Market Insight - October 2016
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50s Are the new 40s

That’s Life - 50s are the new 40s
The typical property lifecycle is changing as rising house prices limits the number of younger homeowners.

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The overall owner occupation rate has fallen from 65 per cent to 63 per cent between 2011 and 2016, while the proportion of households who rent has increased from 33 per cent to 35 per cent. That is not an insignificant change over just five years, but what is more interesting is the age profiling.

In Q2 2011 half of owner occupiers in the UK were under 50 years old, by 2016 that proportion had fallen to 45%. The most common age to be an owner occupier has shifted a decade from the 40s to the 50s in just five years.

Part of the reason for this is that the availability of finance has become more difficult. The financial crash in 2008 meant that credit was rationed severely which really hit borrowers – particularly in the younger age groups who needed higher percentage loans. Finance availability has improved gradually and by 2013, 95 per cent loans had once again become available as mortgage lenders’ risk appetites increased.

But other mortgage regulation governing the affordability of a mortgage at a higher interest rate over the subsequent years came into the equation, cutting off some demand. And then, as house prices began to increase once more, raising even a 5 per cent deposit became more difficult.

And just as owner occupation has come later in life, renting is no longer the preserve of the young. The proportion of renters has increased by 2 percentage points, but the age profile has moved more slowly yet it is still quite striking over such a short period. But this has been a longer process. Five years ago a quarter of all renters were in their twenties, now it’s fallen to 22 per cent with the most common age to rent rising from the late twenties to early thirties.

It’s an ongoing issue as house prices increase while incomes do not, yet the desire to own one’s own home has not diminished, one cheaper route is to part own and part rent a property. Shared ownership has been around for a long time but has remained only a small proportion of the total market.

Overall this tenure accounts for just 1 per cent of all households, but there is increasing interest in it. Over the last five years there has been a 36 per cent increase in the number of households who part own and part rent, compared with just a 6 per cent increase in the total number of households in any tenure.

 

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