People concerned with the difficulties faced by young people wanting houses will probably be examining the latest English Housing Survey. As expected, there are some misleading news articles:
- Home ownership collapses to its lowest level for 25 years: Millions of families and first time buyers priced off the property ladder
News articles quite accurately point out that people under 35 only own about 10% of the houses. An important missing question is: “how many should they own?“ Here is a more informative view. This graph comes from the tables released with the survey; the orange columns show how 100% of the houses are spread over various age ranges:
It is seen that the headline is really “people aged 25 to 34 only own about 10% of the houses”. I doubt if “people under the age of 25 only own a small percentage of the houses” is particularly noteworthy. It would be far more surprising if they owned a lot!
(The “55-64″ age range which looks smaller than expected comprises people born about 1948-1957. In other words, this is part of what is often called the “baby boom”).
I think it is more interesting and useful to concentrate on people 25 and over. With an average age at end of full time education of about 19, and the need to work for a while to get money for a deposit and qualify for a mortgage, this is where anguish begins. These are the young people who are worried that they may be in their 30s or 40s before they get a house, if they ever do.
So here is a graph that imagines that the important potential house-owning population are those aged 25 and older. The orange columns are 100% of the houses, (except for the tiny percentage owned by the 16-24 group), as in the graph above. The blue columns are 100% of the people of 25 and over. This graph shows how these are spread over various age ranges.
In other words, if the percentage of houses owned by each age range were exactly the same as the percentage of this age range in the “25 and over” population, houses would be spread evenly across all ages, and the orange and blue columns in an individual age range would be the same height. The graph shows that the spread is not even.
There are only two parts of this graph which significantly stand out:
- People in the age range 25-34 are about 20% of this part of the population but only have about 10% of the houses
- People of 65 and over are about 23% of this part of the population but own about 30% of the houses.
Is that it? Are these young people doomed to only half the house-ownership percentage that would be expected from their percentage of the population? Will this cohort only ever own half as many houses as older 10-year cohorts? That is certainly a major concern both of these people themselves and of anyone interested in intergenerational fairness.
It won’t be as bad as that, because no 10-year cohort reaches its peak house-ownership while they are aged 25-34. Here is a graph from “The effect of baby booms on the housing crisis of younger people“.
The mapping of birth dates to ages at 2012 is:
- 1926-1945: this is roughly the “65 and over” group which has about 30% of the houses. It’s ownership is declining.
- 1946-1955: this is roughly the “55-64″ group which has about 19% of the houses. It’s ownership is probably declining.
- 1956-1965: this is roughly the “45-54″ group which has about 22% of the houses. It has nearly peaked.
- 1966-1975: this is roughly the “35-44″ group which has about 18% of the houses. It probably hasn’t peaked.
- 1976-1985: this is roughly the “25-34″ group which has about 10% of the houses. It is unlikely to have peaked.
- 1986-1995: this is roughly the “16-24″ group which has hardly any of the houses.
Look at the 1956-1965 cohort: its percentage of house-ownership has been rising for 3 decades or more. First-time buying hasn’t been stopping at 35 before now. It is unlikely to have stopped at 35 with younger people.
The average age of first time buying is certainly increasing. (One of several factors is the increased average age at end of full time education). I predict that house buying will be spread over decades, like early cohorts. (I wonder if it will be spread over more years, just as education and having children are spreading over more years as life expectancy increases?)
I also suspect by examination of the graphs that today’s younger people won’t reach the 80% house-ownership of some earlier cohorts. But this is really guesswork because it is decades away.