Is owning a home better than renting?
RENTERS ARE WORSE OFF BY £651 A YEAR, SAYS TRICIA PHILLIPS
THE number of first-time buyers has reached a 10-year high with 335,750 people getting their foot on the property ladder last year.
Research from Halifax shows the average first-time buyer deposit has more than doubled over the past decade from £15,168 in 2006 to a hefty £32,321 in 2016, an increase of 113%.
Young people get stuck in a rental trap, unable to even consider buying a home of their own as they spend a huge chunk of their income on rent.
The reason so many have managed to push through that rental barrier is because the bank of mum and dad has come to the rescue.
Over a third of first-time buyers rely on parents to help them get the cash together for a house deposit.
The Social Mobility Commission reports that help from parents with property transactions has shot up 20% in the past seven years. By 2029 it is predicted that 40% of buyers will be backed by their parents.
It makes financial sense for parents to encourage their grown-up children to save towards their own home and to offer help to get them there.
Figures from Halifax show those buying are on average £651 a year better off than people who rent – that adds up to £3,255 over five years. In London the figure is the highest at £1,927 a year, while East Anglia has the lowest difference at £84pa.
Martin Ellis, housing economist at Halifax, says: “Although the average costs associated with buying have grown at a faster rate than average rents over the past few years, owning a home is still the more financially attractive option.
“However, the gap has narrowed since 2011 because of the rising prices of a typical first-time buyer house.
“While prices are at an elevated level, the number of first-time buyers continues to rise and this group now accounts for half of all new home purchases financed by a mortgage.
“Improving economic conditions, lower rates and government schemes such as Help to Buy, have played a key part in helping first-time buyers.”
The size of the deposit is the major barrier for many people taking the plunge to buy. It’s a huge hurdle they have to face before the financial advantages of home ownership kick in.
Andrew Hagger, independent financial expert from Moneycomms.co.uk, says young people have to bite the bullet and consider moving back in with their parents for the best chance of getting that deposit together and getting a foot on the property ladder.
He says: “Although renting gives you your independence and own space, it can severely hamper your chances of owning your own home.
“The cost of renting has soared and for many tenants it takes a huge chunk of their disposable income each month and prevents them from saving at a level needed to get a deposit together.
“As hard as it may seem, moving back in with your parents for a couple of years could be the answer. Without having to find the rent and knuckling down hard to save, you will be surprised how much you can tuck away in just a couple of years – think of it as short-term pain but for long-term gain.”