There have been several reports on house buying in the last twelve months. Here's a summary of key points to everyone saying 'just save'.
- Most stories you will hear about people who bought in the past. They are not contemporary accounts of how people who have bought for the first time recently.
- When you start to talk about contemporary accounts, people will talk about how they saved. Newspaper articles will reflect this. Yet when you scratch the surface, its amazing the sheer number of people who didn't just save. Most will have had help from the Bank of Mum and Dad or an inheritance that they don't openly admit at first, or down play the significance of.
- In terms of affordability, people are on higher mortgage multipliers today than they ever have been.
- The ratio of earnings to average house prices is increasingly significantly. The average nationally is seven times the average house hold income. In some places its higher than 20 times the national average income. Even at 7 times higher, that's significantly higher than the standard 3.5 income multiplier. If people are not gaining equity from property price rises, this makes it impossible for the majority who do buy to even buy an average house. As the market stagnates, this becomes a growing problem which will start in some areas, but will spread elsewhere.
- The whole thing will have the effect of leading to 'gentrification' in more and more areas, and the marginalisation and growing issues for those who do rent. This problem is not going away.
- People have to save longer to get on the housing ladder, they have increasing rental costs. This means the age that people buy for the first time is getting later and later. (The current mean age is now 30). This also means they have less years to repay a mortgage. So they can't take as many steps up the ladder either. The problem a rental prices increase, and the demand at the bottom of the market stays high, is that less people can buy in the first place. This is reflected in housing ownership in the under 35 dropping from 67% twenty years ago to less than 40%. The dream of house ownership is increasingly that for the young. They can not aspire to what baby boomers have ultimately taken for granted.
Overall the situation is getting worse. Not of this is 'news'. A lot of people have done a lot of sitting on their hands. Many decision makers have conflicts of interest a landlords or involved in house development. Nimbies don't want large developments of small housing. Socialists don't want to encourage building private housing - their priority is social housing. There is very little political will to do anything about it.
Ironically YouGov had a survey out last week and one of its findings was that young people want to OWN a house. The desire and dream of ownership is just as strong as it ever has been.
Anyway, my point is that unless you personally have bought for the first time in the last ten years, that your experience is irrelevant and just a historical anecdote which can not be compared to the contemporary market conditions. Telling people to 'just save', is a load of debunked bollocks - its still out of reach for even the most frugal in many areas.
The reality is, there is a massive problem that no one really wants to properly acknowledge and admit. Its easier to just say 'Oh well we all found it difficult to buy a house' and be dismissive of it.
It is the consequence of 2008's crash working through the market with wealth being concentrated and locked up in the houses of baby boomers. And that's what makes it different to other dips and peaks in the housing market. It will screw an entire generation, if not longer.