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HomeSeeker As house prices soar, it takes first-time buyers longer than ever to save for a deposit. When the goal is so far away, is it any wonder that Generation Rent have lost the desire to save? Sophie Herdman reports...
OUT shopping recently, I bumped into a friend who is about 30 years older than me. Spotting my newly-purchased shoes (a sale item, I should point out, but a treat nonetheless), she told me that when she, like me, was a twentysomething, such extravagances were a no-go because she was saving for a house. The implication was clear – I should not be buying luxuries. The problem, I pointed out, is that resisting the odd pair of shoes, walking to work instead of paying for the bus and sacrificing that weekly dinner with friends now makes only the tiniest dent in a deposit. Despite a reduction in house prices over the past five years, 2013 has seen them bounce back up again. The Nationwide’s House Price Index for September found that the price of a typical house in the UK – £172,127 – is a whopping 5 per cent higher than a year ago. The housing charity Shelter recently calculated that the average first-time buyer house price in England is £139,920 and requires a hefty £27,984 deposit. That’s a lot of money. I worked out recently that I could real-
istically save about £200 a month if I cut out luxuries – always bring lunch into the office, go to the cinema less, no holidays, things like that. I reckoned I could live like that for a few years if I had a goal to work towards. When I saw Shelter’s average deposit figure, I realised I would have to adopt this frugal approach for more than 11 years before I could buy a house. Shelter used the average national salary to calculate that it would take a couple six-and-a-half years to save that amount of money. For a couple with a child, it would be 11.8 years. And for a single person, it could take 14.3 years. Which means that if you start saving aged 25, you won’t own a home until you’re nearly 40. A new report by the Post Office shows how much has changed in the last 50 years. In the 1960s, the average firsttime buyer was aged 24. By the 1980s they were 28. From 2005 to 2009, the age had risen to 30. But in 2012, when the research was conducted, many said they did not expect to be able to buy a house until they were 35. In Scotland and the North East, first-time buyers said they expected to be 40 before they could own a home.
All of this leaves Generation Rent, as we are called, with a decision to make. We can make a dramatic lifestyle change in an attempt to speed up the process – move to a cheaper part of the UK or even move back in with parents, as many are doing. Almost certainly it means putting off starting a family until we’ve saved for a house. Or it could mean deciding to buy a property with a partner earlier in the relationship than might be deemed desirable. The only other option is to sit it out, saving bit by bit and making sacrifices every month over a very long period of time. But when the many who have no other choice but to opt for this course see that the goal is so large and so far away, is it any surprise that they feel a sense of hopelessness and lose the impetus to save? Or perhaps even kid themselves that a higher-paying job or some inheritance is just around the corner? Shelter has many handy tools to help calculate how long it will take you to save for a deposit, and has amassed many case studies during its campaign for more affordable homes. As Abi from Reading told the charity: “We could, in theory, start putting
about £200 a month away, but it would never bring us anywhere near the amount we’d need for a deposit, and that kind of feels pointless.” The good news is there’s now some Government help available for hardpressed first-timers. In March it launched its Help To Buy scheme, allowing first-time buyers to purchase a new build if they have just a 5 per cent deposit. The rest of the deposit, up to 20 per cent, is borrowed interest-free from the Government for five years. Some experts have warned that the scheme will fuel a housing bubble and only make matters worse for the next generation. But Prime Minister David Cameron insists: “If we don’t do this, it will only be people with rich parents to help them who can get on the housing ladder – that is not fair, it is not right.” But perhaps renting is the future. A recent Halifax survey of people aged between 20 and 45 found that more than half believed renting rather than buying would become the norm within the next generation.
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Why Generation Rent must make some big decisions