For Many in Britain, Being a Homeowner Is a Fading Dream

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.

Article source: http://www.nytimes.com/2011/06/24/business/global/24rent.html?partner=rss&emc=rss