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Property wealth: More bad news for the young

It’s not breaking new ground to say that younger people have what many regard as the raw end of the deal when it comes to property wealth.

Stories of Generation Rent, frustrated first time buyers unable to raise a deposit and the repeated reliance on the bank of Mum and Dad are now all too familiar. They are unlikely to be made much better by the Budget stamp duty change, which will create only 3,500 more first time owners according to the independent Office of Budget Responsibility.

Yet new figures released this week are likely to shock even those who are familiar with the current spate of stories about the challenges facing younger generations.

Those figures come from the Halifax and reveal (for the first time, to my knowledge) the scale of age difference between the property haves and have-nots.

The figures show that the value of the UK’s privately-owned homes over the past decade has grown by £376 billion to reach £6.015 trillion. 

The Halifax estimates the average property wealth per household is £256,912 - a big leap from the £187,310 in 2007, just as the world financial crisis was about to begin.

And to be clear, the definition of property wealth in this survey is equity - the difference between the value of the house and the outstanding debt.

So far so straightforward, and perhaps a reason to cheer: after all, property wealth has expanded considerably in the same decade that Britain suffered an economic depression.

What is less cheery, however, is the age breakdown.

Around 40 per cent of property wealth today in the UK is accounted for by households aged over 65, three-fifths of which are mortgage free so enjoying massive equity. Nearly another quarter of total housing wealth is held by households in the 55 to 64 age group.

So to be clear, those aged 55 and above own over SIXTY THREE PER CENT of the country’s equity in housing.

And at the other end of the age scale? Well, you may want to sit down to read this. 

Those aged 16 to 34 own precisely 3.3 per cent of the property wealth. No, that’s not a typo nor a statistical error - just THREE POINT THREE per cent.

Even if you combine the equity owned by those aged between 16 and 44 the total is only 15.5 per cent.

I understand that this is a dynamic assessment and that as younger home owners today pay off more of their mortgages, so they will see their equity grow as they get older. I understand, too, that younger generations may inherit property wealth from their parents and grandparents, turbo-charging their ascendency into the higher league of wealth.

However, that does not apply to every young homeowner and - perhaps as ever - those in wealthier families will benefit most. 

On top, consider this: many baby boomers enjoyed an era from around 1980 to 2005 when capital appreciation was high and the cost of moving house was low. For them, it was relatively easy to move house frequently and move up the proverbial ladder into bigger and better homes using purely the appreciation from your last property. 

Even the most fortunate of younger owners today are unlikely to see more than, say, three or four per cent capital appreciation on most homes per year for the foreseeable future - and that may effectively be wiped out by inflation. Meanwhile as for house moves ... well, we know all about stamp duty and what that has, over time, done for transaction volumes.

This isn’t a hard luck story. This is what the market has done and, of course, there are always winners and losers in a market economy. 

What is a shame, however, is that younger generations seem on the losing end of the market quite a lot these days - the market for educational fees, real-terms wage growth, permanent employment as well as home ownership. 

Is there anything we can do about it? Perhaps not. But the shame is that on the basis of housebuilding levels and practical measures to make homes more affordable, it seems we are hardly trying. 

For the record, here is the total household net property wealth distribution by age group, according to the Halifax:

16-24: 0.1%

25-34: 3.2%

35-44: 12.2%

45-54: 21.3%

55-64: 24.4%

65-74: 21.8%

75-84: 13.2%

85-plus: 3.9%

*Editor of Estate Agent Today and Letting Agent Today, Graham can be found tweeting all things property @PropertyJourn

  • Chris Arnold

    The 'young',with enough ambition and perseverance, can create more than enough wealth from endless opportunities.
    This seems to be another boo-hoo-poor-young crusade. Give us something for nothing.
    Plenty of examples where ambitious youngsters have created a millionaire lifestyle. It's achievable.

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    • A A
    • 05 February 2018 16:48 PM

    What were the equivalent figures in, say, 1978, 1988, 1998 and 2008, all of which, interestingly were within a couple of years of a heavy recession?

    It's always been hard to buy a first property or move up the ladder: when I started out in the early 1990s, my Mum and Dad weren't in any kind of position to make me a loan: I had to raise my whole deposit on my own. And there was no such thing as Help to Buy. Unemployment for much of the 1980s was also much higher than young people have any experience of today, and the entire country was much poorer in real terms than today, with matching wage levels.

    My generation in its youth also had to cope with wild swings in interest rates, hitting 15% for a period in the early 1990s, and it was much, much harder to get a buy-to-let loan or find anywhere decent to rent: there simply wasn't the volume or quality of private property to rent as there is now. I was a student in London in the mid-1980s and although I had a small grant, there was no space for second-
    and third-years in the halls of residence, and it was an absolute nightmare trying to find anywhere affordable to live: I remember spending three weeks cycling round the city in the summer of 1984, with all telephone calls having to be made from call-boxes (no mobile phones).

    What is to be done about the lack of supply of housing for sale or rent? Governments seem unwilling to invest tens of billions in social housing, and will only tinker around the edges of the tax system. Perhaps we need to look at abolishing the exemption of primary residences from capital gains tax, thereby reducing the demand-side attractiveness of the "property ladder", which was largely created in 1963 by the removal of Schedule A taxation on the implied rental value of property. Measures to improve supply include abolishing VAT and NICs on labour for property renovations and conversions; abolishing the 25% exemption on council tax for single people (it encourages under-occupation); and introducing a Land Value Tax (a tax on the planning status of all pieces of land, but not on the buildings that stand on them), which would encourage the release of under-utilised land for development and could permit a reduction in SDLT to encourage people to downsize and release under-occupied property. LVT, provided it were charged at a high-enough rate and updated on an annual basis, should also help reduce boom and bust cycles in housing, as it is a counter-cyclical tax (it increases as land values increase).

    Of course I'm not saying that all of these measures would be popular with all of the electorate!

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