JMW Solicitors has predicted that 2016 will see a record number of family-funded house moves as property buyers continue to rely on financial help from their loved ones to progress on the housing ladder.
It explains that rising demand and higher property prices are making it increasingly difficult for buyers to stand on their own two feet, and all indications point to a worsening picture during the next 12 months, despite recent government moves to help first-time buyers, as outlined in the recent Comprehensive Spending Review.
JMW has analysed national data from the English Housing Survey from the past six years, which revealed that the percentage of people financing property moves with help from family and friends has risen every year since the peak of the UK financial crisis in 2008.
In 2008-09, when questioned on the source of finance for the purchase of their current property, 5.3% of respondents answered “a gift or loan from family or a friend”. This percentage has continued to climb in each consecutive year, reaching 7% in the most recent report of 2013-14.
Andrew Garvie, conveyancing specialist and partner at JMW, said: “We have every reason to believe this figure will continue to rise as a result of the increasingly high demand for property, at a time when prices are higher than ever before. In 2015 I’ve dealt with a record number of cases where buyers are using money from parents and other family members to fund their deposit, and I expect this will be surpassed in the next 12 months.
“While there are many benefits to this approach to purchasing property, it’s important for buyers and those providing the financial assistance to ensure adequate legal measures have been taken from the outset. The most common scenario, and the one accepted in the main by mortgage lenders, is that the funds are to be gifted by the family member rather than a debt be created. If the money is a loan however, this should be specified at the start, and simple trusts can be implemented to safeguard the funds so no confusion arises in the future – particularly if the buyer is cohabiting with an unmarried partner who could become entitled to a share in the property if they contribute to the mortgage repayments.”
In addition, JMW expects a continued trend for foreign investment in UK properties in 2016, following increasingly strong interest from overseas buyers in the past 12 months. Cash buyers from the Far East and Asia have been particularly active in areas such as London and Manchester, seeing British property as a safe-haven for investment.
It says its only cautionary note is that the new increased stamp duty and tax rates recently announced by George Osborne on second homes may dampen demand when the measures come into force on 1 April 2016.