Young people are gloomier than ever about their prospects of getting on the housing ladder, according to a new poll today. But are they actually being too optimistic?
The YouGov survey commissioned by the National Housing Federation finds that 86% of 18-30 year olds who do not already own their home cannot afford to buy. This despite the first house price falls most of them will be able to remember.
The poll also finds that 54% say they will only be able to afford to buy with help from their family, 37% think it will take them 10 years to get on the ladder, 12% think it could take 20 years and 6% think they never will.
The results prompt the NHF to call on all the main parties to build more homes for first-time buyers and address the shortage of new homes and to give the housing budget the same untouchable status in the next spending round as health, education and policing.
It’s a good argument but the results also prompt a deeper question about what the next government will do because the truth is that young people’s prospects are even worse than they think.
There are roughly 11m people aged 18-30 in the UK. Loans to first-time buyers are currently running at under 200,000 a year. Make whatever assumptions you like about how many of them will buy together, how many first-time buyers are actually older (the average age is 28) and lending increasing when the recovery starts and their prospects still look grim.
Meanwhile, thanks to the shortage of high loan-to-value mortgages, the average deposit they need to buy is currently more than a year’s salary. The Council of Mortgage Lenders estimates that the proportion needing parental help is now 80%.
One way forward is the one put proposed by the NHF - build more homes in general and affordable homes in particular.
Another would be to do everything possible to kick the mortgage market back into life - and get first-time buyer loans back up the level of 500,000 and more seen in the mid noughties. However, many of them only got on to the ladder thanks to sub-prime lenders and the securitisation that triggered the financial crisis.
However, as Adair Turner, chairman of the Financial Services Authority, argued in a speech yesterday to do that would be to risk repeating the whole depressing cycle of boom and bust all over again.
He wants a range of ‘macro prudential policy tools’ to stop future asset price bubbles, with one of the best options being maximum limits on loan-to-value ratios applied either continuously or varied through the cycle.
That would certainly help stop future boom and busts and repossessions but it won’t do much for young people’s prospects of getting on the ladder.
Put that together with the fact that homeownership has already been falling for the last five years and they look more than ever like a generation of renters than owners.
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