Gen Z’s Housing Crisis
Just got back from a sun-soaked holiday in Europe?
You're not alone - many Gen Zers are doing the same.
And as the narrative goes, Gen Z supposedly can’t afford homes because they’re splurging on luxuries like Netflix, vacations, and flashy cars.
But is that really the full picture? The truth is far more complicated.
With the housing market becoming increasingly unaffordable, Gen Z is shifting its focus from saving for a house to enjoying life’s fleeting moments. The dream of owning a home seems more out of reach than ever, pushing this generation to prioritise experiences over property.
In this post, we’ll uncover five eye-opening truths about the widening generational wealth gap and explore why buying a home is so much harder for young adults today than it was fifty years ago.
Truth 1 - The Average Cost of a House Is 72x Higher Than in the Early 70's.
The numbers are staggering, to say the least.
In January 1970, the average house price in the UK was just £3,920.
Fast forward to January 2023, and that figure has soared to £283,209.
This means homes today are worth a whopping 72 times more than they were just over 50 years ago — an insane price increase that has left Gen Z struggling to get a foot on the property ladder.
The dream of homeownership is slipping further out of reach.
Source: Land RegistryTruth 2 - Wages Haven’t Kept Pace with House Prices
While house prices have skyrocketed, wage growth has lagged far behind.
In 1970, the average UK annual salary was around £1,664, compared to £42,210 in 2023.
So, here’s the problem: Over the last half-century, house prices have surged over 72 times, but wages have only increased 25 times.
How much have prices increased over the last 50 years?
Price in Jan 2023 relative to Jan 1970
Source: Land Registry, The Guardian, IndeedThis is the fundamental issue.
Saving for a house deposit used to take about a year, and moving into your dream home soon after was achievable.
First-time buyers now face a much longer savings journey due to rising living costs, and mortgage repayments are tougher than ever to afford.
The house-to-wage ratio has jumped from 2.4x in 1970 to 6.7x in 2023, making it harder than ever for young people to get on the property ladder.
Truth 3 - 83% of Homeowners Agree: It’s Harder for First-Time Buyers Now
Despite what some might say on social media, the majority of people don’t believe that too many "avocado on toast's" are why the younger generation can’t afford homes.
In fact, 83% of homeowners—across all age groups—believe that first-time buyers today face more difficulty entering the housing market than they did.
“83% of homeowners across all age groups feel that first-time buyers face more difficulty than they did.”
This widespread feeling highlights just how much the generational wealth gap is being recognised.
Myths aside, it's clear that the challenges young adults face today are unlike anything we've seen before.
Truth 4 - One in Six Boomers Owns a Second Property
Here’s where it gets tricky: one in six Baby Boomers in the UK owns a second property, often renting it out to younger generations.
This allows them to use rental income to cover mortgage payments, putting them in a strong position to buy even more property.
While this helps Boomers build wealth and support their families, it makes it harder for younger generations to save, as they face high rent and living costs.
This demand pushes up house prices as more buyers enter the market.
However, it's important to note that second homes aren't the only factor driving the housing crisis and rising property prices.
Source: Institute for Fiscal StudiesTruth 5 - Gen Z Is Shifting Priorities: Experiences Over Houses and Retirement
Faced with these challenges, Gen Z is choosing to hit the beaches and resorts of the world rather than the housing market.
According to a report from Experian, 63% of Gen Z and 59% of millennials would rather spend money on life experiences like travel and concerts now than save up for retirement.
“63% of Gen Z and 59% of millennials would rather spend money on “life experiences” like travel and concerts now rather than save up for retirement”
This shift reflects a broader trend: the younger generation is redefining what it means to be successful and happy.
With the goalposts for financial stability constantly moving, they’re willingly sacrificing potential house deposits for life-changing experiences.
Pouch's Final Thoughts
The challenges Gen Z faces in the housing market go far beyond lifestyle choices.
While many are choosing experiences like travel over saving for a home, the reality is that unaffordable house prices, stagnant wages, and a market dominated by wealthier older generations make homeownership feel out of reach.
Stay tuned for more insights as we dive into what the government is doing to help young buyers enter the housing market.
In the meantime, click to learn more about the Mortgage Guarantee Scheme and First Home Scheme helping young buyers enter the UK housing market.
