Why are your parents so keen for you to get on the property ladder?
For many of us, it's a goal in life to own our own home. But that is not how the Millennials and Gen Z do it. There is far less convention and structure in the path of life for these younger generations. So is it imperative to get on the housing ladder? Why are there so many ladders that we must climb to be successful in life?
For many of us, it's a goal in life to own our own home. Saving diligently for the deposit funds and searching for a home to call your own.
We feel we should buy a property and settle down. Get married and have a family. Keep a good job and work up the corporate ladder, gradually paying off your mortgage. Then one day, you'll retire with a good pension and your mortgage paid off so you can relax into old age without a care in the world.
But that is not how the Millennials and Gen Z do it. There is far less convention and structure in the path of life for these younger generations.
So many people go to university and then travel for a few years. They broaden their horizons while trying to keep the fun years of uni alive before it's time to ultimately 'grow-up'.
Times have changed, and the age of first-time buyers is rising. Ask a millennial if they are looking to climb the corporate ladder and build up a great pension, and they'll most likely look at you like you are crazy. Ask a Gen Z, and they may even ask you what a corporate ladder is!
So is it imperative to get on the housing ladder? Why are there so many ladders that we must climb to be successful in life?
In many European countries, property ownership is much further from people's minds. They happily commit to living their whole lives in rented property. But, long-term renting in the UK has always been seen as bad; rent is dead money.
But what if we re-frame the way we think about renting? The money you pay to your landlord isn't dead; it just isn't invested.
When you buy a property, you pay for the privilege of living there, and you're also paying back some of the loans you took to buy it in the first place. You will pay it all off eventually, and your monthly payments will stop when you own the property outright. Of course, with rent, it will never stop; and you'll never own the property.
It's much the same as leasing a car or buying one. You pay the lease fees and 'borrow' the car for a few years, then give it back and get a different one. Or you can buy your own vehicle and make loan repayments, which will eventually mean you own the car fully. But, there is one crucial difference between owning cars and owning properties.
Capital Appreciation.
A car, unless extremely rare, is a depreciating asset. Over time you own the vehicle and drive around in it each day, and as the age and mileage increase, the car's value decreases.
However, statistics have shown that property values will go up over time. Even if you live in it and put proverbial miles on the clock. This means that if you buy a property for £100,000 and live in it for 10 years, it should be worth more after 10 years. In contrast, if you purchased a brand new car and drove it every day for 10 years, it would be worth less than when you bought it.
Our parents and their parents before them have seen their outstanding mortgage decrease and the value of their homes increase. As this gap widens, the difference, known as equity, belongs to them. They've built a little nest egg so that, theoretically, they could sell the property and bank the cash, which is now significantly more than when they bought. And they haven't done anything to earn that money other than owning and living in a property. This is not a benefit that you can get from living in rented property.
So you can see why people say that renting is dead money. Once you've paid your rent, the only benefit you get is using the property for another month.
Of course, there are pitfalls with everything, so, with a rented property, you're not responsible for any building insurance or maintenance if something breaks. If the boiler breaks down, you don't have to worry about finding £5000 to pay for a new one. Or, if the roof is in a sorry state, it isn't your job to find and pay a roofer.
You can move on simply if you want to live elsewhere, relocating with only a month's notice. If you decide you don't like your neighbours or the property is suddenly too small, simply hand in your notice and go elsewhere.
If you owned the property, you can't just sell up and move at the drop of a hat - selling a property takes time.
Living in rented property gives you freedom and flexibility, but owning a property is a sound financial option. So it seems that, as a nation, we are waiting a little longer to settle down and buy a property, opting to keep things flexible for longer.
If you think it's time to settle down and buy your first property, get in touch to see what properties we have available for you.