What amount of wealth do your parents need?

It is becoming more important for parents to have a bank account in order to purchase a house. (Getty)

House prices began to fall in January of this year. Sadly it’s not the welcome news that people struggling to get on the housing ladder might have hoped. Year-on-year house price inflation still far outstrips wage increases and a growing number of people are now only able to buy their own home if they’re lucky enough to have a handout from their parents.

So what’s really happening in the property market?

Yahoo used the figures to figure it out.

The average house price in the UK dipped slightly to £294,000 in December 2022, still much higher than 15 years ago. (ONS)

The average house price in the UK dipped slightly to £294,000 in December 2022, still much higher than 15 years ago. (ONS)

What does it really cost to purchase a house in these modern times? The average house in the UK costs £294,000, down from November’s prices but still £26,000 higher than a year earlier, according to the Office for National Statistics. In England, the average house now costs £315,000 – up by 10.3 per cent in just one year.

Average year-on-year growth of weekly earnings (3 month average) in the UK. (Statista)
In the UK, average year-on-year growth in weekly earnings (3-month average) (Statista)

However, my salary isn’t increasing as fast. Indeed. In fact, incomes are increasing slower than expected. This is increasing the gap between house prices and earnings every year. The average wage grew by 6 percent last year. However, the growth was only 3% for those who work in government.

Who is it? It is How to purchase? Family members who can help bridge the gap between income and price are more likely than others to be able buy a house. It is almost possible half of first-time buyers Now, their parents can help them with a deposit or cash gift.

The ‘Bank of Mum and Dad, right? Yes, there were 6.8 million homes in England with mortgages in 2020. 8.8 million were bought outright. according to the Office for National Statistics That ratio is on the rise. This means that the percentage of families who can pass large sums to their loved ones through inheritance or cash handouts is increasing.

Who is getting this money? The Institute for Fiscal Studies (IFS), a research institute, predicts that parents will provide for their kids with. £17bn in gifts and informal loans this year. The majority of cash transfers will be made by those over 50 to their adult children in their twenties or thirties.

They give these gifts because they love it. IFS discovered that parents were more likely make gifts when their child marries or buys a home. “About half of the money young adults receive is for property purchases or home improvement, with an average of £20,000 in support coming from parents,” it concludes.

Share of adults receiving a substantial gift or loan in the past two years, by year. (IFS)

The percentage of adults who received a loan or substantial gift within the past two year period, by year. (IFS)

How many people are receiving a handout? The percentage of adults benefiting from their parents’ generosity is rising, with 5 per cent of adults now receiving a gift and another 2 per cent getting a “significant” loan in a two-year period.

The richest earn more than others Young adults who are the most financially secure receive 26 times as much in handouts from their parents than those with lower incomes. The average gift is just £2,000 but the largest 10 per cent of gifts are for more than £20,500.

The chosen few are therefore the best. Unsurprisingly, the majority of this money ends in the hands only of a handful of people. According to the IFS, the largest 5 percent of family cash transfers accounted for more than half of the total value of family loans and gifts between 2018 and 2020.

What does all this mean for home buyers? Nearly a quarter of property sales There are increasing numbers of first-time buyers in Britain who can now buy cash. Henry Pryor, a private buying agent, told us: “The bank of mum and dad is still busy, so some fortunate first-time buyers are still able to proceed onto the housing ladder – and a small but growing number without even needing a mortgage at all.”

However, this also means that cash buyers are driving up the prices for everyone. It is more difficult for people who rely only on their income and savings to take the first step up the ladder of property ownership if they receive large gifts from wealthy parents to their adult children.

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