I’m Mari, I’m 30 years old and I have a confession to make: for a few minutes last month I seriously thought I could afford a one-bedroom flat in Bermondsey, south-east London. The tour made me feel like Carrie Bradshaw about to buy a New York penthouse: I admired the bright, open-plan living room, ran my fingers along the marble kitchen countertop, and stepped out onto the admittedly tiny balcony.
And just like that, I realized that the price actually referred to a 25 percent interest in the property, through a joint ownership program. In my defense, it really wasn’t clear in the ad. It turns out the only places in Bermondsey that are in my budget are garages.
London has for years been the least affordable part of the UK to buy property and has been at the center of a supply crisis over the past 12 months, with some homes selling 10 or 15 per cent above their asking prices. So far, rising interest rates have offered no respite, and a long-promised fall in house prices has yet to materialize.
For a late millennial like me, the inability to buy a first home is tied to territory. According to data analysis firm Outra, the under-40s are buying fewer homes than ever before, and those who are buying are mostly being priced out of capital. As parody Twitter user Brooks Otterlake put it rather succinctly, “Maybe millennials could travel to 1974 and afford a house if they spent less on brunch and more on particle physics research.”
For those of us who weren’t born in the UK, the question is: will London really be my long-term home, or should I buy back a place in my home country?
“It’s so difficult,” says Andrea, 32, from Spain, who has been struggling with the same dilemma for almost three years and is still undecided. It’s a common problem: Foreign-born Londoners like her make up 37 percent of the city’s population, according to Oxford University’s Migration Observatory.
Laura, a 29-year-old French teacher, bought a £250,000 studio in Haggerston because she wanted to climb the UK property ladder. “London is my long-term city,” she says. But Alberto, a 30-year-old Italian who works in tech, opted for a place in Milan instead: “I moved to London to get some good work experience,” he tells me, “but I’d like to move back in sometime.” settle in Italy. Also, the prices in London are totally inaccessible.”
Of course if I wanted to buy in London I could buy anywhere further out than Thameside Bermondsey. But I moved here for the London experience. As an English friend put it, “You didn’t move from Tuscany to London to live in Ilford.”
Some have chosen to abandon the idea of buying up their voting capital altogether. “We could only have afforded houses in Barking or Plaistow [in zones 4 and 3]says Claudia, 42, an Italian cognitive psychology researcher at London South Bank University who has lived in the UK for six years. She tells me she decided to buy back in Italy instead.
Claudia plans to rent out her new flat while continuing to live in London. Maybe I should too.
However, the most lucrative option is to rent out a property to tourists through a short-term rental platform. That made Claudia uneasy. She bought in her hometown of Trieste, but cited ethical concerns about vacation rentals: “I don’t want to contribute to the destruction of my city by listing my house on Airbnb,” she says.
I understand their reservations, having grown up on the edge of an expensive tourist hotspot that has overwhelmed locals for decades. However, the increased revenue is significant. When I spoke to Lorenzo Marchi, a Timavo real estate agent who works in my home region of Versilia, he said that a modest two-bedroom apartment would fetch at least €15,000 per summer season if rented through Airbnb. The same property rented out annually to a local family would generate €8,400 per year.
But then there are tax consequences. In four years I would have to relinquish my non-domicile status as a non-dom, which prevents me from paying tax on worldwide income to HMRC. After that, margins look even thinner unless rental income is significant.
“[Buying in your country of origin only makes sense] when you get such a great deal on the rent you get abroad that even after tax it’s better than anything you could get here,” says Angus Johnston, PwC’s UK and EMEA property manager. “If rents are about the same then there’s no point in buying abroad because HMRC will tax any excess income if the home country charge is lower than the UK rate.”
So by my count I make that zero good options. While I’m not planning on moving to Tuscany anytime soon, the sky-high housing costs make it difficult for me to consider buying my permanent home in London – unless, of course, the FT starts to be as generous as Carrie is to its contributors pay Bradshaw must have been paid.
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