UK: Is homeownership becoming a privilege for the elite?

Investing in brick and mortar has never been easy but recently it has become a downright privilege, according to a new report by the Yorkshire Building Society (YBS).

The YBS found that more than 70% of homeowners and first-time buyers believe that owning your own home is becoming an increasingly limited opportunity.

As the Bank of England keeps interest rates at a historic high of 5.25%, borrowing costs are elevated and mortgages are out of reach for many.

The UK property market has seen a significant slowdown in recent months, and the latest data about a major drop in mortgages forecasts more to come.

The country is battling soaring inflation which has contributed to a cost-of-living crisis, further limiting the financial resources of households.

Recent data has unveiled more of the stark reality, showing that almost 300,000 households in England became homeless or were at risk of becoming homeless, including more than 100,000 families with children, between April 2022 and March this year.

There are still many who, despite the difficulties, haven’t given up and aspire to buy their own home – but they need to adapt in many ways, according to the YBS report.

Is the UK property market reserved for the elite?

Almost four in five (78%) first-time buyers and nearly as many remortgagers (73%) indicate that homeownership is becoming an elite privilege, the YBS says, due to factors like the changing make-up of income and rising house prices.

Buyers are adapting, however, including postponing the purchase of their first home: The average age of first-time buyers cited in the report was 35 and almost two thirds of them confirmed they would be buying a house later than intended as a result of the current economic climate.

Furthermore, seven in 10 mortgage holders are considering extending their mortgage terms with 84% of those contemplating doing so all the way into retirement.

Almost all first-time buyers surveyed (94%) were saving towards a deposit, expecting that to take them four-and-a-half years on average.

Nearly nine out of 10 buyers are prepared to make responsible lifestyle choices to prioritise the biggest investment most of them are ever likely to make.

More than half of them are ready to forgo holidays and almost the same amount would cut down eating out, while more than a third would buy less new tech.

More than one-third of first-time buyers are still planning to purchase next year, with the majority saying it would allow them to stop wasting money on rent.

How the demand is changing

Ben Merritt, director of mortgages at YBS, pointed out how the demand has shifted in the market, including buyers looking for larger properties and places with higher energy efficiency ratings.

“More people are working for themselves, or employed as contractors, meaning they have unstructured incomes; while factors like the shift to hybrid working following the global pandemic are changing what they want from a home, and therefore their borrowing needs,” he said.

Renting is losing its attractiveness as an investment

More than half of first-time buyers and remortgagers think the UK is in danger of becoming a nation of renters within five years, while almost two thirds of landlords feel pushed out of the rental sector at the same time.

However, the survey also shows that a surprisingly low amount (38%) aim to buy as an investment.

Almost two-thirds of landlords taking part in the survey said that renting is becoming less attractive as an investment with increasing costs that are also impacting tenants.

Meanwhile, a critically short supply of private rented housing could leave those needing help most stranded, as the findings suggest those landlords serve couples with dependent children (34%), single parent households (18%), the low paid (9%) and those with disabilities (4%).

The majority of private landlords (66%) are intending to stick around for at least five years with many saying that the government should do more to support the rental sector in light of changes to regulation and taxation which are making it harder for them to operate profitably.