It’s not really a secret but in recent years more and more people, especially young people, have really struggled to get a foot on the property ladder. A recent report from The Intermediary Mortgage Lenders Association (IMLA) which specifically tries to assess the growth in the buy to let (BTL) market and its subsequent impact on first time buyers, is suggesting that for the first time in over 60 years that by the time today’s infants reach maturity in 2032 that over 50% of UK homes will be rented making them the Generation Rent.
The report goes on to state that one of the major factors, driving this change in rent versus ownership, has been the recession which first started in 2007. This was when the when the property market took a huge nosedive, and subsequently was the main reason why the number of owner-occupied homes in the UK fell to 64%, in 2012 compared with 71% in 2003.
During the same period, private rentals have increased from over 3.5 million to nearly 5 million properties during the same period. Recession aside, there are a number of factors and multiple trends including social reasons which the report identifies as being behind this shift. The reduction in social housing, changes in the employment marketplace, higher immigration, increase in university student numbers, reluctance to get married early and increased separation rates were all suggested as factors contributing to this increase in the private rented sector.
In addition to which we have witnessed growing financial obstacles to home ownership such as lack of available mortgage funds, higher deposit requirements, increased demands on financial status to name a few.
The report also highlighted that the group currently with the lowest buying power seems to be single people. Currently families and couples combined make up 94% of the purchasing market, whereas individuals only account for fewer than 3% of property sales.
Taking all these obstacles in the way of home ownership then it’s no real surprise that the first-time buyer market as we used to know it has changed dramatically over the last few years. With so many being priced out of the market place means that many so called ‘singletons’ as they are now called are either choosing to stay at home or continuing to rent for a longer period.
Equally other factors at play such as the Bank of England’s quantitative easing programme and record low interest rates have also advantaged landlords, whilst on the other hand increased financial restrictions such as limits on interest-only mortgages and reductions in lending limits and increased income multiples have all been obstacles facing new, potential (would be) homeowners.
In line with other statistics available the reports demographic projections point to a rapidly increasing housing demand, with the UK population forecasted to reach over 67 million by 2020 and over 75 million by 2035.
It goes without saying that if these current trends continue without a clear policy or economic shift to address the forecasted shortfall in new homes being built, then the vast majority of households in the UK will be renting properties 2032. This will be the first time since the early 1970s that this will have happened and could lead to homeownership increasingly becoming the preserve of the old.
This continuing fall in home ownership coupled with the rapid decline and availability of social renting would result in over a third of households renting privately by 2035 which is twice as many as today.
Peter Williams, Executive Director for IMLA, commented:
“There are many misunderstandings clouding the growth of buy to let, including its impact on first time buyers. This report is a fresh look at how and why the private rental sector has grown. It asks important questions about our current direction of travel and the failure to build enough homes to support the rising population”.
“Growth of the private rented sector has been from a historically low base and has been fuelled by strong underlying demand. If current trends continue then demand for private rented property is likely to drive further expansion and increase the burden on our already-overstretched housing stock, at a time when first time buyers are also feeling the pressure of new mortgage market regulations”.
So with property prices increasing at a far higher rate than wages the question is “are we as a nation falling out of love with traditional British obsession of owning your own home and moving towards “Generation Rent”. The answer to this lies with government reaction to the current housing shortage and future policy in respect of the provision of new housing. Early signs are encouraging in particular with the current approach on Help to Buy being deemed a success, however, the jury is still out on the current attempts to reverse the demand in the private rented housing sector and to have a joined up housing strategy that meets everyone’s needs.
