Tony Ward is chief executive of Clayton Euro Risk
An article in The Economist this week focused on the attitudes of the younger generation. Most revealing, yet unsurprising, was how heavily the dysfunctional housing market weighs on their standard of living. This is understandable: in the past 25 years, the rate of homeownership has fallen among people of all working ages but is down by a massive 30% among 25–34-year-olds. Whereas in the early 1990s two thirds of this age group owned their home, today little more than one-third do. Of course, some younger people chose to delay buying a home as they wanted greater mobility than previous generations. Research also reveals that yearning to own a home is influenced by the desire to get married, which for most is eight years later than in the 1970s. So maybe the inclination to own that first home comes a little later in life?
However, without doubt, other factors keep would-be buyers out of the market. While construction of new homes seems to be on the up – new government figures showed housebuilding in England was at its strongest level in eight years, with new homes built having increased 11% in a year – Britain’s housing stock is still failing to keep up with demand. This mismatch continues to push up prices. The average home now costs twice as much as in 2000. At the other end of the spectrum, research suggests that the proportion of under-occupied households in England – with two or more spare bedrooms – increased from 6 million to 8 million in the two decades to 2015.
The average first-time buyer now has an income of £40,000 (the average for the whole country is £25,000). So-called ‘Bank of Mum and Dad’ is now involved in a quarter of mortgage transactions. No wonder some youngsters describe themselves as ‘Generation Screwed’.
Given this backdrop, I was pleased to see this recognised in the Redfern Review, a study by one of the UK’s biggest housebuilder, Taylor Wimpey, which came out last week, identifying that first-time buyers need more support to halt the decline in homeownership. Long-term building targets were also required to avoid ‘kneejerk’ policy moves, the review concluded.
Led by Pete Redfern, chief executive of Taylor Wimpey, the review found that lower incomes for younger people since 2008’s financial crisis, as well as their more limited access to mortgage finance, were major contributing factors to the fall in home ownership among 25–34-year-olds.
To help them back on the housing ladder, Mr Redfern said schemes such as Help to Buy should be targeted more exclusively at first-time buyers. “We must focus on supporting today’s younger generation and creating a genuine long-term housing strategy independent of short-term party politics if we are to improve the position in a sustainable way for future generations,” he said. The Redfern Review also called for 10 and 20-year building targets, agreed by all political parties, to tackle the housing shortage. The creation of an independent housing commission, it said, would help to avoid ‘kneejerk reactions in our policy approach’.
Yes, certainly. Agree with all of the above. However, to me the lack of supply of housing remains the main concern. The number of new builds must be our primary focus. But not just that. I know I’ve mentioned this before, but it’s looking at how we free up existing housing stock which may now be unsuitable for older householders. And that’s by providing attractive alternatives which suit their needs as well as more innovation in, say, the equity release market to support these moves.
A lot still to do.