"These latest research findings are perhaps our most stark yet, pointing to a potential loss of faith in the idea of homeownership. "
- Ben Merritt, Yorkshire Building Society’s director of mortgages
New research from Yorkshire Building Society suggests that a fifth (21%) of UK 18-to-34-year-olds and three fifths (59%) of those aged 35 to 54 are unsure if they will ever own a home or are not planning to do so at all.
The mutual also asked would-be first-time buyers about the barriers preventing them from buying, and the things they cited included worries about the level of financial commitment a house represents, affordability and the high cost of living. In fact, 41% said that the cost of living is the key challenge preventing them from buying their first home and 43% have delayed purchasing due to high prices. Half (50%) said they feel so overwhelmed by the complexity of the current market, they’ve given up even looking for a property to buy.
Meanwhile, the Society’s own analysis suggests opting out of owning could result in renters being £2.6 million worse off over their lifetime – not to mention the impact on their ability to pass on wealth to future generations.
This is based on a comparison of renting versus buying over the 55-year period from 33 – the current average age when people buy their first home – to 88, the average lifespan of a person today.
Over this period of time, the average borrower would pay £367,000 in mortgage payments, while the renter would pay £1.6m in rent. However, while the borrower would own a property worth £1.7 million after this time, the renter would have nothing to show for it. Even if they were to invest the equivalent of the first-time buyer’s 5% deposit of £10,000 over this time, their money would only be worth £155,000. Not only that, but £960,000 of the renter’s £2.6m additional spend would result from continued rental payments over the 20 years from retiring at 68, while the buyer would have no accommodation costs to pay for other than occasional maintenance. Unlike the renter, they would also have the flexibility to release capital from their home to support their retirement lifestyle or pass on their accumulated wealth to their loved ones.
All of this is particularly telling given that the Society’s research showed that the key motivator for buying among 55% of people was not wasting money on rent. This sentiment is felt most among people in the 35-44 age bracket (64%) and those aged 45 to 54 (67%).
Meanwhile, survey respondents who are looking to buy also cited basic needs like freedom to live how they like (40%); wanting to start a family (34%) and providing them with security in retirement (33%) among their reasons – reiterating the important role homeownership plays in life planning.
And those who haven’t quite given up yet are pulling out all the stops to get themselves into a buy-ready position, with 69% saying they would consider extending their mortgage term to make it more affordable, and 83% saying they would look to try to pay off a lump sum to make their mortgage more affordable.
Not surprising, then, that 37% of prospective first-time buyers ranked housing and house prices as third on the list of national priorities, behind the economy (48%) and health and the NHS (46%), and ahead of immigration, crime, environment, terrorism and defence.
Dante John Baptiste, a 23-year-old from Essex, gave his view: “I’ve seen a lot of people older than me really struggle to get onto the property ladder and I think the general discourse from many is that my age group will never physically own anything.
“That said, my friends who want to own a home have started planning out how to make it happen from their first years at university, for example through lifetime ISAs, working multiple jobs while living at home or making plans to move to countries that have a more stable economy and housing market.
“Others, like me, find comfort in accepting that it’s unlikely they’ll be able to own in the UK, and so turn their attention to spending on life experiences – travelling, business opportunities etc, rather than the traditional life path of our parents.
“I think younger people start out by basing their ideas on what their parents and loved ones want for them. However, as they actually begin to navigate the property market, while balancing their living expenses, it becomes apparent that it’s not as simple as it once was.”
Ben Merritt, Yorkshire Building Society’s director of mortgages, said: “These latest research findings are perhaps our most stark yet, pointing to a potential loss of faith in the idea of homeownership.
“That – coupled with our lifetime analysis of what this means for anyone who has to settle for long-term renting – shows just how big an issue this is for the UK right now, which our respondents have seconded in the priority they have assigned to housing.”
