Young UK adults looking to buy their first home in future years have to brace themselves for tough challenges, according to a new study by the Council of Mortgage Lenders (CML) reveals.
While there has been a recent recovery in first-time buyer numbers, with 2014 seeing the highest level of activity since 2007, the long-term prospects are far from great, according to the latest issue of the CML News and Views.
Using a methodology developed by Alan Holmans, chief housing economist at the then Department of the Environment, senior researcher at The Cambridge Centre for Housing and Planning Research, the CML combines first-time buyer numbers with demographic trends to identify the likelihood of different age groups making their first step into homeownership.
The results of the study show that there is a material homeownership gap between the generations and younger would-be buyers seem to take the hardest blow.
Plausible home ownership paths, % by age, by year of birth
The table above shows that older generations are considerably better positioned to own a their own home than younger ones.
Comparing the two ends of the spectrum the 55 year olds and the 25 year olds. The data shows that over a quarter (27 per cent) of today’s 55-year-olds were home-owners by the time they were 25 and currently 77 per cent of them are living in their own home, and that proportion may even increase over the next decade.
The proportion of homeowners aged 25 now is only 8 per cent and by the time today’s 25 year olds turn 40 that proportion is seen to rise to only 47 per cent.
People currently aged 35 may have to struggle to close the material gap separating them from the previous generation over the next 15 years.
However, the CML points out that those estimates could turn out to be worse than what would actually happen in the next ten years. Should buyer propensity return to the levels seen over 1999-2003, which was the period before affordability pressures became unduly acute or lending terms very relaxed, the situation for younger buyers would improve considerably. In that case, homeownership growth rates for today’s 25-year-olds could be by 10 percentage points higher than shown in the above table.
