Michaela and Andrei bought their first home for £265,000 and are now buying another for the same price
After dipping their toes into the property market, many first-time buyers seek to climb the housing ladder with their next purchase.
Conventional wisdom states that households have a lifetime journey up the property ladder through different homes – increasingly bigger and more expensive – as their income and financial circumstances improve.
But Michaela Simsova and her partner Andrei have taken a different path.
The couple, who currently live in Thatcham, Berkshire, bought their first home two years ago. They are now moving to their second next month, but instead of upsizing they are taking a “sideways move” to a property the same size as their current house.
Michaela, 31 and Andrei, 33, bought their two-bedroom home for £265,000, and are now moving to another two-bed, in Calvert, Buckinghamshire, for almost exactly the same price.
“Upsizing just didn’t make sense. The property market feels uncertain, interest rates are still high, and we didn’t want to take on more debt. Moving sideways means we improve our lifestyle without overstretching ourselves,” she says.
When they bought their first home, Michaela and Andrei started paying a mortgage rate of £1,400 per month.
Rates have dropped slightly since then – and Michaela secured the cheapest rate she could using mortgage platform Tembo – but with their current home loan, they are still paying more than £1,200.
They initially intended to be in the home for around five years before upsizing.
“After that, we would have been hoping to upsize to at least a three bed because I work from home and I need an office, and maybe we’ll have a baby,” Michaela said.
But they have now decided to move for Andrei’s work, as his current commute to his role as a logistics supervisor is more than three hours in total each day.
As part of the moving process, they did consider upsizing to a bigger and more expensive home.
But while they say they could technically could afford the payments, it would severely restrict their lifestyle.
Michaela explained: “We could have stretched but we’d have a different lifestyle. We would rather live somewhere that perhaps is not our dream, but allows us to do other things. We can go on holiday and do other things too for example.”
Financially, the move also gives them breathing room.
After selling their renovated home and covering fees, the couple expect to have around £30,000 left over – because £30,000 of upgrades to the home have made it more valuable than when they bought it – and they plan to use to clear debts and bolster savings rather than put into a larger mortgage.
In the future the couple would like to upsize, perhaps if they start a family after getting married later this year, but say they could buy a home that requires extensive renovations, to get it for cheaper than they would do otherwise.
Property experts say that upsizing is becoming more difficult for prospective second-time buyers because of slower property price growth than occurred in previous years.
Although Michaela, who works in the property industry herself, and Andrei are selling for more than they bought for, this is because they put significant amounts of money into renovations and improvements, rather than because of overall growth in the property market.
In fact, figures from Nationwide show that in the past year, property price growth in the UK was just 0.6 per cent, far below inflation.
Some starter homes, such as new builds and leasehold flats, have even gone down in price over the past few years.
“The lack of house price growth seen in recent years means it has been hard for those on the first rung of the housing ladder to accumulate enough equity in their home to give them the confidence to take the next step up,” explains Lucian Cook, director of residential research at Savills.
As of last year, it would take a homeowner 7.8 years to accumulate 25 per cent equity in a property via house price growth, compared to 2.2 years back in 2004, according to Savills’ analysis.
Though mortgage rates are easing slightly now, they are still above the lows seen in the late 2010s and early 2020s, meaning affordability for buyers is still limited.
How first-time buyers can climb the property ladder
Although it can be hard to move up the ladder, there are certain things you can try to do to add value to your first home, so that you can sell it for more and potentially have more money to buy a second home.
Jonathan Rolande, property expert and founder of the National Association of Property Buyers, gives his tips below:
- Get the energy performance certificate (EPC) as high as you can. This is a rating given to homes based on how energy efficient they are. A higher rating is becoming more valuable for various reasons e.g. some mortgage lenders give better deals to highly rated homes. Get yours as high as you can by installing insulation, getting energy-efficient bulbs and more.
- Some renovations can add value. Some extensions, turning garages into rooms and more can add value, but always speak to a local agent, as the specifics will depend on your area – adding a room in central London will raise your price more than in rural areas for example.
- Remember that some of it is luck. Don’t beat yourself up if your home does not grow in value. Some areas see faster growth than others and it’s hard to predict where these will be.