'Generation rent' excluded from home ownership

ruggedtoast

http://www.guardian.co.uk/money/2011/may/31/housing-market-generation-rent

Two-thirds of potential first-time buyers have no realistic prospect of owning their own home in the next five years and lack the long-term saving mentality they need to get onto the housing ladder, according to a report on home ownership by one of the UK's biggest mortgage lenders.


Owning a home has been a priority for most Britons since the 1950s when living standards began to rise, but the Halifax says that the high cost of property, strict lending rules and unwillingness of non-homeowners to save a deposit have fundamentally changed the attitudes of younger people towards home ownership.

The article does go on to grudgingly allude to the fact people cant buy may be due to prices being too high.

It is also difficult to save much when rents are as high as they are.

At some point the tone of these media releases will change from "Cost of living now too high for average Briton" to "Average Briton now to poor to afford cost of living."

FTBFun

This might be why:

In a survey of 8,000 people aged between 20 and 45, only 5% of those described by the Halifax as "Generation Rent" (those with no realistic prospect of getting on the housing ladder) are making spending sacrifices to save towards their first home. The remaining 95% have no spare cash, no interest in saving or are trying but failing to save.

Sorry but even if house prices were to fall substantially, one would need to make sacrifices and save in order to afford the deposit and associated costs.

And an example of someone refusing to make any kind of compromise:

Sarrah Laspa, a 29-year-old who has lived in London for seven years, regards rent as "wasted money" and would love to buy her own home, but has no disposable income left at the end of every month with which to save a deposit. She lives in Borough, a central area of south London, which is within walking distance of her legal publishing job and spends half her monthly income on rent.
"I could live further out, but then I would have to pay for public transport which would negate the benefits of cheaper housing," she said. "And being single, it would be pointless living in the middle of nowhere."

ruggedtoast

FTBFun wrote: »

This might be why:



Sorry but even if house prices were to fall substantially, one would need to make sacrifices and save in order to afford the deposit and associated costs.

And an example of someone refusing to make any kind of compromise:

I would agree with you but for the fact that her comment about transport costs is entirely valid. If you work in Central London, especially if you need to use the tube, you quickly find that moving minus £200 a month away for rent just equals plus £200 a month in travel.

Moving minus £250 for rent equals plus £280 a month on travel, and so and on so on.

There seems to be this misapprehension amongst non Londoners that for most people who work in London there is an alternative to living there.

Percy1983

As much as I agree people aren't willing to cut back then I have no sympathy for there situation.

On the flip side I do wonder how many have done the sums of 'if I cut back x y z I can buy a house in 2082' yes maybe not exactly a perfect example but my point is there maybe many who moan they can't afford a house while having a new iphone every 6 months and 2 foreign holidays a year, but how many of them have looked at the sums and it just isn't possible even if they live like hermits.

dtsazza

True - though there are other options with the housing situation, such as getting together with others to share a larger place. There's a huge premium to living on your own (which I think is implied, though of course not confirmed either way).

There could well be sacrifices in other areas too. Borough's no Kensington but it's not exactly cheap either. Just plucking a figure out of the sky, I expect she'd be paying in the order of £800/month rent on a one bedroom flat. If that's half her salary, it means she has £800 left every month for everything else. There's definitely some room for sacrifices there to start the savings train rolling (unless she has large amounts of unsecured debts, which would be a reason for failure in itself).

It would be quite interesting to see an SOA of an average "Generation Renter" - but I suspect that fundamentally FTBFun is right, and we won't because that mentality is missing.

ukcarper

Nobody said what she earns but you have always needed to be on a very good salary to buy a house in central London.

FTBFun

ruggedtoast wrote: »

I would agree with you but for the fact that her comment about transport costs is entirely valid. If you work in Central London, especially if you need to use the tube, you quickly find that moving minus £200 a month away for rent just equals plus £200 a month in travel.

Moving minus £250 for rent equals plus £280 a month on travel, and so and on so on.

There seems to be this misapprehension amongst non Londoners that for most people who work in London there is an alternative to living there.

Oh absolutely. In her case she needs to balance up owning her own place further out and renting right in the centre but not saving much if any money up.

Some compromise must be made if she wanted to save up for her own place. Even flatsharing in that area, or perhaps downgrading the type of property she is currently renting, would help.

mr_fishbulb

FTBFun wrote: »

And an example of someone refusing to make any kind of compromise:

Sarrah Laspa, a 29-year-old who has lived in London for seven years, regards rent as "wasted money" and would love to buy her own home, but has no disposable income left at the end of every month with which to save a deposit. She lives in Borough, a central area of south London, which is within walking distance of her legal publishing job and spends half her monthly income on rent.
"I could live further out, but then I would have to pay for public transport which would negate the benefits of cheaper housing," she said. "And being single, it would be pointless living in the middle of nowhere.

I would argue in Sarah's case that it is not wasted money - it is paying for the convenience of being able to walk to work and offering things for a single person to do without having to save up for a deposit.

I would also argue that if she hasn't saved anything in 7 years then she isn't cut out to be a home owner. I'm sure she has had a pay rise in that 7 years. What has she done with the extra money?

ruggedtoast

dtsazza wrote: »

True - though there are other options with the housing situation, such as getting together with others to share a larger place. There's a huge premium to living on your own (which I think is implied, though of course not confirmed either way).

There could well be sacrifices in other areas too. Borough's no Kensington but it's not exactly cheap either. Just plucking a figure out of the sky, I expect she'd be paying in the order of £800/month rent on a one bedroom flat. If that's half her salary, it means she has £800 left every month for everything else. There's definitely some room for sacrifices there to start the savings train rolling (unless she has large amounts of unsecured debts, which would be a reason for failure in itself).

It would be quite interesting to see an SOA of an average "Generation Renter" - but I suspect that fundamentally FTBFun is right, and we won't because that mentality is missing.

Assuming thats the case, and its quite probable working in publishing she makes nothing like that much:

Even in an absolute dive like Borough the cheapest ex LA studio flat rental I could find on Rightmove was £850.

Add:

• £130 council tax
• £120 utility bills
• £200 food
• £50 clothing
• £30 travel out of area
• £15 tv license
• 20 phone and internet
• 100 a month student loans

With no other unexpected expenses, and spending absolutely nothing on socialising, that leaves a grand total of £85 a month disposable income while she's sitting in her 6ft by 4 ft box listening to police sirens and chavs fighting.

One a property costing £160,000 she'll need a deposit of £32,000.

Factor in some modest payrises and it will still take her about 20 years to save this.

20 years of living like a hermit in a total dump in order to get a low spec flat she now cant afford because 20 years have passed and prices have gone up.

Then a couple of decades living in it, childless because its a studio, before she goes into an OAP care home and the government sell it for fees.

Many people who arent saving for a house arent saving because they simply see no point.

Percy1983

mr_fishbulb wrote: »

I would argue in Sarah's case that it is not wasted money - it is paying for the convenience of being able to walk to work and offering things for a single person to do without having to save up for a deposit.

I would also argue that if she hasn't saved anything in 7 years then she isn't cut out to be a home owner. I'm sure she has had a pay rise in that 7 years. What has she done with the extra money?

Probably payed the rising rents of her landlords greed.

But yes I do agree, if after 7 years there isn't a penny saved she clearly isn't commited to the cause.

GlynD

It's no different now than it ever was. Rental has always been the ordinary working man's lot. It's only the more recent generations who benefited from Mrs Thatcher's "right to own" policy who seem to think they MUST own a house. My advice is to save. If you can't save enough to buy a house then you can't afford it and that's just a fact of life.

I'm not trying to be nasty to anyone by saying all that. Nor do I want to sound like my dad but if you can't afford to have something, you have to do without. It's as simple as that. Today, people seem to think society owes them something - it doesn't and the quicker you face up to that reality the happier your life will be.