Number of young people owning a home up by 3% since low of 2016
28 Dec 18
New research shows that the UK’s housing market has seen the first rise in home ownership for young families in 30 years but renting is set to be an important sector.
Although home ownership among those aged 25 to 34 has increased by 3% since 2016 when the level reached a record low of 25%, the high cost of buying a home means that letting is still an option for many people.
The analysis from the Resolution Foundation says that better credit conditions as the nation moves further away from the financial crisis, and a slowdown in house price growth in recent years have improved the situation for young first time buyers.
It means that the equivalent of an extra 190,000 young families now own a home but rates are still barely half as high as their late 1980s peak, when half owned their own home. If ownership rates hadn’t fallen sharply from this peak, some 1.4 million more young families would be home owners today.
The Foundation adds that, despite this recent uptick, renting will continue to be the norm for the majority of young people, particularly in the UK’s major cities. The long term drivers of lower home ownership are here to stay with low interest rates and a shortage of homes driving higher house prices and deposit requirements.
It would currently take a first time buyer in their late 20s around 18 years to save for a deposit if they relied solely on savings from their own disposable income, up from three years as recently as in the mid-90s.
A new local area analysis shows that fewer than one in five young families in London, Manchester, Liverpool, Brighton and Birmingham currently own. For these families, owning their own home is likely to come far later in life, if at all.
In contrast, nearly half of young families in areas like South Lanarkshire, South Hampshire and Central Bedfordshire already own their home, highlighting that Britain’s housing divide is not just between London and everywhere else but between major cities and rural areas.
The analysis shows that falling home ownership rates, and reduced access to social housing, have driven rapid growth in the number of young families who rent privately. Nationally, the share of young families in the private rental sector increased from just 9% in the late 1980s to 34% today.
For this group of renters, shared residencies are quickly becoming a core feature of urban British living: twelve per cent of all young families are now sharing with others in the private rental sector, an increase from just 3% in the late 1980s. In Bristol and Brighton, one in three young private renters are now living in shared accommodation.
The Foundation says that rising home ownership rates for young people will be welcome news, but a better deal for renters is needed as the high financial barriers to getting on the property ladder will continue to force many into long term renting.
It calls for the Government to improve security and stability for young tenants by making indeterminate tenancies the sole form of private rental contract and introducing light touch rent stabilisation that limits rent rises to CPI inflation for set three year periods.
‘After decades of falling home ownership, recent conditions in the housing market as we move away from the immediate aftermath of the financial crisis are finally helping more young families to buy a home of their own,’ said Daniel Tomlinson, research and policy analyst at the Resolution Foundation.
‘But the long term drivers of lower ownership rates, including low interest rates, and high house prices and deposit requirements, are here to stay. Home ownership rates for young families are barely half as high as they were back in the late 1980s, while fewer than one in five own in many of Britain’s major cities,’ he pointed out.
‘So as well as welcoming the tick up in youth home ownership politicians should act to increase the number of homes available to buy, use the tax system to favour first time buyers over second home owners, and ensure that the private rental sector is fit for purpose, providing the security that many young families need,’ he added.