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Young Reject Buying To Rent

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Young reject buying to rent

Mira Bar-Hillel, Evening Standard

11 August 2005

SPIRALLING house prices have spawned a new breed of 18- to 34-year-olds who have no interest in buying a property and are at the heart of a move towards Continental-style renting.

Research published today has found a generation of young people who would rather rent in a fashionable area, where they can enjoy an active social life, than commit themselves to a mortgage for a home in a more affordable location further out of town.

This change in attitude is bringing London closer in to line with countries such as France, Germany and America, where young people rent before buying a property later in life.

It also helps explain why the percentage of first-time buyers in the housing market has recently plummeted. In the past about half the people looking to buy a property at any one time were first-time buyers. Now it is a third.

Today's study, by GMAC-RFC, the UK's 10th largest mortgage lender, found living in a desirable location is important to young renters.

Two thirds said renting allowed them to live in a much better area than they could afford to buy in.

A third prefer to rent because it allows them to live with or close to friends. And more young people are now delaying marriage and family life, extending the period during which they rely on the company of friends. Six in 10 non-homeowners said this was their main reason for renting.

Many also pointed out that young graduates now enter the workplace already saddled with debts and have no wish to add to them.

More than 1,100 young nonhomeowners were questioned for the study, which found that:

• More than half were comfortable delaying their first step on to the property ladder until they were over 30.

• Almost three in four young people see buying a property as 'settling down' another reason for them to delay it.

• Eight in 10 said renting allowed them to avoid making a big financial commitment.

• Nearly three in 10 said they would not be buying a property soon because they did not want the responsibility of a mortgage at their age.

One in five said getting married would provide the impetus to buy, while one in 10 said they would take on a mortgage when they start a family.

Jeff Knight, marketing director of GMAC-RFC, said: 'We wanted to understand why fewer first-time buyers are entering the housing market.

'Historically, first-time buyers shying away from the housing market would have been a problem. However, the market appears to have evolved, with the boom in buy-to-let making up for the shortage of first-time buyers.

'A new balance has been created between investor landlords offering rental properties in desirable locations, and affluent young renters.'


Sarah Whatmore, 26, is typical of the new renters. A children's clothing designer for a company which supplies high-street names, she lived with her parents in Huddersfield before coming to London a year ago.

She is sharing a house in Islington with two friends, paying £491 a month, and would rather rent in Islington than try to get on the property ladder elsewhere.

'Renting gave me the flexibility of moving out of my parents' home and starting a new life in London,' she said.

'Home ownership can wait until I'm much clearer about my future. I realise I am paying a lot of money for a lifestyle and that in order to live here and enjoy the local amenities I have to delay making a commitment to a mortgage, which I would never do on my own anyway.

'But it means I can leave without financial penalties. I like my freedom and keeping my options open - and that means renting.

I personally don't like the bit about "new balance struck between investor landlords and affluent young renters". Sounds like VI spin to encourage priced-out FTBs to prop up the BTL market as a "socially responsible and appropriate" thing to do...

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I think this article obliquely raises a couple of interesting points.

Firstly, it seems to me to be unlikely that the housing market will be ressurected by FTBs in the near future. They are saddled with debts of up to, and over, £15000. When I graduated in the early 90s, I owed £1500. How could any even vaguely responsible mortgage lender fail to take this level of debt into account?

Secondly, when FTBs are in a position to buy and, indeed, in wish to buy, the prices of dreadful newbuilds and the enormous inverse ratio of poor quality and undesirable location to price, is going to put them off buying for even longer. Why spend as much, if not more, for a property in, say, Edmonton, when you can rent in Islington for the same or less?

I cannot see how FTBs, the lifeblood of the market, will return to buying in these circumstances unless there is a major correction. FTBs won't buy, BTLers lose money every month unless they sell. This is not a soft landing, and we'll all (except for TTRTR) be better of for it.

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How could any even vaguely responsible mortgage lender fail to take this level of debt into account?

Do we have any responsible mortgage lenders in this country?!

As for BTLers losing money hand over fist: I guess it depends on when they bought their BTL houses. If they bought them when they were still cheap enough, then they might be quite happy that they have a a steady stream of people prefering to rent.

If they bought later (jumping on the band-wagon) then they'll be lucky to cover the interest payments on their mortgages with the rental income and hence be in a world of pain now that they are making no money from the value of the house.

In reality, I suspect we have a mix of both.

I certainly agree that there is no sign of FTBers helping the market any time soon.

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It's funny to see how they forget to mention the MAIN REASON why young people are not buying anymore... it isn't a question of life style or sociologics... it's because HOUSE ARE NOT ANYMORE AFFORDABLE TO FTB, dummy :angry: is it so hard to understand ?

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