The Housing Marketing and Millennials: Why Some May Never Get A Step On The Property Ladder

The quest for owning our own home in Britain is something of a love affair. The obsession with getting on the property ladder is still prevalent, despite difficulties taking those first steps. The British Social Attitudes Survey found that in 2014, 86% of respondents would buy a house if they were given the chance.

When it comes to owning a home, British millennials seem to be having a hard time getting onto the property ladder. A recent report released by think-tank, Resolution Foundation, found that a third of millennials will never own their own home. High deposits and even higher house prices are just some of the reasons UK millennials are struggling to become homeowners and are choosing to rent instead.

With government incentives to help first-time buyers own their own slice of property becoming more popular, why are millennials still struggling?

The Report: What are the findings?

The Resolution Foundation report found that a third of Britain’s millennial generation will never own their own home. The gloomy outlook also suggests millennials will end up renting in the private sector until retirement.

The views come as Britain’s housing crisis rages on, with many struggling to find affordable housing. According to the Halifax House Price Index, home values in the UK rose by 2.7% in the first three months of 2018, compared to the same period in 2017. This resulted in a staggering UK average house price of £227,871 in March this year, the highest on record.

The combination of steep house prices and lack of affordable housing has resulted in a housing crisis that millennials are facing the brunt of. Lindsay Judge, Senior Policy Analyst at Resolution Foundation, said:

“Britain’s housing problems have developed into a full-blown crisis over recent decades and young people are bearing the brunt – paying a record share of their income on housing in return for living in smaller, rented accommodation.

“While there have been some steps recently to support housebuilding and first-time buyers, up to a third of millennials still face the prospect of renting from cradle to grave.

“If we want to tackle Britain’s ‘here and now’ housing crisis we have to improve conditions for the millions of families living in private rented accommodation. That means raising standards and reducing the risks associated with renting through tenancy reform and light touch rent stabilisation.

“For any housing strategy to be relevant and effective for people of all ages, it must include this combination of support for renters, first-time buyers and ultimately a level of house building that matches what the country needs.”

Resolution Foundation’s research also found that private renting has seen a rapid growth compared to previous decades, with four in ten millennials living in private rented accommodation by the age of 30. While this may not seem surprising for some, it’s double the rate of Generation X and four times that of baby boomers at the same age.

A recent survey, conducted by Good Move, found that 67% of UK people feel that it is harder for UK millennials to get onto the property ladder due to high house prices and deposits. A further 23% were not sure and just 10% thought it wasn’t harder for millennials to get onto the property ladder.

Historical changes

It’s hard to imagine a period of time where homes were affordable, with house prices reaching sky high prices over the past 50 years.

According to data from insurance specialists, SunLife, the majority of new homes in pre-WWII Britain sold for less than an astonishing £750, with reports of a North London semi-detached house bought for £850.

Millennials’ quest to own their own home reflects the changing trends for home ownership. Between the 1950s and the early 1970s, home ownership rose from 30% to more than 50%. Today, home ownership stands at around 65%.

But, what were house prices like in the past? Data collected by Nationwide looks into house price averages for every year since 1952 and shows a rapid increase.

The chart above shows the staggering increase in house prices over the past 60 years. The fluctuation in house prices is a somewhat obvious result of Britain’s changing housing landscape, as well as meeting housing demands. By comparing the property trends between 1960 and 2018, there is an obvious increase which can only continue.

What options are available to help people get on the ladder?

It may not be all doom and gloom for millennials as government incentives are paving the way to getting more on the property market. The incentives, in the form of ISAs and equity loans, are designed to help millennials and first-time buyers get onto the property ladder.

Lifetime ISA

Launched in April 2017, the Lifetime ISA is another government incentive which aims to help first-time buyers. Open to 18 to 40 year olds, opening a Lifetime ISA enables you to save up to £4,000 each year until you’re 50. The government adds a 25% bonus to your savings per month, up to a maximum of £1,000 per year.

When buying your first home and using a Lifetime ISA, there are some restrictions which apply.

• The property must cost £450,000 or less.
• You must buy the property at least 12 months after you open the Lifetime ISA.
• You use a conveyancer or solicitor to act for you in the purchase – the ISA provider will pay the funds directly to them.
• You’re buying your property with a mortgage.

Help to Buy ISA

A Help to Buy ISA is another type of ISA which is predominantly aimed at helping first-time buyers get onto the property ladder.

It has a similar purpose as the Lifetime ISA, however, you’re capped at adding £200 per month, whereas there is no limit on monthly deposits made to Lifetime ISAs. The government will top up your savings by 25% (up to £3,000).

When using a Help to Buy ISA towards your home, there are some restrictions which apply.

• The property you are buying must have a purchase price of up £250,000 (or up to £450,000 in London).
• The property must also be the only home you own.
• The property must be where you intend to live.

The Help to Buy ISA scheme, which runs until 2029, has helped 320,000 people buy a property for the first time.

Stewart Baseley, Executive Chairman of the Home Builders Federation, said: “This help for first-time buyers is encouraging builders to invest, with permission being granted for more new homes than ever before.

“This is not just only giving tens of thousands of families a place to call home, it’s generating jobs and driving local economic growth in communities around the country.”

Help to Buy equity loan

The Help to Buy equity loan helps those wishing to buy a home, through a low-interest loan towards their deposit.

With a Help to Buy equity loan, a home-buyer will need a 5% deposit. The government will lend up to 20% (or 40% in London) towards the deposit and the remaining 75% must be provided by a mortgage.

As with the Lifetime ISA and Help to Buy ISA, there are some criteria you must meet to be eligible for an equity loan.

• The home you buy must be a new build.
• It must have a purchase price of up to £600,000 in England (or £300,000 in Wales).
• The property must be the only one you own.
• It can not be sub-let or rented out.

Stamp Duty

November 2017 saw the announcement from the Chancellor of the Exchequer, Philip Hammond, that stampy duty will be abolished for first-time buyers who are purchasing properties for a price of £300,000 or less.

Stamp Duty Land Tax (often referred to as SDLT or stamp duty) was first introduced by the Finance Act 2003. Traditionally, house buyers were required to pay stamp duty on increasing portions of the property price above £125,000 when purchasing a residential property.

Hammond’s announcement as part of the Autumn Budget last year allows first-time buyers to claim a discount (also known as a relief), so homeowners don’t pay any tax on properties up to £300,000.

As a result of the abolishment, £159 million of stamp duty was relieved between November 22, 2017 and March 31, 2018. The average amount relieved was £2,300, although there was some regional variation.

Mel Stride, Financial Secretary to the Treasury, said: “I’m proud that the cut to stamp duty for first-time buyers is helping to realise the dream of home ownership for a new generation, alongside building more homes in the right areas, and generous schemes such as the Lifetime ISA and Help to Buy.”

What does the future hold for millennials?

It’s hard to predict what the future holds for both the housing market and millennials. It’s fair to say that house prices are likely to continue to rise, with Nationwide house price data showing a steady increase in prices every year since 1952.

The implications for the housing market when the UK leaves the EU, in March 2019, is also uncertain. There is rife speculation that house prices will crash, with a change in interest rates. This would be good news for those buying, however, bad news for those wishing to sell their homes. However, many housing experts believe that house prices (apart from London), will stop going up, or go up by no more than 1%.

There is fresh hope that ISAs, equity loans and the abolishment of stamp duty will help secure homes for first-time buyers, but only time will tell.