Millennials' Struggle to Buy Homes: Is it Getting Easier?
The path to buying a home has become increasingly difficult for millennials, but there are signs that it may be getting easier. Property prices have outpaced incomes, and a lack of housebuilding has contributed to the issue.
The dream of owning a home is becoming increasingly elusive for many millennials. Leaving education, getting a job, and buying a home - the traditional path to adulthood - seems like a distant dream for many young people. However, there are indications that the situation may be improving, at least slightly.
The Current State of the Housing Market
The chances of owning a home are significantly lower for millennials than for previous generations. For example, someone born in the UK in the mid-1990s has only about a 25% chance of owning their own home. In contrast, twenty-somethings in the 1990s were almost twice as likely to be on the housing ladder.
One of the main issues contributing to this trend is that property prices have outpaced incomes over many decades. Housing economist Paul Cheshire notes that the rise in house prices has been stark, comparing it to the rise in egg prices over the past 71 years. The lack of housebuilding is also a significant factor, with England alone needing an estimated 300,000 new dwellings per year to keep up with population change and the preference for living in smaller households.
The cost of building materials, such as timber, steel, and concrete, has risen significantly, driven by inflation, the Covid-19 pandemic, and the war in Ukraine. This has made it even harder for young people to save for a deposit, which can reach tens of thousands of pounds.
Challenges in the Construction Industry
The construction industry is facing several challenges, including a lack of skilled staff, exacerbated by Brexit, and strict regulations that protect the environment and uphold safety standards. These factors have contributed to the rising cost of building and have put some housebuilders off.
Signs of Improvement
Despite the challenges, there are signs that the situation may be improving. House prices have risen more slowly than wages in recent years, making it easier for young people to save. Some lenders are also offering smaller deposits and larger loans with longer repayment times. Additionally, the slower growth of property prices and lower interest rates mean that mortgage payments, relative to wages, are moving back towards the long-term average.
However, to make it as easy to get on the housing ladder as it was for previous generations, more homes need to be built. The government has introduced plans to streamline planning processes and allow more homes to be built on the green belt. While these reforms may help, it will take years for the results to come through, and more needs to be done to incentivize builders to commit to building with confidence.
