A report by the Social Mobility Commission has caused some heated debates in the property investment market. The government commissioned review believes that more first-time buyers are now dependent upon the bank of mum and dad and those without access to additional funds are struggling. As a result there could well be an increase in inequality across the UK property market as first-time buyers polarise. So, how many people are still using the bank of mum and dad to help with deposits for property purchases?
Family assistance
In 2010 a report showed that 20% of first-time buyers turned to family finance to help fund their property purchases. The situation has changed dramatically today with 34% of first-time buyers now turning to family for financial assistance. Many parents in a position to help their siblings have benefited from the significant increase in UK property prices over the last 40 years so. However, not everybody was able to acquire their homes therefore not all parents are in a position to assist their children.
There are growing concerns that homeownership could become something of a distant dream for many people unless radical changes are imposed by the government. When you sit back and look at the situation from a distance, this does make perfect sense because house prices are rising faster than household incomes and the cost of living is still increasing.
First-time buyers
One interesting statistic which emerged from the report is that those first-time buyers with access to additional funds from the bank of mum and dad were on average able to buy a property 2.6 years earlier than those without access. The situation is more marked in London where the figure is 4.6 years. In reality any parent in a position to help their siblings would likely do so to a certain extent but not all parents are in the position.
This is perfectly reflected when we learn that one in 10 first-time buyers use inherited wealth and 12% a family “gift or loan”. First-time buyers are literally the lifeblood of the UK property market and if they are not accommodated for in the short, medium and longer term this could cause liquidity issues within the marketplace.
Additional housing required
The commission’s “State of the nation 2016” report has suggested that the UK government commit itself to building 3 million homes in the UK over the next decade. There are suggestions that greenbelt land should be used for additional housing but when you bear a mind the authorities are currently tens of thousands of newbuilds behind the current curve, what chance is there of building 3 million homes over the next decade?
It is difficult to see what the UK government can do in the short to medium term to alleviate this problem. On one hand the introduction of the minimum wage assisted those at the bottom of the income scale but, with the same pool of wage funds available to employers, this must surely have slowed income growth for those higher up the scale. At the same time the UK property market continues to surprise on the upside even in these challenging Brexit times.
It will need something dramatic from the UK government, a concerted effort by all parties where political allegiances can be put to one side for the good of the UK electorate.