Young British adults’ homeownership circumstances and the role of intergenerational transfers

Abstract

<jats:p>Despite the continuing preference for homeownership, it has become increasingly difficult for young adults to own a home in Britain. House prices have increased faster than real earnings between the mid-1990s and the 2010s, resulting in significantly deteriorated affordability. Mortgage products have also become less accessible, as a large deposit has been required to secure the loan after the financial crisis of 2008/09. Previous studies point to the increasing role of intergenerational transfers in filling this gap. Some young adults obtain help from family to become homeowners, either receiving monetary support or by saving through living at the parental home. Using the Wealth and Assets Survey, this study attempts to examine the effect of these two types of family financial support on young adults’ homeownership circumstances, and controlling for other characteristics such as parental homeownership. First, it examines the characteristics of homeowners among young adults cross-sectionally using logistic regression. Second, by focusing on the non-homeowner subsample it analyses the effect of direct (money) and indirect (co-residence) family support on young adults’ entry to homeownership in the six-year period using discrete-time event history analysis. The results show that chances of young adults’ homeownership between 2008/10 and 2014/16 are very much tied to family support. The odds of becoming homeowners who have received direct or indirect support are found to be three times higher, even after accounting for other characteristics.</jats:p>

Can't save or won't save: financial resilience and discretionary retirement saving among British adults in their thirties and forties

“…Substantially smaller proportions of the younger generation own a home compared to their parents’ generation at their ages as it has become more difficult to enter the housing market. Home-ownership outcomes for the younger generation are increasingly linked to parents’ socio-economic standing (Coulter, 2017 a ; Suh, 2020 a ).…”

“…Intergenerational transfers, such as inheritance, cash gifts or informal loans, have become more prevalent in recent years (Karagiannaki, 2011 b ; Karagiannaki and Hills, 2013); three-quarters of British adults born in the 1970s have either received or expected one (Hood and Joyce, 2017). Such a transfer is also found to be associated with substantially increased chances of becoming home-owners among young British adults (Suh, 2020 a ), which could then motivate retirement saving (PPI, 2018). An industry study reports that around half of 30–45-year-olds expect an inheritance, and that it could prompt them to consider retirement saving (Old Mutual, 2017).…”

Intergenerational wealth transmission and homeownership in Europe–a comparative perspective

“…One example of this is “asset-based welfare,” where security in old age is based on homeownership (often financed by a home mortgage) rather than a pension [ 53 ]. Another example is that young adults in the UK were found to believe that investing in housing assets is the best value-for-money retirement option, due to the neo-liberal policy which significantly reduced old-age pension allocations [ 54 ]. Homeownership also has symbolic power as a highly visible representation of status [ 55 ].…”

“…IWT is essential for purchasing housing assets in many countries. Previous studies reveal that homeowning parents or parents who transfer wealth to their children increase the likelihood of the latter’s becoming homeowners themselves, as was found in France [ 9 ], the Netherlands [ 65 ], and the UK [ 54 ]. One remarkable example consists of recent mortgage deals in the UK, which offer mortgages secured using parents’ savings or home equity [ 54 ].…”

“…Previous studies reveal that homeowning parents or parents who transfer wealth to their children increase the likelihood of the latter’s becoming homeowners themselves, as was found in France [ 9 ], the Netherlands [ 65 ], and the UK [ 54 ]. One remarkable example consists of recent mortgage deals in the UK, which offer mortgages secured using parents’ savings or home equity [ 54 ]. The literature also suggests that a socialization process shapes preference towards homeownership earlier in the life cycle, depending on the parents’ homeownership tenure.…”