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3/4s of UK Millennials Expect to be on Property Ladder in the Next 5 Years

Posted: 10th April 2017 by
Finance Monthly
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Home ownership ambitions of millennials in the UK are still very much alive, despite the challenges of assembling a deposit for a house, according to HSBC’s first Beyond the Bricks study.

The study of more than 10,000 people across nine countries found that three-quarters (74%) of UK millennials expect to be property owners within the next five years, however, this is significantly below the global average of 83%.

Slow salary growth and house price inflation mean the British millennial generation face significant challenges compared to its global counterparts when it comes to housing affordability. The average property price in the UK increased by 7.5% in 2016, with official wage growth figures showing just a 1.9% growth.

Global statistics – millennial home ownership:

Country Millennial home owners (%) Millennial non-owners intending to buy in next 5 years (%)
Average 40 83
United Kingdom 31 74
Australia 28 83
Canada 34 82
China* 70 91
France 41 69
Malaysia 35 94
Mexico 46 94
United Arab Emirates 26 80
United States 35 80

* China survey sample includes 85% urban, 14% rural and 1% rural respondents

Country Annual house price

growth 2016 (%)[1]

Projected real salary growth 2017 (%)[2]
United Kingdom 7.5 1.9
Australia 5.4                        1.6
Canada 7.4                        0.9
China 3.6 4.0
France 0.6 1.5
Malaysia 3.2 3.9
Mexico 5.2 1.9
United Arab Emirates -5.4 0.5
United States 4.8 1.9

According to Tracie Pearce, HSBC UK’s Head of Mortgages: “This study challenges the myth that the home ownership dream is dead for millennials in the UK. With three in ten already owning their own home, the dream of home ownership for millennials is definitely alive and kicking. In the UK, they face a two-pronged problem of rising house prices and slow salary growth meaning the dream of home ownership is a challenge but not unachievable.”

Financial support from parents can make all the difference when saving for a home, and over a quarter (27%) of millennials who bought their own home turned to the ‘Bank of Mum and Dad’ as a source of funding.

Despite the challenges, many UK millennials are willing to consider making sacrifices to afford their own home.  Almost half (47%) of those intending to buy would consider spending less on leisure and going out, 33% would be prepared to buy smaller than their dream home.

The report also finds that many millennials need to consider their financials when it comes to planning for their home purchase. Of millennial non-owners intending to buy a home in the next two years, more than 1 in 3 (40%) have no overall budget in mind and a further 48% have only set an approximate budget.

Therefore it is not surprising that over half (57%) of millennials who bought a home in the last two years ended up overspending their budget.

*Average national deposit based on current industry figures

HSBC’s research identified four actions that millennials can take to help make their home ownership dream a reality:

  1. Plan early and don’t underestimate the deposit

Start planning early to make home ownership a reality sooner. Include saving for the deposit, usually the first payment you will need to make. Find a competitive mortgage to help make borrowing the rest more affordable.

  1. Budget beyond the purchase price

Think about the extra things that will make the house you buy the home you want to live in, and make sure to include them in your home purchase budget.

  1. Consider what cut backs you can make

Consider cutting back on your day-to-day spending. Think outside the box about what could help you to buy a home, such as buying with a family member or friend.

  1. Get a full view of your finances

Think of your mortgage as part of your long-term financial plan, not as a one-off transaction. Different types of home loan suit different needs and situations. Seek professional financial advice if you need help to make the right choice.

[1] International Monetary Fund: Global Housing Watch November 2016   

[2] Korn Ferry Hay Group: 2017 Salary Forecast

(Source: HSBC)

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