Graduates lose out in property market

53 per cent of graduates are unable to buy their first home, with this year’s figure two per cent higher than last year’s.

Even for those graduates that have succeeded in getting on the property ladder, almost two thirds bought with a partner, and if they were to split up, 68 per cent would not be able to buy their other half out. This rises to 75 per cent of women. Looking at the number of people that have graduated over the last five years 819,527 would have bought with their partner and 557,279 wouldn’t have the ability to buy their partners out.

For the majority of graduates (64 per cent) it’s unaffordable house prices that prevents them from getting on the ladder. This is not surprising when it is considered that the average property price for graduate first-time buyers is £107,070, rising to £168,446 in London. This figure has been consistent year on year as the greatest barrier to getting on the housing ladder. The following reasons were also cited:

• 60 per cent of graduates believe they do not earn enough to get them on the housing ladder
• Almost a third cannot save for a deposit
• One in seven believe they are just not ready to make the commitment

With the average deposit for Graduate First Time Buyers currently at £16,218 (rising to £30,184 in London) buying a home is likely to remain an unrealistic dream for many. Debt is also an issue. The average student loan debt is £9,246 and one in eight believe this will prevent them from getting on the property ladder. Debt is such a barrier for some graduates that in hindsight one in six would not have taken out a student loan whilst at university.

Murdo McHardy, head of product development and marketing at Scottish Widows Bank, commented: “Our report has yet again revealed that graduates are not finding it easy to get on the property ladder with house prices continuing to rise and first time buyers being unable to save for that deposit. Even for those graduates that are able to get on the property ladder, many are relying on buying with partners and are then not in the position to buy them out if problems arise. This leaves graduates in a real catch 22 situation – do they wait until they can buy on their own or do they buy with a partner when they are not quite ready? With no exit route in place, graduates need to be fully aware of the size of the commitment involved in buying with someone else.”

Home ownership is such an unrealistic dream for many that:

• Almost one in ten cannot ever imagine buying
• Almost half of graduates (46 per cent) think it could be between two and ten years before they buy their first home
• 4 per cent think it could be at least ten years

In this area, graduates were more positive than they were in 2005, when 57 per cent thought it would take at least five years to get on the property ladder

For those graduates that have managed to make the first step onto the property ladder, over a quarter had to wait between five and ten years to buy their first home. One in six graduate first time buyers had to live with their parents rent free following university to be able to get on the property ladder.

When looking back at barriers they faced when buying a home:

• Over one in ten believe that being able to buy through a shared equity scheme would have helped them to get on the ladder quicker
• Over a third of graduates believe that not needing a deposit would have helped them get on the property ladder
• A quarter of graduates believe that if lenders considered future earning potential, rather than current salary, then this would have helped them

McHardy added: “For graduates to stand a chance of getting on the housing ladder, then both lenders and the government need to work hard to develop products that suit their needs. Increasingly graduates are having to find different ways of getting on the ladder – through buying with other people to relying on their parents to put them up while they save. But there are solutions out there such as products that will allow graduates to borrow more than three times their salary and those that will allow parents to guarantee the loan.”

Of those graduates not yet on the housing ladder, they cite the following as the one factor that would most help them get on the property ladder:

• Being able to have my ideal job in an affordable area – 18 per cent
• Not needing a deposit – 15 per cent
• Lenders considering future earning potential rather than current salary – 14 per cent

When questioned on what mortgage products would help them to get on the housing ladder, 30 per cent believed that getting a graduate mortgage would help them the most and 18 per cent believe access to a shared equity scheme would have helped them the most.