Originally published October 2022.
After nine years of enticing first time buyers (FTBs) into – and consequently inflating the prices of – new build, help-to-buy (HTB) is finally coming to an end. Over in the wider mortgage market, recent monetary chaos has spiked rates such that it has further lifted the first rung of the housing ladder from the reach of aspirational FTBs. Now, a great many will see the end of HTB, and far less affordable and accessible mortgage terms for FTBs as the last thing the UK’s beleaguered housing market needs. Well, I see matters very differently.
Each year, well over half a million British-born young adults leave higher education; be it gaining their first or postgraduate degree. The number has risen to such lofty highs because, back in 1997, newly installed Prime Minister “education, education, education” Blair insisted that at least half of 17/18-year-olds should continue to university. To achieve as much, he gave higher education institutions (HEIs) the student-fee incentive to significantly add capacity.
Now, some of those early 20y-something Britons leaving full-time higher education go travelling, choose not to work or simply cannot find suitable employment. This accepted, around 80% swiftly enter take-up employment. True, some of these return to their parental home and many earn no more than had they not been burdened by a student loan. It is, however, those who remain in the UK and quickly find ‘rewarding work’ that I wish to focus on in what follows. I do so with one aim: to show that far from being a ‘sure-fire catalyst’ for a collapse in UK house prices writ large, a less generous mortgage market for FTBs will act to drive-up residential tenant demand. Drive up and so support the buy-to-let (BTL) side of the UK housing market; a market we are being (mis)informed, will flounder.
In total there are just over two million British-born young adults in full-time higher education. This is a substantial increase from as recently as the 90s (Charts 1 and 2). A great many of these studious young-adult Britons live in a part of the UK’s private rental sector (PRS) which has been newly developed specifically for them. Before I return to the large class of graduates demanding homes now that did not exist in the late 80s, I would like to spend a moment considering other marked differences now from then.
“We must not forget that as the university population has grown significantly, the UK has annually recorded migratory flows of record proportions, injecting young adults into places which had hitherto been abandoned by the youth”
