A new report reveals that high house prices are significantly impacting the number of young people owning their own homes. Over the past 30 years, homeownership among those aged 25-34 has almost halved.
So, will 2022 be the year that house prices finally crash, giving young people some respite? Letís take a look.
What did the report reveal about high house prices?
According to theResolution Foundation, the number of people aged 25-34 owning their own homes has plummeted since 1989.
During the final year of the 1980s, a massive 51% of this age group owned their own home. This compares to just 25% reported in 2016, and 28% in 2019, when the data was last compiled. This means that homeownership among young people has almost halved in the past 30 years.
While the consumption of avocados on toast has increased since the 1980s, the report reveals the main reason why young people canít afford to buy a home is that they donít earn enough. The report also says many young people lack sufficient savings to put down a deposit.
According to theOffice for National Statistics, the average house price is now £270,000, having grown almost £30,000 in the space of a year. This means someone buying an average home with a 10% deposit will need to have saved £27,000.
While it should be noted that some young people choose to rent by choice, the vast majority do not. According to the report, a massive 80% of 25-34 year oldís would rather buy than rent through a landlord.
The report also rubbishes the suggestion that high house prices are limited to London and the South East. It clearly states that young people are affected by high house prices in all regions of the UK.
What is the government doing to help young people afford a home?
To support the housing market during the pandemic the government also axed Stamp Duty. However, most first time buyers didnít benefit as Stamp Duty doesnít apply to first home purchases up to £300,000.
Despite the array of support schemes available, the fact is that house prices have continued to accelerate over the past few years. As a result of this, many feel the government isnít doing enough to support young people to buy their first homes.
In fact, some critics suggest the government is only keen to support the demand for housing and not address supply issues. They believe government support schemes only help to increase house prices due to the fact they essentially boost the number of people able to buy property and not much else.
Many also blame high house prices on the Bank of England. Thatís because its ultra-low base rate has widened access to cheap credit. This belief was echoed by Peter Beaumont, CEO of The Mortgage Lender, who, after the Bankís most recent base rate decision, said this would likely push up prices.
He explained: ďThe Bank of Englandís decision to keep the base rate at 0.1% will keep the market frenetic for at least another month.Ē
Whether or not the government is contributing to high house prices is debatable. However, it is a fact that homeowners are more likely to vote than renters.
Will house prices crash in 2022?
Due to soaring house prices, young people may feel a house price crash presents their only hope of owning property.
While the housing market is notoriously difficult to predict, it is possible that house price inflation will cool in 2022. This theory is supported by the fact thatmortgage approvals have plummetedover the past few weeks, indicating that lenders are tightening their criteria.
On a similar note, the Bank of England is under pressure to increase its base rate to cool inflation. If this happens, then mortgage costs will likely increase too, potentially reducing house prices.
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