The good old days
Let's look back in time and see how the first-time buyers' market has changed over the years. In the past, a large proportion of young people stayed at home until they married and even afterwards often returned as a couple to live with the wife's family.
Over time we started to see young single people trying to move out of the parental home into their own home, more often than not by using the "Bank of Mum and Dad". When they met their loved one and settled down, they could each sell their respective flats and buy a home together.
Funding availability then changed and we saw another shift. Single individuals could buy a flat; meet their other half; keep their flat as a buy-to-let investment; and still buy a home together as a couple. This trend took off as funding at above 100% loan to value became available, also removing the requirement for parental help. Then along came the banking crisis and with it a major shift in lending criteria, resulting in renewed reliance on Mum and Dad.
A changing world
This picture is, however, oversimplified. The reality is that the whole world has changed and multiple factors are now in play. Here are some of the key factors affecting first-time buyer involvement in the market.
Debt - Greater numbers of school leavers now go through higher education. Previously, there were fewer students and they were either supported financially by their family or had grant assistance. Unfortunately, many students now have to rely on loans for their education and end up with significant personal debt, limiting their ability to raise funds for a deposit.
Employment - The employment market has changed radically in recent times. Historically, young people would join an employer and stay there until retirement. This is often no longer the case, and many now change employers and career paths several times in their employment journey. Since the recession, many opportunities are currently offered on the basis of a zero-hour or temporary contract, restricting mortgage availability.
Travel opportunities - We have seen travel become more of a possibility and priority for young people. Many in their twenties don't wish to settle down immediately. There is perhaps not the same ambition to be a homeowner at such a young age as in previous generations. There has also been a shift in the age that individuals settle down with their life partner, and this shift has affected the property market.
Deposits - When loans of hundred percent or more were available with general borrowing and credit card credit also freely available, there wasn't the same drive to think about and save for deposits as before. As the recession hit, not only did the deposit requirement return but parental coffers had sometimes been emptied, leaving a funding gap. As time has moved on, attitudes have changed again, and we are starting to see the return of individuals who have funds for a deposit.
Expectations - We are living in a culture of instant gratification and high expectations. Some first-time buyers nowadays hope to jump onto the ladder above the bottom rung and try to maintain the same standard of living as when they were renting property near the city centre or living with their parents. However, first-time buyers sometimes end up having to modify their expectations in terms of location and simply live further out of town in order to make buying an affordable option. At the time of writing, for example, there are 30 properties under £70,000 within commuting distance of the city of Edinburgh being advertised in the ESPC whilst on another portal approximately 100 properties are available priced at under £50,000.
Renting - The current owner-occupier model is not common throughout the rest of Europe. As demographics have changed, there has been a growing acceptance of the rental market in Scotland, particularly within the main cities.
Getting a foothold
It's clear that the involvement of first-time buyers in the property market depends on many variables, many of which are not within their control. Many will debate the rights and wrongs of this, and whether it is fair. It is worth remembering, however, that there remain many options for first-time buyers to get a foothold on the property ladder. If you are a first-time buyer and want to explore your options, please don't hesitate to contact our Property team.