It may be difficult for first-time buyers to take that first step on the ladder, but that doesn't mean they're giving up hope – indeed, their homeownership ambitions remain heightened, with research from HSBC hinting that today's Generation Rent could be tomorrow's Generation Buy.
Millennial aspirations
The research looked at the homeownership aspirations of millennials across the globe, and found that the ambitions of those in the UK remain very much alive and well, despite the challenges of saving for a deposit, with 74% expecting to be property owners in the next five years.
However, while that initially sounds promising, we're well below most other countries surveyed – the average figure came out at 83%, with only France below the UK in terms of aspirations, as 69% of French millennials expect to buy in the next five years.
Slow salary growth and rapid house price inflation are thought to be providing additional challenges in terms of housing affordability for the UK's millennials, with the report noting that the average UK property price rose by 7.5% in 2016, while wages grew by just 1.9% over the same period.
Nonetheless, "this study challenges the myth that the homeownership dream is dead for millennials in the UK," said Tracie Pearce of HSBC. "With three in 10 already owning their own home, the dream of home ownership for millennials is definitely alive and kicking; they face a two-pronged problem of rising house prices and slow salary growth which means the dream of home ownership is a challenge, but not unachievable."
Rising to the challenge
There may be issues with affordability to contend with, but millennials are rising to the challenge. Many are willing to make sacrifices to buy their own home, with 47% of those intending to buy saying they'd consider spending less on leisure and going out, while 33% would be prepared to buy a smaller home than their dream. Many are turning to the Bank of Mum & Dad to make the dream a reality, too, with 27% saying their parents are a source of funding.
However, despite the best intentions, the report also highlighted the fact that many need to do more if they're to succeed, particularly when it comes to sorting out their finances. Indeed, of those planning to buy in the next two years, 40% have no overall budget in mind, and 48% have only set an approximate budget, which could make it a whole lot harder to get to the point of being ready to buy.
Indeed, 57% of those who have bought a home in the last two years admitted they overspent on their budget, so forward planning is key.
Plan ahead
So just what can you do to make your homeownership dream a reality? We've got a few ideas:
- Start planning early. Don't be vague when it comes to your house-purchase dreams – start by getting an idea of the deposit you'll need (whether you're aiming for a first-time buyer mortgage, for example, or are hoping to have more than a 5% deposit) and start saving.
- Don't forget about the extra costs involved. It isn't all about the deposit – buying a home comes with plenty of additional costs that can rack up to thousands of pounds, from estate agents fees to legal fees and stamp duty, so make sure you're prepared for those added extras.
- Set yourself a budget to boost your savings. While you'll need to set a budget or savings goal for your house purchase, it's worth setting a budget for your day-to-day finances too. This way, you can keep a close eye on your spending and look for areas in which you can make cutbacks, all of which could help you get your deposit together faster.
- Consider a Help to Buy ISA or LISA. It goes without saying that you'll need a great savings account in which to squirrel away your deposit, but why not go further than that with a Help to Buy ISA or Lifetime ISA? Both of these offer a Government top-up of 25% on the amount you save, which could go a long way to boosting your savings. Help to Buy ISAs are available now, while the LISA will be launched tomorrow, at the start of the new tax year.
- Check your credit rating. It's important to know your chances of being accepted for that all-important mortgage, and checking your credit rating will ensure you know exactly where you stand – as well as give you an idea of where you need to make improvements.
- Know the market. This applies to both the purchase and mortgage market: keep an eye on house prices so you know the kind of deposit figure you need to aim for, and the same applies to the mortgage market, so you know the kind of options you could have access to. While it's likely that mortgage rates will have changed by the time you're ready to buy, getting a ballpark figure could be a great way to think more closely about your budget for the future. Check out the top mortgage rates to get started.
