Is Property ownership by young people become hard?

[William Hull]

A report warning that young people are finding it harder to own a home than in the past. The report stated that 31 per cent of 25 to 29 year olds own their own home, compared to 63 per cent twenty five years ago. Also, the young are finding it increasingly difficult to secure a bank loan for home ownership, and are turning to their parents. 34% of first time buyers are now depending upon family loans, versus 20% seven years earlier. The study estimates this percentage to rise to 40% by 2029. The Commission's chairman sees this as an issue for the government to address. He feels that home ownership is a sign of upward mobility. The inability to own a home has negative impacts upon the social system. The government painted a less dire picture, noting a nine-year high in the total of buyers for the first time and starts in new home construction. The Commission has nevertheless urged the government to take action. The Commission recommended that the government build over three million new homes over the next ten years. The Commission argued that government could partially fund this effort by selling off some of its public property.

Key Takeaways:

• Young people don't have access to property ownership and that impedes social mobility
• Many people don't have enough resources and assets to put down for collateral or for a down payment
• Action by the government is necessary in order to increase the supply of housing properties

"Home ownership is increasingly out of reach for young people without “the bank of Mum and Dad”, a study warns today – demanding “radical action” from the Government."

[Colin G Murphy]

Morning all 

As an Irishman who lived through the Celtic Tiger and who has been a full time investor in Tampa Florida since 2009, I´ve seen my share of bubbles and crashes.

While real estate is a great business and great way to earn a living, America is a bit obsessed with home ownership (it´s certainly not the only country) but there is no need to be. Contrary to the argument in the report above, I don´t believe for a minute that a high percentage of owner occupiers means an economy is healthy and history has shown that there is little to gain (and a lot to lose) by making it too easy for people to buy their own home. Getting the government involved in building millions of houses and convincing more Americans to buy their own homes is not necessarily a good idea, because it often makes things worse (think of the millions of foreclosures from 2008-2010). To put it simply, home ownership isn´t for everyone.

Look at Germany. Economically, it is right up there with the most powerful countries in the world right? Well, if you are worried about homeownership in the US falling from 70% to 64%, consider that the homeownership rate in Germany has been steady at 52% and most Germans are perfectly happy with that. In Switzerland, which is one of the richest countries in the world, it is just 44%.

When I was a kid growing up in middle class Ireland, there was a bit of a stigma attached to renting. If the people down the street were renters, people just assumed it was because they were a bit poorer than the rest and that they didn´t have great jobs.

There has been a big shift in attitudes since then and not just among younger generations either. In any urban area across America, you can be a successful professional with a lovely family and a happy long term renter all at the same time. I know plenty of people with good jobs that are renters and I´m sure most of you do too. 

So we have a situation across the country where banks make it very hard to qualify for a loan, where house prices, rents and student debt are all increasing quite quickly and where wages are either steady or rising at a much slower rate. You don´t need a degree in Economics to figure out that this is a combination that will create a huge new generation of renters.

My takeaway from all this is that investors have a HUGE opportunity to be key suppliers of inventory as America continues its shift away from homeownership and towards renting. You can provide great rental properties to people who want a safe place to live. 

In exchange for doing that, the renters will pay back your mortgages, build equity in your homes and provide passive income streams to fund your lifestyles and retirements.