Cost of living series – Housing

Welcome to Finance Pondering’s “Cost Of Living” series.

Over the next few weeks we’re going to be exploring the concept of the “Cost Of Living” here in the UK, from the cost of housing, transport, food and drink through to all the activities that make life worth living, seeing your friends and family.

We all know that for the last decade or so the cost of living has gone through the roof whilst wages and salaries have, predominantly, not kept up. Whilst government sources would suggest they have been broadly in line, the way that the Government calculates inflation may not be as indicative as our real life inflation – see this fantastic source which explains this concept here.

Trust me, in the early part of this decade I definitely felt this with about 3-4 years of 1% salary increases meaning by the mid-part of this decade I was roughly £450-£500 worse off. Both J and I enjoy a beer too and I keenly remember the price of a Peroni in 2008 being at the more expensive end of a pint at around £3.40. (“Hahaha” I hear you laugh”) as now the cost of a point in London is getting ever closer to the £6 mark. Honestly Wetherspoons is an absolute saviour.

So, we know the “Cost Of Living” is going up and in this series we’re going to explore this further. Today we’re looking at Housing.

Housing

Unless you’re unbelievably lucky and have been bought a house by your parents, have somehow come into a large amount of money or have scrimped and saved for a number of year it’s somewhat unlikely you’re a homeowner in your 20’s or early 30’s and living in the south of England. It’s not impossible just highly unlikely.

Assuming you’re not in any of the above categories then you’ll be renting or living at your parents home. Whilst living with your parents has all the benefits of not paying rent, cooked meals and having your laundry done, ultimately you are still living with your parents and I’m sure we all know how annoying, over time, that this becomes.

So what are you left with? Renting. Excellent.

I’ve been renting since 2013 and, honestly, it hasn’t been that bad. Though, at the beginning, the percentage of my take home earnings that went into renting was just over the UK national average of 34%. I was paying £540 for a room in a flat without a living room albeit with bills included. Usually this would be a red line as I would refuse to live anywhere where I was more or less confined to eat and sleep in the same room which quite frankly is miserable. However, I was in a rush to find somewhere and left with little choice. Plus the flat was only a 30 second walk to my workplace, meaning I could nap at lunchtime, useful for the inevitable hangover I had after playing poker into the early hours. Since then I’ve moved three times, though the first two in reasonably quick succession. The second and third rooms I rented were £650 and £725 respectively which at the time dropped down to 30% and 29% of net salary. I’ve been happily settled for nearly the last 4 years with my landlord taking the princely sum of nearly £1k a month, delightful.

Life is cheap and fun isn’t it?

The Cost of Renting

In 2018 the average cost of renting a one bed house was £600 a month with this figure being heavily skewed by London and other regional averages. For example, the average cost of a room in Brixton, in a 3-bed house was £767 whereas in this amount would get you your own entire place in Milton Keynes, according to Hometrack.

Delightfully if you wish to rent a one bed flat in London be prepared to shell out £1665. Per month. Great. Entirely affordable for everyone.

Hidden costs of renting

These figures though don’t include what I refer to as the “Hidden Costs of Renting” which are prevalent in both renting an entire property for yourself or renting a room in a property.

Typically if you were to rent a whole property you would also be expected to pay the council tax for that property as well (though this can be factored into the rent if a landlord is deciding to pay it). Council tax varies depending on what borough you’re in and the value that the council has your property at. Nonetheless, it’s a minimum additional few hundred pounds you’re going to have to fork out. Further to council tax you’ll also to have to pay for the bills of the property, ranging from broadband, heating and water through to electricity and if you watch live TV, a tv license.

On top of this, unless you’re able to go direct to the landlord, you’ll have to deal with the worst people on the planet, Estate Agents. This may seem like an exaggeration but it is not. Estate Agents are just the worst. What estate agents add to any process of renting a property is far beyond me but none the less they do exist and if you’re going for renting a whole property you’ll have to deal with them. Thankfully as of the 1st June 2019 the Tenant Fees Act prohibits the extortionate, profiteering and simply morally wrong charges that estate agents and landlords used to charge. An explanation of what estate agents and landlords can charge for can be found here.

If you’re just renting a room then you’re likely to only be liable for the bills, though occasionally these are included (most likely you’re still paying through the uplift in what the rent otherwise should be). Personally, given that this is exactly my situation, I stick away £50 a month into a separate bank account which is usually more than enough. Then, usually every 3 months (quarterly for all of you working in finance who cannot stand the idea of the term 3 months), when the landlord asks everyone in the house for the money for said bills, I’ll be left with about £30 . Happy days. I’ll go treat myself.

Summary?

I guess we could just say “Live anywhere other than London because everything is expensive here”.

Honestly, housing is expensive. Whether you’re renting a property or just the room, you’re easily going to be spending a minimum of £600 a month, that’s a big chunk of your income.

With a pay rise though, this would be less of a chunk.

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