guided by the number of bedrooms, and not the actual square footage. Many European countries operate on the m2 basis and at this level, UK new homes are at the smaller end of the scale.

A City of London paper from 2006 calculated the minimum square metres for a one-bedroom (double bed) property to be 32m2. The same paper promoted MIDA (the minimum internal dwelling area) and suggested 37m2 for one person. These were suggestions for local authorities and house builders. National space standards introduced in 2011 demand that a one-bed flat for one person should be at least 37m2.

Homes from Pocket are designed for ‘City Makers’ on incomes below £90,000 who don’t already own a property and who live in the borough of the development. Pocket Living aims to offer prices 20% below market values. One of the latest developments in Kingston is offering 21 one-bedroom homes with 38m2 expected to start at £256,000.

Demand for new Pocket homes is a ratio of about 10:1 so buyers must register beforehand, qualify, and pass the affordability assessment. Even if you live yards from a development but are in a different borough – then sorry, you won’t qualify.

Here is their time-lapse film of the flats being built at Mountearl Gardens SW16 in Streatham.

Production Line Pre-Packs

The very latest trend has come from one of the largest UK insurance companies Legal &General, who are behind a new factory in Leeds which is producing starter homes in pre-built modules, with only 26m2 floor space. A one-bedroom apartment will take a week to build and will be delivered to a site on the back of a lorry.

This has led The Guardian to refer to ‘rabbit hutch Britain’ and ‘prefab sprout’ and the race to the bottom for home living space. The current development in Richmond will be for renters only. The view is that renters will only live there for short periods as they save their deposit and move out to buy.

Stride Up

At one of the ‘home buyer’ events in London I came across StrideUp, which is another innovative venture. Please be aware that they (Seven Summits Financial Ltd) offer an unregulated product as part of their co-purchase plan, so make sure that you do careful due diligence.

In essence, this is a real estate fund and the co-investors make an income and capital return on a diversified stock of properties, whilst helping starters onto the housing ladder. It also bridges the gap between renting and buying (with a mortgage) because with StrideUp you can’t have a mortgage, but you do pay them rent on the part of the property share you don’t own.

In summary, even with help from the ‘bank of mum and dad’ getting onto the first rung of the housing ladder can be difficult. This is why innovation enters the marketplace, but as with all things new, the devil is in the detail and home-buying is a high intensity emotional roller-coaster. For something so important, a cold hard-headed approach is always best.

At Capital, we love to see financial planning come to life.

By Don Fraser, Director and Chartered Financial Planner at Capital.

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