Generation Rent Has No Choice But To Arrive
When buying your first home you want everything to be perfect. From the size of the property to its location. The most important aspect, of course, is the budget. While traditional wisdom says one should look at property within his means, very often we go for aspirational homes. Properties that have a slightly bigger price tag and in 'high in demand' localities.
Very often we do this because we feel it is the demand which is driving the price of the property up and so we consider it to be a 'hot investment'. Experts, however, believe the opposite to be true.
"We should not accept extreme price levels in our housing markets. High house prices are not a sign of city's success, but a sign of failure to deliver the housing that its citizens need," said Oliver Hartwich, executive director, The New Zealand Initiative, while summing up the findings of the 13thAnnual Demographia International Housing Affordability Survey.
This has created a vicious cycle of reluctance to invest in new upcoming areas and then being unable to afford it once it becomes a commercial or residential hub. This has resulted in people being unable to move out of rented accommodation giving rise what is being called – Generation Rent.
Per a Pricewaterhouse Coopers report, UK capital London will turn into a city of renters, with 60 per cent of its population living in rented accommodations by 2025.
According to the Demographia International Housing Affordability Survey, London, the largest market in the UK, has a "severely unaffordable median multiple* of 8.5". Property markets of the old city are so vulnerable that the UBS Global Real Estate Bubble Index has listed London as "having the world's second-worst housing bubble risk". In fact, the Demographia survey points out that "London has experienced substantial domestic out-migration, as its high house prices appear to be repelling population growth".
A report published in The Guardian says: "By 2023, it is possible that a majority today's young children will be growing up in social or private rented accommodation. Their parents will have no hope of ever having a home they own. But perhaps by then people may have managed to secure some rights – what Anne Power, when speaking in Oxford at the weekend, called "mild rent regulation"."
London property markers are not lone sufferers.
The Demographia survey, which covered 92 major metropolitan markets across nine countries**, shows there were 29 severely unaffordable major housing markets in 2016. This means more and more millennials cohort are joining Generation Rent and are likely to be an integral part of it for the rest of their lives. Trend watchers are quick to respond, and suppliers are getting ready to tap this segment.
According to Richard Ronald, associate professor, Centre for Urban Studies, University of Amsterdam, “In cities, this shift (from house ownership to renting) has started to stimulate private-sector responses, including large-scale purpose-built developments expressly tailored to the needs of Generation Rent.”
It is time the world started working on easy rent control laws if the attempts to make housing affordable are not working.
In India, we might be going through a similar transformation even as the Government is striving to meet its housing-for-all-by-2022 target. Reports by global think tanks show India's financial capital Mumbai is among the most expensive property markets in the world. The fact that even Bollywood biggies and corporates honchos have to be content with apartment — bungalows have long gone out of bounds, even for these segments — a lot about housing affordability in the city. The story in national capital Delhi is no different. While data in this regard is unavailable, it is safe to say that the number of renters in the two cities have increased by leaps and bounds in the past couple of years-- PropTiger DataLabs figures show home sales across cities have been declining for three years while there has been no deceleration in the number of migrants moving to these cities. Those who are not buying are certainly living on rent.
*Median multiple is the ratio of the median house price by the median gross annual household income.
**The nine countries analysed in the survey are Australia, Canada, China (Hong Kong), Ireland, Japan, New Zealand, Singapore, the United Kingdom and the United States.