The under 40s in London will be locked out of the housing market as renting becomes the long-term norm. This is the gloomy forecast by economists at accountancy firm PwC, who say that changes in the housing market mean that those aged 20-39 will become “generation rent.”
Private rental has increased from 10% of the housing market to 20% between 2001 and 2014. According to the English Housing Survey, as reported here by Urbs, a quarter of all private rental properties are in London. PwC forecasts that a further 1.8 million people will join the private rented sector by 2025. And private rental will be the housing solution for more than half 20-39 year olds.
In its UK Economic Outlook for July PwC says that a number of factors are changing the nature of housing tenure in the UK:
- Affordability – the growth in house prices has declined, especially in London, but has outpaced the growth in pay. The earnings to house price ratio is at its highest in London, passing the previous record in 2007. A tightening in mortgage lending means that saving for a deposit is beyond many first time buyers
- Housing Supply – house building in the UK has been insufficient to meet demand for decades but this problem has intensified in the past five years. There is a shortage in both the private sector and in social housing.
- Demographic change – the share of the housing market of people who own their home outright will rise by around 2 million by 2025. This is due to an increase in the UK population of over 60s who have been able to pay off their mortgage.
% share of households by tenure 1981-2014
PwC also warns that kicking away the property ladder from the under 40s will have a long-term impact on wealth. It says that house purchases have driven wealth for lower and middle classes and an inability to enter the housing market may limit social mobility.
For many in London long-term rental is already a reality. PwC says that private rental is common in other European countries but there is a higher quality of property and security of tenure beyond a year. This is yet to happen in the UK private rental market.