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Time to promote a ‘property-renting democracy’ – Richard Ramsey, chief economist, Ulster Bank

In this column, Richard Ramsey reiterates many of the points he made in his presentation at the NIFHA Development & Asset Management Conference on 14 June at the Malone Lodge Hotel.

There’s no shortage of information on the housing market, telling us how prices and sales activity for instance are changing on an annual, quarterly or even monthly basis.

These surveys are important and give us a flavour of how the market, which is a key part of the economy, is performing. But there is a danger that we get too fixated on these numbers and miss a more important trend.

Taking a step back from the fluctuations in price and sales data, more significant are the megatrends impacting on the long-term structure of the market. Chief amongst these is changing demographics and the relative economic fortunes of different generations.

We’ve heard a lot about the ageing population impacting on the public finances and the health sector, but it is also contributing to the changing face of the housing market. In 1972 (when I was born), the number of people aged over 65 was around one-in-10 of the population. Today it’s one-in-six, and in 20 years it will be one-in-four.

Back then, every 100 people of working age (16-64) supported 19 pensioners. In 2015, the ratio was 100 to 24 and in another five years, this will have increased to 30 pensioners for every 100 working-age people. The speed of change in the eight years between 2015 and 2023 was great than in the previous four decades. And this trend will only accelerate, meaning that by 2061, the ratio will be two to one.

The number of people in the first-time-buyer bracket (i.e. aged 25-34) peaked in the late 1990s and is forecast to not get back to anywhere near that level any time in the next 20 years. Similarly, the home-mover market (aged 35-44) peaked quite some time ago, is currently well below that level and is forecast to go on a downward trajectory in the 20 years ahead.


This has wide-ranging implications for housing. For one, it changes the supply and demand dynamics of the market and the mix of housing that is required. The market has always been subdivided into the following categories – first-time buyers, home movers and downsizers. As a result of the demographic changes, the latter category will surge and become the biggest driver of the market. Developers, housing associations and other players in the market will have to respond.

Of equal significance is the economic position of the younger-generation today. When we look at both the first-time buyer segment of the market and the home-mover segment, we see that their economic situation has been deteriorating.

The labour market at a headline level looks like it has been performing very well, with record employment and record-low unemployment. However, real earnings have been stagnating, and we have been seeing the younger generations faring less well than their older counterparts in terms of wages. Job quality and tenure, as well as increasing instances of insecure work (e.g. zero hours contracts) have also been issues.

All of this means has an impact on the type of housing tenure that people can afford.

Home-ownership has traditionally been the housing tenure of choice across all age-groups.  In the UK, Governments over the years actively promoted home-ownership through a variety of measures. Most notable of all was Margaret Thatcher’s Right to Buy scheme, enabling council house tenants to purchase their homes at a discount. This formed part of a wider aim to promote a ‘property-owning democracy’.

Fast forward to today and this model is unrecognisable to the younger generations. Despite being the best educated generation in history, home-ownership for millennials in NI and the UK has collapsed. Millennials are those born between 1982 and 2000 which broadly corresponds with the first-time buyer age-bracket (25-34 years of age). Back in 2005, over two-thirds of individuals in the potential first-time buyer age bracket owned their own homes. By 2017 this had plummeted to 38% (a rise from 35% in 2016). Even those getting on the first-rung of the property ladder required £17k on average as a deposit. Similarly the prime home-mover age-group (35-44yrs) – dubbed the negative equity generation for NI – has fallen from over three-quarters to 59% over the last decade. For over 45s, more than two-thirds are still owner-occupiers with three-quarters of those aged over 65 years of age.  As a result, the private rented sector has become the dominant housing tenure for millennials and a growing number of working-age households.

The Resolution Foundation, a think tank that champions the cause of younger generations, highlights a number of stark facts and the growing unaffordability of housing for younger generations. Half of all millennials will rent into their forties while one-third will rent into retirement.  For the latter, their biggest monthly outgoing (rent) will never be paid off / disappear. ‘Generation rent’ may be required to work until they literally drop. Other challenges include the growing share of households / children that will be raised in private rented accommodation and exposed to the insecurity of short-term leases. Meanwhile demand for social housing is expected to continue to grow.

Even for those households that manage to get into property ownership, they are less likely to have the means or desire to upsize in later years. Conversely, the surge in the number of individuals aged over 65 years of age is going to lead to a boom in would-be downsizers. Therefore we will see a demographic and economic demand mismatch between upsizers and downsizers.

On the supply side, the key issue is whether there will be sufficient housing of an appropriate nature for this potential downsizing tsunami? The challenges of an ageing population will apply to social housing too. Will we see a boom in pensioner bungalows and retirement villages to house our ageing population? In addition, how will the increasingly complex and costly needs of an ageing population from dementia to mobility issues be accommodated?

In the same way that technology has enabled firms such as Google, Amazon and Uber to disrupt their respective markets, demographic trends and the relative economic fortunes of different generations will disrupt our housing market. To date, too little attention has been given to this changing dynamic. Governments and policymakers will have to proactively respond to these challenges. Rather than solely promoting a ‘property-owning democracy’ we need to see a ‘property-renting democracy’ championed too. Otherwise intergenerational tensions will intensify.

This blog appeared in The Irish News on 19 June 2018.