LONDON — For a large number of young adults in Britain, homeownership has become increasingly difficult to achieve, viewed as a distant goal attainable only later in life, if at all.
That is a significant shift for a country where owning a home remains deeply rooted in the culture. Owners occupy a higher percentage of homes in Britain than in the United States, France or Germany.
But as the pain of government-imposed austerity sinks in, disposable income has shrunk and loan requirements have toughened, forcing more and more Britons into renting rather than buying.
The average age of first-time buyers is now 31, up from 28 five years ago, and the number of people renting has increased sharply, signs that the boom in homeownership that began under Margaret Thatcher’s government 30 years ago is starting to reverse.
Some economists are concerned that as more people are forced to wait to buy a home, the country’s wealth gap could widen, endangering the retirement prospects for a swelling group of young adults they call “generation rent.”
Charlotte Ashton, 30, has lived in rented accommodations ever since she left her parent’s home to attend university. She said she was happy sharing a five-bedroom house in the Shepherds Bush area of London with four other women but was saving for a down payment to buy her own home.
“I do believe in the fundamentals of owning bricks and mortar as security for the future, more than leaving my money in the banks at a low interest rate,” said Ms. Ashton, who works in public relations. “Unless you have a very well paid job and are willing to save every penny, it’s unfeasible to buy without the help of the bank of Mum and Dad.”
About four years ago, a first-time buyer had to raise an average down payment equal to 41 percent of annual income to buy a property, according to the Council of Mortgage Lenders. Now it is more than 87 percent of income, or about £26,500 ($42,800). And while banks were willing to make mortgage loans for more than the value of the house before the credit crisis, buyers now find they must put up at least 10 percent, and often substantially more. (The average deposit for first-time buyers is 23 percent, according to the price comparison Web site Moneysupermarket).
A study by Halifax, a British mortgage lender, showed last month that while 77 percent of 20 to 45 year-olds who were currently renting would like to buy a home, more than two-thirds believed they had no prospect of doing so. Only 5 percent said they were managing to save toward a deposit.
Those who do save, like Ms. Ashton, who has set aside the equivalent of about $50,000, are unlikely to be able to afford a home in the same area they rent in. “I would have to look further out of London or for a smaller property,” she said. So for now, like many, she is staying put.
One reason homeownership remains attractive in Britain is because property values dropped less drastically than in the United States, in part because of a shortage in housing. Prices in some large cities, including London, have even increased recently. People still perceive a home to be a better and safer investment than a pension fund, said Andrew Hull, research fellow at the Institute for Public Policy Research. “Homeownership is also culturally entrenched,” he said. “Owning a home is the main way of showing you made it.”
The big shift toward homeownership came in the 1980s with Mrs. Thatcher’s right-to-buy policy, which allowed many in rented government housing to buy their homes. About two million homes were sold, earning the government tens of billions of pounds.
At the same time, the rental market became increasingly unattractive. Unlike Germany and other Continental European countries, Britain’s private rental market is highly fragmented, with many landlords, and laws that generally favor the property owner. Most leases are for six months only, with landlords rarely agreeing to commit to longer terms; this makes renting highly insecure.
But the aftermath of the banking crisis and the recession made buying more difficult. Over the last 10 years the number of people who owned homes here dropped to 67 percent from 70 percent. Meanwhile, the number of people in private rented housing rose to 16 percent from 10 percent over the same period, according to the Office for National Statistics.
“A growing number of young would-be buyers are preparing for lifelong renting — by necessity rather than choice,” said Jonathan Moore, director of easyroommate.co.uk, a property Web site.
Katherine Fyfe is one of them. Ms. Fyfe, a 42-year-old clinical systems teacher for the National Health Service in Devon, is eager to buy her own place, but her £15,000 in savings is not enough. “I’ve been clawing money together since my divorce in 2008, but it’s not been easy as the cost of rent has bitten into most of my pay,” she said. She pays £380 a month for a room in a house in Exeter that she shares with two others.
Rising demand has pushed up rents by an average of 4.4 percent over the last year, according to LSL Property Services. In London rents increased 7.8 percent.
Being unable to buy a home is just the latest blow for a British populace already battered by severe austerity and contraction. To reduce debt, the government is cutting pensions, welfare spending and public services, and has said it will eliminate 310,000 public-sector jobs by 2015.
Amid this economic hardship, some analysts warn that a wider shift toward renting could have adverse effects on society as a whole.
“It could open up a widening of the wealth gap that already exists between homeowners and non homeowners, and people in ‘generation rent’ risk insufficient finances at retirement,” Alison Blackwell, a research director at the National Center for Social Research and author of the Halifax report, said.
It could also have implications for the cohesion of neighborhoods, she said. Renters tend to be less involved in local communities because they are forced to move more often. And the economy as a whole may suffer because renters tend to curb spending to save for a deposit.
For some, including Ms. Ashton, the prospect of buying in Britain seems so daunting that she even considered buying a property elsewhere. “I don’t rule out buying abroad,” she said. “There are many more appealing markets than Britain. Florida, for example.”
