The plight of first-time buyers has been filling newspaper columns for decades, and in a densely-populated country such as the UK the average young adult is always likely to find it a challenge to get on the property ladder – unless (and even if) they are able to get significant assistance from their family. The good news, however, is that, usually, where there is a will there is a way, as evidenced by the fact that not only are there still first-time buyers in the property market, but that their numbers are the highest they have been for a decade.
First time buyers are now in the majority
According to research from the Halifax, first-time buyers now account for 51% of property purchases. This compares to 30% of property purchases in 2008. What’s more, in absolute terms, the number of first-time buyers is only 8% lower than it was in the red-hot housing market of 2006 and more than double what it was in the first half of 2009, when lenders (and house sellers) were still reeling from the financial crisis of the previous year.
First-time buyers are getting older
Ten years ago, the average age of a first-time buyer was 29, now it is 31. The most obvious reason for this increase is that the days of 100% (or even 100%+) mortgages are long gone and we are now in the days of substantial deposits. This new emphasis on deposits is not solely due to the increase in house prices (although that is certainly a factor). It’s also connected to the fact that being able to put down a large deposit means that you need a smaller mortgage, which makes it easier to meet the affordability criteria.
Deposits are now in the region of 15% to 30%
Nationally the average first-time buyer is putting down a deposit of £33,127 on a property priced at £208,741. That’s 15% of the purchase price. In London, however, the average first-time buyer is putting down a deposit of £114,952 on a property priced at £419,608, which is almost 30% of the purchase price. These hefty deposits can be a challenge to build although there are some ways in which this challenge can be made easier such as by using a special ISA.
Home is where the money is saved
It can be particularly difficult to save up for a meaningful mortgage deposit if you are also paying commercial rent. Therefore, from a financial perspective at least, it makes sense for young adults to stay at home and simply pay their parents a contribution towards their living expenses. In many cases, this may be a perfectly agreeable arrangement for both parties. In other cases, however, it may be more challenging for young adults to balance their desire for independence with living in their parents’ house and for parents to balance their own desired lifestyle and plans for the future to accommodate their offspring (literally and metaphorically). Parties in this situation might wish to look at taking professional advice to help both children and parents to move onwards and upwards as quickly as possible.