Whey Finance

5 Ways to Climb the Property Ladder Without Mom and Dad’s Help

In 1981 my grandparents bought their council house in Enfield, North London, the first recruits to Margaret Thatcher’s vision of landlord democracy. In the early 1980s, 55% of the UK population owned their own home. In 2003, it was 71%. Right to Buy has truly made an Englishman’s home their castle, and in the process, we’ve become a nation obsessed with Rightmove. It also arguably fueled divisions: young versus old; London versus the rest of England; Mom and dad bank vs no caregiver.

Over 30 years later I received my dividend from the scheme when I bought my first property, a flat in east London – the deposit coming from my part in the probate of my grandfathers house- parents. With a down payment in place, I knew I would be paying about two-thirds of what I was paying in rent each month.

I still had to convince the mortgage company that I could afford a property many times more than my salary. House prices have risen by more than 24 times the rate of annual wages since 1980, when the average house price was £25,000. Today it is £254,624. Not in London though, where it’s £500,000. In the end, I bought it with a friend.

I had every reason to feel smug. And then the building security crisis happened. Retrospective changes in building regulations after Grenfell have meant that many new flats need sanitizing. While a fund has been set up to cover the cost of certain aspects, tenants are expected to meet some or all of the costs in certain areas. I am still waiting for my repair bill to fix the fire safety issues and not sure if it will be £10,000 or £70,000. And yet, I am one of the lucky ones. Today, a young generation cannot approach the ladder.

News in December of the end of historically low interest rates came at a time when homeownership rates among 25- to 34-year-olds are the lowest since records began in 1961. The average deposit FTB (first time buyer) in the UK is now £59,000, and aspiring FTBs have been tightening their belts accordingly. Not that those avocado brunches were really the problem; in 2017, the typical London flat depot cost around 25,000 brunches.

How did we get here?

Empty high end apartments in London; elderly couples living in five-bed houses while their children cannot afford a two-bed house; entire streets boarded up in depressed industrial towns; second home owners in rural communities.

It’s common to talk of a housing shortage, and we’re building less than ever (a far cry from the estimated 345,000 new homes needed in England a year, according to charities such as Crisis), but there’s also a failure to build enough of the right homes in the right places, experts say.

The housing crisis is often centered on London because, according to Anthony Breach, senior analyst at the Center for Cities, it has a stronger economy than other cities in the UK, “meaning young people have little to no no choice but to settle there”.

Yet the number of houses built in the capital has not kept pace with the number of people living there. This results in higher housing prices and rents.

Meanwhile, says Darren Baxter, head of housing policy and partnerships at the Joseph Rowntree Fund, low long-term interest rates have made real estate a good investment relative to others. “This has resulted in an increase in buy-to-let properties, which are used as assets to generate income, and an increase in the number of existing owners buying second homes.” Although the government has introduced new tax rules to make buy-to-let less attractive, they have yet to completely lose their luster, meaning FTBs often compete with landlords.

Government assistance

Aid for purchase, mortgage guarantee system, co-ownership: the government has tried to help the FTBs, but are they the solution hoped for by the government? Experts fear that any positive effect will be temporary, storing long-term problems for urban housing markets and the national economy. Breach says: “The long-term effect is to kick down the street and make housing even less affordable for the next generation of young people by driving up prices even further.”

And then there is the current building security crisis; 95% of properties purchased through Help to Buy since 2013 have been rental apartments, which are the main property types caught up in the post-Grenfell scandal, with the associated costs of remediation currently being borne by tenants. Meanwhile, with much of the bottom rung of property caught in the slump, what’s on offer for FTBs is limited, even if they have their finances in order.

Boom or bust

Properties in London are so expensive: should the bubble burst? When the government announced the suspension of stamp duties in July 2020, it made its position clear: the housing market is too big to fail.

It may even have helped fuel a 15-year high in FTB numbers, putting almost half a million on the ownership ladder. According to analysis by lender Yorkshire Building Society, the number of new customers reached around 408,379 last year. The surge was fueled by cheap mortgages amid low interest rates, the pandemic-induced space race, stamp duty exemptions and a boom in Moms and Dads Bank lending. dads (BOMAD). These proud new owners probably bought at the top of the market. According to a study by getagent.co.uk, FTB house prices have risen by an average of 11.7% in England and 31.5% in some parts of the country. Unsurprisingly, BOMAD’s role has become essential in helping FTBs. According to Savills, BOMAD distributed a total of £9.8bn in 2021 – a new record, compared to £6.1bn in 2020.

Meet the FTBs who made it without bomad

Jo Thelfall, 29, Manchester