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the generation of people born from the eighties onwards, who because of changes in the economic situation are more likely to rent their homes than buy them
'Although 77 per cent of all non-homeowners still aspire to buy, many members of generation rent might never get a realistic chance to do so, and nearly half of 20-45-year-olds say Britain is following Europe to regard renting as the norm.'Ripley & Heanor News 26th June 2011
There's an old saying which goes 'an Englishman's home is his castle', expressing the idea that we Brits love our homes as the ultimate refuge in which we can do as we please. In the current economic climate, however, it seems that these castles are far more likely to be rented rather than bought, as a generation of young adults are finding it increasingly difficult to get a foot on the property ladder. This new demographic has recently been dubbed the generation rent.
the only young adults who appear less likely to join generation rent are those fortunate enough to have affluent parents with cash to spare to help them raise a deposit
Owning your own home (or rather part-owning it with the bank!) has always been the norm in the UK, with those whose financial circumstances permit usually choosing to buy rather than rent. This is a phenomenon unique to Britain and contrasts with the rest of Europe and the USA, where renting is the usual option. Changes in the economic situation during the past few years however have made it increasingly difficult for first-time buyers to get started in the property market, so that there is an emerging generation, the so-called generation rent, who may never own their own homes.
At the peak of the borrowing binge prior to the 2007 credit crunch, some lenders offered first-time mortgages worth as much as 125% of a property's value, and six times the salary of the borrower. Today, by contrast, the banks are much more conservative about how much money they'll lend and demand much bigger deposits from first-time buyers, typically 20% to 25% of the value of the purchase. This means that the average deposit a first time-buyer needs to save is around £28,000, a predictably off-putting amount of money. This has caused many young people, including professionals on good salaries who would traditionally enter the housing market, to stay renting long-term in a property that they like.
The only young adults who appear less likely to join generation rent are those fortunate enough to have affluent parents with cash to spare to help them raise a deposit. This gives them a huge, and possibly lifelong advantage over those who do not have access to what has sometimes been called the Bank of Mum and Dad, a tongue-in-cheek expression used to refer to the situation of parents lending significant amounts of money to their offspring in order to give them a helping hand in today's tough economic climate.
The expression generation rent first appeared in May 2011, in the context of a report giving details of a survey commissioned by the Halifax Building Society. The survey, undertaken by the UK's National Centre for Social Research, included responses from 8000 20-45-year-olds, over three quarters of whom still aspired to owning their own home. Nearly two-thirds however, felt that they had no prospect whatsoever of buying a home, with only 5% saving up for a deposit, and nearly 50% saying that they felt Britain was now following Europe in the trend of considering renting to be the norm.
In noteworthy contrast however, a recent survey in Australia revealed that the Antipodean counterparts of generation rent are in fact more likely to buy than rent. It seems that young Australians are increasingly choosing to stay in the parental home so that they can avoid paying rent, save up for a deposit and buy their own place as soon as possible. These young home-buyers have been dubbed Generation Y-Rent – a clever play on the expression Generation Y which is used to refer to the generation of people born between the late seventies and the mid-nineties.
Read last week's BuzzWord. Gazanging.
This article was first published on 17th October 2011.