HAVE WE UNDERESTIMATED THE MILLENNIALS?
They have been written off a thousand times…the millennials…”the homeowner-less generation”…doomed to be renters for the rest of their lives.
But could we have got it wrong? Are the millennials set for a spectacular comeback? Is millennial homeownership destined to increase in the long term, confounding the doom-mongers?
Definition of millennials: there are several definitions of the term “millennial”, which can cause confusion. However the term basically refers to people in their twenties or thirties. According to the Pew Research Centre, millennials are people born between 1981 and 1996.
1.The old story
I am sure you are familiar with the story by now. It really is boring but because it is very important, I will tell it again.
The twenty somethings and thirty somethings dubbed the millennials, of which there are about 14 million in the UK, are the generation set to lose out in the game of homeownership Monopoly.
Not too many of them are going to pass “Go” and make a property fortune upon snapping up a one-bed apartment in an up and coming area off Pentonville Road.
They are in this sad position because their baby boomer parents have manipulated the most awesome property price explosion in the history of the UK, resulting in wildly unaffordable properties in every part of the country.
Their wages are low; their contracts are zero hours; their jobs are of the precarious gig type and they would need to be armed with a nuclear weapon to get anything other than a derisory pay rise year on year.
Okay so I am exaggerating quite a bit — but you get the picture.
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2.The doomed generation
The millennials seem like the doomed homeownership generation — the first generation where homeownership will be less of a right and more of a privilege.
In April of this year (2018), reporting on findings of the Resolution Foundation, the Guardian’s headline was “One in 3 UK millennials will never own a home”.
The report expected half of millennials to be renting in their forties and one third would still be renting on reaching pension age.
The housing benefit bill for pensioners was anticipated to increase from £6.3 billion to £16 billion by 2060 — having a huge impact on the public purse.
Also in April the Guardian reported the findings of a commission on “intergenerational fairness in Britain” which found that millennial home ownership had fallen dramatically from 1984 to 2017:
- 53% to just 16% in outer London
- 55% to 27% in the South East
- 53% to 26% in Greater Manchester
- 45% to 20% in the West Midlands
- 54% to 25% in South Yorkshire
- 50% to 28% in Wales.
Only in Scotland did millennial ownership remain stable — 32% in 1984; 33% in 2017.
In London, home ownership was noted as falling consistently in the last 30 years.
The problem is of course not confined to the UK. It seems most pronounced in the richer countries of the world.
In the USA a report by the Obama Administration in 2014 showed the “probability” of 18 to 34 year-olds” owning a home was just 13%.
A study by Harvard University concluded that homeownership by Americans under 35 had been falling for many years, reaching a low of 31% in 2015.
A report by HSBC in 2017 showed only 28% of Australians in the 18–36 age group were homeowners.
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3. The winds of change
In the last couple of years there has been better news for millennials hoping to buy a home — although you would never think that if you look at some of the scare headlines the mainstream media likes to trot out on a regular basis.
US millennials have rebounded from the all time low of 31% in 2015.
US census data released earlier this year showed that home ownership of people under 35 increased on the previous year — from 34.7% to 36%.
The improvement was put down to a rise in employment and higher rents making it easier to choose owning over renting in terms of cost.
Last month (July 2018) the New York Post reported data released by the Urban Institute suggesting 37% of millennials 25 to 34 years old are homeowners — with 96% of those surveyed either saying they want to own a home or already do so.
According to UK Finance, 2017 was the best year for UK first time buyers in a decade. There were 365,000 first time homebuyers (predominantly millennials), up by 7.4% on 2016.
Last month Property Wire revealed that there were 32,000 new first time homeowner mortgages completed in May 2018, 8.1% more than the same month in 2017.
The increase has been attributed to a fall in purchases by landlord investors on account of harsher taxation by the UK government.
4.What might the future hold?
So are the millennials making a sensational comeback on the homeownership front?
Are we seeing a long term trend?
On balance there is nowhere near enough evidence to run such an argument with any conviction.
In the UK the number of millennial first time homeowners has increased significantly since 2016.
Similarly, there has been a healthy increase in US millennial homeownership since an all-time low in 2015.
In the UK there are clear signs of improvement across several variables.
However, these positive signs have to be set against a range of continuing negative factors, including:
- Falling affordability in a growing number of regions especially London and the South East
- Modest wage increases year on year
- The rise in gig employment, which tends to be less permanent and reliable
- Difficulties in raising a deposit or down payment
- The likelihood that we are moving into a period of higher interest rates with greater difficulty in obtaining home loans.
In recent years, more millennials have managed to get onto the property ladder — at least in the UK and US. But long term there are many formidable factors against the trend continuing.
However, none of this is to say homeownership is beyond individual millennials prepared to work consistently, systematically and diligently to get on the property ladder.
For millennials as a whole, the road to homeownership seems as obstacle-strewn and perilous as ever.
At the moment, millennials are making a bit of a comeback, but it would be too much to suggest the future is bright.
Do you think the growth in millennial homeownership is set to continue long term? Please leave your comments below.
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Rebel Property Coach
My website is: www.rebelpropertycoach.com