First Time Buyer Index - Aldermore

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Jun 19, 2017 - next 3-5 years. Around a quarter of first time buyers. (23%)plan to use their own savings to fund their f
First Time Buyer Index Insight Report Q2 2017

aldermore.co.uk

Q2 2017

First Time Buyer Index

Foreword House price growth has slowed, but the cost of property in the UK remains stubbornly high given the combination of a supply shortage and strong demand for housing. There is little respite for struggling first time buyers, with the cost of living rising, alongside low wage growth and rock-bottom interest rates, which together make raising a deposit particularly difficult. Given this scenario, it’s little surprise that in the UK, more than three million 20-somethings still live in the family home. This trend is underlined by our latest First Time Buyer Index, with around half (48%) of respondents saying they would consider living with parents to help save for a deposit. One in five (22%) are currently living at home to save money on rent. Around a quarter of this group say they will have to live with their family for five or more years to save enough to get onto the property ladder. While parents are generally willing to help, around half of those with children living at home have seen an increase in their outgoings as a result. The report reveals that first time buyers living at home will cost parents an average of £416 extra a month on living costs, such as food and drink, petrol and electricity bills, equating to £4,996 a year. This is impacting parents ability to save for themselves with 33% of parents saying they are sacrificing pension savings. A potential knock on impact

of this is that more people may require products that allow them to unlock value held in property rather than rely on their pension in old age. This is clearly an incredibly complex problem which needs a joined up long term strategy as a solution. There had been hope that measures would be put in place to help those wanting to buy a home by the new Government. However following the recent General Election, housing policy could remain uncertain for some time when what first time buyers really need is clear solutions that will help them make that important step onto the housing ladder. Our survey shows that around one in six would like to see the Government’s Help to Buy mortgage guarantee scheme reinstated, while a quarter of respondents said the Government should address rising house prices to help bring the first rung of the property ladder within reach. We hope to see proposals put in place by the Government to address the difficulties first time buyers face across the UK.

Charles McDowell, Commercial Director, Mortgages Aldermore June 2017

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Q2 2017

First Time Buyer Index

When do first time buyers hope to get on the ladder? Thinking about buying a property, which of the following best applies to you? The number of first time buyers who are hoping to buy in the next 12 months has increased from last year with figures showing that this year 19% of first time buyers intend to buy within the year, compared to 13% in 2016. Similarly the number of first time buyers that are looking to buy in the next 1 to 2 years has increased, almost a quarter have this aspiration (23%) compared to one in five last year (19%).

June 2017

Those aged 18–34 are the least confident about buying in the near future. One in six (18%) say they will buy within the year, up from 15% this time last year, while 33% think it will be more like 3 to 5 years. Those who live in the West Midlands are the most confident about buying in the next 12 months (23%) although this has dropped from 42% in June last year.

June 2016

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Q2 2017

First Time Buyer Index

How do first time buyers plan to get on the housing ladder? How do you plan to fund your deposit? More than one in five (22%) prospective first time buyers are planning to use parental or family assistance to raise a deposit, a similar level to Q1 2017. This varies across the regions, with more than a quarter (27%) of those in London requiring financial assistance, compared with 17% in Wales.

The number of first time buyers planning to use their own savings has risen to around a quarter (23%), compared to less one in five (18%) in the previous quarter, with one in 10 (10%) supported by an inheritance. More than a third (35%) plan to use joint savings with a partner, although this has dropped from 45% in June last year.

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Q2 2017

First Time Buyer Index

Would you consider living with parents to help save for a deposit? Just under half of respondents (48%) would consider living with parents to help save for a deposit, around the same number as Q1 2017 with one in five currently living with their parents (22%).

for five or more years to save for a deposit. One in ten (10%) will have to live with their family for three to four years. Three in ten (30%) say they will have to live with their family for up to 18 months.

Around a quarter (26%) of those living with parents say they will have to live with their family

Net yes: 48%

Net no: 52%

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Q2 2017

First Time Buyer Index

Questions asked to parents of first time buyers living at home: Has having an adult child (over 18) living at home with you increased your monthly outgoings? If so, please tell us by how much. Almost two thirds (63%) of parents with children living at home (aspiring to get on the property ladder) have seen an increase in their monthly food and drink bills. The report reveals that first time buyers returning home will cost parents an average of £416 extra a month on food and drink, petrol and electricity bills, equating to £4,996 a year. For those parents whose children have to live with them for five years, it would cost around £24,979 extra over the period, while for those who find themselves at home for three years, it could cost their parents around £14,988. This means that parents are having to fork out an estimated total of £20.1 billion across the country each year to help their children get on the ladder. This massive spend has meant that more than one in three (33%) parents have had

to sacrifice saving for their retirement to cover the additional outgoings. Other top costs that have increased with adult children living at home are electricity, with 47% seeing a rise in this bill, and petrol spend rising by a third (32%). Eight in 10 (80%) parents with adult children living at home say they want to do everything they can to help their child. Seven in 10 (71%) say they would rather their child lived with them and saved than in rented accommodation. However, over half (58%) believe that past and present governments have not done enough to support the younger generation. The same proportion (77%) agrees that, these days, it’s quite normal for children to take longer to move out of home than previous generations.

Average:37%

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First Time Buyer Index

Q2 2017

Three in ten parents have had to sacrifice saving for their retirement to cover their children’s costs

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First Time Buyer Index

Q2 2017

Which of the following things are you doing in order to save money for your first property? Cutting back on eating out is top of the list when it comes to saving for a deposit, according to more than a quarter (28%) of first time buyers. Around one in five (21%) are spending less on clothes, with the same proportion cutting back on holidays. Just under a fifth (18%) are working extra hours or shifts to save money. One in five are giving up expensive food brands (20%) and one in six (15%) have stopped going out with friends.

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Q2 2017

First Time Buyer Index

What are first time buyers thinking? Following the general election, what is the one thing that the new Government should do to help first time buyers? A quarter of respondents (25%) say the Government should address rising house prices, this is particularly important to first time buyers in London (31%). Just one in ten (10%) say that building more homes is the priority. Around one in

six (14%) are keen for the Government to relaunch the Help to Buy scheme as a priority, and 12% say lenders should adapt their lending criteria in order to better support first time buyers.

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First Time Buyer Index

Q2 2017

One in six first time buyers want the Government to relaunch the Help to Buy scheme

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Q2 2017

First Time Buyer Index

How are you planning to apply for a mortgage to fund your first home in the UK? The number of respondents saying they plan to apply for a mortgage on their own rises slightly to 32% from 30% last quarter. However, the number saying they are planning to apply for a mortgage with their partner fell to fewer than three in five (59%), compared to 64% in the previous quarter.

A third (33%) of those in full-time employment plan to apply for a mortgage on their own, the same as the number of self-employed respondents.

59% 56%

With my partner

32% 33%

On my own With family

2%

With a friend

2%

More than one option Don't know

1% 6%

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Q2 2017

First Time Buyer Index

Attitudes to buying a first property How difficult do you think it is to buy your first property in the UK? Just over nine in ten (91%) think it is difficult to buy a first property in the UK, around the same as the previous quarter (94%) . Around two thirds (65%) of respondents believe it to be ‘very’ or ‘extremely’ difficult. Only 7% of total respondents do not think it is difficult.

Around two thirds of those living in London (66%) say it is very or extremely difficult, while in Scotland the proportion is not dramatically different, at 57%.

46% 39% 30% 29% 28% 23% Net very/extremely difficult: 65%

Net difficult: 90%

Net not difficult: 7%

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11%

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First Time Buyer Index

Q2 2017

Nine in ten first time buyers think it is difficult to buy a first property in the UK

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Q2 2017

First Time Buyer Index

Which of the following do you see as the biggest obstacle to people who are looking to buy their first home in the UK? Raising a deposit continues to be the biggest obstacle faced by potential first time buyers, with more than a third (35%) of respondents saying this is a bigger hurdle than property prices (26%).

Mortgage affordability is the greatest obstacle for one in ten (10%). Just securing a mortgage is the biggest obstacle for one in six (15%) selfemployed respondents, compared to 10% in fulltime employment.

18%

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Q2 2017

First Time Buyer Index

Property goals What type of property are you mainly looking to purchase for your first home? More than a third (35%) of prospective first time buyers questioned plan to purchase a semidetached house or bungalow, with one in six (15%) planning on buying a purpose built flat or maisonette. Around a fifth (19%) plan to buy a detached house or bungalow.

Net house: 68%

Buyers in London are far more likely to buy a purpose built flat or maisonette, with over a quarter planning this (27%), compared to just 9% in Wales and 4% in the East Midlands.

Net flat: 20%

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Q2 2017

First Time Buyer Index

Key Findings

Almost one in five (19%) aspiring first time buyers hope to purchase their first home in the next 12 months. But 30% are planning to buy in the next 3-5 years.

Around a quarter of first time buyers (23%) plan to use their own savings to fund their first property purchase. More than a third (35%) plan to use joint savings with a partner.

More than a quarter (26%) of those living with their parents say they will have to live with their family for five or more years to save for a deposit.

Over half (53%) of parents with adult children living at home believe the past and present Government have not done enough to support the younger generation.

Around half (47%) of parents with an adult child living at home say this has increased the amount they spend on food and drink.

A quarter of respondents (25%) say the Government should address rising house prices as a priority, increasing to 31% in London. Around one in six (14%) say the government should relaunch the Help to Buy scheme. 16

Q2 2017

First Time Buyer Index

Methodology Research conducted by Opinium Research between 18 to 24 May 2017 amongst 1,502 potential FTBs and between 19th and 20th June 2017 amongst 153 parents with children who are potential FTBs (i.e. over 18, living at home but who plan to buy a property within the next 10 years). Cost averages are based on asking those with children living at home who are aged 18+ and plan to buy a property within the next 10 year show much their monthly outgoings have increased in a range of areas (e.g. electricity bills, insurance). The median averages of these increases were combined to give £1,140 and then multiplied by the average percentage who said that their outgoings had increased in each category. The average was 37%. The sum of the median averages of £1,140 multiplied by 37% which gives us a monthly average of £416 across all parents of potential FTBs. Multiplied by 12, this gives us an annual average increase of £4,996.

The estimated cost of an adult child staying at home for 5 years is based on multiplying the annual average increase of £4,996 by 5 to give us £24,979. The estimated cost of an adult child staying at home for 3 years is based on multiplying the annual average increase of £4,996 by 3 to give us £14,988. These averages assume that the cost will not change year-on-year. There are approximately 4,020,000 people in the UK who have adult children who live at home who say that their child / children plan to buy a home within the next 10 years. This is based on 153 out of 1,954 respondents on a nationally representative survey, equating to 7.8%. 7.8% of the UK adult population of 51,339,000 is 4,019,891 The average annual increase in outgoings (£4,996) multiplied by the number of people affected (4,019,891) gives us an estimated annual cost of £20,082,861,285.

Contact Us For any questions or comments on this report please contact: Rachael Snelling, Aldermore 0208 1853 102 [email protected] aldermore.co.uk

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