By Kush Rawal, Director of Residential Investment at SO Resi
For Gen X and above, it’s a given that you know your housing options – for many of us, we are lucky enough to own our own homes, or have likely seen our parents own theirs. The process was simple, salaries and house prices were closer aligned, and for an older generation, buying a house meant paying a deposit and securing a mortgage.
Yet the landscape for first time buyers today is entirely different, not least given the astronomical gap between average salaries and house prices. Halifax recently reported that house prices rocketed by 16.8% since the start of the pandemic, whilst salaries rose by just 2.7%.[1] And there are stark warnings that the next generation of homebuyers could face average house prices that are ten times their salary, according to the National Association of Property Buyers.[2]
With an alarming backdrop, Gen Z and millennials could be forgiven for giving up all hope on homeownership – but our latest research report, which surveyed 2,000 18-30 year olds across England, revealed that 70% would prefer to own their own home. Despite a strong appetite and optimism from young people, an enormous two-thirds said they knew nothing about the process of buying. Shockingly, less than a fifth of young people today are even aware of affordable housing options such as shared ownership. Once explained, interest in using such schemes jumped to as much 50%.
Our research indicates a desperate need for greater housing education for young people – not least because one in two of those surveyed said they relied on advice from their parents to get on the housing ladder.
Whilst it’s natural for young people to turn to their parents for advice, the housing market has changed beyond recognition in the last 40 years and young people need to be able to access reliable information about all tenures of homeownership. Parents are often unaware of schemes such as shared ownership which have been designed for a new generation of priced-out buyers, and may unwittingly fail to give confidence to young people who can’t afford a mortgage in the traditional sense.
Our research looked into the general knowledge of options available on the market for first time buyers, ranging from renting through to shared ownership. One resounding result was the inherent belief that renting was a necessity in their homebuying journey, with around 60% of respondents saying it was all they could afford. 47% of 25-30 year-olds who were renting said they couldn’t get a mortgage because they weren’t earning enough or they didn’t have sufficient credit rating – yet we know through experience that often it is this demographic that could access homeownership through a product such as shared ownership.
Financial literacy has been part of the National Curriculum since 2014, however, its level of implementation has varied, as have its focuses. Our research indicates how this absence of proactive teaching has been a disservice to young people, as they are entering a market with limited knowledge of only the traditional options of renting or buying, which doesn’t capture the full picture of the opportunities available in 2022.
Our report is not alone in its warning regarding concerns over a lack of education of the housing industry, and follows a series of investigations more broadly looking at money management. The Centre for Social Justice’s recent report ‘On the Money – A Roadmap for Lifelong Financial Learning’ revealed through research by Opinium that 14 million adults experiencing financial problems attribute this to low money management skills, with only one in three children currently receiving any form of financial education in primary school.[3]
At SO Resi, we are in discussions with a number of education providers to take the first step in securing financial education within schools. But we can’t do this on our own.
As an industry, we must take action now to ensure that we take a proactive approach to delivering education on the subject of homeownership, whatever their future housing tenure may be. If we don’t, a whole generation may miss out.
[1] https://www.thetimes.co.uk/article/houses-the-least-affordable-on-record-522kh7n2k
[2] https://www.mirror.co.uk/money/house-prices-soar-record-ten-27365691
[3] The Centre for Social Justice, ‘On the Money – A Roadmap for Lifelong Financial Learning’, p.6.
