In recent years, first-time buyers have faced daunting obstacles when it comes to getting a foot on the housing ladder, but there may be ways to overcome them.
Although the economic downturn has seen the end of the property boom, challenges remain for those who want to step onto the first rung of the housing ladder. These hurdles are:
- Property prices remain relatively high.
- There is a shortage of new-build houses.
- Lending criteria are stricter than they used to be.
- In most cases, a large deposit is required.
- Saving for a deposit can be tough, even if you have a healthy salary.
- Not everyone can turn to parents or other family members for help.
Below are some helpful answers to frequently asked questions:
Do young people have realistic expectations?
Generally, yes. Younger people are faster to adapt to new circumstances and can see how hard it is to buy property these days. Some are living at home or renting, some are looking at alternative ownership schemes where appropriate (see below) and others have deferred the decision to buy, hoping for a future change in market conditions.
Can first-time buyers learn from previous generations?
Home ownership in the UK underwent a revolution in the 20th century. Just over a hundred years ago, only around 10% of homes were owner-occupied, but by 2000 the figure was more like 70%. This trend may have reversed, but the UK is not in uncharted territory given how many people rented their homes in the relatively recent past.
What are alternative ownership schemes?
Across the UK, there are various schemes to help people get a foot on the housing ladder. Whether they involve social landlords, housing developers or the government, they are all designed to help people build up equity in a property. They do have social and financial qualifying criteria however - they are not open to all. Alternatively, some young people have taken the concept of flat-sharing to the next level and simply bought flats or houses jointly with friends, paying half a mortgage rather than a whole one. However, you should think carefully about the implications of such joint property ownership - always get legal advice first.
During the boom years, property was an investment. What are the current alternatives?
It is unlikely that we'll revisit the spectacular returns seen on property in the past, especially in those feverish years between 1995 and 2007. You may find the best alternative at the moment is sensible, regular savings - particularly into tax-free accounts such as ISAs, although it is important to shop around for the best rates.
Money Advice Service - www.moneyadviceservice.org.uk
Department for Communities and Local Government - www.communities.gov.uk
Council of Mortgage Lenders - www.cml.org.uk
BBC's Money Box - www.bbc.co.uk
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