02 Buy

5 Things Millennials Must Do to Become Homeowners

  • Deposits are probably the main thing stopping millennials from becoming homeowners
  • The Bank of Mum & Dad is a source of funds millennials should not overlook
  • Buying with someone else can slash the financial burden by half.

According to Pew Research Centre, millennials are people born from 1981 to 1996, broadly people currently (2019) in their early-twenties to late thirties.

They are a concern to politicians and commentators because few of them are becoming homeowners compared to prior generations.

The Intergenerational Commission Final Report overseen by Resolution, released in April 2018, looking at UK millennials in the 25 to 34 age range with children, found that levels of homeownership have fallen right across the country – and not just in London – in the previous 35 years.

From 1984 to 2017 the reduction in such millennial homeowners was:

Greater Manchester 53% to 26%
South Yorkshire 54% to 25%
West Midlands 45% to 20%
Wales 58% to 28%
South East 55% to 27%
Outer London 53% to 16%.

Of 22 regions analysed only in one, Strathclyde, did homeownership increase, from 32% to 33%.

These steep falls show that millennials are finding it increasingly difficult to own their own home, and are being compelled to rent, often in unsuitable conditions.

However, if you or someone you know fall into the millennial category, it would be wrong to give the impression that it is impossible to become a homeowner.

It has definitely become harder for millennials to become owner-occupiers, but the general picture should not obscure the prospects of highly motivated, organised, resourceful and committed individuals who want to become homeowners.

It will always be possible for such persons to climb onto the housing ladder.

Here are 5 powerful and effective steps you should as a millennial take to buck the trend and join the ranks of homeowners…

1. Pull out all stops to secure a deposit

2. Be prepared to move to cheaper locations

3. Talk to the Bank of Mum & Dad

4. Don’t delay buying

5. Buy with someone else

1. Pull out all stops to secure a deposit

A deposit is usually the main reason millennials or first time buyers give for not being able to become homeowners.  

Often the main cause lies not in the lack of earnings to save a deposit, but in the inability to save rather than spend.

If you fall into that category, it is all about improving your systems and mindset around saving.

Don’t see it as a sacrifice, chore or something burdensome. See it as an exciting, interesting challenge which will give you the house of your dreams, a comfortable home environment and financial independence when you pay off your mortgage.

There are many simple, practical and effective ways to raise a quick house deposit.

Devise a budget to totally clampdown on unnecessary spending and use a budgeting app if that will make things easier for you.

Well regarded 2019 budgeting apps include Mint, Pocketguard, YNAB and Wally

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2. Be prepared to move to cheaper locations

One thing stopping millennials from buying is a lack of flexibility in where they are prepared to buy. 

Depending on your income, you may find a particular location unaffordable. But that does not mean all other areas are unaffordable.

Check out the BBC’s house price calculator to identify the parts of the country where you can afford to buy, taking into account your earnings and the deposit you can raise.

It is inconvenient and not ideal to have to move to another area or part of the country in order to buy – but often that is what is necessary to get on the first rung of the property ladder.

There is little doubt that greater pragmatism and flexibility can grow the number of millennial homeowners.

3. Talk to the Bank of Mum & Dad

The so-called Bank of Mum & Dad refers to the sums that parents make available to adult children to become owner-occupiers.

According to Legal & General, cash from the Bank of Mum & Dad assisted 4 out of 10 house purchases in 2018, with up to £5.7 billion advanced.

You can access funds from parents and grandparents in various ways including:

  • Asking for an advance on any legacy you will get in the future
  • Borrowing from savings in the form of a repayable loan
  • Raising capital from equity held in a home or investment property.

Equity can be accessed from property in several ways including:

  • Sale/downsize
  • Mortgage
  • Remortgage
  • Further advance
  • Equity release.

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4. Don’t delay buying

A big problem for millennials is that the longer they take to buy, the more expensive properties become, the less able they are to buy.

Even though house prices have not increased spectacularly in the last 5 or 6 years, in many parts of the country prices have increased by over 25% in that time. 

In a few areas of the country, such as London and the South East, prices have fallen back slightly over that period – but such relief is only expected to be temporary.

The clear lesson is that it is sensible to buy sooner rather than later – as soon as you can possibly afford to do so.

Avoid the risky temptation to “time the market” by holding off buying pending some anticipated fall in the market.

Trying to predict the movement of house prices is essentially a mug’s game. 

5. Buy with someone else

A simple but effective way for you to get on the property ladder is to look at ways of reducing your ingoing costs.

One way you can do that is by buying with someone else on a co-ownership basis.

If you buy with someone else on a 50:50 basis you will be able to reduce your financial burden by 50% – not just on the purchase, which is great, but also on your running costs after you have bought. 

If you cannot afford to buy, consider co-ownership as a way of stretching your financial resources just that little bit further.

Conclusion

These steps to homeownership are not just good for millennials, they are good too for Generation X (Pew Research: people born from 1965 to 1980), currently (2019) in their late-thirties to mid-fifties. 

Generation X, being older, may have access to greater savings and earning power and may, if determined, find it easier to become a homeowner. 

The main lesson for all generations is simple – explore all ways to secure a deposit and be flexible as to location.

Other blogs you may find helpful:

Why millennials must buy (7 irresistible reasons for millennial homeownership)
Have we underestimated the millennials? (millennial home buyers are on the up)
Why become a homeowner (the many benefits enjoyed by homeowners)
Why renting is super stupid (rock solid reasons to buy not rent)
Easy home ownership (10 super-powerful reasons for homeownership)

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Are you a millennial looking to buy your first home or do you know a millennial looking to buy their first home? What issues, problems or challenges have you encountered?  Please leave your questions, observations or comments below.

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Dalton Barrett
Rebel Property Coach

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My website is: www.rebelpropertycoach.com


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