Delays in getting on the housing ladder will cost the average first-time buyer over £270,000 over their lifetime, or twice the cost of a typical first time buyer home, but those forced to rent into their retirement could pay even more dearly driving up housing benefits and state long term care costs to truly unsustainable levels.
This is not an assertion but a forecast based on independent research by The Model Works, a company that has been analysing the growth of the rental market at the expense of the first-time buyer with growing concern.
Back in the 1960s the average age of the first-time buyer was 24. Today, according to Moneysupermarket, it is 37.
Based on market data averaged over 30 years, The Model Works has calculated that the returns from investing all the savings from buying a home at 24 as opposed to 37 could over a lifetime amount to more than £270,000 at today’s value (the calculation assumes a tax efficient savings scheme).
“That first-time buyers are getting older is a well established fact,” says Brian Hall, the founder of The Model Works. “But we believe this is the first time that the full cost to those affected has been quantified and of course millions are affected.”
Mortgage repayments are pegged to the original purchase price, while rents rise over time and so the savings from homebuying increase year on year. Buying at 24 also reduces the term spent renting by 13 years, compared with 37. Finally, tax breaks and compound interest over a longer period contribute significantly to the total.
The Model Works previously linked growth in the private rental sector with rising demand for housing benefits and now research by Partnership has found that almost half of homeowners expect to sell or rent their property to pay for their long-term care. Tenants don’t have this option and may require comparable support from the state.
“If current trends continue, the total cost of delayed homeownership and exclusion for life could cost the taxpayer tens of billions of pounds per annum”, warns Hall “and these costs will rise as the retired population is expected to double by 2050”.
“I don’t see anyone balancing both sides of the equation when considering initiatives like Help to Buy,” says Hall. ‘The taxpayer is already committed to provide staggering levels of support in the future to those being disadvantaged today”.
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