Fresh housing fears: Prospects for generation rent 'sobering'

Study urges more action on affordability housing as house prices soar 

RESEARCH by Price Waterhouse Cooper Scotland (PwC) into housing affordability for the 20-39 year old age group has shown that buyers may have to save for as much as 19 years to buy their first home.

A report into the economic effect of Brexit on Scotland by the accountancy firm described the impact on housing as “sobering”.

According to the study, the average home in Scotland is expected to be worth £156,000 by 2020 and comes after planning reforms suggested by the Scottish Government, covered recently by CommonSpace.

Also known as ‘generation rent’, the 20-39 age group notoriously find it increasingly difficult to get on the housing ladder, being exposed to harsh conditions in the private rental sector.

Adam Turner, government and public sector assistant director PwC in Scotland, said: “The picture on housing is sobering and timely as we see the end of ‘the right to buy’ scheme at the end of this month. For first time buyers, our latest analysis is bittersweet. 

“Yes, they don’t have to save as long to afford a deposit for their first home as in our previous forecasts – but it’s still going to take them an astonishing 19 years if they don’t have family assistance.”

“Collaboration among developers, social housing providers and government alongside radical and innovative investment measures will be key to solving Scotland – and the UK’s – housing market challenge.” Adam Turner

The report stated that the amount of time it takes for the same age group to buy after saving has trebled since 2000, when it previously took six years to get on the housing ladder.

Its analysis also found huge inequalities within the age range between renters and those 20-39 year olds who have already managed to get a foot on the housing ladder. 

Those who have already managed to buy a house have mostly been shielded from the dramatic decline in affordability due to capital gains made on their existing homes and continued relatively low mortgage rates.

For example, PwC estimated that a person buying their first home in 2016 could move to a larger property after only four years, on average less than a quarter of the time it would take to save a first time deposit as a renter.

Turner, additionally said: “Those already on the property ladder are in a slightly better place as they have been largely insulated from the deterioration in affordability due to capital gains made on their existing homes. 

“But even these so-called ‘second steppers’ are seeing an increase in the time they need to save before moving on meaning an even tighter supply of homes for first time buyers as people stay put for longer."

“The only long-term solution for Scotland is to build vastly more affordable, quality housing in the places where people want to live.” Adam Turner

The Living Rent Campaign maintains that because so many people rent for an extended amount the time, emphasis should be placed on social housing to improve security of tenure.
 
It has previously said: “For-profit housing is the most expensive, and least secure form of tenure, and this will always remain the case. 

“Only eight per cent of people would choose to live in the private rented sector, the vast majority prefer a socially rented flat or aspire to home-ownership, and a ‘tenure neutral’ approach to housing is not appropriate for Scotland. 

“Given that it is the least desirable form of tenure, the private rented sector should bear the full risks of investment, and instead any subsidies should go to the forms of tenure that people in Scotland want, such as non-profit housing.”

“For first time buyers, our latest analysis is bittersweet.” Adam Turner

There appeared to be some agreement on the need for better rental conditions in the PwC report, with Adam Turner, going on to say: “The only long-term solution for Scotland is to build vastly more affordable, quality housing in the places where people want to live. But such a shift is likely to be the work of decades not years.

“With people in rented accommodation for longer, an important priority in the interim should be to increase the quality, choice and security of rented accommodation so this becomes a more attractive option as it is in countries like Germany or Switzerland where professional institutional investors play a much bigger role.

“Collaboration among developers, social housing providers and government alongside radical and innovative investment measures will be key to solving Scotland – and the UK’s – housing market challenge.”

In Germany, renting is the norm with home ownership at 43 per cent. Its rental market is still robustly regulated, and the regulations are quite favourable to renters. For example, German law allows state governments to cap rent increases at no more than 15 per cent over a three-year period, which allows young people to save.

Picture courtesy of Cowrin

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