The prospect of home ownership grows ever more elusive for millennials. Research by the Institute of Fiscal Studies (IFS), a think tank, found earlier this year that not only have homeownership rates declined with each succeeding generation, but at a sharper rate. Where someone born in the 1960s had a 45% chance of owning a home by the age of 25, a 27-year-old today is only 25% likely, 8% lower than someone born just five years earlier.
Unswayed by this gloomy outlook, Rob Gardner, a serial entrepreneur, campaigner and author, wants to give millennials a fighting chance. In an increasingly nebulous financial landscape, Gardner’s mission is to ‘demystify financial planning for everyone’ so that they can achieve a financially secure future.
Gardner acknowledges the laundry list of challenges that millennials face in today’s housing market, but owning a home is not necessarily a dream out of reach. His first piece of advice is to start saving: “Firstly, think about how much deposit you have to save” says Gardner. “The average deposit as a percentage of the house depends very much on location. Around the UK, that may be around 10 or 15%, but sadly in London, it is closer to 20% for young people. So for example, If you want to buy a flat for a million pounds, the deposit would be £200,000”.
Of course, first-time buyers would be looking for a flat with a more digestible price tag, but Gardner stresses that “you need an understanding of saving, investing and personal discipline. I have an exercise: what’s an example of a weekly vice that you could forego and see how much you could save in 10 years.
If you buy a coffee a day for £2.50, you could save £912 over the year. If you save that over 10 years, that would be £9,250. Put that into a LISA and the government would give you 25p for every pound”.
A LISA, or Lifetime ISA, is a longer-term, tax-free account that allows Brits between the ages of 18 and 39 to deposit as much as £4,000 per year. In return, the government adds a free 25% bonus on top. Thus, for every £4,000 saved annually, the government adds another £1,000.
According to Gardner, there is a trade-off for young professionals in London looking to buy their first house. “You have to choose between being Generation Rent and living in Notting Hill or Kensington,” says Gardner, “or foregoing the zone 1 and 2 life and looking at places further out like Croydon”.
Exhausted by exorbitant rent, faulty electricals and curmudgeonly landlords, renting in zone 1 and 2 has lost its allure for many young professionals. Moreover, as work habits pivot away from multi-storey office blocks to remote platforms, a flat in Notting Hill may soon become a relic of the past. Besides, Gardner notes, an Englishman’s home is his castle – that is one relic worth protecting.
Rob Gardner is the founder of Redington, one of the biggest investment consultants in the UK, author of children’s financial literacy book Save Your Acorns, founder of national charity RedSTART and campaigner for better financial education for young people.