Generation rent

The tradtional route to adulthood is changing with a new style of European living becoming more normal...

For some time now we have been suggesting that the traditional route into adulthood of university, career, fall in love, get married, buy a house and have a baby are becoming less defined.  In its place we are following a more European style of living, with renting later in life becoming more normal (see our recent rental report); a recent report by Halifax has also confirmed that there is currently a trend of an increase in long term renters in the UK (offset by a fall in home-ownership). The proportion of people aged 40-45 who own their own home has decreased from 62% in 2011 to 56% in 2015 and the share of young home owners has reduced over the last thirty years from 32% down to 10%.

So what is going on? Why the shift?

Mainly it is financial; it is just not financially viable to buy a home as it once was. Halifax shows that the first-time buyer house price has risen 14.8% over the last five years while the average income has only increased by 4.2%. This impacts both the monthly mortgage payment and deposit; there is a double whammy for the deposit as lenders now ask for an average 20% deposit compared with 5% pre-crash. In fact, 56% of people cite high property prices as the most significant barrier to home ownership. So much so that 82% of Londoners under 45 fear they will never be able to buy a house. However, although the mortgage market has improved, with general relaxing in loan criteria and the introduction of government schemes like Help to Buy, 21% of the 20-45 age group still believe that it is virtually impossible for first-time buyers to obtain a mortgage, thus putting them off even thinking about entering home ownership. 

The legacy of the financial crisis is also putting off buyers in other ways; 81% of potential first-time buyers surveyed by Halifax fear that it is simply too risky to enter home ownership – that too many things could go wrong; interest rate rises, falling house prices, losing their job etc.  – renting just seems like a less risky business.

Some renters who initially were pushed into the sector by financial considerations have realised that there are actually huge benefits of renting. These are young professionals, with middle to high earnings, who perhaps could buy, but like the freedom of renting. These renters like not having to worry about maintenance and upkeep, and probably living in a better flat or nicer area than they could afford to buy in.

But essentially it doesn’t matter whether people are choosing to rent is as a result of financial necessity or simply as a lifestyle choice, all that matters is there will be more renters in the future. And as a result there will need to be more rental properties. Cue the growth of build-to-rent schemes, a trend already being embraced by savvy developers. Not popular in Britain since the 1930s, the resurgence of these schemes will help to satisfy what is sure to be an ever increasing demand for good quality rental properties.