Why is everyone so desperate to get on the property ladder? What's the big deal?

Why is everyone so desperate to get on the property ladder? What's the big deal?

The average age to buy your first home in the UK is now 37 years old. But, the average age that people move out of their parents is still the early 20s. After flying their parent's nest and stepping out into the world as young adults, most stay in a rented property rather than getting on the property ladder. As a result, they have been termed Generation Rent.

The average age to buy your first home in the UK is now 37 years old. But, the average age that people move out of their parents is still the early 20s. After flying their parent's nest and stepping out into the world as young adults, most stay in a rented property rather than getting on the property ladder. As a result, they have been termed Generation Rent.

 

And there are many reasons for this. 

 

Firstly, most 'young' people stay in education for longer than they used to, whether university, college or apprenticeships. This means that the age to leave home is often later than in previous generations. 

 

After graduation, employment can often involve relocation to a new town or staying in the city where they studied. So cheaper rentals and HMO accommodation are often chosen as simple options requiring lower commitment and costs.

 

Secondly, the cost of purchasing a property is higher than ever before. Not to mention the deposit funds that are required to buy a property. Previous generations could buy a property without saving up a 10% deposit. With the increase in property values, that 10% is also going up.

 

After university and the inevitable student debt, graduate job roles often involve a period of training and, therefore, a slightly lower income. The chances of saving up a 10% deposit are pretty slim. 

 

And so, continuing to live in a rented property is the only real option. 

 

And if there are any property purchases, it is more than likely that the purchaser will be taking a withdrawal from the 'Bank of Mum & dad'.

 

Realistically, how else can first-time buyers purchase? No savings, student debt and a starting position salary are not conducive to property buying. So, it's little wonder that we are seeing generation rent. 

 

But should we still be trying to buy our own properties? 

 

In some European countries, people have no intention of buying their own properties. It is normal to rent a property, and they live happily ever after. They enjoy a lower commitment to a location as moving is much simpler, and no property maintenance costs. 

 

Of course, there are positives to living in rented property. But, one of the main reasons that, particularly in the UK, we advocate buying our own homes is the potential for capital increase.

 

As a homeowner, you will benefit from the housing market value increases, which is impossible when renting. So much so that Brits describe paying rent as dead money. You're paying for the property but with no other benefits, over and above a place to call home. It's not an investment. 

 

Paying a mortgage each month slowly chips away at the debt until you eventually own the property outright. And, if the property market increases whilst you are paying the mortgage off, you gain a capital increase. And each month you make a payment is an investment towards your future and ultimate property ownership.

 

However, you're also responsible for all property maintenance as the property owner. If the boiler stops working or the roof falls off, the cost of that repair is on you.

 

In conclusion, buying your own home is a sound investment. Pay off your mortgage, and you'll ultimately own the property outright. You will have invested your money wisely; historically, property ownership has increased value and, therefore, equity. 

 

However, there are most definitely barriers to entry. 

 

As this generation reaches middle age and the Gen Z's begin to venture into moving out of home, I imagine we will move towards a European style of living. Fewer and fewer people will be able to buy their own homes, choosing instead to live in rented accommodation long term.

 

Perhaps these people will purchase their own properties eventually. Still, the average age of the first-time buyer is likely to get older and older. As student debts are paid off, or job roles are promoted to senior positions, salaries will increase. Therefore there will be more opportunities to save money and, thus, be able to purchase a home. But, even in this case, the time that a homeowner will have to pay back the mortgage will be reduced, meaning that the monthly repayments will be pretty high. With that in mind, will mortgage terms extend and allow the term to surpass the usually expected retirement date? 


 


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