20th Jan 2012 Rightmove’s early indicators of housing market activity in 2012 show that interest in buying is strong despite the lack of mortgage finance, though the willingness or ability of new sellers to come to market remains weak.
Search activity on Rightmove during the first 10 days of 2012 reached new record heights, up by 27% on the same period in 2011, as prospective movers intensively research the market.
However, they are faced with the lowest level of new supply per estate agency branch that Rightmove has ever recorded – an average of less than one new listing per branch per week.
Miles Shipside, director of Rightmove comments: “Old records are being shattered as search activity is up by a staggering 27% on this time last year. Potential buyers and sellers are looking more often and researching more thoroughly. In areas where there is a lot of property up for sale, buyers are looking hard for properties that tempt them with something really special in terms of value, potential, location or quality of finish. If it doesn’t shout ‘special’ then they are unlikely to overpay for the privilege of buying an average property in these mortgage-constrained times. In locations where there is little stock for sale, they appear to have become online junkies, ready to pounce on fresh property coming to market to see if it will satisfy their housing need. This search-addiction is in part caused by each estate agency branches currently listing an average of less than one new property per week, an all-time low and around half of pre-credit crunch levels.
The market is stuck in a low transaction volume pit that will be hard to escape from without the mortgage funding to satisfy what appears to be strong pent-up demand.”
There have been more than 44 million property searches on Rightmove during the first ten days of 2012.
While this doesn’t necessarily indicate a surge in proceedable buyer numbers, it does highlight a strong pent up demand to move and is also a reflection that value-seeking buyers who can proceed are taking extra care to research the market. It also emphasises the fact that, were a larger number of mortgages available to the market, the interest, confidence and necessity to buy would lift the current muted sales transaction numbers from the virtual subsistence level of the last three years.
As well as less property coming to market there is less available stock already on the market compared to the same period last year. Average unsold stock per estate agency branch is 66, the lowest we have measured since February 2010. The 36,433 properties coming to market this month equate to an average of less than one new listing per branch per week. This is the lowest recorded in the ten years of Rightmove’s House Price Index and around half of pre-credit crunch levels. Agents report prospective sellers are being deterred by a combination of a shortage of confidence, lack of choice of property to buy and restrictive mortgage lending.
Depending on local market conditions, there will be differing pressures on the direction of prices. The lack of property coming to market in some areas will help to underpin new sellers’ asking prices in those locations, especially as estate agents compete to attract fresh stock for the new year. January often sees the beginning of a ‘spring bounce’ in the asking prices of properties coming to market, and there is again evidence of this with an increase of 1.4% in the first week of 2012. This is masked within the overall monthly price fall of 0.8%. In spite of the challenging market, year-on-year asking prices remain virtually unchanged, up by a nominal 0.4%, though with RPI running at 5.2% this represents a fall in real terms.
Shipside explains: “The increased market fragmentation caused by the credit crunch means that success in selling now requires a very careful and complex micro-market analysis, rather than a wishful price-punt to see what happens. There can be hotspots and blackspots by property type within the same geographic location depending on local buyer confidence, demographics and their ability to obtain a mortgage, so doing your research and taking expert advice are critical. There will be upwards price pressure where the local market is short of a type or style of stock. In these areas, getting your property onto the market soon could be to a seller’s advantage given the strong upsurge in property search activity.”
Rightmove forecasts that the market will remain challenging and fragmented during 2012. There are opportunities and threats within local micro-markets for different categories of buyers and sellers. Some of the groups that stand out as potential winners and losers in 2012 are:
Winners in 2012:
- The Mortgage-Ready. Deposit-assisted first-time buyers and equity-blessed trader-uppers will be able to access historically cheap mortgage deals and be sought after and fought over by sellers in areas of property over supply. Shipside comments: “Mortgage-ready first-time buyers have lots of bargaining power. Some will benefit from parental assistance. Others, who wish to buy a new build home, can benefit from a variety of schemes such as FirstBuy and the imminent Government-backed mortgage indemnity guarantee, aimed at assisting them to realise their dream of home ownership. Those who are selling to trade up will have to offer good value on their sale, but should be able to offset any reduction by negotiating hard on their purchase.”
- Savvy Buy-To-Letters. Buy-to-let investors who can identify where tenant demand and rental levels will give good secure returns compared to local capital values are being strongly courted by lenders. Shipside explains: “There are nearly three times more buy-to-let mortgage products available than two years ago. With low yields on most alternative investments, 2012 is potentially a good year for investor landlords to expand their portfolios.”
- The Special Ones. Those selling properties ‘with a difference’ have an opportunity to stand out from the crowd, especially if they operate in a micro-market where there is a shortage of supply of their property type or style. Shipside adds: “With discerning buyers seeking value, estate agents will be competing hard to attract the attention of owners who are selling a property that offers something special.”
- Golden-Oldies. Agents report that in locations of low stock for sale and shortages of fresh stock coming to market, some properties that have been on the market for a long time are now attracting interest. Shipside comments: “New-on-the-block potential buyers will look at everything that is available no matter how long it has been for sale, while due to the lack of choice, more long-standing searchers are re-considering properties that they have previously discarded. Relaunching a stale property by combining a price reduction with refreshing of photographs to show off previously hidden ‘golden features’ of a stale property could do the trick with this upsurge in buyer interest.”
Losers in 2012:
- Trapped Renters. 55% of renters state they wish to buy but cannot afford to, according to Rightmove’s recent Rental Market Report. Shipside comments: “With the upwards pressure on rents, many tenants will be thinking they could pay less on a mortgage if only lenders would relax their deposit criteria.”- The Upwardly Immobile. There are a large number of homeowners who would like to trade upwards, but find themselves immobilised in a property that no longer suits their needs. They are equity-poor and stuck in their existing property, as the size of the deposit that they would need in order to move on or move up is more than they could raise from the sale of their current home. Shipside explains: “Many would-be first-time sellers will fit into this category. They will be further disadvantaged by the removal of the stamp duty holiday at the beginning of March for their target audience of first-time buyers.”
- The Average Ones. Those selling properties ‘without a difference’. In areas of over-supply, a property that is ordinary must be made extra-ordinary either by reducing its price or by improving its appeal, if that is practically and financially feasible. Shipside comments: “In locations with plenty of choice, sellers that do not or cannot offer a special home or a special deal are likely to be left on the estate agent’s shelf. There is a ‘mass-market mortgage desert’ now parched of funds. They were formerly provided by overseas and UK lenders, raising funds in the wholesale money markets that have now effectively closed down. To stand out as the exceptional property where supply really outstrips demand requires a financial hit that many are not willing or able to take unless they are absolutely forced to.”
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House prices increased by 0.4% in October according to the latest Nationwide House Price Index out today.
The price of a typical home in October is now 0.8% higher than one year ago.
Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said:
“UK house prices increased by 0.4% in October, lifting annual house price growth into positive territory for the first time in six months. The price of a typical home was 0.8% higher than October 2010.
“Given the challenging economic backdrop, October’s data is encouraging, but it doesn’t fundamentally change the picture of a housing market that is treading water. Property transaction levels remain subdued, and prices essentially flat compared to last year.
“The outlook remains uncertain, but with the UK economic recovery expected to remain sluggish, house price growth is likely to remain soft in the period ahead, with prices moving sideways or drifting modestly lower over the next twelve
months.”
31st August 2011
Home ownership in England will slump to just 63.8% over the next decade - the lowest level since the mid 1980s - as an entire generation are effectively locked out of the housing market, according to a new study.
Huge deposits, combined with high house prices and strict lending criteria, have sent home ownership into decline in recent years and the downward trend will continue for the foreseeable future, the National Housing Federation’s independently commissioned forecasts predict.
The Federation, which represents England’s housing associations, warned the housing market will be plunged into an unprecedented crisis as it forecast steep rises in the private rental sector, huge social housing waiting lists, and a house price boom – all fuelled by a chronic under-supply of homes.
•In England, the proportion of people living in owner occupied homes will fall from a peak of 72.5% in 2001 to 63.8% in 2021.
•In London, the majority of people living in the capital will rent by 2021 with the number of owner occupiers falling from 51.6% in 2010 to 44% by 2021.
•The North East will be the only English region to see any increase in owner occupier numbers over the next decade, rising marginally from 66.2% to 67.4%.
•The average house price in England will meanwhile rise by 21.3% over the next five years from £214,647 in 2011, to £260,304 in 2016, according to Oxford Economics, who were commissioned to produce the forecasts.
For the hundreds of thousands of people locked out of the housing market, the options open to them will be limited and increasingly expensive.
Average rents in the private sector are forecast to increase sharply by 19.8% over the next five years fuelled by high demand and a shortage of properties. Oxford Economics predicted that would mean rents would increase on average in England from £486 a month in 2011 to £582 a month in 2016, meaning tenants would be paying £1,152 more a year in total.
Around 4.5 million people are currently stuck on social housing waiting lists – but only those in the most desperate of circumstances have a realistic chance of being allocated a home.
At the heart of the problem remains a chronic under-supply of new homes. In 2010/11 just 105,000 homes were built in England – the lowest level since the 1920s. Plans for more than 220,000 new homes have been abandoned by local authorities since the Government announced the abolition of regional house building targets last year.
The Government’s latest projections suggest new households will form at a rate of 232,000 a year to 2033. Housing associations produced nearly half of all homes built in England last year and are on course to deliver 50,000 affordable homes a year – despite seeing government grants slashed by 63%.
More government investment in affordable housing would stimulate a wider, faster economic recovery and help fix our broken housing markets, according to the Federation.
It is calling for suitable surplus public land to be made available for the building of affordable homes, for local authorities to regularly assess housing need and for ministers to make a renewed commitment to building the homes the country needs.
For housing associations to secure their financial futures, it is also vital that ministers scrap plans to remove tenants’ rights to have their housing benefit paid direct to their landlord, which could seriously hinder associations' ability to borrow from the banks.
Federation chief executive David Orr said: “With home ownership in decline, rents rising rapidly and social housing waiting lists at a record high, it’s time to face up to the fact that we have a totally dysfunctional housing market.
“Home ownership is increasingly becoming the preserve of the wealthy and, in parts of the country like London, the very wealthy. And for the millions locked out of the property market the options are becoming increasingly limited as demand sends rents rising sharply and social homes waiting lists remain at record levels.
“At the heart of this crisis is a chronic shortage of new homes. Despite the overwhelming need to increase supply, house building has slumped to a 90-year low, plunging the country even deeper into the mire.
“Ministers need to make unused public land available to housing associations, local authorities must assess the level of housing need in their area, and housing has to be finally treated as a top political priority.”
12th August 2011
Forget the old theories. It is the flow of equity that currently drives the housing market and, where it does not reach, there will be little real price growth according to Yolande Barnes, head of Savills Residential Research in the latest issue of The Residential Property Focus.
Radium, anti matter, and the Higgs Boson particle are not usually items that start an article about the UK housing market but they do illustrate how good physicists are at finding missing elements when their theories show they should exist.
What is true of physicists however is not true of some property economists who seem to be clinging to a few explanatory variables rather than acknowledging that other, previously undiscovered, forces may be at work in the UK housing market.
Predictions of another housing market crash are still being made by some on the basis that the average house prices to average incomes ratio is still high in relation to historic levels. But it is impossible to explain recent housing market behaviour and price growth since 2009 if all that matters in the housing market is household incomes and mortgage rates.
We have been observing the prime markets for over 30 years and, in so doing, have noticed the very low reliance their behaviour has on mortgage rates, lending policies or the world of debt in general. Rather, it is new wealth, bonuses, savings and investment, domestic and overseas, that drives these markets. In short, equity, not borrowing, is key.
We have long suspected the equity used in prime markets has not just leaked but sometimes cascaded into surrounding markets and down into the mainstream markets. Anecdotal evidence has pointed to such a "champagne tower effect" but it is difficult to measure and so has been ignored by the macroeconomic scientists – despite being an increasingly obvious component of UK housing market behaviour.
The Eureka moment has been in measuring, as well as observing, housing equity. First its existence was quantified in the UK housing market as £2.9trillion of owner occupied stock, then it was observed and measured flowing from overseas into the prime London market at the rate of £3.7billion in a single year.
In measuring equity, it became apparent there is a divide between those that have it and those who do not. This is a Generational Divide: equity is concentrated among the older age groups; it is a Geographical Divide: equity is concentrated in London and the South; and it is a Tiered Divide: equity is concentrated at the prime end of the market.
With less debt finance available, it is as if the glasses at the edge of the tower have been emptied and are waiting for equity to make up the deficit. The champagne tower of the housing market may be filling at the top and in the centre (London) but it has most definitely not reached the equity-starved edges.
5th August 2011
Analysis of data from the five leading house price indices shows that the average UK house price has now risen consistently for the first half of 2011, from £195,425 in January to £198,908 in June.
This is a rise of £3,483, or 1.8% since the start of the year. Annually, prices are down 1.2%.
All of the annualised average rates of growth continue to point to increasing market stability, with the annualised monthly growth now at 3.3%, the six month annualised rate at 3.5% and the three month rate of growth at 2.3%.
Stuart Law, Chief Executive of Assetz, said:
"GDP figures released this week show that economic conditions are faltering but still positive with a strong services sector, falling unemployment and strengthening house prices combining to present a brighter economic outlook than at the start of the year.
"Looking at all the house price data together, it is clear that the overall trend is one of positive growth in the last six months, with pent up demand from people who need to move and the rapidly growing appetite of buy to let investors supporting price growth. There is no other choice of investment currently available to investors which is as safe and producing such a strong income as buy to let, with 8% gross yields being achieved in regional cities such as Manchester and Leeds. Tenant demand continues to strengthen to new highs.
"The availability and interest rates of mortgages are also improving each month, steadily reversing the finance famine which has restrained the market from an earlier recovery. Several lenders, such as Yorkshire BS, Barclay's, Abbey, Natwest, Halifax, Northern Rock, Leeds BS and RBS have all announced reductions in their fixed rate deals over the last few weeks, making borrowing even more affordable.
"Improving market conditions could be jeopardised, however, if the Bank of England refrains from raising interest rates in a slow and measured fashion. It was too slow to reduce rates as we entered the recession, which led to a series of rapid rate reductions in an attempt to stimulate the economy. Its failure to raise rates now could result in a series of panicked rises in 2012 or 2013 to combat inflation, which would have a serious impact on consumer affordability and confidence."
HOMEOWNERS were cheered last night as a report revealed that house prices shot up £2,000 last month as the summer property market gathers steam.
Confidence-boosting record low interest rates, cheaper mortgages and rising employment have helped the £67-a-day rise.
The price of a typical three-bedroom semi is now £163,049 – up £2,010 or 1.2 per cent on May’s price, according to Britain’s biggest mortgage lender, the Halifax.
Interest base rates are today expected to be held at 0.5 per cent by the Bank of England for the 28th month in a row. And that has helped lighten the burden for borrowers seeking mortgages with lenders battling to offer competitive deals.
Typical mortgage payments for new buyers fell from a peak of 48 per cent of average disposable earnings in mid-2007 to 28 per cent in the second quarter of 2011.
And an extra 80,000 people came off the dole queues in the three months to April, compared with the previous three months.
“Economic conditions are definitely improving, with a booming services sector and rising employment.
“All the house price data is quite clearly showing that the overall trend is one of positive growth since the end of last year.
“The availability and rates of mortgages are steadily improving and the pent-up demand from people who need to move, as well as buy-to-let investors keen to take advantage of strong yields, is driving prices back up.”
Mark Montgomery, commercial director for 1st Property Lawyers, warned potential buyers who were waiting for price falls to act quickly before prices rose even further. “They could seriously live to regret waiting,” he said.
Almost a third of landlords (29%) said that their rental income increased during Q2 2011, research carried out by buy-to-let mortgage specialist Paragon has revealed.
Paragon's quarterly research showed 13% of landlords surveyed had increased rental rates across their portfolios by between 2% and 4% - with 4% saying they had increased rental income up to 6%.
Of those surveyed, 8% said their rental income had risen by 2%, with 4% saying it had increased by more than 6%.
There is a clear difference between the results from smaller scale and professional landlords. Nearly one in five smaller scale landlords (19%) reported rising rental income during the quarter, but the overwhelming majority (75%) said rents remained unchanged.
For professional landlords, however, it is a different picture, with almost a third (32%) saying their rental income had increased in the first quarter and only 2% saying that it had decreased in Q2.
Nigel Terrington, Paragon Group Chief Executive, said: "Results from our latest research shows that rental income has increased steadily during the second quarter. Landlords are continuing to experience high levels of demand for their properties so have been able to make small increases to rent levels, without making accommodation unaffordable.
"Demand for privately rented property shows no sign of slowing down with four out of ten landlords (40%) believing that tenant demand is either growing or 'booming', and will continue to do so for the next 12 months.
"However, it is increasingly important that finance for landlords becomes more readily available, so landlords can respond to growing demand for rental properties."
Tuesday the 21st June
After three months of successive house price falls, the market is once again showing signs of stabilizing according to the latest Chesterton Humberts/cebr May 2011 House Price Poll of Polls.
However, unlike last summer’s recovery in house prices (which ended prematurely in late August), there are signs that this second stabilization in prices is here to stay.
Last summer’s housing rally took place during a time when secured credit was still being cut and economic conditions were weak. This time however, the second phase of the housing recovery will be underpinned by modest increases in mortgage lending – albeit still below credit crunch levels.
Housing transactions suffered from modest falls as the extended Bank Holiday weekends reduced the number of sales. The Bank of England reported that the number of approvals declined from 47,600 in March to 45,166 in April.
Nevertheless, a steady number of buyer enquiries and a pick up in viewings - supported by the unusually good weather in April – has improved sales expectations for the immediate future.
House price falls have begun to stabilise although the future remains uncertain as the mortgage market remains in turmoil. Higher sales to stock ratios indicate that the market has tightened modestly – sales now account for roughly a quarter of unsold stock, which is still lower than the long-run average of around a third.
Only two out of seven national house price indices are reporting falls in house prices over the month. This month’s Poll of Polls confirms that prices stabilized over May – ending seven consecutive months of house price falls since September 2010.
Robert Bartlett, Chesterton Humberts’ CEO, comments:
“The Poll of Poll results this month are encouraging, with house prices holding steady for the first time in seven months. While mortgage rates are lower than before the credit crunch, households are still being squeezed on three fronts: the continuing lack of access to credit, slow wage growth and higher inflation in the commodities sectors, which have kept confidence low and indicate a difficult year ahead for the consumer. The slight improvement in mortgage availability last month has helped to steady house prices and demonstrates how this lack of funds acts as a stranglehold on the market.
“The announcement from the BOE that interest rates are likely to be held at 0.5% is very welcome news indeed for the UK economy. Most inflationary factors currently affecting the UK are beyond the scope of the Bank of England to resolve and a rise in the UK base rate would have little impact on curbing inflation. Any rate rise currently would have a significant negative impact on the fragile economic recovery.
“The outlook for the UK housing market remains fragile and varied. Whilst London continues to perform well it is a very different story in the regions.”
Monday the 20th June
Loans for house purchase increased in April, according recent data by the Council of Mortgage Lenders.
But, with Bank of England data showing a fall in house purchase approvals in April, there could be a lull in house purchase completions in the next few months.
There were 40,900 loans, worth £5.9 billion, advanced for house purchase in April, up from 37,900, worth £5.5 billion, in March and down from 41,900, worth £6 billion, a year earlier. While this is a further increase compared to earlier in the year, house purchase activity is still below the level seen in April last year.
Remortgage lending fell in April. 24,700 remortgage loans were advanced, worth £3 billion, compared to 34,100, worth £4.1 billion, in March. This is fractionally higher than April last year.
With remortgage activity currently linked to expectations of interest rate movements, future activity will be subdued as an imminent increase in the bank rate is now looking less likely. There was also a fall in remortgage approvals in April so remortgage completions are likely to remain modest in the coming months.
The number of loans to first-time buyers increased by 8% in April, from 14,700 (worth £1.7 billion) in March to 15,800 (worth £1.9 billion). Loans were also up slightly from 15,700 (also worth £1.9 billion) in April 2010.
First-time buyers borrowed on average 80% of their property’s purchase price in April, more than for most of the last two and a half years, but still well below the 90% that first-time buyers typically borrowed before 2008.
Mortgages to home movers also increased in April, with 25,100 advances, worth £4 billion. This is an increase of 8% (5% by value) compared to March, but, unlike lending to first-time buyers, a fall of 4% (2% by value) compared to a year ago.
Home movers have typically borrowed just below 70% of their home’s purchase price since the middle of 2009 – in April it was 69%.
For the second month running, in April 2011, only 4% of first-time buyers took out an interest-only mortgage. Before 2008, it was typical for around 30% of loans to first-time buyers to be on an interest-only basis. This shows here has been a clear shift away from interest-only mortgages, in particular for first-time buyers, since the financial crisis.
Michael Coogan, CML director general said:
"The market continues on a stable footing and the increase in house purchase lending is a good sign that the stability will continue throughout 2011. However, the economic outlook, coupled with Bank of England subdued approvals data for April, suggests a muted summer for mortgage completions so we do not expect further increases in lending over the coming months."
Monday the 13th June
Increased tenant demand and low levels of rental property coming onto the market pushed rents higher in the three months to April, according to the latest RICS UK Residential Lettings Survey.
Overall, 42% more surveyors reported rents rose rather than fell in the three months to April (up from 40%). Although rents increased across Great Britain, it was London and the South East which saw the most notable increases.
Comments from surveyors reveal that rents in some areas have now risen so sharply that previously affordable homes are now unattainable to many, as an increasing number of renters are priced out of the market.
Meanwhile, home ownership remains out of reach for many would-be buyers, partly because of the high deposits required by lenders, but also due to the cost of available mortgage finance.
As a result, surveyors report that many people have little choice but to rent. In the three months to April, 35% more respondents reported demand rose rather than fell – the highest level for more than two years.
Turning to supply of rental property to the market, 6% more surveyors reported new instructions from landlords increased rather than fell – taking the net balance into positive territory for the first time since April 2009.
Instructions from landlords to let flats showed the most pronounced change, with a net balance of +6% (from -7%). The increase for houses was slightly less than in the previous three month period (+2 compared with +5%).
Despite an upturn in new instructions, supply to the market still remains unable to keep up with demand. Tenants are staying longer, resulting in less availability, while fewer landlords are selling their properties at the end of a tenancy. Just 2.8% of landlords sold property in the three months to April (down from 4%).
Looking ahead, the overall rental outlook remains strong, with 33% more surveyors expecting rents to rise rather than fall. Expectations for rental prices were highest in London, followed by the Midlands, the South East and the North.
RICS UK spokesperson James Scott-Lee said: "Although we are beginning to see more mortgages aimed at first-time buyers, many potential homeowners are still restricted from getting a foot on the property ladder, leading to increased demand in an already oversubscribed rental market.
"There has been a small uplift in supply, but the imbalance between demand and availability can only mean rents will continue to rise."
Monday the 6th June 2011
The April data from Land Registry's flagship House Price Index shows an annual price decrease of 1.3 per cent which takes the average property value in England and Wales to £163,083.
The monthly change from March to April is an increase of 0.8 per cent.
Two regions in England and Wales experienced increases in their average property value over the last 12 months. The region with the highest annual price change was London with an increase of 5 per cent. London also experienced the greatest monthly rise with a movement of 3 per cent. The North East experienced the greatest annual price fall with a decrease of -8.1 per cent. This region also experienced the most significant monthly price fall with a movement of -1.7 per cent.
The most up-to-date figures available show that during February 2011, the number of completed house sales in England and Wales decreased by 10 per cent to 38,336 from 42,515 in February 2010. The number of properties sold in England and Wales for over £1 million increased by 14 per cent between February 2010 and February 2011, from 399 to 454.
Peter Rollings CEO of London estate agent Marsh & Parsons, said:
“London is defying the dip in house prices elsewhere in the UK.
“The figures show a monthly jump rise of 3% in April but in some prime parts of London, we can confirm they are even higher. Prices in London have gone up by 5% this year and with limited supply and huge demand, we believe this trend will continue. But in Hammersmith & Fulham and Kensington & Chelsea, where Marsh & Parsons have 7 offices, the rise is 6%.
“The reason is that there is still a shortage of property on the market, around 50% of its long term average however, although there is a pent up demand building, some potential buyers are still being restrained by the inadequate availability of mortgage finance.
“Today, the CEBR stated that house prices are close to bottom and that London will rise 2% faster than the rest of the UK. That being the case, London represents good value – especially for overseas buyers who can leverage the relative weakness of sterling against the dollar and euro.”
Wednesday the 1st June 2011
Britain is home to a generation of renters who are giving up on buying their own property, an in-depth new report has revealed.
If these attitudes become reality, the shape of Britain's housing market will be fundamentally changed within a generation.
According to the report - the most in-depth research into the attitudes and behaviour of young people toward home-ownership since the credit crunch - 77% of all non-homeowners still aspire to own a home.
However, despite this aspiration, nearly half of 20-45 year olds say Britain is becoming more like Europe where renting is seen as the norm and predict Britain will become a nation of renters within the next generation.
Commissioned by Halifax and produced by the National Centre for Social Research (NatCen), the report analysed the results of a survey of 8000 20 to 45 year-olds, and identified the emergence of "Generation Rent": two thirds (64%) of non-homeowners who believe they have no prospect whatsoever of buying a home.
The perception that banks are not lending, the size of mortgage deposits necessary, and a fear of the application process has prevented "Generation Rent" from making any significant attempts to buy a home. Longer-term, only 5% of this group are making sacrifices to save for a deposit. Some 95% say they have no spare cash, no interest in saving for a deposit or were trying to save but failed to do so.
Stephen Noakes, Commercial Director, Halifax Mortgages, said: "Our research indicates just how many potential first-time buyers are not making it to the application stage because of a fear of being declined."
The report revealed widespread pessimism about lenders and the mortgage application process:
* 84% say first-time buyers are put off by a belief that banks do not want to lend to them and find excuses to turn them down;
* 92% see it as hard for first-time buyers to get a mortgage, with 60% seeing it as very hard or virtually impossible;
* 67% believe there is a general perception that everyone is rejected by lenders so there is little point in applying;
* 61% say that first-time buyers do not want to go through the stress and anxiety of applying for a mortgage.
Alison Blackwell, NatCen report author, said: "The phenomenon of Generation Rent could have major socio-economic implications. It would mean fewer homeowners being able to buy and therefore fund the construction of the new homes required in the UK to meet demand, resulting in a slowing down in the housing market. It could open up a widening of the wealth gap that already exists between home-owners and non home-owners. And people in Generation Rent risk insufficient finances at retirement."
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