4 out of 10 young adults still can’t afford to buy a house
New research by the Institute of Fiscal Studies (IFS) has shown that 4 out of 10 young people cannot afford to buy one of the cheapest homes in their area with a 10% deposit, let alone an average-priced one.
The crisis continues
Figures show that the average house price in England has risen by an astonishing 173% over the last 20 years (253% in London).
By comparison, over the same timeframe, the average real income for 25-34 year-olds has only risen by 19%.
Unsurprisingly in light of these statistics, the last two decades have seen a dramatic decrease in the number of 25-34 year-old homeowners, from 55% in 1997 to 35% in 2017.
The numbers speak volumes and it’s a worrying read: the message is loud and clear - first time buyers are still struggling to get a foot on the housing ladder.
Struggling to save
At a time when house prices continue to rise as reported by the UK’s biggest mortgage lender The Halifax, recent analysis by the Office for National Statistics also showed that over half of 22-29 year-olds have no savings.
Insecure work and the squeeze on pay has highlighted the difficulty to set money aside and many young adults are struggling to save even when living with parents.
To add insult to injury, the IFS report also highlighted the increase in rental prices, from an average of £140 per week to £200 per week, so those unable to rely on the bank of mum and dad are finding it an increasingly impossible challenge to save for a deposit.
The first step onto the property ladder is becoming further out of reach for Generation Rent.
Autumn budget, new solutions?
Despite previous attempts to address housing problems and pave an easier way for first-time buyers, critics argue that government policies such as the Help to Buy subsidy scheme, have contributed to pushing house prices up and making the problems worse.
This Autumn, the Chancellor Philip Hammond is considering introducing a new policy recently published by thinktank Onward, whose proposals offer tax breaks to landlords who sell to long-term private renters and improved incentives to landlords to offer long-term tenancies.
The IFS argues though that ultimately more houses are needed, with Paul Johnson, economist with the IFS, recently telling the Today programme : "The government has been trying to give younger people a bit more power in the housing market relative to older people. It's made it more expensive to own second homes by increasing stamp duty and made it somewhat cheaper for younger people to buy homes by lowering stamp duty. That helps a bit, but in the long run, you have to just have more houses where people need them."
What can be done now?
Whilst fundamental housing supply and affordability issues are firmly in the hands of the government, there are steps that first-time buyers can make to both improving savings and make the house-buying process cheaper and easier.
If you’re currently buying your first home and need specialist legal advice, contact either David Williams or John Spittle in our Conveyancing Department on 01606 48777.