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Nick Churton of Mayfair Office comments on how the landscape of property purchase is changing in the post-recession period, and how the spring Budget will bring some cheer to some hard-hit first time buyers.
There is something odd going on with the ageing process. We all know that as one gets older our policemen look younger. But ask an estate agent about first time buyers and he or she will tell you that nowadays these are definitely looking older. In fact they are ageing at an alarming rate.
Twenty-five years or so ago many young people would leave school and enter a vocational career or occupation that didn’t require a university education. Within four or five years, when still in their very early twenties, many of these were on the first rung of the property ownership ladder. This set in place the foundation of future wealth generated though the capital appreciation of their property asset.
But today all that has changed. Gap years, university, student debt, establishing a career – often including a period of early unemployment - and time spent building up a very substantial mortgage deposit means that many school leavers now cannot realistically expect to purchase their first property until they are in their late twenties or even well into their thirties.
This may be very good for the rental sector but not quite so good for parents - to whose bosom offspring are now often now forced to return. But sadly, school leavers of today, unlike their parents, may not be able to build up a substantial equity that will help them in later years.
What does this mean for our school leavers of today and tomorrow who want early entry into the property market? Many will hope that the education system will swing back to some extent and provide a viable route to a rewarding vocational career. Otherwise, as things stand, the only alternative seems to be obtaining a very good degree in some fiendishly difficult subject and then securing a well-paid job in an investment bank or corporate law firm that pays a huge bonus every year. Anything else - unless the bank of mum and dad, the lottery or a legacy comes along - and young people may not be so young by the time they get on to the property ladder.
Mr Osborne’s Budget does at least nod in the direction of this problem. His measure to assist 10,000 first time buyers with a £250 million shared equity scheme to help with the purchase of new homes will be welcomed. But this is only really scratching the surface of the problem. Reforms to encourage young people into rewarding vocational training and apprenticeships may have much longer-term benefits to the property market as well as themselves.
The road we are on to a more buoyant property market is still a challenging one. The economy, national confidence, rising cost of living, unemployment, difficult lenders and the looming spectre of interest rate rises will all have to be overcome. Plus we must remember that a period of time will have to elapse while this new order of first time buyers works its way through the further education and initial career-establishing years. First time buyers are the fuel that drives the property market. At the moment there is not much in the tank. It could well be that first time buyers will have to be a little older before existing property owners become a little wealthier.