Spiralling house prices and rising interest rates threaten to lock out those from “generation rent” ever getting their foot on the housing ladder, a new study has revealed.
According to PricewaterhouseCoopers, the number of 20-39 year olds renting privately by 2025 is predicted to be 59%, up from 45% in 2013.
Only 26% of those in generation rent will own their own home by 2025, down from 38% in 2013.
Older generations will be largely be unaffected by these trends, with three quarters of over 55s that currently own their home still doing so in 2025.
Richard Snook, senior economist at PwC, said the continual advance of house prices was fundamentally changing the way people live and called for a change in policy.
“With the majority of 20-39 year olds living in the private rented sector by 2025, policy will need to adapt. This could include encouraging a better quality of private rented accommodation including longer tenure periods, and more rental properties designed for families.
“Demand for housing in the UK has outstripped supply for more than two decades. Changing the outlook for generation rent will require us to build more houses than needed just to match population growth in order to make up the past shortfall between housing supply and growth in demand.”
Research from estate agents Savills shows that 350,000 new households will be excluded from the housing market over the next five years, even if the government meets its current target for house building.
Savills said that 70,000 new households a year will be unable to afford to rent or buy housing at a market rate unless assisted over the course of the next five years.
This means that 350,000 households in England will need some form of sub-market housing by 2020, based on the assumption that 30% of gross household income is spent on housing.
Government figures revealed last week that 170,690 new homes were built in England during the past year. This still falls significantly below the 250,000 homes experts believe are needed to be built each year in order to meet demand. The government is currently aiming to build around 200,000 new homes a year.
