I was reading snippets of a report one day last week about the UK housing market and happily, as I was still basking in the effects of my morning caffeine, I didn’t immediately switch off or put it in the “read later” folder which turned out to be a good thing as the report was more than the usual list of housing hotspots and best buys based on post code affordability.
It was, however, pretty scary reading if you are either a twentysomething looking to get onto the housing ladder or the parent of a twentysomething looking to get on the housing ladder as we, as a nation, have moved on from being dismissively referred to as a nation of shopkeepers by Napoleon, to one which seems to be obsessed with property. And if we’re not actually that obsessed, surely the media is on a mission to make it that way given the sheer number of property related programmes on anytime I happen to sit down to watch tv and start to wonder again why we bother subscribing to a service which gives us so many options channel wise but so little when it comes to actual variety of content.
Anyway, back to business as this wasn’t intended to be a blog post about tv.
The National Housing Federation has warned that a generation could miss out on home ownership.
I’m not decrying the aspiration as I’m a homeowner myself and have been from the day that I set foot outside of the comforting cocoon of my family home but over the years I’ve come to realise that owning your own home is a double edged sword.
According to this report, two thirds of first-time home buyers now need some support from their parents either in the form of a cash contribution towards a deposit or standing behind a financial guarantee to the mortgage company if they are ever going to be able to get onto the housing ladder. Savings of £30,000, as a minimum, are the order of the day. Ouch!!!
As with any such sweeping generalisation, you need to look at the detail behind it but my guess here is that these first time buyers are young professionals used to renting in the more vibrant parts of a town or city or key workers who really do need to be as close as possible to where they work given the demands placed upon them.
I could wax lyrical on the whole reason why you might want to live in a certain area or might find vast discrepancies in the same square footage flat depending on their postcodes but I’m all about looking at off-setting risk where possible so I won’t.
What I will do though is ask if you really need to own?
It’s a UK phenomena afterall. Most of our European neighbours rent so why don’t we? Why is it such a big thing to own your own home?
All you are actually doing is saddling yourself with a liability which you will be constantly paying for whether that means in mortgage, insurance, repairs or upgrades and for those parents who contribute or guarantee a mortgage, they probably have that same liability of their own and have now just added to it. Just when they may be thinking of looking forward to winding down at work.
We’ve all got to live somewhere but by owning you need to think about what happens if you are then faced with a period where, for whatever reason, you don’t get paid. What happens then? I know the argument in favour of owning is that renting is dead money and property will always go up in value eventually but what happens if that “evenutally” doesn’t coincide with when you may need to sell. And, would you want to sell as people have a habit of getting emotionally attached to their bricks and mortar, I know I do…..
Before you commit to making such a big purchase just remember that you’re in this for the long haul and that owning a house isn’t about building up an asset base; you have to pay out too much on a regular basis for this asset to ever provide a realistic return.
It’s a big commitment to take on and isn’t one which it’s easy to walk away from.
Maybe the thing to do is to study the property market and get to understand it first and then use it to start creating residual income for yourself instead?
If you don’t live in a property you can send it to work to make money for you in rental income and whilst this will initially be used to pay any mortgage you could, if you are lucky, reach the stage where the monthly rent is more than your mortgage. It still comes with the same risks as an owner occupied abode and you will need to have a think about making sure you can cover the extra financial commitment during times when there is no rent coming in but you’ll have an income generating asset to your name.