UK housing market is indeed broken, and failing young people

The figures speak for themselves, it takes an average single first-time buyer in the UK almost 12 years to save a 15% deposit for a home, according to research based on very recent figures. It is quite sad that it takes such a long time and even sadder that a separate piece of research reveals the stress saving up to buy a home causes, with 40% of first-time buyers admitting that they had to rebuild their life and relationships afterwards.

Buying a home should not be such a bruising experience. There are more mortgage products out there, there is the government’s Help-to-Buy scheme, but still there is a struggle at the bottom end of the housing ladder. The research from Hamptons International shows that a bit of homework and perhaps better advice from a mortgage broker, first-time buyers can reduce the time needed to save for a deposit. But still if you are not a couple, saving for a deposit is undoubtedly an uphill task.

Even being able to buy with a smaller deposit still needs years of saving with the analysis showing that raising a 10% deposit rather than 15% cuts the time to save for single buyers to eight years, still a long time.

The fact that rents are rising also makes it hard for prospective first-time buyers who are letting a home while they save to buy. The latest Landbay index shows that rents are creeping up across the UK with all areas apart from London and Northern Ireland seeing them rise both month on month and year on year. Also of concern, the report shows that younger people who live alone in a rented home in the UK spend upwards of a third of their monthly take home pay on rent. Those aged 18 to 39 face rental costs of an average of GBP 1,012 a month and need 69% of their monthly income after tax to face that cost if they don’t share.

This means they have little money left over each month to save for a deposit if they aspire to buy their own home, the report points out, as rents have increased by 9% over the last five years. In a shared house of two people, overall rent of GBP 1,152 adds up to 39% of each tenant’s income, while those living in a three bed property would each spend 30% of their monthly take home pay on a rent of GBP 1,322.

There may be good news in that rents are not increasing massively and the latest data published this week, also relating to April, shows that while UK-wide asking rents were 0.4% higher than a year ago they fell in London by 1.2% year on year, the first annual fall since 2009. With the average monthly rent now standing at GBP 904, the country has seen the lowest rental price inflation figure since February 2010. But there is regional variation and Wales, the North East of England and Scotland saw the highest levels of rental price inflation during April.

Indeed, the areas of the country where rents are rising more quickly are those that experienced less rapid rental price inflation during the first half of 2016, when rental prices in regions such as London, the South East and East Anglia spiked sharply. In Wales, for example, rents were 2.2% higher in April compared to the same month of last year. But it should also be remembered that the number of landlords seeking to expand their portfolios is falling at a demand when demand for rented homes is rising and it has been suggested that rents in England will rise when letting fees are banned.

So the outlook for young people aspiring to buy their own home is still not brilliant. They need to make sacrifices to save for a deposit and it is no wonder that the bank of mum and dad remains so popular. It is also interesting that equity release is soaring among UK home owners and it will be interesting to see if more grandparents use this as a means of helping out.

Buying your first home should be exiting, stressful yes, but not to such an extent that it causes people to feel the need to rebuild their lives afterwards. It is a sign that the housing market is indeed broken and failing young people.