The actuaries are at it again – and they are calling for all of us to be at it too. A recent report from the profession stated that falling birth rates will cause real problems for government and individuals' finances. It believes that not nearly enough attention is being paid to this issue and calls for a review of the incentives and disincentives that government policy offers to families to raise children.
Children are expensive, which is not news to any parent. Estimates about quite how expensive abound, but Liverpool Victoria reckons that parents pay out on average £111,442 until a child is 18, and it doesn't get any better after that.
Thousands of students across the country are sitting their A levels at the moment, many with a view to going to university. There are 1.17 million full-time students in the UK and this will increase if the government meets its target of 50% of 18-30 year olds entering higher education by 2010.
The National Union of Students estimates that it costs £23,200 to fund a three-year course. Accommodation, books, subsistence – and the bar bill – add up quickly and in most cases it is the parents who pay. In England and Wales students also have to find money for tuition fees. Not only that, but there is increasing pressure on accommodation as the numbers rise.
Many parents are now looking at buying a property for their student offspring to live in instead of paying rent. This is a solution that makes sense. Given the rise in student numbers it is now usual for universities to be able to offer only a year in halls of residence – if that. So the vast majority of students will spend the bulk of their university careers in rented accommodation.
University towns outside London tend to have 'student areas'. One reason such areas become heavily populated by students is the availability of properties that are cheap to rent, often have a number of bedrooms and are near to the university campus.
The advantage for a parent looking to invest is that property in these areas tends to be on the market at a lower price. Other advantages are that the other students sharing the house will pay combined rent which should cover not only the cost of the mortgage but also what the parents would have paid in rent. If you are lucky the investment in the property will also net a profit when it is sold.
The quality of student accommodation varies enormously and better quality properties will be easier to rent out in the long-term. Recent research shows that rental yields are likely to be about 2% higher on student properties than the traditional letting market. It is increasingly difficult for young people to earn enough to save for a deposit for their first home and pay rent.
There are some downsides too. Rental income is likely to be over 10 months rather than 12 as many students do not want to pay over the summer break. It is a strain on relationships within the house if one of the student sharers is effectively the landlord. And depending on whether the parents buy the property in their child's name or their own, there are also tax implications to consider. Plus, of course, some students may not want to have the responsibility of a mortgage at such a young age.
Investing in student property is also an option for the traditional buy-to-letter. Some may have concerns that students are a bad risk and more likely to default on rent payments.
However, competition for good quality student accommodation is likely to increase and being careful about references and managing your student lodgers properly can help to mitigate the problem.
Of course it is not inevitable that every child will go to university but even this does not let parents off the hook. More and more young people are depending on family to help them raise a deposit for their first home.
So there might also be a less altruistic reason for parents to invest in property for their children. There is a growing trend for children to return home once they have finished their studies, pushed back into the bosom of their family by the high cost of property and student debt.
Given the real costs of bringing up a family, it is not hard to see why the actuaries are worried. In Italy the government has started giving first-time mothers a one-off payment of £700 to try and raise the birth rate from 1.2 babies per family to two. Given the cost of children and property in the UK, we might soon have to consider payments to first-time mothers and first-time buyers here.