Across many parts of the UK house price inflation over recent years has no pushed price to average earnings ratio to new highs and accordingly there is a growing need for help to buy for many younger buyers. Much of this support is now being given to homebuyers by the ‘Bank of Mum and Dad’ which is expected to continue to play a key role amongst buyers in 2018 and beyond.
According to Legal and General and CEBR, in 2017 a quarter of home purchasers (316,000) received financial help from their family or friends to buy property, amounting to a staggering £6.5bn of support.
More help to buy with less money
This year, with the number of properties being sold expected to be lower, the proportion of home buyers getting help from families is expected to rise to 27%, albeit the average amount at £18,000 is lower than last year. The Bank of Mum of Dad is feeling the pinch perhaps?
Further analysis shows that nearly two thirds of under 35-year olds receive help from family and friends but this group is far from being alone in the need for parental support with 40% of the 35-44 age range and a 25% of 45-54-year olds also benefitted from family help.
A growing national trend
On a regional basis, the percentage of purchasers receiving help and the average contribution at £30,600 was highest across London.
Not surprising given that, according to the ONS, housing affordability (median price vs average earnings) has continually worsened over the past 5 years to 2017 and remains the worst in the UK.
This said, even in the north where prices are lower, parents have typically still had to stump up around £12,000 to help their offspring get onto the housing ladder.
So how are parents best to help their children buy property?
According to research, the majority (70%) of this financial support was a result of parents dipping into cash savings. All well and good if you have such a disposable nest egg available to you and can afford, as most parents do, to equally support each of your children.
Another option is to consider releasing equity from the existing family home either through an equity release scheme or by downsizing. Indeed, according to ONS research, the over 65s hold £100 billion worth of housing equity, with over 50% of the age group living in under occupied homes. This certainly gives new meaning to the concept of finding ‘coins down the back of the sofa’ Worth exploring?!
Offer of help and advice
Whilst providing financial support is a highly valuable and often beneficial, means of supporting their off-spring, many parents wish to continue the time-honoured tradition of giving advice and guidance – only to find that as they themselves have been out of the property market for years or even decades, their knowledge is somewhat rusty.
The increased mobility of workers also means that many homebuyers are purchasing property in a new area where prices, local knowledge and investment potential is relatively unknown.
Garrington is regularly contacted by concerned parents asking for our help to guide their off-spring through the property maze.
Where to buy in London?
One of the most common enquiries we receive from concerned parents is where their ‘children’ are looking to buy in London.
The vastness of the city, the ever-changing transport links, horror stories of potential property price crashes and conversely, the dream of snapping up a good buy in a future hotspot means that the risks of getting it wrong are high and the potential to get it right is very enticing.
Help from those in the know
All our consultants in London and the south east live and work in the areas that they cover (as do those covering the other parts of the country).
They are out each day, talking to estate agents, viewing properties and networking with local people means that they have their fingers firmly on the pulse, creating a thorough knowledge of their local property market.
So, if you are concerned about your children buying in an unknown area and would feel reassured by them receiving some professional and independent property advice, please get in touch and we would be delighted to support them during the whole purchasing process.