Home ownership is still a dream that most Brits aspire to. And why wouldn’t they want to buy a home? Living as a renter provides risks such as rent hikes, evictions and poor living standards. In fact complaints to local councils about private landlords and properties have increased by almost 30% in the last three years.
Owning your own home provides security and stability. However it may not be an affordable dream for the average British household anymore. The average home now costs more than six times the average salary in London and the average deposit is now £27,000 according to Shelter. Coupled with increasing rents first time buyers are unable to afford to rent whilst maintaining a comfortable living standard. The National Housing Federation found that the cost of privately renting went up by 35% in the past 5 years and will increase another 35% in the next 6 years. Even if a household was able to save a £100 a month it would take 27 years to save up for a deposit.
The average age for a first time buyer, without the aid from the bank of mum and dad, is 33. In the 1960s the average age was 24 and in the 1980s it was 28. This decline in home ownership for younger households reflects the wider housing market conditions and impacts wider community conditions.
Home ownership may soon be unaffordable for the majority of people.
Despite the fact that many are struggling to save up the equity required for a deposit there are affordable housing schemes that are helping to improve the number of affordable houses available whilst minimising the risk of home buying. Shared ownership schemes and equity loans, such as the government initiative FirstBuy, help buyers get on the property ladder at an affordable price.
With an equity loan the buyer purchases 80% of the property and pays a 5% deposit on the remaining 20% of the property. This allows the buyer to slowly build up the equity to outright own the home.
Shared ownership, also known as part buy part rent, allows the buyer to buy shares in the property and pay a reduced rent on the remaining share of the property. Buyers can purchase anything from 25% to 75% of the property, over time buying more shares until they own the property outright.
Shared ownership and equity loans provide less risk than traditional paths to home ownership providing households less monthly outgoings, lower deposit and shared risk of falling house prices whilst achieving their dream of home ownership.
To find out more about the home ownership schemes available to you visit the Affinity Sutton website.
Image: Queen Elizabeth Street (London, UK) by garryknight via Flickr