Millennials are the most educated generation to date and employment for this age group is at a record high. In 2016, the employment rate for millennials was 82.1% and by 2020 they will represent 50% of the workforce. In many ways, millennials have bright futures ahead of them. But there’s one thing that they may never manage to achieve and that’s to own their own houses.
Young People and the Current Housing Market
The number of young people owning homes has halved in the past 20 years, which is because of how much the housing market has changed in recent years. Back in 1966, for people on the average salary buying a house would cost just over 3 times their wage. Today, the average salary in the UK is around £29,000 and with the average house being around £220,300, it costs over 7.5 times the average salary to buy a house. According to a report by the Resolution Foundation, 1 in 3 millennials will never own their own home.
And as house prices continue to rise, so is the price of renting. Is it going to reach the point where young people can’t afford to do either? Frequently referred to as “generation rent,” 59% of millennial households are renting their home. And this is just the millennials who have been able to move out of their family homes. Currently 25.9% of 20-34 year olds live with their parents. For many, this seems like their only option, especially if they want to save for a house since renting is so expensive.
Rent has been rising gradually year by year. In just 7 years, the average renting cost across major UK cities has increased by 19.8%. These increasing renting prices mean that young people are spending the majority of their salaries on their accommodation. For young people, average rents for a one-bedroom home eat up more than 30% of their typical salary in 65% of British postcode areas. Many housing organisations regard spending more than a third of income on rent as unaffordable, however this is often what is required for people starting out in their career today.
Millennials in London
UK millennials are concentrated in London where 19% of them live. It’s the UK city with the highest employment rate however it’s also the most expensive place to rent. In fact, an annual salary of £51,200 is needed to be able to afford to rent a one-bedroom home in London. It’s extortionate renting prices such as these that forces people into unliveable housing conditions or to live in the suburbs and commute to work. Unfortunately, it’s often the former of the two, and many people in the private renting sector are faced with poor living conditions. In 2013, four in 10 private rented tenants were living in bad housing in the UK, and 338,000 properties rented by under-35s were deemed hazardous and likely to cause harm. This meant tenants were facing issues such as rats, mouldy walls, exposed electrical wiring and leaking roofs.
Do Millennials Want to Buy Houses?
When you buy a house, your investment will likely increase in value, which is why renting is sometimes viewed as a waste of money. However, there are some positives to renting, especially for the younger generation. Typically the biggest reason for people to buy a house is because of marriage and children. In 1990, 52.3% of 18-34 year olds were married, whereas in2015 it was about 38.5%. It seems that millennials are generally more concerned with their careers and the opportunity to travel than starting families, and renting a property allows millennials the flexible lifestyle that’s likely more in line with their values.
The Benefits of Renting
- Flexibility to move and live in different places
- You can live with different people
- You’re not tied down to a place if things don’t work out
- There are no maintenance or repair costs
Advice for Young People Wanting to Save for a Property
Of course, owning a property is always going to be a milestone that people will be aiming for, and it’s a shame that despite all their hard work and after a good education, young people will not be able to own a place of their own.
Fortunately, where there’s a will there’s a way, even when trying to navigate our current property market. If you are a young person wanting to save for a house, with some determination, support from family or parents, or by using one of the saving schemes available to you, you should be able to achieve your goal. Here is some of the help that’s available to you as a young person trying to buy a property:
Help to Buy ISA
A bank account available with a range of banks, building societies and credit unions, where you can build savings that will go towards buying a home. To help you with property-buying costs, the government will boost these savings by 25%.
Help to Buy Equity Loan
This is a low-interest loan that you can get to put towards the deposit on a property. You will pay 5% of the deposit and the government will lend you up to 20% (up to 40% in London) so you can get a mortgage to cover the rest. It’s also interest free for the first 5 years.
This is where you buy a share of your home (between 25 and 75%) and pay rent on the rest. You won’t own the entire of the property however this option allows you some building equity without the full commitment of buying a house.