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Baby new Home Taking his first step at 12 weeks
found at telegraph.co.uk
17/07/2007
This baby already has one bootie-clad foot on the property ladder. And there are more like him, writes Ross Clark The average buyer has to wait until their early 30s for a home of their own, but for Charlie Sturges, now 12 weeks old, property ownership began almost simultaneously with his birth.
"While I was in labour my husband Robert received a call from the estate agent through whom we were buying a flat in Fulham for Charlie," says Tonya Sturges, 35. "As the flat was going in my name, I had to take the phone so that contracts could be exchanged. It was quite ridiculous, really, but it was well worthwhile. It might turn out to be his first home, or just something that he might have as an investment, shared with any other children we might have." So far, Charlie isn't terribly impressed about reaching the first step of the property ladder. The first time his mum took him to see his very superior £250,000 wendy house, which is undergoing building works before being let out, all he did was sleep. But Tonya is convinced that she and Robert, who works for Wellingtons Estate Agents, are doing the right thing. "We live in Fulham, just about seven minutes from the flat, and I am very confident about the area in which we are buying." They may have made the decision a little earlier than most, but there is nothing unusual about parents buying their children a place to live - not just providing a deposit from "the bank of Mum and Dad". While first time buyers struggle ever harder to get on to the housing ladder by themselves, it can't help to know that a privileged group have been given a leg-up at an age when most children aspire to no more than a tree house. A study by the Council of Mortgage Lenders in 2005 revealed that 46 per cent of first time buyers are receiving some kind of help from their parents. Where help was given, suggested an Alliance and Leicester study last year, it averaged £18,000. For those who couldn't afford to help, the consequence was a child languishing at home long into adulthood: in a poll for the Joseph Rowntree Foundation in 2004, 48 per cent of parents with children aged between 18 and 29 years said they had a child living at home. Perhaps it is the thought of having a 25-year-old living in the family home that motivates some parents to buy property early. It isn't just one bed flats on the Fulham Road, either. "I've recently bought a £3million flat in Mayfair for a Middle Eastern buyer who wanted it as an investment for his son," says Charlie Ellingworth of buying agents Property Vision. "The child was 12. It happens quite often. It is not always that people think the market is going to do well. They want to buy more as an insurance policy. If the market goes up by the time the child is in a position to occupy the property, they know that they won't be priced out. And if the market goes down, they still have the property. I advise clients buying on behalf of children to buy in a good area where no more property is being built." Setting up junior with a home is easier if you have one child. But the fact that they have five isn't going to deter Anne and Chris Currell. They have just bought their 20-year-old daughter Amy a one-bedroom flat off-plan in a development in Dalston, East London, and have promised to do the same for their other children. "We both had help from parents to get on the property ladder when we were young," says Anne, who runs the East London chain of estate agents Currell Residential. "I can see property prices rising year in, year out and I think it is almost impossible for young people to get on the property ladder without help. We paid £203,000 for the flat in Dalston, and by the time Amy moves in it will be worth more." If prices do rise, it will become all the harder for the Currells to buy a first home for Lucy, 18, Hugh, 17, Alice, 15, and Georgia, 13. They also have a task on their hands persuading Hugh that he should buy in the East End, where Anne has confidence in the market, rather than where he currently thinks he wants to live. "He has asked us whether he could have a house next to Anfield, because he is a mad keen Liverpool supporter," says Anne. "I think I might try to dissuade him from that." Although the Currell children are extremely lucky, their properties will not be out-and-out gifts. "The properties will be in the children's names, with us acting as guarantors for the mortgage," says Anne. "But when the children come to sell them, some of the money will come back to us. If they want to continue living in the property, on the other hand, they will at some point have to take over the mortgage by themselves." So you've found the ideal investment for your child, you've sorted out the finance. Now all you have to do is wait for him or her to grow up. But there is one thing you have to bear in mind. The child whom you treat to a leg-up the property ladder might not grow into the adult you had hoped for. What if that sensible one-bedroom flat turns into a venue for riotous parties, or, instead of getting a job and taking up residence in the home you bought for him, your good-for-nothing 21-year-old announces he is going to bum around the world instead? Unfortunately, if you have bought the property as a mortgage guarantor, it is going to remain your problem. You might just wish you had spent the money on a yacht for yourself instead. Buying a property for a child is not just a question of picking the right investment; the other consideration is tax. If you are making an outright gift, you can avoid inheritance tax (IHT) - so long as you survive for seven years after the gift was made. If, as the Currells are doing, you are helping your child to buy a property by acting as guarantor, there are some IHT benefits: any increase in the value of your property would be tax exempt and you may be able to treat the mortgage payments as regular gifts. This bypasses the normal IHT rules. However, this will only be so if the money is genuine spare income, as opposed to using your savings for example, says John O'Leary of accountant Sheen Stickland. "If you are earning £1,000 a month and spending almost every penny you are not allowed to give away £200 a month in mortgage repayments." Neither, he says, can you avoid paying tax on rental income by exploiting the child's tax-free allowance. Unfortunately as the property is gifted by the parents any income is treated as theirs until the child turns 18.
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