In the UK last year there was a 0.5% drop in the number of first-time buyers, to 310,000, according to the Halifax, which they put down to the lack of affordable housing, particularly in London and the south-east.
I think that’s an over-simplification – there are many other economic factors to explain the reduction in first-time buyer numbers. For a start, the average 27-year-old earns less today than they did 25 years ago, and over the past 10 years, owner occupation in the 25 to 35-year-old sector has dropped from 59% to 36% – not to mention the fact that this last decade, first-time buyers’ deposits have rocketed a whopping 88%
Although these statistics are undeniable, I do wonder if this is also a social shift in expectation as much as an economic one.
Being a 60s baby boomer, I was born into a family environment where home ownership was seen as a status symbol. It was drummed into me from an early age to invest your money into bricks and mortar, but this was at a time when parents’ memories were still filled with a much less plentiful post-war era.
It was also a time when only people looking to follow a profession went to university. You left school, either got an apprenticeship or a friend or family member found you a job at the company where they were employed. You would see adverts for second-hand cars stating “house purchase forces sale,” showing the lengths people would go to achieve homeownership.
Fast forward now to the present batch of 25 to 35-year-olds and the background is very different. They have generally grown up in more affluent times, attended university or have friends who have attended university, where the idea of renting has been given credence. Gap years and travelling are more common and defined career paths aren’t established so early on. People also get married and have children later. This means that the pressure and status of home ownership no longer exist and the taboo of renting has been smashed. It’s now far more acceptable to rent, to be more transient with work and to establish a career path later in life.
It’s also a world of instant gratification. If you want something don’t worry about saving for it, just have it and put the cost on a credit card or loan. Perhaps the approach should change? First-time buyers are making a genuine effort to purchase an asset which will increase in value over the long term, but getting on the property ladder is made hard for them, sometimes impossible, if they can only raise a small deposit. How about making their lives easier and concentrating economic policy on making credit harder to obtain through loans and credit cards? This would lower monthly financial commitments as well as reducing reliance on credit, which must be a good thing.
Yes, the statistics confirm what is happening to the first-time buyer and I 100% agree that for those wishing to purchase their own home the new stress tests have made the entry bar harder to achieve. But, and it’s a big but – I do also feel that some of the people not purchasing have made an informed choice not to, delaying that leap until they are at a time and place in their life when they are ready to settle down.
Enviably perhaps, some of the current batches of potential first-time buyers do choose living life to the full over home ownership!