Home » Uncategorised »
More Tenants than Homeowners in London by 2025, Claims PwC
This article is an external press release originally published on the Landlord News website, which has now been migrated to the Just Landlords blog.
The majority of Londoners will be living in rental accommodation by 2025, with just 40% owning their own home, according to a new study by PwC.
This prediction is a reversal of 2000’s property market, when 60% of Londoners owned a home either outright or with a mortgage.
The expected continuation of generation rent will be bad news to many, including the Government, which has been attempting to fuel homeownership through schemes such as Help to Buy.
Additionally, Chancellor George Osborne is clamping down on the buy-to-let sector by imposing tax and financial changes on landlords.
However, it is young people that will be the hardest hit by changes to the housing market. Priced out by high house prices and impossible deposits and mortgages, only 26% of those currently aged 20-39 will own their own home by 2025.
Comparatively, 64% of those born in 1960 and 1970 owned a home by the time they were 35.
Affordability issues will hit Londoners the hardest, with a predicted 24.4% rise in the amount of people renting privately in the capital between 2000 and 2025. In the UK as a whole, it will increase by 14.5%.
A senior economist at PwC, Richard Snook, comments on the firm’s predictions: “This analysis shows that people are increasingly being locked out of owning a home in London, demonstrated by the sharp rise in private rental levels and sharp fall in homeownership.
“High prices are making homes in the capital unaffordable to most and could undo a century-long trend towards rising homeownership rates. In just 25 years, the city has been transformed to one where rental is becoming the norm – especially for younger people.”1
Thanks to low interest rates, those with mortgages are seeing their housing costs fall in comparison to tenants, particularly in London.
The Resolution Foundation reports: “Measured before housing costs, median incomes in London appear to have grown by 2.9% post-crisis; measured after housing costs, they remain 3.7% below pre-crisis levels.”1
The number of people renting is expected to grow in every region of the UK. Northern Ireland will experience the next highest increase in renters, at 24.4%, fuelled by low levels of house building and a younger population. The slowest rise will be seen in the South West, at 6.1%.
Homeownership in Britain hit a high in 2003, at 71% of households. It has been in decline ever since, according to Savills’ Neal Hudson. The Right to Buy scheme of the 1980s is thought to have boosted the peak in homeownership.
David Snell, a partner at PwC, explains how the country must adapt to these forthcoming changes: “With around 60% of Londoners predicted to be renting by 2025 – 40% private sector and 20% social housing – policy will need to adapt. This could include encouraging a better quality of private rented accommodation, including longer tenure periods and more rental properties designed for families.”
He continues: “Demand for housing in the UK has outstripped supply for more than two decades. Changing the outlook for generation rent will require us to build more houses than needed, just to match population growth in order to make up the past shortfall between housing supply and growth in demand.”1
Recently, we reported that the average buyer who purchases a home this year will have already spent a huge £52,900 on rent.
However, it was also revealed in HomeLet’s rental index that rent price growth in Greater London is at its lowest rate for two years. Despite this, the average new rent in the capital is £1,510 per month. The average across the UK, excluding London, is £740 a month.
The Chief Executive of housing charity Shelter, Campbell Robb, says: “Faced with sky-high housing costs and instability, and forced to wave goodbye to their dreams of securing a home of their own, the shortage of affordable homes in the capital is putting huge pressure on London’s renters.
“But it doesn’t have to be this way; many renters in Europe enjoy greater stability, and there’s no reason London’s tenants can’t as well. To turn around this crisis, the next Mayor of London must prioritise longer, more stable tenancies in the capital and finally commit to building the genuinely affordable homes that Londoners are crying out for.”1
1 http://www.telegraph.co.uk/finance/property/property-market/12157946/Generation-Rent-London-to-become-a-city-of-renters-by-2025.html
