The RICS (Royal Institution of Chartered Surveyors) is calling for more to be done to help young first time buyers better understand the process of buying a property, starting with increasing their access to knowledge of the local housing market.
This news comes after a survey conducted by NatWest revealed that while optimistic about getting on to the property ladder; many ‘millennials’ (young adults aged 22-30) do not have a good understanding of the core buying matters. These include how much deposit is needed, the mortgage process - including the strict lending requirements - the time it will take to pay off a mortgage and where to find financial support.
The NatWest Millennials Home Buying Survey revealed that, 69% of young adults believe they will have saved enough for a deposit within five years. However, 41% admitted they did not know how much deposit was required, suggesting that many may be overly optimistic. Of those who said they did know how much deposit they would need, the most common estimate was 6-10% of the house price.
RICS says first time buyers should become familiar with their local housing market in order to see what properties are available within their budget, and from here, budget to save a minimum 10% of the property’s value for the deposit – which is what most lenders recommend.
Andrew Bulmer, FRICS Residential Director at RICS commented: “It’s important that young buyers have a clear understanding of their local housing market – including what areas they can and can’t afford to buy in - as well as the buying process.
“Until the rate of home building sees a significant increase, it’s likely that house prices will continue to increase, especially in the more popular areas, where competition for homes is much greater. Therefore, saving up as large of a deposit as possible will not only help secure a purchase, but also the best mortgage deal with a lower interest rate.”
The mortgage process is another area that the NatWest Millennials Home Buying Survey revealed many young adults are confused by. Of those who had looked into mortgages, only one fifth found the process to be simple. Similarly, only 30% believed that it would take over 30 years to pay off their mortgage.
To further help first time buyers understand the home-buying process – including mortgages - RICS has created a Consumer Guide to Buying a Home. Commenting on the guide, Andrew said: “It includes everything a first time buyer needs to know; from financial advice, instructing a solicitor, the benefits of a Home Buyer Survey, to what to expect when exchanging contracts.”
Andrew says one of the common misunderstandings around the home buying process is the difference between a mortgage valuation and a Home Buyer Survey - a property report of a home’s condition - with many believing the former is a type of Home Buyer Survey.
He commented: “We have recently worked with Moneysupermarket.com to produce an informative podcast, in which the difference between a mortgage valuation and a Home Buyer Survey is explained. It advises buyers to obtain this thorough survey in order to fully understand a property’s condition and potential defects, such as structural problems and damp and decay. If the survey highlights issues such as these, buyers can make an informed decision on their next steps, which could include negotiating a reduction in the asking price.”
Andrew concludes: “Buying a house is often the most expensive purchase any of us will ever make. Therefore, do your research, and look around plenty of properties to get a feel for the market and what is going to be a realistic price, should you decide to put an offer in.”