Jules Birch, Insde Housing

17/06/2013

As average asking prices pass £250,000 for the first time, two-thirds of the under-45s seem to have given up on the idea of ever owning a home.

Two surveys out today underline the point that what’s ‘good news’ for existing owners is exactly the opposite for people struggling to get on to the housing ladder.

Rightmove says that the market in the ‘under-priced’ (its word not mine) South East has ‘lifted off’ with asking prices rising by 14.8 per cent in the first six months of 2013 alone. However, the average increase across England and Wales is 10.4 per cent and the increase is even 5.8 per cent in the least buoyant region, the East Midlands.

If anything like that was repeated across the whole 12 months, 2013 would be appear to be set for a boom unlike anything seen since the credit crunch hit in 2007. True these are asking prices and prices actually achieved are still in the relative doldrums but they indicate that existing owners are reacting predictably to the start of Help to Buy by ramping up their demands.

Contrast that with another survey out today from the Halifax. Its Generation Rent report shows that only 32 per cent of non-owners aged 20-45 have a realistic plan to buy within the next five years. The remaining 68 per cent are split between those who like to buy but don’t think they will ever be able to (36 per cent), those who have given up because they were rejected for a mortgage (2 per cent) and those who don’t want to buy and haven’t tried (29 per cent, up from 23 per cent in 2011).

Deep pessimism about earning enough to buy is one reason for the split: the average mortgage that they think they can afford is £425 a month whereas the amount currently required by the average first-time buyer is £580 a month.

Problems obtaining a mortgage are another: over half of Generation Rent and an even higher proportion of their parents think it is ‘very hard’ or ‘virtually impossible’ to get one.

And Help to Buy does not seem to have changed the mood among buyers as much as it obviously has among sellers: 30 per cent of 20-45 year olds think it and similar schemes will work but 30 per cent believe the opposite.

Surveys like this can usually be taken with a pinch of salt but this one has some worrying implications for the future too. Some 71 per cent of Generation Rent fear that the country is in danger of being divided by social and economic differences between owners and non-owners and 58 per cent think it will create long-term social problems.

Perhaps most alarmingly, 57 per cent in the Generation Rent survey think that without a foothold on the property ladder they will be unable to retire. That perhaps shows a very low awareness of housing benefit and, as I’ve blogged before, the financial consequences of falling ownership will be huge for the Treasury.

That’s just one of the implications for the housing market and for the housing system as a whole.

Some 52 per cent of Generation Rent think Britain will become a nation of renters within the next generation – up from 46 per cent in 2011. And more people think Britain is becoming more like Europe, where renting is the norm.

However, as the report points out, European law means rental agreements are much longer than the six and 12 months contracts that are the norm in the UK. Pressure for reform can only grow.

So too is the evidence that Britain’s housing market has moved beyond dysfunctionality into something even worse. Last week, the National Housing Federation published figures showing that the number of people aged 30-44 has fallen by 9 per cent in rural areas thanks to soaring prices.

Meanwhile the Intermediary Mortgage Lenders Association published a discussion document warning that the regulatory response to the financial crisis has ‘hard wired’ a lower level of ownership into the system. It points out that on current trends only a third of 25-34 year olds will be owners by the end of the decade. That is half the level seen in 1993.

Warning that the regulatory response an imbalance between the regulated mortgage market and the unregulated buy to let, with the continuing availability of interest-only mortgages giving landlords a marked competitive advantage over would-be first-time buyers.

If nothing else will, perhaps the prospect of that soaring benefit bill for pensioners will concentrate government attention on more fundamental and long-term reforms to the whole housing system?

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