Top reasons why millennials are finding it hard to get on the property ladder and ways to combat that.
The ‘millennial’ generation are those of us born between 1982 and 2004. This is considered the peak time to buy houses, yet data from numerous surveys have shown that fewer millennials than ever are buying houses.
Using a large number of sources and evidence from various bodies, we are going to look at why millennials aren’t buying houses and ways we can combat that.
So, millennials are buying fewer houses. Why?
- Slow Wage Growth
According to a study by HSBC bank, UK wage growth stood at 1.8% per annum, yet house prices are growing by a nationwide average of 7.5%. The gap is large and is currently growing.
With affordability becoming a bigger and bigger issue, the average UK first time buyer is now 30 years of age, up from 26 in the early 1980’s.
This trend has continued over the last decade, with the average UK house price growing in value by 15% since 2008 (this figure does not include the 2009 housing market crash). Meanwhile, wage growth has hovered around the 2% mark.
- Huge Deposits Are Required
Arguably the biggest stumbling block when it comes to buying houses is the large deposit required. A nationwide average of nearly £23,000 is required to buy your first home – a lot of money to save, which takes time.
In London, the average first time buyer house deposit is an astonishing £107,000, which is three times the average London gross salary of £34,473.
When factored in with generally rising prices of living – increased car and commuter costs, increasing rent costs, increasing food prices etc, saving for a deposit is a goal that’s increasingly harder to hit.
- There’s a Shortage of Available Housing
Housing has been a political football for decades. A combination of lack of government investment in housing, some of the strictest planning laws in the world and a huge overseas interest in UK property has seen the pool of available housing shrink over the decades.
This BBC article shows that UK estate agents have the lowest number of houses available in 40 years. In many cases millennials have the least financial muscle, so are often outbid for houses, making it even more difficult for them to purchase.
- Rising House Prices
Another obvious point is the dramatic rise in house prices. Since the 2009 house price crash, the average UK house price has climbed 21% to a value of £226,071. This figure puts pressure on millennials in two ways – one, they need to save more as a deposit and two, they need to earn more to afford a suitable mortgage.
The BBC have pointed out how work carried out by the Institute for Fiscal Studies has shown that middle earners such as millennials are being locked out of buying a home.
The figures show that in 1995-96, 65% of 25-34 year olds owned their own homes, as opposed to just 27% in 2015-16. They point to house prices rising 7 times faster than incomes in this demographic.
With this in mind, it’s easy to paint a bleak picture for any millennials looking to buy their first home. That needn’t be the case though – there are plenty of ways that millennials can get themselves on the property ladder.
With those factors in mind, it may seem impossible for millennials to buy their first property. All is not lost though – with these tips all millennials will be able to buy their own home…
- Accept Responsibility – Save Money!
If you are serious about buying a house, you have to accept responsibility and look at ways you can save money. Look at your overall outgoings – can you reduce your phone package? Can you go out less? Buy fewer clothes?
With a consistent figure being saved each month, you can work out exactly how long it will take for you to reach a required figure.
Saving money won’t necessarily be fun, but it will be vital if you want to achieve your goal of owning your own home.
- Take Advantage of Government Help
The help to buy ISA is a government scheme where those saving up to £200 per month will qualify for an (up to) £3,000 bonus when they come to buy homes for sale.
Essentially, everything you save, the government will top up with a 25% bonus up to a maximum of £3,000. The bonus will be paid directly to your lender when you buy your home.
If you save the maximum £12,000, the government will top it up to £15,000.
The scheme is limited to one account per person and can only be used on house purchases up to £250,000 outside of London and £450,000 in London.
- Boost Your Income
First of all, saving money by cutting out unnecessary spending is an easy way to boost your deposit savings. The next step is boosting your income, which is relatively easy nowadays.
Could you take on extra shifts at work? Could you sell unwanted items on eBay? Do you have a trade or usable skill you could offer?
Even an extra £50 per week quickly adds up and can really boost your ability to save quickly. It may even change the way you earn your living going forward!
- Be Realistic With What You Can Afford!
A lot of people aren’t willing to compromise when it comes to buying their first house.
Of course we’d all like to live in a beautiful house with front and rear gardens, en suite bathrooms, great location and a two-car garage, but sometimes we have to be realistic. Unless you’re very lucky, you’re unlikely to get that for your first home.
Think about what you really need, what you can afford and what you’re willing to compromise on and you’ll be able to buy your first home much more quickly.
- Shop Around For Bargains
Understand your local property market. Understand value in the area and look around for the best deals you can find.
Knowledge really is power in property, so take the time to learn what true market value is. Keep an eye on properties and locations, putting yourself in prime position to act when the time is right.
Millennials may be finding it harder to buy houses, but that doesn’t mean it’s impossible – you just need to be disciplined and market-savvy!