It may be good news for those looking to get on the property ladder with London facing the worst performance in house prices since the financial crisis in 2009, but a report from Resolution Foundation stated that in some parts of the country ‘generation rent’ will have to rent their whole life. However, there is some good news with regional areas performing much better than the capital whilst savvy Millennials are taking advantage of the government Help to Buy Scheme and Life time ISA’s and for those in London, they’re starting small with “pocket homes”.
Millennials and renting
A third of Millennials, (those born between 1980 – 1996), face living in private rented accommodation for their entire lives. This is twice the number of those born between 1965 – 1980, known as ‘generation X’. The report dubs millennials ‘generation rent’ and said that ‘1.8 million families with children rent privately, up from 600,000 15 years ago.’
The accountancy firm PwC has predicted that as house prices rise, 7.2 million households will be in rented accommodation by 2025, compared with 5.4m now and 2.3m in 2001.
The report notes that renting is often a viable option for those who are younger and have few ties. However, for those who are older and have dependents, renting can be an unstable and unpredictable option. This increase demonstrates the declining accessibility to affordable properties to buy.
The report went further and added that ‘while housing benefit should be able to help millennial families, its value has been reduced relative to the generation who came before them’. The help offered to Millennials is not keeping up with current inflation.
Lindsay Judge, senior policy analyst at the Resolution Foundation, said: “Britain’s housing problems have developed into a full-blown crisis 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 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 associating with renting through tenancy reform.”
The government has promised that it will put new policies in place to improve the housing market.
One of these improvements offered for Millennials is the “Pocket home” initiative. Marc Vlessing a former banker and the chief executive of Pocket Living, a small developer, was looking for ways to help younger people get onto the London property market and came up with a simple solution: make them smaller.
The properties have around 38 sq m of floor space and are sold at a 20% discount of the market price and is a condition for their planning permission. This discount then has to be passed on from the owner to the next when they come to sell their property.
Currently the average price of a property in London for a first time buyer is £363,000, whilst those built by Pocket Living, range from £225,000 to £264,000 so they do fill a whole in the housing market.
In order to save for their deposits, Millennials have been utilising government Help to Buy schemes and Lifetime ISA’s, as well as having to seek financial support from parents.
House price drop worst performance since 2009
News of a house price drop in London is of little consolation to ‘generation rent’ as the average house price in London is still a whopping £472,000.
National house prices have fallen by 0.1% month on month from February. The average house price in the UK was £225,000 which according to figures released by the Land Registry and Office for National Statistics (ONS) marked a 4.4% increase from the previous year. Now the annual growth rate has slowed to 4.7% as of January. This drop in growth has been led by London and according to an official report: “Is the lowest annual growth in London since September 2009, when it was negative 3.2%”.
The average house price in London has seen a 1% decrease from February 2017. This decrease stays in line with the continued slowdown in growth since mid 2016. An economist at PwC, Thomas Fisher said that: “Regionally, the picture remains mixed, with London diverging from the rest of the country”.
Jeremy Leaf, a former residential chairman of the Royal Institution of Chartered Surveyors (Rics) and a north London estate agent had some more hopeful news: “We should bear in mind that the figures reflect what was happening in the period immediately before and after Christmas so we should be hopeful that the market will show more improvement as the figures emerge for the traditionally busier spring period”.
More hopeful news is that whilst London’s prices have slowed, those in the north are performing much better.
Within England, the West Midlands showed the highest annual house price growth, with prices increasing by 7.3% in the past year to February. The East Midlands followed with a 6.3% increase.
Wales’ house prices increased by 4.8% from the previous 12 months to £153,000. Whilst in Scotland, the average price increased by 6.2% to £144,000 and a 4.3% increase was seen in Northern Ireland which reached £130,000.
Michael Foxford, solicitor at Birchall Blackburn Law says: “Despite market fluctuations we are seeing a steady demand for our Conveyancing services. We’re also seeing more first time buyers looking for other ways to put in equity, whether that be from the bank of Mum and Dad or buying with friends, and seeking legal advice in order to properly protect their investments.”
For more information, please visit our conveyancing page.