Have things improved for renters AND first-time buyers?

I never thought I’d ask this question with the possibility of a positive answer. But…is the UK housing situation actually getting better for young people?

Today, new figures from Zoopla paint a pretty rosy picture of the housing market – for both buyers AND renters.

Certainly, we’ve been hearing for some time that the number of first-time buyers in the UK is rising beyond expectations. Yesterday, UK Finance (the industry body for banks) published data which showed that the number of first-time buyer mortgages completed in August was at an 12 year-high. Not since the financial crash have we seen so many young people get their first foot on the property ladder.

But this buying boom comes with a few important catches. Young people are buying later, with the average first-time buyer age rising from 30 to 32 just this year, and borrowing more. Many new homeowners are having to take out mortgages lasting as long as 40 years to spread the (still) enormous cost. Shaun Church, Director at mortgage broker Private Finance, said this will create a new generation of homeowners who won’t be mortgage-free “until their early 70s”. That has worrying long-term implications: will pensioners in the future have enough left over after their monthly housing costs to really enjoy life?

Another red flag is our addiction to Help to Buy. The government-backed scheme has been a license for home-builders to print money since it was introduced in 2013. That’s because the Equity Loan initiative has only been available on new-builds, meaning home-builders can use government money (and their monopoly) to create overpriced homes at rock-bottom standards. But Help to Buy doesn’t just exploits taxpayers: it capitalises on young people’s feverish haste to buy a home, and an immaculate “turn-key” one at that. The scheme is slated to end in 2023, but home-builders have already jibbed at that deadline, as well as new restrictions on how much they can jack up prices.

From 2021, there will be a limit on the price developers can set for a Help to Buy home, fixed at one and a half times the average first-time buyer price in each region. This sounds like a no-brainer for a scheme that is supposed to provide affordable homes for first-time buyers. But of course, experts are already warning that home-builders will either turn their backs on the entry-level market, and squeeze supply, or make the homes even more pokey to compensate. Plus ça change!


But putting all that aside, we can now at least say one thing: if you really want to buy a home, it’s possible. And it will not necessarily make the life of renters harder. In fact, the home-buying boom may be making the rental market more affordable, according to that surprising data from Zoopla today.

The home-buying aspiration among young people has attracted a lot of stick in recent years. The UK is traditionally fond of property ownership due to lots of complex economic and social factors. But that attachment to home ownership has been criticised for making housing more expensive right across the board. If only we could become a rent-positive country like Germany and lose our fixation on home ownership.

But with 80 per cent of first-time buyers quitting the rental market, it stands to reason that home-buying (at a reasonable price) helps to keep the whole housing market moving. And it’s great news for young people that renting is becoming (overall) more affordable. This doesn’t just help our home-buying prospects, but all our finances. Renting is the single biggest cost for young people, but if it can be contained, it might just be the difference between falling into debt to survive and being able to save (or even invest) from an earlier age.

So Zoopla’s data makes a compelling case for supporting the young home-buying dream – with a vital caveat. Saving up the right deposit and signing on the dotted line isn’t enough. Your mortgage will need to be paid off, and the more you commit to that process, the better it will be for your long-term finances. After all, buying a home may feel like the end of a tough financial journey – but it’s actually only the beginning.

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