In The Future, The “Have Nots” Will Have To Have More

For anyone prepared to listen over the last 15 years or more, I have been forecasting/hoping for a correction in the UK residential property market on the basis that the laws of supply and demand must eventually mean that prices will fall so that first time buyers can get on the ladder and allow everyone else to move up.

It’s not that I want a fall but I don’t believe property prices can continue going up forever and, as a parent, I can’t see my sons (now in their 20s and just starting their careers after university) having any hope at all of getting on the property ladder until I am dead and gone. Until then, they will be caught in the money pit of tenancy seeing their home-owning possibilities diminish ever further due to house price increases outpacing wage inflation, and their ability to save for a deposit wiped out by ever increasing rent (that, ironically, is probably far more than the cost of having a mortgage).

Of course, there is always the option of them living with me. But, really, I don’t want that and neither do they. We certainly wouldn’t want a repeat of this

The rising proportion of us never owning our own property means a lot of the assumptions about retirement planning need serious revision.

Traditionally, the level of income needed in retirement is lower than during working life as the largest cost – the mortgage – is assumed to be finished by the time retirement age is reached. However, as a tenant, the costs continue regardless.

This new profile of the future retired is put sharply into focus by research carried out by Royal London which can be seen in more detail here

The headline of the research is that the average worker who is a homeowner needs a fund of £260,000 to provide a secure retirement. A non-homeowner will need £445,000! You can argue about the level that constitutes a “secure retirement” but it is impossible to ignore the fact that tenants will need a fund over 70% larger than homeowners.

Being a “have not” during your working life means you must have substantially more than the “haves” to remain a “have not”!

I will continue with my prophesying of the imminent fall of the current housing market on the basis that, like a weather forecaster, if I say the same thing for long enough it will eventually come true.

More seriously, the exclusion of a generation from home ownership has such far reaching consequences for us as a society that I don’t believe we can afford to let the status quo continue.

Peter Murphy Dip PFS

This information is provided strictly for general consideration only. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.