There is no denying in pre-covid times, getting on the property ladder for the first time wasn’t easy. Rising property prices and living costs have meant that young people typically have much less spare money at the end of each month to put into savings for their own home. This is even more so for those who are currently in rental properties, where the monthly rents often far exceed what they would be paying on a mortgage for a similar property. It is fair to say that whilst we should always be mindful of the devastation and personal loss that has been caused by the COVID-19 pandemic, there have been financial and economic incentives that have led to improved circumstances in some areas. So, have the developments in real estate practices and policies as a result of the COVID-19 pandemic helped or hindered young people when it comes to real estate purchases?
One of the biggest factors influencing the ability to proceed with a property purchase is a stable income and clearly, the pandemic has caused many to lose their jobs or face reduced hours. There have however, been certain areas which have flourished during the pandemic, including food retailers, delivery companies and the healthcare sector as a whole to name a few. Whether job uncertainty affects any particular young person will depend on the area they work in, but it is fair to say that the vast majority of younger people are likely to be employed in the areas most affected, such as leisure, hospitality, entertainment and retail.
Living with Parents
Many young people may currently be living with their parents, or may have returned to live with them during lockdown. If there were living in rented properties beforehand, returning to the family home will enable them to save much more, particularly if they have been able to retain their employment. In such cases, the pandemic may have provided them with an additional savings window where it has made sense to stay at home with the family and save, without the social pressures of feeling like it is really time they moved out.
Reduction in Social Spending
Cities and towns across the world have been facing varying degrees of lockdown measures, but overall there has been a huge reduction in social activities, particularly by younger people. From nights out on the town, to cinema trips and even holidays abroad, every aspect of the social calendar has been impacted by the pandemic. Whilst this isn’t directly a benefit and many are missing out on their social outings, the money that has been saved by not participating in these activities is significant. Some young people have reportedly been able to save ‘hundreds of pounds’ a month by not going out as much, which can all be put towards a deposit on a property in the future.
There has been much concern over whether the pandemic will negatively impact the real estate sector, as people put off house moves due to worries over the virus, lost income or because they want to stay closer to family whilst the virus is still circulating. There have been a number of financial incentives to try and encourage people to continue buying properties during the pandemic including the freezing of Stamp Duty payments in the UK. This means that anyone buying a property worth under $655,000 ($5,000) will not have to pay any Stamp Duty, which is a land tax. This will be in place until March 2021, meaning that those who have been able to save a deposit and are in the financial position to proceed with a sale, can do so and save themselves an average of $2,600 (£2,000). Obviously, this won’t apply to everyone as many won’t be in the position to proceed with a mortgage application and there is no denying that mortgage lenders have tightened their lending criteria in the wake of the pandemic. But as Ron Lieber suggested in his article for the New York Times, “Many people who are considering buying now may be swayed by other benefits of homeownership: control and certainty. You get a stable monthly housing payment — and rock-bottom interest rates might mean you never even have to refinance — plus the comfort of knowing the place is yours as long as you make that payment.”
Reverting back to the original question, it would appear that the answer is ‘both’. For those select few who are in a position to proceed with a house purchase, now could be the perfect time to invest and reap the rewards in the future when the market improves. For the vast majority of young people however, it is likely that they’ll need to take the long view. Now will be a time to focus on building up the savings pot, so that when the opportunity arises they will be in the position to move quickly.