Friday, 20 July 2018

Getting on the property ladder

Recently I read an article in the Guardian about how young people are finding it difficult to get into houses. Aside from the fact that the article used generational theory as an argument, which has no validity (here), it got me thinking about how we expect to 'have it all'.

People who got into houses 30 to 50 years ago - when we used property far less as an investment - are lucky; regardless of how old they are, no matter how much they had to mortgage their soul to get on the property ladder. 

I appreciate that getting into a property is harder now, because of our disturbing habit of using property as a retirement fund. This has hiked up the ratio between worth and payments because property provides more security than shares or savings. This is a global phenomenon; not confined to any one nation. Lots of people want property as an investment, and there are fewer houses to go around.

Why? Older folks are no longer going gently into that good night, leaving property to the next generation. They are instead living many years beyond their originally anticipated lifespans. Retirement once fell two years before our expected deaths: now it falls 15 years past our retirement age. Those aged 65 and over often either don't retire, or, if they do retire, they don't stay retired. These people are fit, mentally agile, don't have lots of young grandchildren to keep them busy... so they stay enaged, and that usually means that they also stay in the workforce. These people are experienced, and love what they do. As a result, there are fewer jobs to go around.

As far as I am aware, this simultaneous competition for both property and work is a situation which has not happened before in human history.

However, there are actions that young people can take to get into their first house. 

When I built my first tiny, cheap house at 23, I sold my car to help finance it, along with everything else that would earn some dosh. It was on the cold side of a hill. It was built on the most tremendous of budgets. While I got a 'finished' house, nothing else was finished: the house was in the middle of a big, clay puddle. There was no garage. I had no furniture. I had no car!

However, I did have a house, along with three mortgages. I had borrowed off my parents for my deposit, was in debt up to my eyeballs, and so took in a lodger to make ends meet for the first few years. Each time I got a payrise, it went on the mortgage. I am now mortgage-free, but that didn't happen by accident. I made deliberate choices to buy few clothes, to keep holidays to a minimum, and to make do and mend until that financial security was achieved.

I appreciate that the factorisation between now and thirty years ago has increased the gap between earnings and property prices - through supply and demand - but those who are determined will find a way. Young people need to be as determined as I was many years ago to get my first house. They have to choose to buy a house, just as I did. They have to forgo holidays, cars, new clothes every season, the latest iPhone, and movie tickets. No flat whites with friends - have a glass of water. It should be the catch-up that is important, after all.

Younger people will have to think about new ways to get on the property ladder. What about getting creative? Buy a house between two couples and have a five year buy-out arrangement?

Determination. That is what will get them there. Complaining it is 'not fair' won't.


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