Just one in four young people will get on the property ladder by 2026

31 July 2019

While nine out of ten young people say they want to own a home, realistically just one in four will be able to achieve it

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More than half of young people say that owning their own home is one of their top life goals.

But this dream is being crushed by collapsing home-ownership rates, according to research conducted by Santander Bank.

Half of people under 34 owned a property in 2006. By 2026, Santander expects this to halve to just 26%. 

Of people on middle incomes (figured between £20,000 and £30,000 in 2019) the rate of home ownership has collapsed from 65% in 1996 to just 27% by 2016.

Meanwhile 64% of new buyers today have incomes higher than £40,000, and just 16% are individual buyers (i.e. buying without a partner).

This is despite the latest ONS stats showing that the mean disposable income currently stands at £29,400, making home ownership unrealistic for millions.

Miguel Sard, managing director of Santander Mortgages, comments: “It’s clear that while the aspiration to own a home is just as strong as in previous generations, it’s a dream that is looking increasingly out of reach.

“Without change, homeownership in the UK is at risk of becoming the preserve of only the wealthiest young buyers over the next decade.”

Rungs knocked off the bottom of the ladder

The causes of the current crisis in ownership for young people are not that difficult to discern.

Deposit requirements are astronomically high. While the average young person aims to save around £24,000 for a house deposit, the actual average required is nearer £44,000.

House price growth has totally outstripped wage growth too. Average salaries have risen by 18% in the last decade, while house prices have increased 47%.

The average age of a first-time buyer has risen from 26 years to 33 years in the last 20 years.

Some 39% of first-time buyers required help from parents or grandparents – so-called Bank of Mum and Dad – to get on the ladder.

Meanwhile, 40% of prospective buyers are bargaining on receiving an inheritance to be able to do so.

As such, Santander is calling on the government to more to help first-time buyers as a result. It is calling for:

  • A new lending model backed by the government to help those without family support to raise a deposit;
  • More flexibility in lending affordability criteria, for example less restrictive ‘stress rates’ for fixed-term mortgages; and  
  • Better use of existing housing supply and encouraging greater circulation of homes by introducing a stamp duty incentive for downsizing.

The government currently has several programs in place to help first-time buyers onto the property ladder such as Help to Buy and Lifetime Isas. These have however been critisized in recent times for only stoking further demand and therefore house prices, while doing nothing to increase the supply of housing for young people. 

Stress rates were introduced by the Bank of England after the financial crisis as a means to ensure borrowers could stand increased mortgage payments, in the event that the bank rate was lifted from the historic lows of the last decade. It has however also been critisized for making afordability criteria too higher for many who wish to get on the ladder.  

With the appointment of a new Prime Minister and a slew of new ministers it remains to be seen how the new government will respond to the growing despair among aspirant home owners.

New housing minister Kit Malthouse, for instance, has mooted the idea of using government land to build new houses, selling them at cost to first-time buyers. In regions such as the South East this could see properties being sold for as much as a 75% discount on the market price. 

Mr Sard adds: "This report should be a wake-up call for industry and the government to think more creatively to keep the homeownership dream alive for the next generation of first-time buyers."

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