Today’s generation are tomorrow’s property owners/investors and landlords, as well as future tenants. Thus, it is vital to observe the trends in the property market in order to reap the best benefits from our investments.
One thing that’s gotten very clear is that youngsters are becoming more disenchanted with the housing market. Millennials all over the world, especially in major capital cities like London, Manchester, Melbourne — even in Kuala Lumpur — are facing difficulty in getting on to the property ladder.
Affordability is a prime factor that millennials have to consider when buying a house today. Despite government initiatives provided for first-time house buyers (who are mainly millennials), affordability remains a serious issue, especially if the property of choice is in a prime location.
Chances are that lower-priced properties will not live up to most expectations, namely, convenience and proximity to what matters. Land size is no longer a priority for millennials; rather, easy access to transport links, hospitals, educational institutions, convenience stores, and the city centre are what counts. Even with governmental incentives, properties within reach of affordability are usually located in the outer suburbs, which tend to be less developed than the city centre.
First-time house buyers are getting older
Research shows that the average first-time buyer in the UK is now 30 years of age or older, which is 7 years older than in 1960.
In 1960, the average first-time buyer at 23 years old, needed only to pay £595 as down payment. Today, the average first-time buyer will need to save around £20,000 and pay a deposit of £20,622 to be able to own a house. If current property trends continue, this amount will increase as property becomes more valuable in future.
Researchers found that homebuyers in the 1960s spent only two years saving money for their deposits with an average household income of £2,854. Those who bought houses since 2011 spent more than five years saving as deposit amounts kept increasing. As a result, 48% had sought financial help from their parents.
Recently, yet another report noted that the average single first-time house buyer would need just over 10 years to save for a deposit to buy a house in the UK. Single first-time buyers who just started saving this year would struggle to put together a 15% deposit before the end of 2028, while couples only need five years.
In London, however, it take first-time buyers 17 years to put down a 15% deposit by 2035, despite house price falls due to Brexit. Goes to show how inflated prices in the UK’s capital city have become as a result of housing supply unable to cater to a growing population.
In Australia, the typical age for first-home buyers has increased from 27 years old in the early 1990s to 29 years old in the early 2000s. As at 2017, the average age has increased to 31 years old, with around 20% required as deposit.
Clearly, home ownership is becoming a big challenge for the young people all over the world. Bad enough that they would have to wait so long to own a house as prices keep rising, what more the taxes they would have to pay later on?
Buy-To-Lets Make Profitable Investments
Millennials especially in the UK and Australia are choosing to rent while saving to own a house. Even more are opting to abandon the idea of homeownership entirely, preferring to rent instead. Renting and partial homeownership is easier, as well as cheaper, and certainly more favourable compared to a mortgage payment, especially if it means living in convenience.
This offers a great opportunity for profit in the buy-to-let market as landlords stand to receive good and regular income from rental property.