Home ownership rates for families aged 25 to 34 are rising for the first time in 30 years but high barriers to entry facing first-time buyers remain acute, according to a pressure group.
The Resolution Foundation says that eased credit conditions, as we move 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.
As a result, home ownership rates among 25-34 year olds have risen by three per cent since they hit the rock bottom level of 25 per cent in 2016.
The analysis finds that this increase is the equivalent of an extra 190,000 young families owning a home this Christmas.
However, young families’ home ownership 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, 1.4m 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.
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” claims the foundation.
In contrast, nearly half of young families in areas like South Lanarkshire, South Hampshire and Central Bedfordshire already own – highlighting that Britain’s housing divide is not just between London and everywhere else but between our 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 nine per cent in the late-1980s to 34 per cent today.
For this group of renters, shared residencies are quickly becoming a core feature of urban British living: 12 per cent of all young families are now sharing with others in the private rental sector, an increase from just three per cent 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.
Daniel Tomlinson, a research and policy analyst at the Resolution Foundation, says:
“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.
“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.
“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.”