Wednesday, 03 June 2020

Lotus Investment Group Survey Finds Most Believe Parents Should Offer Financial Assistance to Children Buying Their First Home

Written by Posted On Sunday, 21 July 2019 05:36

With housing costs across Ireland continuing to climb, potential homebuyers are looking for financing from a wide variety of sources – including the bank of mom and dad.

A recent survey commissioned by Lotus Investment Group, a firm providing financing for property developers and investors, found that more than half of respondents (51%) believe that parents should provide financial assistance to their children when they are purchasing their first home.

The survey sampled 1000 people from all over the country and was conducted by iReach. The sampling found that 34% percent of survey takers believed that parents offering financial assistance of children buying their first home should take place on a case to case basis. While 15% considered the financial support from parents not a good idea to varying degrees.

While the survey found that idea of parents financially supporting their children is broadly endorsed, a large portion (36%) deemed that the financial future of the parents should be considered before making any big financial decisions.

According to David Grin, chairman of Lotus Investment Group, “It’s also important for these parents to take into account that while they may be managing financially at the moment, they do have their retirement to think about – and it’s important that people don’t end up handing over thousands that they find they themselves might need as their own nest egg when they stop working, and perhaps still have their own mortgage to pay.”

Interestingly, the Lotus Group survey found that men (19%) were more likely than women (11%) to agree that parents should support their children ‘whenever they can, no matter what.’

Lotus Group Survey Reveals Interesting Findings

The survey revealed an interesting generational divide, with 59% of respondents aged 55 or over agreeing that parents should offer their children financial support when it comes to homebuying compared to middle-aged parents 35-54 – 48% of whom supported the notion. This could signal a change in culture and standards, but this dissonance could also reflect the changing ability of families to afford a home.

A further investigation of the Lotus Group survey findings revealed that there was a measurable geographical divide when it came to the question of parents offering financial assistance to children. This variance likely reflects the costs of housing in urban areas versus the cost of housing in rural areas.

Consequently, only 10% of respondents who indicated they lived in Dublin believed that parents should offer financial assistance whenever possible. This figure compares to 25% of respondents in the rest of Leinster reports Finance Fox.

Grin gave his impressions of the survey stating, “Property price growth has slowed considerably with the market now close to equilibrium , which is good for buyers. However, as evidenced by recent reports, the fact remains that affordability is still a challenge for thousands of would-be first-time-buyers all over the country.”

He continued adding, “ High rents and high property prices are making that elusive ‘10%’ a challenge, as those in their 20s and 30s struggle to budget for monthly expenditures and the savings required.”

“But is the ‘Bank of Mom and Dad’ an option for financial assistance or should it be? This is certainly a delicate topic. While some families are fortunate enough to have the financial means to help their children out if they so wish, there are many others for whom it’s simply not affordable.”

Complete results of the survey commissioned by Lotus Investment Group

Home Affordability Today Compared to Past Generations

It is often stated that it is harder for young people to buy a home today compared to their parent’s generation. In a 2017 paper published by the Nevin Economic Research Institute Research, researchers used data on housing prices and wages to conclude that many people aged 25-34 were being priced out of the opportunity to buy a home today, compared with the late 1980s.

For many, the dream of owning their own home is slipping farther and farther out of reach . Rising mortgage rates and restrictions in addition to a lack of affordable supply have created obstacles making it more difficult for more people to buy a home today.

Speaking on this point, David Grin added, “The Central Bank of Ireland mortgage lending limits continue to preclude some people from taking those first steps onto the property ladder, with recent research pointing to the amount of deposit required as being the biggest stumbling block in many cases.”

Representatives from Lotus Investment Group recommended that before the country turns to the moms and dads of Ireland for financial assistance, there need to be tough questions posed to the government and policymakers regarding the plight of first-time homebuyers. Mr. Grin stated that he is in support of the continuation of the Help to Buy Scheme, which is slated to end this year, in the upcoming budget. The government has signalled that it intends to extend the grant program , acknowledging that it has benefitted over 12,000 people.

Recently released statistics show housing price inflation beginning to slow, possibly signalling the Irish housing market is stabilising . But Lotus experts say recent reports paint entirely different pictures of the housing market in Ireland depending on where you look. The latest EY DKM report analysed housing affordability Ireland and found that in some counties it would take anywhere from 1-15+ years for first-time homebuyers to save the deposit amount required to qualify for a home loan.

The Current State of the Bank of Mom and Dad

While it is often customary – and sometimes expected – for parents to help their children financially, changes in culture, social norms and the economy have altered the way that parents and children approach the subject.

As David Grin says, “In many cases, sons and daughters would know the finances of their parents and so would never approach them for assistance, but in some cases the financial situation may not be as clear, and parents may feel under pressure to come up with the cash from somewhere – though they too might be finding their finances tight.”

According to the Lotus Investment Group survey, it appears that the current market and regional difference may also play a large role in parent’s willingness and ability to offer financial assistance in buying a home to their children.

 
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James Stevenson

Hi, My name is James and I've been involved in the property and real estate industry for 10 years now. I hope people will like to read about my thoughts and experiences in the industry and please contact me if you want to discuss my articles further!

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