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Renting in retirement: young face lifetime under landlords

Soaring house prices mean many people will not be able to get on the property ladder and secure their financial future.

 

by Michelle McGagh on Jul 23, 2015 at 08:00

Renting in retirement: young face lifetime under landlords

Inadequate savings and longer life expectancies are not the only problems young people will face in old age as unaffordable house prices mean a third will still be renting in retirement.

Those aged under 40 are feeling the strain of increasing house prices, with many fearing older generations have pulled the property ladder up after them. Figures from accountants PricewaterhouseCoopers (PwC) show that ‘generation rent’ is expanding and half of those aged under 40 will be living in privately rented accommodation by 2025.

This is due to the ever-larger deposits that are needed to get on the ladder as house prices swell, and it’s not about to get any easier. PwC also predicts that a typical home will cost an average of £360,000 by 2020, which would equate to a deposit of £64,800 – pricing many more out of home ownership.

‘Driven by a decade of soaring house prices before the financial crisis and lower loan-to-value ratios post-crisis, the deposits needed by first-time buyers have risen significantly,’ said Richard Snook, senior economist at PwC.

‘As a result, a generation of private renters have emerged and this will increasingly be the norm for the 20-to-39 age group.’

The grim state of home ownership for young people is backed up by Council of Mortgage Lender figures that show half of those born in 1960 owned their own home by age 30, while just a third of those born in 1980 have achieved the same. Of those born in 1990, just a quarter will own a property by age 30.

Divide will widen

While younger generations may be frustrated by paying off someone else’s mortgage, and often paying more in rent than mortgage repayments, the inability to buy a property will have longer-term consequences.

Research by the University of York’s centre for housing policy estimated that only two-thirds of 60-year-olds will own their own homes within 35 years – leaving a third at the mercy of landlords.

Paying rent in retirement, rather than having the luxury of living in a mortgage-free home, means future pensioners will face a poorer old age and strained finances. It will also have a knock-on effect on public finances as the government will be forced to help those whose pensions do not cover their rents.

Professor Steve Wilcox, author of the research, said there was a number of factors working against younger generations, including later entry into home ownership, older people living longer and staying in their homes, and a growing rental sector which means properties are sold less frequently.

Combined with stricter rules around mortgages and demand outstripping supply, the future isn’t looking rosy.

‘This means an under-served market and more households being propelled into the rental sectors,’ he said.

Neal Hudson, property analyst at estate agents Savills, said the Conservative bedrock policy of creating a nation of homeowners has only applied to generations that have gone before.

‘Rather than creating a nation of home-ownership, it appears that we may have create a generation, or two, of homeowners and we are now faced with its gradual decline,’ he said. ‘Younger people are finding it increasingly difficult to buy in a housing market where prices are many multiples of income and mortgage lending at high loan-to-values is limited and expensive.’

Snook said older generations would find themselves part of the rising number of households who own their home outright – the number of people expected to own unmortgaged property will grow from 8.4 million to 10.6 million by 2020 – but this would be of little comfort to younger people.

‘There is also the rising dichotomy in the market between those mostly older households who own outright and those mostly younger households who still have a mortgage or rent to pay,’ he said.

‘Overall, we project that the proportion of owner-occupiers, with or without a mortgage, will decline from its peak of around 70% in the mid-2000s to around 60% in 2025. The long rise in the UK owner occupation rate in the post-war years seems to have gone into reverse.’

4 comments so far. Why not have your say?

jo soap

Jul 23, 2015 at 16:53

and still we glorify buy to let landlords with shows on tv instead of showing them the damage they are doing to our children. if people won`t voluntarily desist from this race to steal more than their fare share from society then the government should make it financially uncomfortable for them.

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Keith Cobby

Jul 23, 2015 at 17:14

I would clamp down on buy to let and foreign investors.

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Jack Belfitt

Jul 24, 2015 at 10:28

I am now in my eighties and for at least half of my life have lived in rented premises! It was not resented that the owners of the properties that we rented benefited from their ownership. To us it was common sense that if you did not have the money to buy a house, then renting was a very welcome prospect. The present prospect of affordable housing in my opinion is stupid. To me, the only affordable house is one for which you can pay. The facilities included in any social housing that has to be subsidized in any way by other people should be to an absolute minimum standard to minimise the attraction of living there any longer than they can tolerate. This would deter people from living in rented council properties if or when they have the wherewithal to move elsewhere. This would then open the market up to others with a fundamental need.

We do have course our various governments to blame for the present housing situation. There is in fact no housing shortage! What we do have is an excess of population brought about by our successive governments who have done nothing to deter people for the rest of world from coming here and occupying housing that would otherwise have been available to the original population. This though is just another instance where our governments appear to believe that their principle loyalty should be extended to the rest of the world instead of to the people who elected them and pay their wages. We do appear to have a sequence of politicians who treat their election as an opportunity to betray those who elected then. Is it no wonder that they as a breed are generally despised?

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jo soap

Jul 24, 2015 at 11:00

Bravo Jack,,,, one of the silent majority,,,, the labour party that actively went looking for new resident /voters in the early 2000`s should be stood in front of a wall and the Tories salaries should be withheld until they put a stop on this assault on our borders.

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