The Shift in Priorities for First-Time Homebuyers
Penny Daniels, a 33-year-old accountant, embodies a growing trend among first-time homebuyers who are opting for immediate ownership over long-term retirement savings. Having spent her childhood split between Cumbria and Central America, she recently made a significant life decision by purchasing a two-bedroom shared ownership apartment in west London.
In her case, Ms. Daniels acquired a 35% share of the property, surpassing the typical 25% share that many first-time buyers opt for. This decision required a substantial deposit of nearly £50,000, which she managed to gather through a combination of inheritance, personal savings, and contributions from her two brothers. However, this financial commitment came at a cost: she has had to sacrifice her pension savings.
In an interview with The i Paper, she expressed her initial skepticism about the shared ownership model, stating, “At the beginning, I was a little confused about how it worked—only owning part of a home raised questions about who owned the remaining percentage.” But after conducting research on the Share to Buy website and consulting friends familiar with the scheme, she concluded that the process was more straightforward than she had anticipated. “Once you understand the maths, it’s really about deciding what type of property I can afford,” she added.
Ms. Daniels emphasized her current priority by declaring, “Do I prioritize saving for a deposit over retirement savings? 100%.” She views property ownership as a tangible investment, one that provides immediate benefits, in contrast to pension contributions, which are a long-term investment that won’t yield returns until retirement. “Property is an investment that you can see the benefits of right away, especially as the property value increases or if I decide to increase my share,” she noted.
The shared ownership scheme, implemented by the government, allows buyers to purchase a portion of a property while paying a reduced rent to a housing association for the remaining share. This structure means that buyers only need a mortgage for the percentage they own, which significantly reduces the amount needed for a deposit compared to purchasing a property outright. Generally, the minimum initial share one can buy under this scheme is 10% of the property’s total value, with opportunities to acquire more in the future.
Changing Financial Priorities
According to recent findings from Share to Buy, an alarming 88% of prospective homebuyers are prioritizing saving for a deposit over pension contributions, raising concerns about long-term financial security in retirement. This survey, which included responses from over 2,200 participants, revealed that this trend is not limited to younger generations; buyers across all age groups are feeling the pressure. Notably, individuals aged 36 to 45 represented the largest demographic prioritizing deposit savings over retirement funds (27%), closely followed by those aged 46 to 54 (23%).
“Retirement is simply not something that occupies my thoughts at the moment,” Ms. Daniels reflected, underscoring the low importance she places on it right now. She contributes only the minimum required to her company pension, which in the UK currently stands at 8%. This contribution typically consists of 5% from her salary, supplemented by a 1% government tax relief and an additional 3% from her employer. Occasionally, she has the option to contribute less if her employer increases their contribution.
Ms. Daniels further pointed out that many of her friends and colleagues share her outlook. “I feel like people are focused on living in the present and investing in long-term assets without a strict timeframe or age limit,” she stated. The constant increase in pension age also serves as a deterrent for many.
Jade Turnstill, head of brand and content at Share to Buy, voiced concerns over this trend: “It’s troubling that many first-time buyers feel compelled to prioritize saving for a deposit at the expense of their future financial security.” With property prices and interest rates on the rise, buyers are grappling with the challenge of saving for a deposit while also considering their long-term financial health.
In the current UK market, achieving homeownership is a daunting task, with average property prices hovering around £367,994, according to Rightmove’s latest House Price Index. Ms. Daniels empathizes with those struggling to navigate these challenges, saying, “I completely understand why people feel this way. Traditionally, the path has been to meet someone, marry, and buy a house together. But I chose to purchase on my own. Being independent and single is now widely accepted and even celebrated.”
She continued, “Rental prices are exorbitant. For the amount you pay in rent, you might as well add £500 and contribute towards a mortgage.” Ms. Daniels emphasized the importance of being financially stable to make such a significant investment, acknowledging that not everyone has that luxury. “If you have the opportunity, then I wholeheartedly encourage you to pursue it,” she concluded.
