Young professionals stepping on the housing ladder – achievable or just wishful thinking?
Are we the generation of Young Professionals that will never own a home?
Forecasts for the property market for the next five years are far beyond what someone could call optimistic. With property prices predicted to rise as high as 26.4% in the South East and to similar percentages in other areas, we thought it would be interesting to dig further into the potential young professionals have in buying their first property and get comments on how they feel about these increases.
According to the Halifax report “Generation Rent 2015”, people who are not yet property owners identify three main obstacles in their way to get on the housing ladder. These are as follows: the size of the deposit, high property prices, and low-income.
Research conducted by the Resolution Foundation* think-tank highlights that potential low to middle-income homebuyers can end up saving for around 24 years to be able to gather the amount of the required deposit (provided that they set aside 5% of their income each year).
Should this estimation be close to accurate, what Matthew Ashton, a young architect, highlights in his article in The Guardian seems to reflect the naked truth: “What’s becoming clear is that inheritance is becoming the prerequisite to property ownership.”
Furthermore, a recent market analysis conducted by the Resolution Foundation, reveals that home ownership within young working families on a modest income has declined dramatically over the years to 25% nowadays, in comparison with the respective percentage of 57% recorded in 1998.
On the other hand, the aforementioned Halifax report states that since 2013 there has been a significant rise in the number of first time homebuyers, as a result of the launch of the Help-to-Buy schemes. What, however, seems to be of concern raised within another report published by Halifax in 2013, is that 21% of non-homeowners aged 20-45 seem to have already abandoned their dream of buying their first property.
People within Groundsure that have or are trying to get on the housing ladder, are sharing their thoughts…
We have just come to the end of the process of buying a house. We were only able to muster enough money for a deposit to buy a one-bedroom place in Brighton because we have been living with my wife’s parents while we saved. It has taken us nearly two years to get to this point from when we first moved in with them. If we had gone into rented accommodation we could have been waiting for five or six years before we had the necessary funds. It has been very difficult when competing with, for example, buy-to-let landlords who have offered way above the asking price for properties that we have been interested in, essentially preventing us from being a viable bidder.
I bought my flat with my boyfriend in 2014. We were lucky we were both given a very healthy deposit from inheritance and parents. This amounted to about £50k. We could have bought a much more expensive flat, but due to the monthly repayments we settled for one a little bit cheaper which meant our monthly repayments were still less than rent. Because of this our loan to value ratio was pretty good, we were 70:30 meaning we borrowed 70% of the purchase price. It would have been impossible to save this amount of money and we were incredibly fortunate.
Where my parents’ generation was able to afford a house with relative ease, my generation really struggles. There’s a big class element to this. Those people whose family have means (savings and assets) tend to be ok but people like me – from a working class family – are struggling to get so much as a small deposit together. Despite being relatively comfortable in terms of regular income, there are a load of problems that lead to me being unable to scrape together a deposit – rising living costs, a rising rental market in Brighton and Hove, the price of travelling (I don’t drive and train season tickets are very expensive) – these are all issues that contribute to me and my partner still being in the rental market.
I have a good job but I am unlikely to be able to afford a property for many years, even with a shared income with my boyfriend! The main reason is that house prices seem to be astronomical, especially in Brighton. One of the main problems at the moment for us is that we are in rented accommodation, which is also expensive and the chance to save up enough money to buy and still live is difficult. I live in hope that it won’t be too long before I finally get to buy my own property, but without additional support from close family, it is highly unlikely to be in the near future.”
* The Resolution Foundation is an independent British research and policy organisation, established in 2005.
- Halifax, 2015. Generation Rent Five years of Generation Rent: Perceptions of the first-time buyer housing market 2015. [pdf] Available at: https://static.halifax.co.uk/assets/pdf/mortgages/pdf/Generation-Rent-2015-Dont-stop-believing-full-report-7th-April-2015-Housing-Release.pdf [Accessed 1 April 2016]
- Independent, 2015. UK homebuyers must save for 24 years to afford first property, says new study. [online] Available at: http://www.independent.co.uk/news/uk/uk-homebuyers-must-save-for-24-years-to-afford-first-property-says-new-study-a6780626.html [Accessed 1 March 2016]
- The guardian, 2014. Without family money, who can afford a home?. [online] Available at: http://www.theguardian.com/commentisfree/2014/apr/06/house-prices-outside-london-renting-buying-tenant [Accessed 1 March 2016]
- Resolution Foundation, 2016. Owning a home set to become a pipe dream for young workers on modest incomes [online] Available at: http://www.resolutionfoundation.org/media/press-releases/owning-a-home-set-to-become-a-pipe-dream-for-young-workers-on-modest-incomes/ [Accessed 1 April 2016]
- Halifax, 2013. Generation Rent: A Society Divided? Perceptions of the First-Time Buyers Market 2013. [pdf] Available at: http://www.lloydsbankinggroup.com/globalassets/documents/media/press-releases/halifax/2013/1706_halifax_generation_report.pdf [Accessed 1 April 2016]