Generation U: unlucky and unaffordable
The affordability of homes in Britain has changed significantly over the past half a century. Baby boomers in the 50s, 60s and 70s could expect to pay around four or five times their earnings for their home, due in part to high housebuilding rates. Greater credit liberalisation made it easier to borrow in the 1980s, but this also increased the view that a house was also an asset, not just a home. By 2000, you could expect to pay over seven times your earnings to purchase a property.
We are now suffering an affordability crisis in Britain, and it is more and more difficult for first time buyers to get on the property ladder. According to the ONS, the average house price in England was £302,000 in November 2015, a 50% increase since 2005, and in London the average is £537,000, a 90% increase. In contrast, since 2005 wages have risen by just 23% in England and 19% in London. In 39 local authorities across England and Wales, fewer than 10% of people can afford to buy, with all of Inner London and much of the South East and East being affected.
Lucian Cook, head of residential research at Savills, said that this highlights just how inaccessible the market is for single income households. Home ownership is becoming confined to households with two incomes, whether for those buying their first home, or for those looking to upsize. Joe Sarling, an economist at Nathaniel Lichfield and Partners, recently described the emergence of Generation U, unlucky and unaffordable, as it becomes more and more difficult for young people to buy their first home.
So what’s the solution? Well, the most affordable areas for single earners are Blaenau Gwent and Merthyr Tydfil in Wales, or Burnley in the North West. However, if you don’t fancy moving, that is unlikely to seem very helpful. The long and the short of it is that we need more homes. Smaller one and two beds help younger people get on the ladder and three and four beds help growing families move up to free up their smaller starter homes. But one thing is for sure, if we don’t start building them soon, we truly will become Generation U.