LONDON • Record home values in London meant retired doctor Sheila Shribman had to help her three children, who work as lawyers and a doctor, with a down payment to afford their apartments.
"There is no doubt that they would not have been able to do this without our assistance," Dr Shribman said. "Affordable housing is in short supply, renting is very expensive and buying is out of most young people's reach now."
Parents in London are now giving half of their net wealth, excluding real estate assets, to their children as gifts or loans to be used as deposits for property, according to Legal & General Group.
That means the so-called Bank of Mum and Dad is now facing a funding crisis as they put their own finances for the future in jeopardy.
A recent report from Legal & General and the Centre for Economics and Business Research said: "Families clearly cannot continue to use all of their net wealth to help their offspring onto the housing ladder without putting their own financial stability at risk.
Families clearly cannot continue to use all of their net wealth to help their offspring onto the housing ladder without putting their own financial stability at risk. There is now an affordability issue on both sides of the fence, for the children and their parents.
'' REPORT FROM THE LEGAL & GENERAL GROUP AND THE CENTRE FOR ECONOMICS AND BUSINESS RESEARCH
"There is now an affordability issue on both sides of the fence, for the children and their parents."
First-time home buyers spent £395,000 (S$778,500) on average in the fourth quarter last year on a London home, almost £100,000 more than five years ago, according to data from Britain's Office for National Statistics.
The typical mortgage of £281,000 is the equivalent of the average London home price in 2005, data shows.
Residential property prices in London rose 9.7 per cent in the 12 months through February to £524,000 as landlords rushed to buy homes ahead of a rise in stamp duty sales tax.
The median gross salary for a full-time worker in London was about £34,320 last year, unchanged from the previous year.
"Home prices need to be commensurate with incomes, otherwise we will all be commuting to London from northern France," said Mr Mark Harris, chief executive of mortgage broker SPF Private Clients.
"The Bank of Mum and Dad is all very good, but it means that unless you come from a wealthy family, it's still extremely hard for first-time buyers."
Chancellor of the Exchequer George Osborne raised the stamp duty tax for landlords and second-home owners by three percentage points last month to help first-time buyers compete for properties. Lending to landlords in Britain rose 61 per cent in February from a year earlier, compared with a 21 per cent increase to debut home buyers. With the British benchmark interest rate at a record low 0.5 per cent for more than seven years, Bank of England Deputy Governor Jon Cunliffe warned recently that lending to owner-occupiers at high loan-to-income ratios "remains significant".
Barclays bank has started offering mortgages with an income multiple of 5.5 times earnings for buyers who receive a 10 per cent down payment from a relative or guardian. Buyers will rely on £574 million offered by family and friends to support home purchases in London this year, according to the Legal & General report.
Dr Shribman said her children realise they are lucky that she and her husband, also a retired doctor, were able to contribute.
"We know we are in the minority and can see how very difficult it is for families to help," she said.
"They all know how fortunate they are that we could do this."