House Prices

A lost generation of house buyers

A lost generation of house buyers
March 22nd, 2010
Author: Jeff Taylor

According to a new poll many young people, as many as 40%, are putting their future life plans on hold until house prices come down to affordable levels.

A YouGov survey, commissioned by the National Housing Federation (NFA), indicates that home ownership dreams have been shattered for many potential first time buyers.

The poll found that, despite recent house price falls, a staggering 86% of 18-30 year olds that do not already own a home could not afford a house if they wanted one. 83% of them thought that home-ownership was for them now just a dream.

54% of them said they would need financial help from parents or relatives to buy their own home.

Of those who said they would need help, 9% would require £40,000 or more, 8% up to £40,000, 28% would need up to £20,000 and 18% would need up to £10,000.

Until they could afford to buy, which in some cases respondents thought they would have to wait for ten or even twenty years, 70% said they would rent privately and 11% would remain with their parents.

The NFA said that the problems stem from the lack of affordable housing and the fact that house building has dropped to the lowest level since 1923. This has led to a record 4.5 million people now on housing waiting lists in England alone.

David Orr, the Federation Chief Executive, said: “Young people are giving up hope of ever being able to afford their own home and who can blame them?

“The simple truth is we, as a country, have failed to build anywhere like enough homes to meet demand, which has sent house prices rocketing over the last decade and well out of reach of most young people.

“Banks are meanwhile demanding tens of thousands of pounds in deposits before even considering lending first time buyers a mortgage. For those without parents with the funds to help them – there’s virtually no chance of getting a rung on the property ladder.

“The three main parties must commit to building significant numbers of affordable homes for rent and sale to avoid locking an entire generation out of having their own home.

“The next government must view housing in the same terms as health, education and policing – and protect it from budget cuts, given the scale of the crisis.

What we may be looking at is a whole generation of people who eventually will never own their own homes. This will of course require many more private landlords and residential letting property developers and investors if the government cannot step in and provide social housing.

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6 Responses to “A lost generation of house buyers”

  1. Michael says:

    The problem is certainly not the lack of house building. The problem is that over the last decade credit has been far too readily available and people have borrowed larger and larger amounts which has pushed up prices.
    Now that the credit is gone house prices will correct back to a sensible amount compared to earnings and first time buyers won't need to get into stupid amounts of debt anymore.

    There are plenty of new build tiny 1 or 2 bed places about but the are simply unaffordable for the average first time buyer.

  2. Jeff Taylor says:

    Hi Michael, I'm not sure that there are the right homes readily available in the right places. Also, why buy a pokey place when you can't live in it properly?

  3. Michael says:

    I personally would not buy a pokey place that I can't live in properly. Especially when it will cost me a lifetime of debt. The fact is this is what most young people are faced with. Stay where you are or borrow from parents get a big mortgage and buy a pokey little new build with paper thin walls that you will hate.

    An average house is currently 4.8 (was about 5.6 at peak) times average earnings. The last crash in the early 90s happened after the ratio reached 4.5 (nationwide) the only reason we have not had a crash so far is due to lax lending. It has been run up into a bubble of credit. The credit which is no longer available and should never be again. We have just seen the end of bear Market rally. The downward trend will continue until sensible prices are reached.

    I earn an above average wage, have large savings for a deposit but still can not afford an average, or even below average house in my area. I will until at least next year when the post election cut backs kick in and we start to see normaility in house prices. The last decade have been anything but normal.

    I can't see how building more so called "affordable housing" will help in the situation. Maybe if enough were built fast enough we would see drops due oversupply. But ultimatly the proplem with the UK housing market is it's massively overinflated.

  4. Jeff Taylor says:

    I agree totally that the UK housing market is vastly overinflated, but what worries me is that long before the price comes down to within a potential owner occupier's affordability a load os greedy investors money floods in and pushes the price back up.

    This will not be helped by recent proposals to allow investors of bulk property to pay stamp duty individually on each property as opposed to as one whole unit. So, if you buy £5 million quid's worth of £100,000 flats you pay no stamp duty, whereas at present you'd pay $5 on the whole lot (£200,000). This is being done so that the private sector will more willingly step into the breach because the government don't want homeless people or further write-downs hurting those poor bankers.

  5. Michael says:

    that is definitly true jeff. Hopefully with some sense the proposals will be rejected. There is only one thing that can prevent the crash and that is the government. It owns the biggest mortgage lenders in the country the last thing they want is further losses and writedowns. But saying that I don't think there are nearly enough private investors in this country to prop up the entire UK property Market. It may be that overseas investors enticed by the low pound help to lessen the drops in major cities.

    After the election we are going to see public sector job losses and tax rises whoever wins. You can ingnore the budget with an election looming. Futher to this interest rates will be not be low forever and could be rising dooming than people think. If you read the minutes of the last MPC meeting you see that serveral members are concerned about rising infation. As you know rising inflation = rising base rates. 2009 saw a 15% increase in repossesions. At 0.5%! for every step up in base rate there will be a flood of reposessions coming onto the Market.

    I don't think the government has anything left it can do to prevent a crash?

  6. kingsley says:

    Michael/ Jeff

    Are you in the property industry yourselves?

    I am a student looking for peoples views on the ability of modern timber frame construction to increase affordability.

    Your comments seem educated and I would appreciate your input…

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