Will Our Children Ever Buy Their Home?

 

 

David Pretty (CBE), Chairman of the New Homes Marketing Board says ‘‘We’re now looking at a situation where perhaps the last generation of people who can’t afford to buy the home they need today, may not be able to rent a decent home in the future either’’.

He added that the inability of people to afford to either buy or rent could constitute a ‘social time-bomb’ with people unable to build up equity for retirement.

However, in terms of the percentage of rented homes in the UK compared to the rest of Europe, the country is not faring that badly. Some recent data I found shows that in the UK around 30% of homes are rented and that puts us about in the middle of the list, and well below some other countries:

Germany (ex DDR) 66%
Germany (ex FRG) 55%
Denmark 51%
Netherlands 46%
Austria 40%
France 40%
Sweden 39%
Finland 32%
Belgium 31%
Luxembourg 26%
Italy 25%
Portugal 21%
Greece 20%
Ireland 16%
Spain 11%

So if other countries are faced with the same situation is it really an issue? In my opinion the real crux of the matter is reflected in Mr Pretty’s comment in regard to building up equity for retirement. The actual equity is only of use if someone chooses to move to a cheaper property or releases equity from their home with an appropriate plan. Doing either would put money in the bank and therefore give cash to live on.

If someone has lived in rented property all their life, what happens when they reach retirement? How do they pay the rent then? Well, if they are lucky enough to have a good pension, then maybe it will cover the rent and allow them to eat too. The problem is that not only are we experiencing poor pension performance now, but many young people are not investing in pensions or saving for their future. That is the real time bomb!

If you have children then I urge you to help them plan for their futures. Renting now is fine, in fact it is probably the best solution as they start out on their own, but (and this is a BIG ‘but’) encourage them to save and put money aside for a deposit on their own place. Whilst we are now in a period where there is some house price growth uncertainty, the trend will always be upward.