Are we changing as a nation, to “generation rent”? Should we separate our idea of property as an investment, from our desire to live somewhere? Is it better to rent or buy your home? Should we help our kids secure themselves an income, investment and pension fund with rented property but at the same time giving our kids the flexibility to move as their jobs dictate, families grow and change shape, not tying them up to a house and mortgage in a fixed location?
With so many young people unable to buy property now, so much talk is of how their parents or even grandparents, should help them to “Buy” their first home… Reading the times at the weekend, there was top tips on helping your children or grandchildren to get their foot on the property ladder. These suggestions ranged, from remortgaging your own home to give them money, acting as guarantor or using your equity or savings as deposit, even the government is now talking of allowing parents to use their pension savings to offer up as security for their child’s first property, this when already there is a national pensions crisis, as generations are making no reserves for their retirement, this seems a little crazy, and can only increase the issue of our increasingly poor, aged generation in the future.
Whilst I am all for boosting the housing market and getting people into property, after all its my industry, and I bought my first property when I was 18, so I can understand why people want to buy, but the world has changed, and a lot of lessons, that should have been learnt, do not appear to have been so. Imagine if you risk your pension to give your son and his girlfriend a leap up on the property ladder, they get married and then divorced and then he loses the house and all the equity to his wife, how would you feel then? What if your son loses his job and is therefore trapped with a mortgage he cannot pay, could you pay it? What if he buys a trendy new build in the centre of town that crashes in value and loses the lot? The property market can be a gamble like any other, and young people’s lives can turn on a sixpence, so can their relationships and how their life or employment twists and turns, leaving the well meaning parents with nothing, except good intentions.
For many decades now, a few generations in fact, it has always been, that part of British culture is that we believe we must “own” our own home, but do we really ever own our own home? And what is the true cost of that ownership? By the time you have paid the deposit, stamp duty, mortgage fees, estate agent fees, mortgage interest, maintenance and insurance, as well as any modifications, you could be talking between 2-3 times the cost of the property originally (dependant on interest rate) and if you factor in the cost of moving a few times during the next 25 years, the cost can even be higher. So even though the property has gone up in value, will it/they actually go up more than the amount you have paid in total to buy them?
Why do we tie up the need to live somewhere, with our need to make it an investment? The type of property that will make a good “investment” may not be the type of property you want to live in. For example you may love chocolate box cottages, with thatched roofs, not the best investment, due to costs and location etc, so why not separate the two.
I believe we are entering a new era, where we separate property investment, completely from where we live. Modern families need to be more flexible and fast, to move as incomes grow and decline, to move where the work is, or as their families grow or leave the nest, and in many cases, such as redundancy, these changes are needed far too fast for the property sales market.
Would it not be better to use our hard earned cash to buy “investment properties” to create an income from the rents, to buy properties that are low in maintenance, and in higher rental areas, to be a true quality investment, and then with the income generated by those rents, to “rent” somewhere for ourselves to live?
This way the modern family will have an investment for the future, paid for by the tenants, generating cash flow, to go towards their own rental expenses, they can rent big/small, town or country, but wherever they go, it will suit their needs at that time. This way they can also buy numerous smaller units, therefore spreading their risk, and increasing their return.
The rental sector, letting agents and landlords, needs to adapt for this new housing needs, it is currently set up for “temporary housing” provision, but if we are to meet the predictions made of the growth of the PRS (Private Rented Sector) reaching 50% of all housing by 2050, then it has some work to do, starting with public perception of renting over buying.
Sally Lawson is a Leading authority on Residential Lettings and Management in th UK, Sally has ran Lettings Branches since 1990, and let over 5000 properties during that time. She has also worked as a consultant and trainer to Letting agents nationwide. Sally is actively involved with ARLA (the association of residential letting agents) as a regional representative and Media Spokesperson for the group, and runs the rapidly expanding nationwide Concentric Lettings operation and Franchised network. www.SallyLawson.co.uk and www.concentriclettings.co.uk