If UK house prices are falling, why is it still so hard to sell?

Britain’s faith in the housing market has always been strong. Before Christmas, we polled thousands of Britons about their money habits, and more people said they viewed property as a better place to invest their money over the next ten years than shares, savings accounts, or any other asset class. But in parts of the UK, that faith is being tested.

The average British home trebled in value between 1995 and 2005, but growth has been much more modest since. In fact, when adjusted for inflation — which, for some reason, people are loath to do when discussing house prices — prices are about a tenth lower now than at their pre-financial-crisis peak.

When we talk about the recent stagnation in Britain’s housing market, two segments usually attract the most attention.

The first is the decline at the very expensive end, mostly in London. Data from Zoopla on prices per square foot, based on valuations and sales, show just how steep those falls have been. In 2015, buyers in Chelsea were paying £1,704 per square foot, a price inflated by foreign investment and a thriving City. By 2025, prices had fallen to £1,227 — a drop of a quarter in nominal terms, or roughly half in real terms once inflation is factored in.

The second is the decline of the British flat. A quadruple whammy — the leasehold scandal, post-Grenfell safety concerns, declining investor appetite, and a general desire for more space — has pushed flat prices below their 2022 levels. By some estimates, nearly four in ten new-build leasehold flats in London are being sold at a loss. Other property types, meanwhile, have pulled away.

But how does this affect the housing ladder?

Buying a starter home in Britain is still expensive. A report by Deloitte puts the cost of a new-build flat in Britain at €5,203 per square metre (about £424 per sq ft), the third-highest among 25 European nations. In Italy, for example, the cost is roughly half that. Relatively high interest rates also mean first-time buyers are spending a substantial portion of their income on mortgage payments.

Yet after years of tight lending restrictions, banks are once again offering increasingly generous terms to new buyers.

Last week, Melton Building Society announced a 100 per cent loan-to-value mortgage. And, as a share of wages, first homes are not dramatically more expensive than the long-term average.

But what happens when those first-time buyers want to move on?

The traditional progression from starter home to stepping stone to dream home remains deeply embedded in the British property psyche.

For baby boomers, climbing the property ladder was made easier by rapidly rising house prices. Imagine buying a flat in 1995 for £40,000 with a £10,000 deposit and selling it for £60,000 in 2000. Even excluding mortgage repayments, your £10,000 equity would have grown to £30,000. Yes, your dream home might have risen from £60,000 to £90,000 during that period — but you would now need only a 67 per cent mortgage to afford it.

Today, however, the first rung of the housing ladder offers far less lift. While today’s first-time buyers have an average household income of £61,000, those able to move a second, third, or fourth time typically earn around £93,000.

The cost of moving has also soared. Gordon Brown turned stamp duty into a major revenue-raiser in the 2000s, and George Osborne later increased it for high-value properties and introduced a second-home surcharge in 2016. The result is that moving home has become far less common. In the late 1990s, 7 per cent of homeowners moved each year; by 2024, that figure had fallen to just 3.9 per cent. Data from Savills suggest that while 35- to 44-year-olds made up 32 per cent of movers in the mid-2000s, that share has dropped to 24 per cent.

At the same time, under occupation — having more rooms than necessary — is increasing among older age groups, as would-be downsizers find it too expensive to move.

There has been a recent glimmer of hope that homeownership among young adults has begun to recover from its early-2010s lows. But increasingly, British homeowners are becoming stuck in the first homes they buy. The penny may have dropped that property is no longer a get-rich-quick scheme; more young people are turning to alternative investments to bridge the wealth gap instead of relying on house price growth.

Some first-time buyers are now going straight to their long-term homes, says Richard Donnell of Zoopla, sacrificing location and size in the process.

And so, as baby boomers in the southeast attempt to cash in on their multi-decade, seven-figure gains, they may find few buyers willing — or able — to trade up behind them.

Source: The Times

Giving Up on Homeownership Can Hurt You in the Long Run

For generations, homeownership has been a cornerstone of the American Dream. Owning a home represents stability, a way to build credit, and a powerful path to long-term wealth through equity.

But today, that dream feels increasingly out of reach.

As home prices in the United States continue to outpace wage growth, more young Americans are starting to question whether they will ever own a home at all.

A Growing Sense of Hopelessness

The numbers tell a concerning story.

• A 2022 survey by Apartment List found that nearly 25% of millennials expect to rent forever — almost double the 13% recorded in 2018.

• A 2024 Harris Poll revealed that 42% of U.S. adults — and nearly half of Gen Z — agree with the statement:“No matter how hard I work, I will never be able to afford a home I really love.”

That’s not just a housing issue. It’s a psychological shift with potentially long-term economic consequences.

What Happens When People Stop Believing?

Economists studying this trend wanted to understand how fading hopes of homeownership might shape financial behavior over a lifetime.

To explore this, researchers built a mathematical model simulating household financial decisions from age 20 to 75. The model incorporated:

• Wage growth and volatility

• Rising home prices

• Savings patterns

• Mortgage debt

• Risk tolerance

• Desire to pass wealth to children

Using real-world data from the Federal Reserve’s Survey of Consumer Finances and U.S. Census data, they compared generations and projected outcomes.

The findings were striking.

Roughly 84% of people born in 1950 eventually purchased a home — closely matching real Census data.

But only 74% of those born in 1990 are expected to reach that milestone.

That 10-percentage-point drop may seem modest — but its ripple effects are profound.

The Fork in the Road at Age 20

The research compared two hypothetical 20-year-old renters who start with similar financial resources.

The Hopeful Renter

This individual believes homeownership is achievable. As a result, they:

• Save aggressively

• Work harder

• Accumulate wealth steadily

• Eventually purchase a home

• Continue building equity and savings into later life

The Discouraged Renter

This individual sees homeownership as unlikely. Over time, they:

• Save less

• Consume more relative to their wealth

• Take riskier financial bets

• Accumulate little to no assets

• Live largely paycheck to paycheck

The divergence begins early — when the decision to save for a house is either embraced or abandoned. That single turning point can lead to enormous differences in lifetime wealth.

Riskier Bets and Reduced Work Effort

When housing feels unattainable, people may redirect their financial energy elsewhere.

Researchers observed that renters with a net worth below $300,000 are significantly more likely than comparable homeowners to invest in cryptocurrencies. Among wealthier Americans, homeowners and renters invest in crypto at similar rates. But among lower-net-worth households, renters are far more likely to take these speculative risks.

It may be an attempt to “gamble” back into the housing market.

Work behavior also shifts.

Among homeowners, only about 2% to 3% report reduced work effort, regardless of wealth level. The same holds for high-net-worth renters.

But among renters with lower net worth, the share reporting lower work effort rises to 4% to 6%.

While critics sometimes label these patterns as laziness or “quiet quitting,” the research suggests a deeper structural explanation: when long-term incentives fade, behavior changes.

If working harder no longer brings you closer to buying a home, motivation weakens.

The Broader Economic Impact

The consequences extend beyond individual households.

The model suggests that people who give up on homeownership may:

• Work fewer hours

• Earn less income

• Pay less in taxes

• Contribute less to overall economic productivity

Over time, this could shift fiscal burdens and reduce economic growth.

The housing affordability crisis isn’t just about ownership rates — it may influence national productivity and wealth formation.

Can Policy Restore Hope?

Policymakers have proposed various solutions to address affordability, including mortgage bond stimulus programs and efforts to increase housing supply.

While the effectiveness of specific proposals remains debated, the research suggests one key insight: Timing matters.

If financial support reaches households before they give up, it may reinforce saving behavior and long-term planning. But once discouragement sets in and habits change, reversing course becomes much more difficult.

In other words, hope itself may be a critical economic asset.

The Bigger Picture

Forgoing homeownership can be a rational response to skyrocketing prices. Saving for years only to watch homes become even more unaffordable is discouraging.

But the long-term behavioral effects of giving up may be far more costly than many realize.

Homeownership has traditionally served as a powerful anchor for disciplined saving, career ambition, and wealth building. When that anchor disappears, financial trajectories can shift dramatically.

The housing affordability crisis may not only reshape who owns homes — it may reshape how an entire generation works, saves, invests, and builds wealth.

And that could have consequences lasting far beyond the housing market itself.

Source: Bloomberg

Can One Income Still Buy a Home? Lessons from The Simpsons

For many viewers, The Simpsons feels unrealistic—not because the characters are bright yellow or because Homer is somehow a nuclear safety inspector, but because the Simpson family enjoys a comfortable middle-class life on just one income. A detached home, a car, and the occasional family holiday, all supported by a single breadwinner with only a high-school education, feels increasingly out of reach for modern homebuyers.

In today’s housing market, single-income households are becoming rare. Data from the United States show a sharp shift over the past several decades. In 1960, more than three-quarters of young married couples who had just bought a home relied on one income. Today, that figure is closer to one in three. While this reflects positive changes—such as greater employment opportunities for women—it also highlights the rising cost of homeownership and family life.

From the 1960s through 2000, more women entered the workforce, with participation rates among prime-age women rising from around 40% to over 75%. Although that growth has leveled off in recent years, the share of single-income homebuyers has continued to fall. The steepest drop occurred between 2012 and 2023, a period marked by rapidly rising home prices. In short, dual incomes are now often necessary not just for lifestyle upgrades but for basic affordability.

The debate around single-income families continues. Some analysts argue that dual-income households have helped push up the cost of housing, childcare, healthcare, and education. Others say that many families would prefer one parent to stay home, but financial realities make that difficult. Surveys suggest that about half of American mothers would prefer to stay home rather than work, yet most continue working—largely because the additional income is essential.

Housing costs play a major role in these decisions. Studies show that in families where the primary earner’s income rises significantly, the likelihood of the other partner working full-time drops—but mostly among homeowners rather than renters. This suggests that once housing is secured and financial pressure eases, some families choose to scale back to a single income. However, the income required to make that possible today is far higher than it was in previous generations.

It’s important to note that this isn’t simply a story of hardship. Many people enjoy their careers and choose to work for reasons beyond necessity. Expectations have also changed. Homes today are larger, more comfortable, and better equipped than those in the mid-20th century. With bigger homes and higher living standards come higher costs—and often the need for two incomes.

For real estate professionals and homebuyers alike, the takeaway is clear: housing affordability and lifestyle expectations are deeply connected. If housing were easier and cheaper to build, more families might find it feasible to live on a single income again. Until then, the “Simpsons-style” single-breadwinner household remains more of a nostalgic ideal than a common reality.

Source: The Economist