The State Of Young Renters In 2015: What Are Their Prospects For Becoming Owners?

By Author: Bradley Weiss
Total Articles: 272
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Current statistics suggest that fewer and fewer people in the middle class will own their homes, particularly among the young. But several forces defy that trend.


The numbers suggest a downward economic slide: real estate chain Countrywide predicts another 600,000 people will be renters and not owners by the year 2019. This is on top of the million UK residents - concentrated in the 25- to 34-year-old age group - who have become renters since 2010.


What’s going on is fairly easy to understand. As the UK population has grown in the 21st century, house building has failed to keep up. This supply shortage increases the cost of both ownership and renting. Compounding this was the financial crisis of 2008, which was followed by a tightening of credit on all borrowing. Younger workers were being paid less as the price of housing went up. Now with wages rising, the main challenge is mustering an adequate deposit – which more typically comes from the “bank of mum and dad” than what individuals are able to save.


So what do those with money to invest make of this? ...
... Is the best option to invest in REITs, which largely concentrate on the rented sector? To be a buy-to-let landlord? Or to join in a UK capital growth fund, which builds homes on scale for that sector of the market of people who can afford to buy?


There are indicators that, despite dim prognostications on the growing renter class, that building for homeowners is still a smart path for all concerned:


• Most people agree, within Government and among economists, that an ownership society is a more economically stable society. Brits who are on the property ladder will accumulate much more wealth over decades that will provide them a more comfortable retirement.


• Shelter, the housing charity, encourages building for all economic strata as it takes a general “rising tide raises all boats” perspective. What the organisation wants is more homes, period, such that those at the lowest levels can find affordable rents.


• Government initiatives that enable buying - Help to Buy, Right to Buy and Starter Homes schemes - have already proven or are likely to prove successful at stimulating both purchase access and increased homebuilding.


• There is a growing consensus that some greenfield and green belt lands might be swapped for brownfield property that would be more appropriately repurposed as urban greenspace (versus residential construction). With more land on the periphery of major cities dedicated to residences, it becomes possible to improve the quality of life nearest centres of work and commercial developments.


• Local planning authorities that are tasked with development goals from the National Planning Policy Framework (NPPF) are reaching for ways to collectively increase the nation’s housing stock, many of which are written with the input of property fund partners whose research show where people want most to locate their homes and where infrastructure will be most cost effective.


• London is no longer the only place to live: anet outflow of 22,000 people in their 30s happened in 2013-2014, a response to soaring house prices there and simply recognising that cities north, west and south have a good quality of living to offer (Birmingham is the favourite, followed by Bristol, Manchester, Nottingham and Oxford).


Investment capital into property generally follows these migrations, and consequently the healthier supply of homes in those cities means that they are becoming more affordable. Particularly in an information-driven economy, this cultural shift is much more likely over time.


Those interested in UK land investment and housing should speak first with an independent financial advisor who can analyse specific investments as well as the general balancing of risk in individual portfolios. There are many variables in real estate and housing investments and as such should they should be considered holistically.