HIGH levels of home ownership is a phenomenon unique to the UK.
Across most of Europe and the USA, renting is the norm.
And changes to the market over the past ten years have made it so much harder for first-time buyers to get a foot on the property ladder that there is a generation emerging who may never own their homes.
Although hard to believe given recent stagnation of the market, property prices soared in the first decade of the century.
And with tighter controls over mortgages, the average first-time buyer today needs £28,770 deposit compared with £9,865 in 2000.
This could consign a generation to spend their entire lives in rented homes, warns a new analysis.
Although 77 per cent of all non-homeowners still aspire to buy, many members of ‘generation rent’ might never get a realistic chance to do so, and nearly half of 20-45-year-olds say Britain is following Europe to regard renting as the norm.
Commissioned by Halifax and produced by the National Centre for Social Research (NatCen), the report analysed the results of a survey of 8,000 people between 20 and 45 and identified the emergence of ‘generation rent’: two thirds (64 per cent) of non-homeowners think they have no prospect whatsoever of buying a home.
Longer-term, only five per cent of this group are making sacrifices to save for a deposit. The rest say they have no spare cash, no interest in saving a deposit or are trying to save but failing to do so.
Stephen Noakes, Halifax Mortgages commercial director says: “Our research found that many potential first-time buyers don’t make it to the application stage for fear of being declined.”
But Halifax approves eight out of ten mortgage applications from first-time buyers, and urges potential first-time buyers not to miss out because of this fear of rejection.
In response to its research findings, Halifax will launch a First-Time Buyer Pledge in July to give ‘generation rent’ more information about getting a mortgage.
Mr Noakes said: “Not everyone wants to get on the housing ladder but we aim to dispel any myths about the mortgage process. We will set out exactly what customers should expect from us, including changes we are going to implement to make applying for a mortgage easier.”
The Halifax pledge will be available online and in branches in July. Even customers turned down will be given a plan showing them how to move forward.
According to The Council of Mortgage Lenders (CML), the number of first-time buyers under 30 who turned to parents or other relatives for financial support has doubled in five years – from 38 per cent in 2005 to 84 per cent in 2010.
The unassisted first-time buyer in England will typically spend £81,321 over 16 years on rent before being able to buy their first home.
This move to the European model of renting is good news for landlords as many tenants – including young professionals on good salaries – are asking for longer lets as they wait out the mortgage famine.
A London-based letting agent – Ludlowthompson – says 71 per cent of lets it has agreed so far this year have been for two years or more, with nearly half (44 per cent) for three years or more.
The agency says that renters who would traditionally enter the housing market as first-time buyers are turning to longer lets of up to three years in some cases, as they tire of lenders’ reluctance to produce funds necessary to get on them on to the housing ladder.
Stephen Ludlow, director of Ludlowthompson, says: “Young people find it very tough to get on the property ladder. Many are now opting to wait out the mortgage famine by renting for longer in a property they like.
“One legacy of the credit crunch could be that the UK housing market moves closer to the European model, where longer lets are seen as the norm.
“Demand for longer lets has leapt in the past few months. Two- or three-year contracts used to be a tiny part of the market but now they are much more widespread.
“A lot of tenants are trading up by renting nicer or more expensive properties because they know they will be renting for longer than originally planned. They pay more for a property they like with the knowledge they will not have to move every year.
“The most sought-after properties are typically attractive two-bedroom homes with good commuter links, and they are being snapped up for periods of two or more years at an unprecedented pace. Much of the demand is from young professional couples.”
Recent Government data confirmed a growing proportion of people are renting rather than buying – up 37 per cent on five years ago.