In today’s fast-paced world of property, it can be difficult to know whether to rent or buy. So, how does society deal with the property market?
Why are more and more of us, particularly millennials, choosing to rent rather than buy a house? Is it only because of house prices, or are there more reasons behind this choice?
We take a closer look at the attitude of society towards the property market.
The property conundrum
Where does the dilemma around whether to buy or rent stem from?
With property prices the way they currently are, i.e. unaffordable to most, there really isn’t a way around renting.
If you don’t have a 10-20% deposit saved up (the average UK house price was £255,000 in May 2021, meaning a minimum deposit of £25,000) how do you get on that property ladder? (If you’re in London that average house price figure rises to £674,182).
Also, average starting salaries for graduates are anywhere between £20,000 – £30,000 per annum.
So how is someone who’s just starting out in life expected to save for a deposit? Is it possible to own a home by the age of 25, or perhaps even older?
Consider too, the lack of real-term wage growth and it should come as no surprise then, that the majority of first time buyers can’t buy without significant help from their parents, and that the average age for first time buyers, across the UK, has risen to 31.
But, despite this, is Generation Rent a choice at the same time?
Help to Buy
There are schemes out there to help people get on the property ladder.
For example, the government has introduced ways to help first-time buyers, who don’t have the benefit of financial assistance from their parents, such as the Help to Buy scheme. The scheme allows first-time buyers to get loans to put towards the purchase of a new build, allowing you to get on the property ladder with only a 5% deposit.
There is also shared ownership – where households earning £80,000 or less outside of London, and £90,000 or less in London, can buy between 25-75% of a home, and rent the rest.
So, why aren’t these schemes being used more?
Rent to buy
Rent to buy is a housing scheme that gives you the option to rent a newly built home for a period of time. You can then buy the property, or a share of it, at the end of your rental period. The rent to buy scheme allows you to live in the property at a reduced rate of 80% of market rents. This can help give you the opportunity to save for a deposit more easily.
Why do millennials spend instead of save?
The bad news is, that no matter which way you approach it, there is going to be some saving of money required. Which means, for the next generation, who have easy access to certain types of money (payday loans, low interest rates and great finance deals) living the lifestyle they want, is affordable in the short term.
But in order to get on the property ladder, something has to give. You can’t have it all while trying to pay rent, eat and save up for a deposit for a house. Also, the average millennial earns 8% less than their counterparts did in 2008, before the financial crash.
So, people choose not to save. It appears that millennials have actively chosen instead to live for today, rather than plan for their financial future. It seems the ‘Why rent when you can buy?’ mentality has been somewhat forgotten.
Is it better to rent or buy?
There’s no hard and fast answer to the question ‘Should I rent or buy?’ But, it’s easy to see why many are choosing to rent.
With so much stacked against them, who can blame others for choosing to spend their money on tangible items such as holidays, cars and rent? Saving for a distant (or non-existent) property simply often feels impossible.
Generation Rent is here to stay.
Need help navigating the world of renting? Check out our more of our renting advice. But, if you are hoping to get your foot on the property ladder, find out everything you need to know about the process with our buying a home advice.
Last Updated: July 8th, 2024
