The Daily Telegraph - Saturday - Money
Get on the property ladder: find a partner or a parent
Young people struggle to buy, but it’s easier with an additional name, says Olivia Rudgard
Britain’s broken housing market means household sizes are growing – with more people living under one roof than at any time in 17 years.
Data from the Office for National Statistics shows that more adult children are living with their parents. House shares – both rented and bought – are also growing, as people are priced out of living alone. The number of under-65s who live alone has fallen by 244,000 since 2012, according to government data.
The struggle young people face to buy is well documented, but there’s also some inequality within their generation. High earnings make it easier to buy – but so do factors such as relationship status and parental involvement.
Two very different savers demonstrate this divide.
Rosie Smith, a 27-year-old account executive, is close to being able to buy with her boyfriend, Alex Cox, 24. They live in Witney, Oxfordshire, and pay £995 a month in rent between them. They had been seeing each other for eight months when they decided to move in together.
“We’ve probably halved our outgoings just by moving in together,” she said. As well as saving around £200 a month each by doing this, the couple have been fastidious in their saving.
Ms Smith has a spreadsheet to track their monthly outgoings and how much they have saved for their deposit and moving costs. They each save 15pc of their salary – around £550 – a month and have so far saved £32,000 between them.
They estimate that it will be at least another year before they’re ready to buy.
Another saver – from the same age group – is having a very different experience.
Rachael Hughes, 28, took a pay cut a month ago after changing careers. After university she became a teacher, but found it tough.
She now lives in London, on lower pay, in a different career as a learning adviser, working with schools to introduce digital learning to classrooms.
The move wiped out some of her savings, and she has just £3,000 left. She is still saving £300 a month, mostly enabled by the below-market rent that she pays to two friends who let her a room in their flat.
She is resigned to being unable to buy a house – and knows many other young people in the same situation.
“I feel frustrated in the same way as a lot of people of my generation,” she said. “In 2008, after the financial crisis, it was obvious what was going to happen. It is annoying and difficult because I want to get on the housing ladder.”
The average property is now worth six times the average salary, according to Nationwide. This makes it out of reach to most single buyers.
Mortgages are offered according to strict salary multiples. Lenders are allowed to offer only 15pc of each quarter’s lending at more than fourand-a-half times the borrower’s salary.
House prices are rising much faster than salaries. Unsurprisingly, young people are joining forces with parents, partners or friends
On a salary of £30,000, a buyer could borrow only £135,000. The rest would have to be made up with a deposit.
However, if they teamed up with a partner, also on £30,000, they could borrow £270,000 together – dramatically reducing the deposit.
One in four young people now lives at home with parents. In some ways they are the lucky ones. High rents, which are now worth around half of income on average in Britain, make it difficult for many people to save.
Living at home rent-free – or for nominal rent – can mean significant amounts of money being saved. But this isn’t an option for everyone.
Ms Smith lives near her parents, so was able to live at home for longer – this wasn’t possible for Ms Hughes.
A more dramatic way in which parents can help is by handing over cash for deposits, or by joining a child on the title of a property so their income can be used for mortgages.
The “Bank of Mum and Dad” is now one of Britain’s largest lenders, with some parents and grandparents releasing money from their own homes in order to be able to help.
There are tax and legal problems that must be avoided, though. Parents can incur an extra three percentage points of stamp duty if they help a child buy because of a surcharge introduced in April this year.
‘We’ve probably halved our outgoings just by moving in together’