Whenever you hear of a friend or colleague who’s bought their own home, are you curious to know how they managed it? We certainly are, but – obviously – it can be intrusive and awkward to ask, unless they’re a close pal. But new research sheds some light on exactly how many of today’s young homeowners acquire the colossal sums needed to buy a home.
It probably won't surprise you that financial support from the “bank of mum and dad” can make all the difference when saving for a home, according to HSBC’s Beyond the Bricks report on British millennial homeowners.
Over a third (35%) received parental help to fund their purchase, while over a quarter (27%) moved back in with their parents to save for a deposit, and a further 27% borrowed from family to meet the unexpected costs after purchasing a house.
This goes to show it’s not worth feeling inferior if you haven’t yet mustered enough money to buy a property by yourself. House prices are extortionate and continue to rise – especially in popular cities like London and Oxford – and many young people are resigned to the idea of renting for the rest of their lives.
Nevertheless, despite the financial challenges, the dream of maybe one day owning a home is still alive among British millennials, according to the research, which questioned more than 10,000 people across nine countries.
Three-quarters (74%) of young people in the UK said they expect to own a property within the next five years, but this was below the global average of 83%. (By contrast, 94% of Mexican and Malaysian millennials believed they’d be property owners over the same period.)
Slow salary growth and house price inflation are holding British young people back from fulfilling their property dreams, the report said. In 2016, the average UK property price rose by 7.5%, while wages increased by a paltry 1.9%.
However, millennials in the UK would still consider making sacrifices if it meant they’d be able to afford to buy a first home. Nearly half (47%) would rein in their spending on leisure and eating out, a third would be prepared to buy a smaller house than they’d intended, a fifth (19%) would consider buying with friends, and 16% would even put off having children.
“This study challenges the myth that the home ownership dream is dead for millennials in the UK,” said Tracie Pearce, head of mortgages at HSBC UK. “With three in ten already owning their own home, the dream of home ownership for millennials is definitely alive and kicking.
“In the UK, they face a two-pronged problem of rising house prices and slow salary growth meaning the dream of home ownership is a challenge but not unachievable.”
If you’re one of the hopeful bunch who hasn’t yet given up the dream of home ownership, it pays to be prepared and have your finances in order, which, admittedly, is easier said than done. Four in 10 millennials planning to buy a home in the next two years said they had no overall budget in mind, and around half (48%) have only set a rough budget.
This could explain why more than half (57%) of those who had bought a home in the last two years spent more than their budget. It may seem daunting, but it’s worth seeking professional financial advice sooner rather than later if you, too, dream of owning bricks and mortar.