I recently read an article in the Croydon Citizen: “Do Croydon’s children and young people have enough space at home?”, which suggests that small homes should be rejected because of the impact they have on family life. I disagree, and I’ll explain why.
It goes back to 2002 when aged just 24 I bought my first property – a three-bedroom house in North Woolwich. The mortgage was a big responsibility and left me stretched financially. As any young person would, I wanted some spare cash to enjoy myself. I reconfigured the house to add two extra bedrooms. I lived in one and rented the the four others. My tenants, young professionals like me, had somewhere affordable to rent and I was able to maximise my income.
That first property paved the way for everything I do now. Inspired Homes’ micro-apartments starting at 30 square metres are 40% smaller than a typical new-build apartment at 50 square metres but 20% more affordable, putting them within reach of young professionals on average salaries. Compared to the purchase of a standard sized new-build apartment, our buyers in Croydon pay around £300 a month less in mortgage repayments (based on a typical 25-year term and 1.99% interest rate), reduced to £160 a month if purchased with a 40% Help to Buy London Equity loan.
Over the years, we’ve become smarter in the way we design our apartments. Hallway-free, we optimise every square inch, so the apartments feel much more spacious than the square metreage suggests. We build them to a very high specification, and we provide shared social spaces such as club lounges and rooftop terraces, to give residents somewhere else to hangout where they can get to know their neighbours and enjoy music and other social events.
Of course, they’re not family homes and our typical buyers are singles and couples in their 20s or early 30s who otherwise can’t afford to get onto the property ladder. In Croydon, it means they can purchase a new home with salary of around £34,000pa, instead of the £43,000pa required to purchase a larger apartment. This offers them the opportunity to build equity from a younger age, so they can trade up to a larger home if, for example, they decide to have children.
Over a five-year period (the interest-free period for a Help to Buy Equity loan), they would pay back nearly £25,000 in equity on our £280,000 entry level apartment (based on a 25-year mortgage term and 1.99% interest rate). Plus, if house prices average just 2% growth pa over that period, an additional £30,000 in equity would be raised. For me, getting onto the property ladder from a young age was the best thing I ever did, not just so I had my own home, but so I could establish a nest egg.
In fact, I would turn this discussion on its head and argue that planning is far too focused (almost exclusively) on family sized homes when in reality ONS data reveals that only 28% of households have dependent children. The greatest need is for singles and couples, where we have proven the demand for our micro concept and customers who are delighted to become homeowners. It’s true the poorest families have been impacted by the housing benefit cap and a shortage of social housing, but housing solutions are also desperately needed for those without children who don’t qualify for state help and simply want somewhere decent and affordable to live – and preferably own so they can build for their future.
The British Property Federation published new definitions for micro living just last week. We have been lobbying the government tirelessly to view micro living as a viable housing solution and I hope that these new definitions pave the way for its inclusion in the planning system.
Purchase price: £280,000
5% deposit: £14,000
40% Help to Buy Equity loan: £112,000
Remaining mortgage balance: £154,000
Monthly repayments: £652 (Based on 25-year mortgage term and 1.99% interest rate)
Monthly saving compared to 50 sqm apartment: £161 (£300 without Help to Buy)
Loan amount repaid over 5 years: £24,999.39
Capital growth over 5 years (2% growth pa): £29,422.10
Equity after 5 years (excl. agent and solicitors fees): £54,421.49
This article was written by our Chief Executive Martin Skinner and originally published by the Croydon Citizen.