This week has seen a lot of press coverage of our report, The Reality of Generation Rent: Perceptions of the first time buyer market. Commissioned by the Halifax, it’s a great example of the value of social research to decision makers across sectors – from banking to government. The report highlights the difficulty people aged 20-45 face in purchasing their own home. It was published on the same day that the Centre for Economics and Business Research (CEBR) released a report estimating that house prices could rise by 16% by the end of 2015.
Our findings reinforce the message that financial constraints such as property prices, the size of deposits and low income put people off getting on the property ladder. We found that nearly two thirds of non home-owners (64%) believe they won’t get on the property ladder with 38% saying they thought they would not be able to own their own home and 23% saying they did not want to. This 64% is the group we’ve termed generation rent, of whom a mere 5% said they were saving for a deposit and making life sacrifices to do so.
But we also found that there are other factors at play. There is considerable pessimism about the mortgage process with three in five respondents (60%) saying it is ‘very hard’ or ‘virtually impossible’ for first time buyers to get a mortgage. There’s a widespread belief that lenders don’t want to engage with first time buyers and fear rejection by lenders.
• 84% of respondents believe banks do not want to lend to first time buyers and find excuses to turn them down
• 67% believe there is a perception that everyone is rejected by lenders so there is little point in applying.
Yet despite all this we’re still a nation of people who aspire to own property. Home ownership is still the aspiration of more than three quarters (77%) of non home-owners. We know that home ownership is attractive for various reasons, greater security, more control and a sense of belonging all spring to mind. But one of its clearest benefits remains financial – at present it is estimated that property accounts for 61% of Britain’s personal wealth. So a worrying consequence of generation rent could be a widening wealth gap between homeowners and non homeowners. It could also have serious implications for people later in life because for generation rent property won’t be the potential resource to draw on during retirement that it represents for home owners. There’s also the possible impact on local neighbourhoods because a lack of security leads to a more transient generation.
And then there’s the potential impact on the housing market itself. First time buyers are widely regarded as crucial to the housing market, so a fall in the number of first time buyers may have an impact on the funding of new builds. With current estimates of a housing shortfall and an estimated 232,000 new homes required each year this is clearly a significant challenge.
The generation rent report highlights some of the doubts and fears that potential first time buyers feel when considering taking the first steps towards home ownership. There are obviously strong messages here for the banking sector in relation to engagement with first time buyers. But there are wider implications too - for housing providers and ultimately for government itself. And there’s a big social question at the heart of all this which housing policy experts amongst others will no doubt have lots to say about – would a shift in aspiration from ownership to renting be a good or a bad thing?