Across the
UK, different generations face different situations in the housing market.
Government policy in the next parliament will face the challenge of finding
suitable homes for the baby boomer generation, while helping a generation of
boomerang kids get on the property ladder.
The arrival
of around 2 million family homes on to the market could shake-up housing supply
and demand dynamics
The outlook
for the UK housing market can be characterised by a series of generational
trends. Whether it's first-time buyers at one end, retirees at the other or
even those on the journey in between, varying social and financial factors come
into play when looking at the housing ladder. Here, we take a closer look at
the trends and what they mean for people at different life stages:
First-time buyers
A number of factors, for example rising average UK house prices, mean it can be tough for younger people to afford initial access to the housing market. Also, research by Shelter shows that since 1969, house prices for first-time buyers have increased 48-fold, with incomes increasing just 29-fold.
Many may now be renting for longer to try to eventually put enough money away for a housing deposit. Government figures show private renters aged 25-34 increased from 31% in 2008-09 to 45% in 2012-13.However, private rental prices are continuously on the rise; they have risen steadily since 2011, with a rise of 2.1% between March 2014 and March 2015.
First-time buyers
A number of factors, for example rising average UK house prices, mean it can be tough for younger people to afford initial access to the housing market. Also, research by Shelter shows that since 1969, house prices for first-time buyers have increased 48-fold, with incomes increasing just 29-fold.
Many may now be renting for longer to try to eventually put enough money away for a housing deposit. Government figures show private renters aged 25-34 increased from 31% in 2008-09 to 45% in 2012-13.However, private rental prices are continuously on the rise; they have risen steadily since 2011, with a rise of 2.1% between March 2014 and March 2015.
As a result,
many more people are making the decision to move back in – or stay living –
with their parents as adults, often referred to as 'boomerang kids'. This may
be while they begin saving for a deposit. According to the Office for National
Statistics (ONS), the number of 20 to 34-year-olds living with their parents
increased by 669,000 (25%) between 1996 and 2013.
This has
become a key political issue across all the main UK parties, with a range of
recent policies aiming to combat this trend; by the end of July 2014, almost
40,000 first-time buyers had bought homes through Help-to-Buy policies.
As the dust
settles on the 7 May general election, it remains to be seen what changes could
be seen to policy in this area. In the meantime, however, the current
environment of low mortgage rates means that there are bargains to be had
whether you're a first time buyer or looking to remortgage your home.
Space seekers
For current homeowners, housing market pressure may be leading more people to improve or extend their existing home, rather than move. Rising house prices may make moving too expensive, but at the same time mortgage borrowing has become more affordable. In the year to February alone, UK house prices increased by 7.2%, while mortgage interest rates have been very competitive.
For current homeowners, housing market pressure may be leading more people to improve or extend their existing home, rather than move. Rising house prices may make moving too expensive, but at the same time mortgage borrowing has become more affordable. In the year to February alone, UK house prices increased by 7.2%, while mortgage interest rates have been very competitive.
One survey
showed that 94% of UK homeowners would rather spend money improving their
current home than sell and move in 2015. For an expanding family household, or those
just looking for more space, improving rather than moving could provide the
extra rooms or floor space needed, while for others moving may be a better
option.
For those
who would consider moving now or in the future, they would have to assess the
current situation surrounding supply and affordability of housing across the
UK. According to a report cited by a cross-party group of MPs at the end of
2014, there were some 8 million people over 60 interested in 'downsizing'.
If half of
these people did sell their homes, it would mean around 2 million family homes
(with three or more bedrooms) becoming available on the housing market, which could, in turn, shakeup housing supply
and demand dynamics, having a potentially positive knock-on effect on property
prices for those looking for a home with the extra space they require.
The downsizers
The relatively large numbers of people born after the Second World War and during the 1960s, known as the baby boomer generation, have retired or are reaching retirement age. This generation own a significant share of the properties in the UK and, at the same time, many are expected to live ever-longer lives.
The relatively large numbers of people born after the Second World War and during the 1960s, known as the baby boomer generation, have retired or are reaching retirement age. This generation own a significant share of the properties in the UK and, at the same time, many are expected to live ever-longer lives.
This
combination of factors is likely to be driving greater consideration of
'downsizing'. Moving home, as you grow older, often means a move from a bigger
to a smaller property, or to a property with fewer bedrooms.
There are
many reasons why this is an increasingly popular idea. Not only are there cost
saving benefits, but it is also a way to release capital tied up in a property,
which may be increasingly important if more years are to be spent in
retirement.
However, a
bigger question may be whether the market is setup to provide attractive, and
in some cases affordable, options for older people looking to move. In the
run-up to the general election, the Council of Mortgage Lenders (CML) urged the
new government to "consider ways of encouraging older households to downsize,
promoting more efficient use of the existing housing stock".
If demand
from people approaching retirement does increase, the market for suitable and
attractive homes could also grow. This could make downsizing a more viable and
appealing idea, as long as the lifestyle and financial benefits add up, with a
knock on impact for the generations below.
Where ever you decide to invest make sure you understand how population changes and changes in the household type will affect your local market, this will impact on tenant demand, renatl returns and capital growth. If you would like more information on the Southampton market please give me a call.
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