In the UK, wanting to own your home is as British as turkey at Christmas and cricket on the village green. The rate of home ownership in the country is approaching 6 percent. The Halifax house price index showed a yearly increase of 7.6 percent to November 2020, the highest price jump since 2016, and the biggest consecutive five-month gain since 2004. The house-price resilience remains despite the impact of Covid-19, although the economic downturn and increased unemployment because of the pandemic and the after-effects of Brexit looks likely to slow the housing market over the next 12 months.
Talkin’ ‘bout my generation
Job losses because of Covid-19 have affected the younger generation more severely than others. Of the 4.1 percent UK unemployment average, 13.4 percent were under 25. When the government introduced a furlough scheme earlier this year, it placed half of eligible under-25s compared to one in four 45-year olds. Other indicators show online graduate jobs in decline and apprenticeships reduced.
The gloom created by recent events has also affected the ability of potential first-time buyers, with seven in 10 of them priced out of the property market. Mortgage lenders are stricter with their lending terms to cope with the increased demand after the initial slowdown in 2020, and also because of the continuing economic instability. The average deposit for a first-time home is now 20 percent, or £47,000 for a £241,000 property; previously, the average deposit cost between 10-15 percent.
In cities like London, the costs are higher. So, is the idea of a dreamhouse best kept that way?
Buy or Rent?
The advantages of home ownership include being cheaper than renting over the long term, although the initial payments can cause considerable financial pain. But the monthly mortgage demands are an investment and not ‘dead money’ that vanishes into a landlord’s bank account. The property is yours to decorate, expand or sell when you want; once the mortgage is paid, you have no further expenses except for maintenance.
Maintenance, however, is one of the main disadvantages, along with the big upfront payments. Although clogged gutters are a simple problem to solve, repairing a faulty boiler or rising damp can become costly. Although homeowners can sell whenever they want, the condition of the housing market dictates how quickly, and the state of your previous mortgage governs how easily.
What about the option of renting? Start-up costs are cheaper, although you will be expected to pay a deposit. Renting gives the flexibility of moving without the time and cost constraints of selling one house and buying another. Contracts are normally for one year, often with clauses on the terms for ending the contract early. ;
Safe and Sound
Another big advantage is that the landlord is responsible for the maintenance of the building. Landlords are responsible for maintaining the structure and main utility services, and repairing any breakdowns that affect the habitability and safety of their property. Broadly, this includes looking after foundations and structure, plumbing, electricity and heating and ventilation. ;
Electrical faults are a leading cause of domestic fires, affecting approximately 20,000 UK homes annually. Eleven percent of the accidents are traced to faulty wiring that should have been detected during regular maintenance. To comply with the latest electrical safety standards in the private rented sector, landlords request qualified electricians to inspect their property. A successful inspection results in the issue of an Electrical Installation Condition Report or EICR certificate – also known as the Homebuyer’s Test or Landlord Safety Test.
As well as increased flexibility and reduced costs, renting property gives the opportunity to live in a better location, in a property with a higher specification than if bought. Finally, living in rented accommodation helps your financial planning and cashflow calculations. With only a regular monthly rent to cover, you don’t need to worry about unexpected expenses for maintenance or local government rates and property tax.
In the UK, a popular saying is that someone’s home is their castle. Although the goal of owning property remains the aim of many, renting is becoming a more attractive option whether through choice or necessity. ;