When it comes to renting, the older generation like to tell those who can’t afford to buy a property that they are effectively burning their money and that paying someone else the privilege of allowing them to live in their property has no financial benefits.
Hey, smug people who have a mortgage, those who rent know this already. They think about it every time their letting agent rings and asks when they’re free to inspect the property and when the landlord decides they can’t afford to fix that leaky window but ‘it’s not a problem anyway right now because it’s summer’, or when the rent goes up for no reason.
The majority of those who rent would love nothing more than to own a house and not have to deal with the hassles that come with living in a rented property, where a scuff on the wall means money deducted from a deposit and you can’t even hang a picture up on a wall. But even though they scrimp and save, will they ever be able to afford to buy?
Well, the Help to Buy scheme – and specialists such as the Money Advice Service – have already assisted first time buyers to climb on that first rung of the property ladder, but many of these were more than likely still living at home, not renting privately.
As soon as you begin renting, you set yourself back a good few years when it comes to buying a house. Those who can stay at home and live with their parents find it easier to save because they pay less rent, no council tax and no bills, so a good portion of their wages can be squirreled away.
Buzzfeed recently used Zoopla’s data to create a calculator that works out how long it would take a person to save up for a housing deposit and the results are shocking. Let’s take a look at some examples. Say you wanted to buy a house in the Birmingham B5 postcode – the average property price is £145,319 and if you could put away £300 a month it would still take 8 years to save up a 20% deposit.
If you live in the W5 area of London, paying out nearly £700 a month for a room in a flat share but want to someday own a property in that area you can quash that dream immediately. With an average house price of £659,933, even if you have the ambitious aim of saving £300 a month, it would still take you 37 years to get together a 20% deposit.
Politicians regularly claim to be ‘worried about generation rent’ but until they set up a scheme that gets them on the property ladder quicker (and build more homes to compensate for our rapidly rising population in the UK) we will be seeing more and more people under the age of 30 renting instead of buying.
The newly emerging buy-to-let generation are also causing an issue. These are people who buy up property using their pension funds and are taking up housing that could go to a small family or couple just starting out. Instead these families and couples are renting from these investors and ultimately not enjoying the experience of having a home you can decorate and actually live in.
So, yes, generation rent will be able to afford to buy but it will be a long and arduous journey until they can scramble together that 20% deposit – especially if they don’t have the option to go for Help to Buy or another Government backed scheme. Good luck generation rent, see you in 20 years once those who buy-to-let are done with their investments!