First time buyers are at a disadvantage compared to previous generations of buyers Essay

The average house cost has risen; however, the cost of living, and minimum wage hasn’t risen to match. ‘In 1985, when Tender Price Index was 100, building costs were £10",000. In June 1998, when the tender price index is expected to be 146, the same building would cost £14",600.’ (Bridge. 1998) ‘The Tender Price Index of Public Sector Building Non-Housing (PUBSEC) measures the movement of prices in tenders for building contracts in the public sector in Great Britain’ (Folwell. 2016). This is in summary means that Tender Price Index is the cost of building a house from a labor perspective. We understand how naturally this would occur as inflation over the years increases the cost of materials, however if you consider how insubstantial the quality of new builds are today and how much development companies, who are under constant pressure from shareholders to minimise expenses, use cheaper and less materials in order to maximise their profit margins, we can see there truly has been an increase in the cost of house building. In my grandparent's lifetime, houses have gone from reasonably affordable to becoming status icons, rather than simply being somewhere warm and dry to call your own they are now ways of showing off your wealth to all who know you. As GALLENT, DURRANT, and STIRLING, said in 2018 ‘Housing has become a wealth machine and government has arguably lost sight of its social function.’ The main status quo that hasn’t changed is geographical locations and demographic segregation, every town has it’s ‘expensive’ and ‘deprived’ area that many want to avoid/aspire to live in, these areas can be mapped out using people’s social demographic grade in most cases. There is still a class system in place within housing which effects the future of children, families who don’t live in the more affluent areas of towns struggle to be in the catchment zones of the high achieving and most sought-after schools. Those who can afford to buy often look at education as a major contributing factor when purchasing a house, many affluent areas are positioned around high achieving schools as children’s education can a main influence on the location. As a young person wanting to buy for the first time, I find myself apprehensive of being able to take the first step on the property ladder. The pay structure in our country is ageist and favors older people, I understand that many people over 25 may have lots of bills to pay out, because they may have their own homes, or they may be renting somewhere to live. However, this raises the question: how can it be fair for someone under 25 to be paid less? Does this mean anyone under the age of 25 is not expected to be a homeowner or be in the position to rent. Speaking as someone under 25 myself with bills and rent to pay I don’t see why I should be paid any less than my colleagues for doing the same job just because they are older. I feel this is an unfair disadvantage to anyone wanting to try and save for a deposit on their future. I feel something as important as this is valuable information and should be introduced into educational curriculum. The process of buying a house isn’t taught and isn’t something you can learn until you think you are ready for the big step of buying your first home. Only then do you enter a world of confusion and questions surrounding which type of mortgage to choose, money: solicitor fees, stamp duty (only on properties over £300",000), surveyor fees, estate agent fees, valuation fees, mortgage fees. I think it makes more sense to re-introduce the lesson of what used to be knows as Home Economics in schools but with a modern day take on it, instead of learning how to use a hoover students should be introduced to how to run the household from a financial viewpoint. I feel it will greatly benefit the next generation of home owners and renters to know what to look for in an energy provider, gas providers, how tax works and the usual process you would go through with each type of mortgage available. At the most basic point of entry students should be taught how to set up a bank account and savings account, hopefully this would help to bridge the gap between school student and adulthood as valuable lesson in life and will provide an insight to help to comprehend the information they will need. There are professional advisers out there to help you work out what you can manage however this is a service you have to pay for. Many people decide to plan their finances out for themselves to save this expense until they need it to discuss they type of mortgage they can afford. This is only the beginning of expenses as a home owner. Since the UK government announced in 2013 the Help to Buy scheme, this allowed first time buyers to only have saved a 5% deposit instead of the usual 10% and helped them slowly increase their money with use of the Help to Buy ISA and an Equity loan. In these schemes the government top up the ISA helping you save the deposit you need (as demonstrated in figure 2) and allow you to take a loan for up to 20% of your mortgage value, being a loan this does have to be paid back however for the first five years you do not have to pay interest on this loan until the sixth year of the loan as from here onwards you will be charged 1.75% interest and every year after this will increase with inflation and add 1% interest year on year. On top of the interest you pay each year once you sell your home you must repay the loan in full and with a percentage of any profit made from the time you purchased the home. Making it easier and more manageable for people to save the money they need, all while take more money from you than necessary. Could this be a good thing? No the government don’t need more money from you since they have been repaid with interest, however the principle could be applied that it would been there is less profit in selling your home and eventually surely this would lower the average cost of a home as there would be no change in the price you paid for the house originally, provided it was in the same condition (unless of cause it had been extended or had value added another way) you would get back the same amount you paid for it. Surely the percentage of money taken could be out to good use, if the local authorities take the money it should be reinvested in the same sector i.e. more/better social housing or improvement current existing housing in the local authority’s area. Unfortunately, as with many people my age we have a large amount of student loan hanging over us and for many this also means extensive overdrafts which although isn’t considered when applying for a mortgage as part of a credit check, it is still another amount to personally consider as coming out each month. ‘The data shows 37 per cent of young people now have financial debt compared to 49 per cent between 2008-2010. While this is something to be pleased about, these figures do not include student loans, which a substantial proportion of this population will face.’ (Griffin. 2018). Financial stability is obviously a massive part of being able to afford a house and in today's current economic climate this isn’t easily achieved. The average cost of a two-story estate house in 1996 was £391 per m2 (Bridge. 1998) and according to the Office for National Statistics in 2016 the average price per square meter sold in England and Wales was £2",395 and the average size of these houses sold was 104m2 (Office for National Statistics. 2018). This means the average house price in 2016 was £249",080, if a standard mortgage is 25 years then without taking interest into consideration the monthly mortgage repayment would be £830.27. National minimum wage in 2016 was £7.20 an hour, working full time (39 hours a week) this works out at £1",123.20 monthly leaving £292.93 for food, bills and everything else in between. This is not affordable for most people even with the Help to Buy scheme, a 5% deposit for this is £12",454 and on minimum wage even if you save a third of your wages (roughly £370) it would take just under 2 years and 10 months to save the deposit amount required. A recent study by the Institute for Fiscal Studies discovered that over the past 20 years, average house prices have grown about seven times faster than the average incomes of young adults. Average house prices have increased by 152% when taking account of inflation since 1995, though wages for 25- to 34-year-olds have only risen by 22% in real terms over the same period. They also found that the average first-time buyer is now 30 years old and has a salary of £41",000 a year. For nearly 90% of 25- to 34-year-olds, the average house prices are more than four times their annual income after tax. (The Guardian. 2018). In the time before you can afford you own home most will rent from private landlords, myself included. These can often be managed by estate agents and aren’t always kept in the best conditions. There can be a lot of restrictions while you're renting, for instance in some rentals you can't hang any pictures or mirrors on the walls or even use Blu-Tack. This means that these houses, while often just a pit stop for people before buying, don't always mean home to the people who live there because they have no personality and aren’t a reflection of the personality of the people living there. Because of the cost of renting in some locations What are the prospect of renting and being managed by somebody else is ideal for those not wanting to consider it home insurance or worry about any burst pipes or boiler problems it can also be quite restricting that if you have any problems with these that you have to go through somebody else in order to get them fixed and they aren't always very responsive but getting the work done. ‘A fifth of the UK population now lives in privately rented accommodation, the English Housing Survey has revealed in its latest report for 2016/2017, accounting for 4.7 million households. This figure has doubled from the 10% of people living in the PRS back in 1996/1997 and is a huge leap over the past decade from 12% in 2006/2007.’ (BuyAssociation. 2018). It seems to be that the sales of properties are dropping the with less and less people buying I wonder if this is due to my generation, are we inclined to want more holidays, spending more money on actual experiences and more materialistic than the generations before us or are we able to see clearly that homeownership is not something we will achieve if we are born from average earning background, young people from affluent backgrounds are more likely to be able to buy houses earlier than those not so wealthy (The Guardian. 2018). Perhaps this is the key, could the economic recession have had echoing repercussions on the generation after the crash effecting the likelihood of this next generations employability? This could therefore be leaving them without as much money as previous generations, meaning they have less chance of being able to own their own home instead understanding the value of money and allowing them to enjoy what money they do have. Figure 3 (16) shows the number of people aged from 16 to 24 years who were employed, unemployed and economically inactive for June to August 2018, broken down by educational status. There is a comparison that in July – September 1996 unemployment for 16-year old and over was 8.1% while in 2018 the same 3-month period saw unemployment at 4.1% (Office for National Statistics. 2018). If not having a job is no longer a restriction clearly the issue lays with the fact of how no one can afford a house on the basic living wage the government believes is reasonable, but then how can we expect those with several houses to understand the struggle to afford somewhere to call home. Home owners never seem to stay in the same house for long, either they outgrow the house and need to move to a bigger property or sometimes downsize to somewhere smaller, I believe if we had a property market that comparable to the car market we could make moving less of a hassle and keep the costs down. A car depreciates in value over the years, unless of course you have a special rare kind of car, why couldn’t the housing market be the same? With all these match-box, cookie cutter houses being built by developers there is nothing special or individual about any of them. You can see how an old Georgian or Victorian house with original features could be in the same classification as those rare special cars where the value does go up over time. I think this is an attitude we need to adapt to housing in order to level the playing field for new players/first time buyers. Maybe we, as a generation raised in a county in debt, are just coming to the realization that having possession of our own home is very unlikely and not within our reach for several years to come. The aspiration to own our own houses and get on the property ladder seems like a distant fantasy or might it be that the rest of my generation are they just not so bothered and happy to rent until the time seems right rather than move from house to house as they become unsuitable as their life progresses and they need more space or less space. Maybe we should just enjoy the money we do have for the time being. In conclusion we can generalise, people are buying a house as they want to start a new life in a new place with some independence from their parents/guardians. The housing market is clearly bias to over 25’s are they have less buying power than those under 25. The last thing we need is to be up to our eyes in a debt we can’t afford. I know I don’t want such a milestone in my life to be overshadowed by the worry if I can keep a roof over my family’s head.

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