Are the days of couples buying their first home in their early 20s all but over?

22nd August 2011

As a result, millions of young couples caught in the trap of high prices, tough mortgage conditions and low wage growth now feel frozen out of home ownership, and have no aspiration of ever owning a place of their own.

Recent findings from the Resolution Foundation suggest that for those with no recourse to the Bank of Mum and Dad, it would take 20 years to save for a deposit on a standard first home if they put aside 5 per cent of their income, rising to 31 years for those on low to middle income.

In 1983, such couples would have to expect to save for just eight years to buy their first home.

Those who have given up the prospect of ever owning a home due to a lack of mortgage affordability have been dubbed "generation rent" by the Halifax.

Only 5 per cent of those aged 20-45 are making spending sacrifices right now in order to get on the housing ladder, while the remaining 95 per cent have no spare cash to save, no incentive to save, or are failing to save despite trying.

"Many first time buyers are resigned to having to rent," says David Hollingworth from broker London & Country. "Halifax suggests that if these attitudes become reality, Britain faces a fundamental change in the shape of its housing market within a generation."

But "Generation Rent" is not without problems.

If people in their early 20s and 30s delay buying their first property, or make the decision not to buy at all, this will put tremendous strain on the rental market.

"The level of new rental stock coming onto the market can't keep pace with the number of people looking to find a home, and this is pushing rental prices up," says Matt Hutchinson from Spareroom.co.uk. "Many parts of the UK have seen double digit rent rises in the past 12 months."

Crucially, if we do see a shift towards long-term property rental, the issue of sufficient supply will need to be addressed.

In the UK, as the Guardian describes, the private rented sector is dominated by buy-to-let landlords who own a handful of properties; the sector is insecure, and the quality of homes is variable.

By contrast, in the Netherlands, around 60 per cent of private rented dwellings are owned by institutional investors; they are managed by professional landlords and provide long-term security for families.

According to the Resolution Foundation, attracting more institutional investment from pension funds and life insurance companies into the private rented sector in the UK would allow more rental accommodation to be built at a time when public funds are limited and the buy-to-let market is only slowly starting to recover.

Vidhya Alakeson from the Resolution Foundation, says: "Institutional investment not only brings the potential to deliver private rental homes at scale, but also a product more in tune with tenants requirements for a long-term home."

Further to all this, attitudes need to change.

In his blog for Shelter, Robbie de Santos talks with incredulity of how Steve Webb, a Lib Dem Welfare Minister, considers that if you rent, you don't really have a home – and that you only have a home if you own it.

"As soon as your tenancy starts, it's your home," says de Santos. "That is enshrined in the law, but more importantly, it's where you bring your children up, hang your pictures on the wall, build your relationships with your neighbours and your community. It's just that renters are more likely to lose their home as their landlord can evict them at short notice, or put up the rent to the point it becomes completely unaffordable."

The Government may be focusing on support for first time buyers, but until the affordable housing gap is solved – which is unlikely to be any time soon – urgent measures are needed to improve private renting.

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