Our relationship with property and the rise of Generation Rent
Here at Manors Estate Agents, we’ve talked a lot about Generation Rent in recent years, but how have our households evolved? Who’s living where? With whom? How many of us are renting and how many own their home? And what does it all mean for the property market and the knock on effects on the way we live? Not just in our backyard in Marylebone, but across the country.
Things look very different than they did a decade ago. Home ownership levels have been falling, from a high of 73.3% in 2007 to a low of 63.4% in 2017. The plight of aspiring first time buyers has been well documented. Since the financial crisis of 2007/8, young people have been struggling to raise the larger deposits demanded by lenders amidst rising house prices – up 75% since 2003. At the same time, their ability to save has been squeezed by rising rents (up 53% over the last ten years) and a prolonged period of low pay growth. The result? More young people are living at home. In fact, according to the latest data from the ONS, more than a quarter of 20-34 year olds (3.4 million) are still living in their family homes. That’s a 42% increase since 2003.
Those rising prices are down to a number of factors including; the increasing demand from a growing population and the new households created by relationship breakdowns and divorce. After splitting up with their partners, more and more people are living alone, especially men in their forties and fifties. To give you an idea of the scale of it, there were over 100,000 divorces in 2017 and that excludes co-habiting families, who make up 20% of family households. There were also increasing numbers of retirees living alone, up by 500,000 since 2008 to 3.9 million. Put together, the total number of single person households has now reached a record 8 million. To further compound the problem, net migration has been running around 300,000/year for the last five years
In order to cope with the growing demand, we should be building at least 300,000/year. Instead we are building less than 200,000. The government has made some rather clumsy attempts to rebalance the market for first time buyers such as; Help to Buy, shared equity schemes and Stamp Duty exemptions and have actively discouraged investing in buy-to-let in an attempt to level the playing field. There have, unfortunately, been a lot of unintended consequences. Landlords have left the PRS (private rented sector) in droves, reducing the supply of rental property and pushing up rents. On top of that, stamp duty has created huge inefficiencies in the market, with the cost of moving proving a serious barrier to mobility. It also means many pensioners are unwilling to downsize, further distorting the market. The only real solution is to build more houses but the government’s attempts to encourage developers to increase production of new housing have been equally unsuccessful.
So what does it all mean for the way we live? There is no doubt a dysfunctional housing market has produced some profound changes; more of us are renting, we are staying at home for longer, marrying and having children later. There is also an argument that high house prices are preventing even more of us from separating from our partners, because most house purchases require joint incomes. It may also partly explain why the number of same sex households has grown exponentially, up by 53% in just four years to 232,000. The long term effects on Generation Rent are yet to be seen. Their more transient lifestyles are certainly already very different from their parents’ and are being credited with the rise of the sharing economy and the rejection of traditional attitudes to ownership. They’re not just renting their homes, they’re renting everything from their cars to their music, furniture and even their clothes.
The last ten years, on the other hand, has been a lot kinder to those older generations who already owned their homes (or had invested in buy-to-let) as the uplift in their net value has been substantial. Mind you, some of that wealth is already being recycled as it is passed on to the next generation in order for them to get on the housing ladder.