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The average first-time buyer is now seven years older than in 1960

The average first-time buyer is now seven years older than in 1960 and needs to save around £20,000 to be able to buy a home, a study has found.

Researchers who polled 2,000 adults found a huge difference in the profile of someone buying their first home through the generations.

Today, first-time buyers will be in their thirties before they get onto the property ladder and pay a deposit of £20,622.

In comparison, in 1960, the average first-time buyer was just 23 years old paying a deposit £595 on their first home – the equivalent of around £12,738 today.

James Thomson, CEO of Keepmoat Homes, which commissioned the research, said: “As the UK’s leading homebuilder for first-time buyers we understand better than anyone the challenges that come with getting onto the property ladder.

“In fact we sell 72 per cent of our homes to first-time buyers and so the results of the research were very interesting for us.

“It’s worrying to see just how much tougher things have become, particularly since 2000, with the research showing house prices have risen by over £55,000 and the average deposit has increased significantly from £12,988 in 2000 to £20,622 today.

“It isn’t surprising that the research revealed 69 per cent of people think it’s now harder than ever to buy a home.

“We are bucking that trend by providing high quality homes, predominantly to first-time buyers.

“Our average house price is £155,000, compared with £226,756 across the rest of the UK today and £193,008 in the regions outside London.”

Researchers found homebuyers in the 1960s spent just over two years saving a deposit of £595 – with an average household income of £2,854 at the time.

But those who have bought since 2011 spent more than five years saving a deposit of £20,622 – more than half the £35,634 average annual household income.

As a result, a staggering 48 per cent of people had help to the tune of £10,200 towards this cost from mum and dad.

In the 1990s the cost of a deposit was just over a quarter of the average household income of £20,591 and only 26 per cent of first-time buyers had financial help – an average of £3,881.

But while 84 per cent of first-time buyers were married in 1960, this has dropped to just 27 per cent in recent years.

In fact, first-time buyers are more likely to be in a relationship today rather than married to their partner.

One in five first-time buyers today are single – compared to just three per cent in the 1960s.

The study also found 31 per cent of people are still living in the first home they bought, including one in 10 of those who bought in the 1960s and 15 per cent who bought in the 1980s.

However, two thirds of respondents think people are now more likely to end up purchasing a flat or small home, which they will have to move from in order to start a family, to get on the ladder.

James Thomson from Keepmoat Homes added: “The situation for first-time buyers has become increasingly difficult but there are positive things happening too.

“This includes the Government’s Help to Buy scheme, which has already helped many people onto the property ladder, and the recent abolition of stamp duty for first-time buyers.

“At Keepmoat Homes we are dedicated to building a supply of quality new homes at prices that people can afford.

“By the end of March 2018 we will have built almost 4,000 homes this financial year. The results of the research show how important it is for us to continue this focus through 2018 and beyond.”

Profiles of the average first-time buyer through the decades: (not taking inflation into account)

1960s
Age: 23
Married (84%) In a relationship (13%)
Household income: £2,854
House purchase price: £16,364
Deposit: £595.26
Length of time to save deposit: Two years and one month
23 per cent had financial help – average of £746
Fees: £180.49

1970s
Age: 25
Married (74%) In a relationship (13%)
Household income: £7,307
House purchase price: £22,226
Deposit: £1,191
Length of time to save deposit: Two years and eight months
25 per cent had financial help – average of £1,774
Fees: £454.10

1980s
Age: 28
Married (49%) Single (24%)
Household income: £14,345
House purchase price: £47,488
Deposit: £2,955
Length of time to save deposit: Three years and one month
21 per cent had financial help – average of £4,052
Fees: £944

1990s
Age: 29
Married (29%) Single (29%)
Household income: £20,591
House purchase price: £78,225
Deposit: £5,210
Length of time to save deposit: Four years
26 per cent had financial help – average of £3,881
Fees: £1,422

2000s
Age: 29
Married (30%) In a relationship (30%)
Household income: £29,993
House purchase price: £123,822
Deposit: £12,988
Length of time to save deposit: Four years and four years
42 per cent had financial help – average of £8,408
Fees: £2,368

2011+
Age: 30
In a relationship (30%) Married (27%)
Household income: £35,634
House purchase price: £179,594
Deposit: £20,622
Length of time to save deposit: Five years and one month
48 per cent had financial help – average of £10,200
Fees: £2,623

Source: News Anyway

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Not sure you want to buy a house? Five alternative options for your money

There are plenty of reasons why you might not want to buy a house: it’s very expensive, it’s inflexible and the housing market is having a bit of a wobble right now. Here are five alternative options for your finances while you make your mind up.

Save for your retirement

It’s boring, but it’s good. You should have a pension at work, but consider supplementing it with a private pension. Groups such as Hargreaves Lansdown or AJ Bell offer read-made Sipp options. Adrian Lowcock, investment director at Architas, says: “Many young investors have a 30 – 40 year investment horizon.  Given this long term focus you are in a position to take some risks, although that doesn’t mean unnecessary risks.  An increased focus on shares makes sense as over the longer term they have been the best performing asset class. By deciding to rent you will need to make sure you have the finances in place to pay rent when you stop earning, which means that you will need a much larger pension and retirement pot than someone who owns their own home.”

Property funds

These are a way to get exposure to the residential or commercial property market, but without having to buy a whole building. The TM HearthstoneUK Residential Property fund, for example, invests in a range of house types across the country so it is broadly in line with the make up of the UK’s housing market. This makes it useful for ‘Generation Rent’ because it helps their money keep pace with house price inflation while they save. Historically residential property provides low volatility and attractive returns with low correlation to equities and bonds so it can also be useful for diversification.

You could also try commercial property funds. Kay Ingram, director of public policy at LEBC, says: “Commercial property funds invest in offices, shops, factories and warehousing. The value of commercial property goes up and down but the main contributor to investment returns is the rental yield. Most commercial leases are long and contain upward only reviews. This can provide inflation proofing.”

Buy to let

23 providers now offer buy-to-let mortgages for first-time buyers, according to data site Moneyfacts,  which offers an alternative way of helping first-time buyers onto the property ladder. You can buy in a cheaper spot, for example, and rent it out without having to move yourself. If you do it right, you may even be able to generate an additional income from it – though take into account estate agents fees and repairs, which can add up. See our article here

Invest to create an income

Savings accounts don’t pay much at all, but you can find plenty of collective investment funds that focus on dividend-paying shares. These will often pay around 4% (though the income is not guaranteed) and give you some extra income. You may even get some capital growth if the stock market rises. Consider keeping it in an Isa to make sure it is tax-free

Give yourself flexibility

Life changes, stuff happens – don’t rule out buying a home just yet. If the property market crashes, you might just be tempted. Lowcock says: “Getting some investments in place to give you the flexibility to choose is essential. It means you won’t become trapped by decisions you made earlier in life. Using the Lifetime ISA could be an effective way of doing this as it has duel function of allowing people to save for a deposit and a pension in retirement, meaning you don’t have to make a decision right away.”

Source: Your Money