Millennials are the generation born between the early 1980s and the early years of the 21st century, which means that at this point they are between their teens and their thirties. The oldest of them will be coming into their peak earning years, while the youngest of them will be thinking about their post-school future. Regardless of their position on the age continuum, for this generation, housing will be one of their most pressing concerns.
From the parental home to rental accommodation
According to research undertaken by CBRE in 2016, 41% of millennials were still living in the family home, of these almost half said that they intended to move into their own place within the next two years, but generally speaking these millennials will be looking to rent rather than buy.
Renting – where affordability meets convenience
Three quarters of UK-based millennials indicated that affordability was their main reason for moving into rental accommodation, but other factors were clearly at work. For example, almost 20% of millennials saw renting as the convenient option and almost three quarters commented on the fact that buying a property would mean making sacrifices in other areas of their lives.
Mortgages are harder to get – especially for millennials
Those somewhat older than millennials will remember a time when you could get mortgages for over 100% of the value of your property and when self certification meant that even the self employed could get a mortgage relatively easily. Those days are now gone.
These days, the result of the Mortgage Market Review is that lenders have to be a whole lot more stringent when it comes to making sure that borrowers can afford their mortgage over the long term, including accounting for changes in circumstances.
Millennials, however, often find themselves entering the world of work burdened by debt from education and are in a life stage where children are at least a possibility if not a priority and as everyone knows, children tend to be expensive.
Renting – the way of the future
The statistics are indisputable. According to a study by the Nationwide, 10 years ago only 12% of homes in England were rented. Now the figure is 20% and 75% of this growth has come from the private rental market.
Unsurprisingly, the increase in renting has been accompanied by a decrease in private homeownership, particularly amongst younger people, both millennials and generation X. It’s also hard to dispute that affordability is a huge factor in this shift, with a survey by Ipsos MORI revealing that 67% of people believe that it is harder for them to buy or even rent their own home than it was for their parent’s generation.
At the same time, however, there appear to be other factors at work. The concept of “a job for life” disappeared years, if not decades, ago and the UK’s economy has become much less London-centric, with the result that young adults in a pre-child life stage may find it very professionally advantageous to be able to move around the country (or even internationally) to be able to further their career development. This means that renting is the obvious choice and suggests that the government’s commitment to the relatively new build-to-rent sector may prove to be a very wise decision.
Mark Burns is the managing director of property investment firm, Hopwood House.