A new study by GE Money Home Lending reveals the extent to which

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					                  Life on Mars
A new study by GE Money Home Lending reveals the extent to
which the landscape for First Time Buyers in the UK has changed
over the past 30 years, revealing a significant shift in affordabil-
ity, attitudes and motivations since 1977...
“The conscious
decision to
choose life over
home does
come with its
consequences,
often making
affordability
more difficult in
later life.”



Life on Mars       1
Introduction
It has become something of a cliché of modern life that taking one’s first step into the world of property ownership
is a financially and psychologically gruelling affair. But the deeper story of first time buying - as reviewed in this
report - is one of a consumer market that is adjusting to a whole set of socio-economic changes and challenges.
The young buyer today is in so many attitudes and outlooks just not the same as he/she was thirty years ago.

In terms of their outlook on life, today’s twenty-somethings are profoundly different to their counterparts of the
nineteen-seventies, prioritising friendships and new experiences over settling into family life.

As recently as 1973 almost nine out of ten twentysomethings who were not living with their parents, were living
in a married couple and other types of household were quite rare. In the last quarter of the Twentieth Century
things have changed hugely for twentysomethings. All those previously rare household types have become more
common and notably, the proportion of independent twentysomethings living in married households has more
than halved – seeing a fall from 88% in 1977 to only 39% today.

The twenties, then, are no longer a time of transition between dependence on parents and establishing a new
‘traditional’ couple or family household. A whole new lifestage has emerged between these points, marked by
more frequent changes of employment, increased foreign travel, vastly increased participation in higher education,
and fluid and unstable household formation. The conscious decision to choose life over home does come with its
consequences, often making affordability more difficult in later life. The pursuit of life experiences and leisure
often increases young people’s personal debt levels, whilst at the same time house prices continue to move out of
reach for them.

This report, buttressed by specially commissioned opinion research, attempts to get under the skin of these
changes and reveals the forces that drive young people to reach for that first rung on the property ladder and how
they are overcoming whatever obstacles to market entry lie in their path. In some ways, contemporary first time
buyers are luckier than their counterparts of thirty years ago; in some ways less so; above all they are different in
many fascinating ways.



Colin Shave

CEO, GE Money Home Lending




Life on Mars                                                                                                       2
Changes in the UK housing
market since 1977
The UK housing market has undergone marked                                       spectacular growth in house prices, particularly over
changes over the past 30 years, due to a combination                             the past 10 years. The annual rate of house price
of demographic, economic and political factors.                                  inflation stands at just over 10% and it is estimated
An approximate 8% increase in the size of the UK                                 that house price inflation has averaged around 8%
population since 1977 has resulted in a general boost                            annually since the late 1970s. Such considerable
in demand for housing, while migration of people into                            growth in the cost of buying a home has had a major
and out of different regions (particularly into London                           impact on the ability of young people to get on the
and the South East) has given rise to changes in the                             property ladder, with a large proportion now opting
nature of the property market at a local level.                                  to live with their parents for longer.

House prices
Perhaps the most salient aspect of the changing
nature of the UK housing market has been the




                   House prices at mortgage completion stage, all houses, £
                    Figures are adjusted to reflect changes in the mix of properties
                    mortgaged
                           £220,000                                                              2007: £205,797

                           £200,000
                           £180,000
                           £160,000
                           £140,000
                           £120,000
                           £100,000                                              1997: £77,531

                            £80,000                              1987: £46,400

                            £60,000
                            £40,000        1977: £13,400

                            £20,000
                                 £0
                                        1977
                                        1978
                                        1979
                                        1980
                                        1981
                                        1982
                                        1983
                                        1984
                                        1985
                                        1986
                                        1987
                                        1988
                                        1989
                                        1990
                                        1991
                                        1992
                                        1993
                                        1994
                                        1995
                                        1996
                                        1997
                                        1998
                                        1999
                                        2000
                                        2001
                                        2002
                                        2003
                                        2004
                                        2005
                                        2006
                                        2007




                            Source: Council of Mortgage Lenders/nVision
                            Base: UK




Life on Mars                                                                                                                        3
Changing characteristics of                             the employment rate among 16-19-year-olds
first time buyers                                        plummeted from 74% in 1961 to 55% in 1977 and
                                                        53% in 1997. For the 20-24-year-old age-group, the
One of the major developments in the property           employment rate has dropped from 75% in 1961 to
market over the past 30 years has been a shift in       73% in 1977 and to 68% in 1997.
the profile of the traditional first time buyer. People
buying their first homes are invariably older than       Another influential trend is changing household
they were in the 1970s and are more likely to be        formation, with the proportion of young people
single or cohabiting with a partner, friends or even    living in households where they are unsupported
strangers, rather than their husband or wife.           by other household members having grown
                                                        substantially since the 1970s. General Household
One reason for the delay in home purchasing is the      Survey data shows that 1973 almost nine out of ten
dramatic rise in house prices which has pressured       twentysomethings who were not living with their
young people to delay entry to the housing market.      parents were living in a married couple, compared
There are now more than three times as many             with just 29% of this age-group in 1996.
students in Higher Education than there were
a generation ago, compressing the numbers of            Young adults are also exacerbating their lengthening
young people who are active in the labour market        dependency for broadly hedonistic or experiental
in their twenties (and therefore in possession of the   reasons. Our own analysis of the most recent data
immediate buying power to create a deposit).            from the International Passenger Survey shows us
                                                        that just over 100,000 visits abroad lasting more than
A muted rate of youth employment has had a              3 months were made by 16-24 year-olds in 1999,
significant effect on the ability of young people        representing a 34% increase on the 75,403 long trips
to achieve financial independence. According to          abroad made by young people in 1994.
the latest data from the Labour Force Survey,




    “Such considerable growth in the cost of buying
   a home has had a major impact on the ability of
   young people to get on the property ladder, with
     a large proportion now opting to live with their
                               parents for longer.”


Life on Mars                                                                                                4
The changing needs of first time buyers

As the population has become more affluent and              as an absolute necessity has almost trebled over
the lives of consumers more complex, the aspects           in the last 10 years. Similarly the proportion of first
of life that people deem they need have changed in         time buyers who say they absolutely need digital/
relative position.                                         satellite television has more or less doubled since
                                                           1997. This may be seen as an important factor in
53% of first time buyers in 2007 cited living with a        people’s decision to delay their first home purchase
partner with whom one has a good relationship as           – a bigger budget is needed to cover those elements
absolutely necessary to live properly. However, this       of daily living which people are increasingly unwilling
is down from almost three quarters of first time            to live without.
buyers in 1977, reflecting a decline in the necessity
of partnership, with more people happy and willing         Having children is now seen as not nearly so
to live alone, or to cohabit with friends or strangers,    necessary a feature of life. This is reflected in the
at least while they are young.                             declining birth rate in the UK, which has slipped from
                                                           14.1 live births per thousand women per annum in
The proportion of first time buyers who say being           1971-75 to 12.4 in 2006 (source: Population Trends,
on friendly terms with neighbours is absolutely            ONS). One third of people cited having children as a
necessary to live properly has dwindled by almost          necessity in 1977, compared with just 19% in 2007.
a third. As well as representing a somewhat
depressing statistic in the sense of possibly declining    The declining importance of children to living
social capital, this may also be a product of people       properly corresponds to the increasing value
compromising on the area in which they live and            people attach to leisure time and going out with
focussing more on the home itself.                         friends. Having sufficient leisure time and, crucially,
                                                           the means to enjoy it, is seen as a necessity by half
Indeed, while other concerns retain more importance        of the population, compared with just over a third
overall, the proportion of people citing internet access   in 1977.




“53% of first time buyers in 2007 cited
living with a partner with whom one has a
good relationship as absolutely necessary
to live properly. However, this is down
from almost three quarters of first time
buyers in 1977...”

Life on Mars                                                                                                    5
                       Absolutely necessary to live properly when bought first home, by year
                       of purchase
                                     Living with a partner with whom you have a good relationship          Being on friendly terms with neighbours

                                     Having children                                                       Having sufficient leisure time and the means to enjoy it

                                     Have a telephone connection in the home                               Going out with friends and family

                                     Having internet access in the home                                    Having digital/satellite TV in the home
                           80%

                           70%

                           60%

                           50%

                           40%

                           30%

                           20%

                           10%

                            0%
                              1977                                        1987                                        1997                                            2007

                                 Source: GE Money/The Future Foundation
                                 Base: 789 aged 16+ who have bought property, UK, 2007




   First time buyers: Living 'properly' then and now
                                                                                                    1977             1987                 1997               2007            % point change
                                                                                                      %                %                   %                  %                1977-2007
   Having sufficient leisure time and the means to enjoy it                                         36.5             39.1                 52.2               49.8                +13.3
   Going out with friends and family                                                                32.2             31.8                 39.0               44.5                +12.3
   Have a telephone connection in the home                                                          53.9             50.8                 63.5               48.9                   -5
   Having children                                                                                  33.0             25.1                 18.2               18.5                 -14.5
   Living with a partner with whom you have a good relationship                                     71.3             60.9                 56.0               53.3                  -18
   Being on friendly terms with neighbours                                                          64.3             49.7                 49.1               44.1                 -20.2
   Having internet access in the home                                                                N/A              N/A                 15.1               40.1                  N/A
   Having digital/satellite TV in the home                                                           N/A              N/A                 13.8               26.9                  N/A

   Source: GE Money / The Future Foundation
   Base: 789 aged 16+ who have bought a property, UK, 2007




        “The proportion of first time buyers
      who say being on friendly terms with
  neighbours is absolutely necessary to live
  properly has dwindled by almost a third.“

Life on Mars                                                                                                                                                                                  6
Changing lifestyle priorities

With priorities among people changing rapidly
over time the picture below shows that in 1977
                                                                                          “With priorities
the top priority when people were 25 was buying
a home and getting married. Thirty years on,
                                                                                           among people
buying is not such an immediate priority and less
emphasis is placed on getting an early toe onto the
                                                                                        changing rapidly
property ladder; spending time with friends makes                                   over time the picture
it to the top of the top list for importance and going
travelling and changing job also see an increase in                                  below shows that in
attractiveness.
                                                                                     1977 the top priority
Nearly 40% of those who have bought today still
agree that being 20-25 these days is more about                                     when people were 25
having fun than buying a property.
                                                                                      was buying a home
In 1977, buying a home was the most important
priority but it was also perceived to be more stressful
                                                                                     and getting married.
among first time buyers back then than it is today.
Over 60% who bought in 1977 say buying a home
                                                                                         Thirty years on,
is one of the most stressful experiences of your life.
Only 51% who have bought today say the same
                                                                                    buying is not such an
thing.                                                                                immediate priority”
Among men particularly, associating stress with
buying your first home tends to be perceived much
more than experienced. Of those men who plan to
buy in the next 3 years, 61% think it is going to be one
of the most stressful experiences of
their life. Of those who have bought              Most important when 25
in the last 3 years, only just over               By year of first home purchase
half agree with this statement.
                                                35%
                                                                                                        1977   1987           1997        2007
It is interesting to look at priorities         30%

in life by age when a home was                  25%
first purchased. Perhaps not
                                                20%
surprisingly buying a home is
of most importance when 25                      15%

among those that actually bought                10%

between 20-25. Among those that                  5%
left it until their 30s to buy, buying
                                                 0%
a home came bottom of the list of                         Buy a home           Get Married                     Spend time     Go travelling Change jobs
importance when they were 25.                                                                                  with friends

                                                Source: GE money/The Future Foundation
                                                Base: 789 aged 16+ who have bought property, UK, 2007




Life on Mars                                                                                                                                              7
However, despite leaving it until later in life to purchase a home, more of those who have actually bought
in the last 3 years than those who plan to buy in the next 3 years believe the positives of buying your first
home outweigh the negatives (69% compared with 60% respectively).




                          Most important when 25
                          By age of first home purchase


                          35%

                          30%

                          25%

                          20%

                          15%

                          10%

                            5%

                            0%
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                                                           20-25                                                           Over 30

                           Source: GE money/The Future Foundation
                           Base: 337 who bought their first home aged 20-25, 144 who bought their first home aged 30+, UK, 2007




    “Nearly 40% of those who have bought
    today still agree that being 20-25 these
      days is more about having fun than
              buying a property. “



Life on Mars                                                                                                                         8
Motivations for buying your first home
In 1977, having recently got married was the most                           unprecedented levels, worries about interest rate
important motivation for buying a home by a                                 rises and the potential for a property market crash
considerable margin. Thirty years later, however,                           are also fearful prospects for first time buyers.
the picture has changed somewhat.                                           Indeed, our survey found that 53% of people who
                                                                            plan to buy their first home in the next three years
In 1977, getting married was a major priority for                           state that they are very worried about the future of
young people and, with levels of cohabitation and                           the property market.
private renting much lower than they are today,
buying a home was perceived as synonymous with                              The average age of both getting married and
this process. Similarly, though it ranks relatively low                     having children for the first time has increased to
as a main motivation, having a child as a trigger for                       30 or over. This shifting back of lifestage factors
home ownership has fallen significantly over the 30-                         traditionally linked with buying your first home has
year period, indicating that those lifestage factors                        helped drive the average age of first time buyers to
which were once key drivers of the first time buyer                          34 in 2007.
market are fading in importance.
                                                                            However, people are delaying buying their first
                                                                            home for a variety of reasons, in terms of both
The primary motivation for buying your first home in                         finance and maintaining a lifestyle (as discussed
2007 is ‘wanting to have something that is my own’,                         in ‘Changing Lifestyle Priorities’ section). As such,
with 51% of first time buyers citing this statement                          buying your first home does not necessarily come
as a main impetus. This suggests today’s first time                          packaged up with lifestage change, and taking
buyers see home-buying more as a move towards                               the decision to move onto the property ladder has
independence and less as a prescription linked to                           become more important in its own right.
marriage for those in their twenties.

Just under half of first time buyers in 2007 cited
‘it was now or never to get on
the property ladder’ as a main
motivation for buying their first
home, compared with only 15%            Main motivations for buying your first home, by year of
                                        purchase
of those who bought their first
property in 1977.
                                                      I wanted to have something that was
                                                                    my own
This could be seen in part as a                           It was now or never to get on the
                                                                                                                             1977
                                                                   property ladder
product of prevailing property                                                                                               1987
                                                                  I had recently got married                                 1997
values – with the annual rate of                                                                                             2007

house price inflation currently                                    It was time to settle down

                                                           I wanted the freedom to make
at just over 10%, people may                              something my own (eg. decorate)
wish to get on the property                                   I had or was expecting a child

ladder before prices rise any                             Purely as an investment to make
                                                                       money
further. Equally, with price-to-
                                                                                               0%      10% 20% 30% 40% 50% 60%
earnings ratios at historically
                                                    Source: GE Money/The Future Foundation
                                                    Base: 789 aged 16+ who bought property, UK, 2007



Life on Mars                                                                                                                        9
Interestingly, the proportion of first time buyers stating ‘it was time to settle down’ as a main motivation has risen
across the 30 years, from 17% in 1977 to 34% in 2007. This can be explained by the fact that in 2007 people
buying their first home are older and so are more likely to buy when they decide they are ready to settle. For
people in the ‘70s and ‘80s, settling down came earlier in life and more as a matter of course.




           Average age at occurrence of selected lifestage factors


                              Average age at             Average age at       Average age of                     Average age of
                           first marriage (men)      first marriage (women) mother at first live birth        first time buyers (b)
                 1977               25                          23                   27                                27
                 1987               26                          24                   27                                31
                 1997               30                          28                   29                                32
               2007(a)              32                          30                   30                                34

           % change               27.5%                      31.1%                       11.7%                       25.9%
           1977-2007

           Source: National Statistics/nVision

           (a) 2007 figures are estimations based on previous growth rate, with the exception of average age of first time buyers
           (b) Average age of first time buyer figures are from the Council of Mortgage Lenders




       “In 1977, getting married was a major
    priority for young people and, with levels
          of cohabitation and private renting
    much lower than they are today, buying
      a home was perceived as synonymous
                           with this process.”


Life on Mars                                                                                                                          10
How the first home is bought
Buying one’s own becomes ever more popular. Only
30% of people who bought in the last three years or
                                                                                                    “Nearly a quarter
plan to buy in the next three feel that people should
wait until they are in a long-term relationship before
                                                                                                    (23%) of men who
they buy a home. Even people who have already
bought with a partner would have bought on their
                                                                                                    bought with their
own if they could have afforded it.
                                                                                                     wife or partner in
As the number of marriages has seen an overall
decrease over the last 30 years, buying your first
                                                                                                       the last 3 years
home with your husband / wife has seen an even
bigger decrease since the 70s from 80% in 1977 to
                                                                                                      said they would
just a third today.                                                                                         rather have
With the average marriage coming later in life,                                                       bought on their
cohabiting becomes ever more popular so it’s not
a surprise that buying with your partner before                                                      own if they could
marriage has seen a strong increase since the 1977.
Nearly a quarter (23%) of men who bought with their                                                      have afforded
wife or partner in the last 3 years said they would
rather have bought on their own if they could have                                                      it. Only 13% of
afforded it. Only 13% of women feel the same.
                                                                                                       women feel the
However, the pre-perception of ownership running
costs is often worse than the reality. Single people                                                             same.”
who have bought on their own in the last 3 years
are more than twice as likely to
agree that their current salary
                                           Who first home was bought with, by year of
allows them to both pay their
                                           purchase
mortgage on their home and live
comfortably than those who are
                                             With my husband/wife
planning on buying in the next
3 years.
                                                      With my partner


Although it’s still the least
                                                            On my own                                                         1977
popular option, buying with a                                                                                                 1987
friend or groups of friends to get             With my sibling/other                                                          1997
                                                  family relative                                                             2007
into home ownership is seeing
an increase in popularity, as is                With a friend/groups
                                                     of friends
buying with relatives. This is
particularly true for those who                                            0%      10%       20%     30%   40%   50%   60%   70%   80%   90%

bought their home aged under 20
                                            Source: GE Money/The Future Foundation
                                            Base: 789 aged 16+ who have bought property, UK, 2007




Life on Mars                                                                                                                                   11
as figures show a sharp increase for this age group.                                    recent times have already built a reasonable amount
                                                                                       of awareness among first time buyers today.
With people feeling it is harder to put a foot on
the first rung of the property ladder these days,                                       The 100% and interest only mortgages have always
more and more financial options are being offered                                       had top awareness and the First Time Buyers
by companies to first time buyers. Some 85% of                                          mortgage has shot up to the same level of awareness
those who have bought in last 30 years agree that                                      in the last 20 years. Awareness of the First Time
there are a lot more financial options available                                        Buyers mortgage is more common among those
now than in the past. As the chart below shows,                                        who buy at a younger age whereas those who buy
awareness of these options is ever increasing and                                      over 30 show higher awareness of the right to buy
options such as the Key Worker Housing and 125%                                        scheme.
mortgages which have only been introduced in




                          Awareness of financial options when buying first home
                          By year of purchase


                          80%

                          70%                                                             1977      1987       1997       2007

                          60%

                          50%

                          40%

                          30%

                          20%

                          10%

                           0%
                                     100%           Interest only    First Time    Shared     Right to Buy   Key Worker     125%
                                    mortgages        mortgages         Buyer      ownership     Scheme        Housing      mortgages
                                                                     Mortgages


                          Source: GE money/The Future Foundation
                          Base: 789 aged 16+ who have bought property, UK, 2007




“Some 85% of those who have bought in
 last 30 years agree that there are a lot
more financial options available now than
               in the past.”

Life on Mars                                                                                                                           12
Parental support
With house prices having risen 1,436% over the                                          financial support from parents in the modern
last 30 years, mortgage payments are increasingly                                       era puts the difficulties which young first time
eating into the incomes of first time buyers. The                                        buyers notoriously face in a new and more benign
average first time buyer must now devote 22%                                             analytical light.
of his/her annual income to mortgage payments
compared with 18% in 1997, 17% in 1987 and 13%                                           Receiving help with the deposit in particular has
in 1977.                                                                                always remained the most common feature but
                                                                                        help in all areas has increased. Although on a
As a result, more and more people are receiving                                         lesser scale, grandparents are also providing more
financial help from their parents these days                                             financial support these days and even getting help
compared to the ‘70s. 51% are now reliant on                                            from other third parties is seeing an increase.
some level of financial support from parents and/or
grandparents.                                                                           Our data shows that it is those buyers aged 20-25
                                                                                        who are more likely to get financial help compared
 (Some 76% of respondents believe that now is the                                       with those aged 30+. Men are slightly more likely
worst time in terms of affordability for first time                                      to receive help than women. But as the chart
buyers. 73% believe it is difficult to buy these days                                    below shows, being single attracts a differentially
if you are under 30). Clearly, the arrival of much                                      high level of parental intervention.




                   Receiving help from parents/grandparents
                   By year of first purchase

                  35%
                  30%
                                                                                1977                       2007
                  25%
                  20%
                  15%
                  10%
                   5%
                   0%
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                                                Parents                                                      Grandparents

                   Source: GE money/The Future Foundation
                   Base: 789 aged 16+ who have bought property, UK, 2007




Life on Mars                                                                                                                             13
“The average first time
buyer must now devote
22% of their annual
income to mortgage
payments…”




                   “51% are now reliant on
                     some level of financial
               support from parents and/or
                            grandparents.”



Life on Mars                              14
Conclusion

This study, in taking a long-term perspective on         Potential first time buyers are adjusting to a range
the changing experiences of first time buyers in          of socio-economic changes and one major result
the UK, has provided us with some striking insights.     of their adaptability has been an increase in the
The profile of the traditional first-time home-buyer       variety of ways in which the first home is bought.
has altered, with the average age at first property       More young people are prepared and willing to buy
purchase coming to rest at 34 in 2007 – a full seven     on their own nowadays – indeed, our survey found
years higher than the average age in 1977.               that for a significant proportion who bought with a
                                                         partner, buying on their own would have been their
The fact that taking one’s first step onto the property   preferred option had they been able to afford it.
ladder now occurs later in life is due in no small
part to economic factors. House prices have risen        A significant proportion of first time buyers rely
dramatically, particularly over the past ten years,      heavily on the financial support of their parents to
and with an unprecedented proportion of young            facilitate their move onto the property ladder. This
people now entering into higher education, many          throws up an interesting paradox in that first time
of today’s twentysomethings simply cannot muster         buyers’ main motivation for purchasing is to achieve
the funds necessary to create a deposit.                 independence, yet many would be unable to do so
                                                         without being dependent to some extent on their
However, our analysis has revealed that today’s          parents.
potential younger buyers also have vastly different
attitudes, aspirations and lifestyles to their           Our survey found the top reason parents give for
counterparts 30 years ago and this also represents a     providing financial assistance is that they want to
significant factor influencing the delay of first home      rather than have to. This suggests that for parents
purchase.                                                themselves, being able to help their children become
                                                         homeowners has become an important and
There has been a considerable decline in the             gratifying part of an extended parenting process.
proportion of those buying their first home with          And, of course, with such a volume of parental
their husband or wife, amid a general shift in the       support, that first time purchase price does not look
priorities of young people in 2007 away from getting     so forbidding after all.
married and having children as key aspirations,
with the emphasis moving towards spending time
with friends, travelling and changing job. As such,
the driving forces behind buying a first property
have changed from family-oriented motivations to a
desire to gain independence and a sense of worth.




Colin Shave

CEO, GE Money Home Lending




Life on Mars                                                                                              15
“...our analysis has revealed
        that today’s potential
    younger buyers also have
    vastly different attitudes,
    aspirations and lifestyles
      to their counterparts 30
      years ago and this also
      represents a significant
 factor influencing the delay
     of first home purchase.”

				
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Description: A new study by GE Money Home Lending reveals the extent to which ...