The rise in micro-homes - It is no great revelation that London is too expensive for many first-time buyers (FTBs), with the average home costing more than £480,000, according to the Office for National Statistics (ONS) for September 2017. The Government recently announced that it has scrapped the stamp duty on all first-time house purchases of up to £300,000, and in London and other expensive areas, the first £300,000 of the cost of a £500,000 property by FTBs will be exempt from the tax. While this goes some way to “reviving the dream of homeownership”, as the Chancellor said during the Autumn Budget 2017, the fact remains that house prices are just too high compared to wages for most young people. Yet, the attraction of the City remains strong - so strong in some cases that people are willing to make sacrifices in order to live there. While that sacrifice may be disposable income for some, others are willing to forgo a ‘decent-sized’ house so they can have shorter commutes to work and still afford to enjoy all that London has to offer, with its thriving social scene.
What we’re seeing right now is a rise in alternative living, and in particular micro-homes which are already commonplace in Japan. They’ve been slowly growing in popularity in the UK since 2013, when the Government changes the rules to allow developers to convert offices into residential homes without planning permission. This led to a record 8,000 new micro-homes being built in 2016, of varying sizes from 16 sqm (one metre bigger than a prison cell) to 37 sqm, the minimum size of a studio by Government standards. By comparison the average home is 76 sqm.
There is certainly an increased demand for cheaper and quicker construction methods, which lends itself to the growing micro-home trend, but those in the property industry are torn in their opinion of this way of living - some praise micro-homes for their unique and compact design that allow them to contain most of the modern amenities you’d expect to find in a bigger house, while critics label them “dog kennel homes”. There’s also a divide over whether smaller homes are the solution to the housing crisis, or part of the problem.
Whatever side the experts fall one, there’s one thing we can all agree on, why they’re so popular with the younger generation. Not only are they cheaper but there’s also a growing trend for minimalism, particular among millennials who are looking for ways to simplify their life (as the famous saying goes ‘clear space, clear mind’...). But it’s not just micro-homes that are on the rise, there are many different ways of alternative living as this Buzzfeed article highlights.
While micro-homes help people get on the property ladder quicker, FTBs should heed a word of warning: these smaller homes don’t increase in value in the same way as larger properties do. Which? carried out an investigation earlier this year, comparing the average price of properties sold in 2016 with those sold between 2013 and 2015 to measure the price growth of different-sized homes (nearly three million in total). They found that the price growth for properties smaller than 37 sqm was 6.9%, compared to 8.7% for homes larger. In addition, micro-homes can make some mortgage lenders hesitant - meaning while you think you’re getting a good deal now, you may have to pay the price later.
Jason Harris-Cohen, founder of fast house buying company Open Property Group