Housing wealth is increasingly concentrated in the hands of older home-owners and investors who’ve paid off their mortgages and benefited from house price growth over the period of ownership.
Across the UK, the over 50s now account for 75 per cent of privately owned housing equity. The over 65s alone hold 42 per cent – around £1.6 trillion – of housing wealth, with total borrowing of only £43 billion, just 2.7 per cent of the total value of the homes owned by this age group.
At the other end of the spectrum, the under 35s, who increasingly struggle to access the housing market, own just £221 billion worth of equity, but owe a total £223 billion in mortgage debt. Just over half the value of property owned by the under 35s is borrowed.
The average first-time buyer deposit, which according to UK Finance now stands at £24,700 across the UK and £93,000 in London, coupled with the post global financial crisis (GFC) constraints on mortgage lending, will continue to thwart the many aspiring home-owners not lucky enough to benefit from the bank of mum and dad.
As Sophie Chick, Head of Residential Research in Sydney, writes in Impacts – the future of global real estate, this issue is not unique to the UK. Across large parts of the world, Generation Y is struggling to get a foot on the property ladder without help from parents and grandparents.
Housing affordability has become a worldwide issue since the GFC. It is the younger generations, usually needing the highest loan-to-value ratios and loan-to-income ratios, who are most affected, as housing wealth is increasingly concentrated in older hands.
Sophie writes: 'In Australia, the share of homeowners aged 25 to 34 is 45 per cent, down from 58 per cent in 1986. In the US, the current rate is 31 per cent for under 35s, against 39 per cent in 1995.'
Latest UK Finance data suggests that the number of mortgages issued to first-time buyers has grown 71 per cent over the last five years, but there is a long way to go. Currently, 16.1 per cent of all households are headed by someone under 35, but they make up just 8.7 per cent of owner occupiers.
The policy challenge across the developed world is how to deal with a generation of renters unable to access housing unless they receive a legacy from older generations. In England, Help to Buy has had an impact, with almost 117,000 first-time buyers using the scheme, but it has primarily been accessed by higher earners.
The focus for governments across the world will be on how to provide the secure, rented accommodation needed now, while encouraging a new generation of owner-occupiers over the long term.
As Sophie concludes: 'We expect that the scarcity of equity among first-time buyers and limits to affordability in many western countries will act as an effective ceiling to house prices and lower price growth in many developed economies will be the result.'
Read more: Gen Y and housing affordability