Real Estate News

Why can´t young people buy a house?

Housing challenges for the new generations are increasing. Providing an answer is urgent, say industry experts.

08 May 2023 min de leitura

Having autonomy and more independence: the aspiration of any young person preparing to make the transition to adult life. But in Portugal, this path is increasingly difficult. From precarious jobs and wages, to difficulties in accessing housing. Buying a house is, for many young people, a distant dream – and even leasing is not feasible in some cases. Eurostat figures leave no room for doubt: Portugal is the country in the European Union (EU) where young people leave their parents´ house later - 33.6 years, on average. And it´s not out of apathy or lack of will. Most cannot even afford a house.
In 2021, the average age at which young people left their parental home in the EU was 26.5 years old. Values vary between Member States, but the disparity is evident, depending on thestatistical authorityfrom the EU. Portugal, Croatia, Slovakia, Greece or Bulgaria are among the countries that recorded the highest average ages of leaving the household, aged 30 or more. In contrast, Estonia, Denmark, Finland and Sweden recorded the youngest average ages, 23 years or less. And Sweden is even the country where young people acquire their independence earlier, leaving the family home, on average, at the age of 19.
Feelings of insecurity about the future and inability to plan their lives are therefore part of the daily life of young Portuguese people. But is it that “This country is not for young people?”. This was the motto of the conference organized by ERA at the Salão Imobiliário de Portugal (SIL), which brought together several experts from the sector to discuss the challenges of housing for the new generations. Why is it so difficult to leave your parents´ house in Portugal? And why can´t young people buy a house?

Buying a first home later and later

The purchase of the first house is increasingly late and reality tends to get worse. The root of the problem is, according to experts, multifactorial, but it is reaching large proportions. The lack of supply, combined with thegap between house prices and wagesit is an obstacle, as well as the difficulty of accessing housing credit, which today is governed by stricter criteria and, therefore, leaves out many young people looking to fulfill the dream of having a home.
In addition to a constitutionally enshrined right, Romana Xerez, professor at ISCSP-ULisboa and researcher at CAPP, author of the study “Access to own housing in Portugal”, recalls that “home is a positive narrative that gives people security”, hence that play such an important role in their lives. The academic points out that “young people´s access to housing has deteriorated sharply”, a “complex” situation that represents a “very great social risk”. And not just because of not being able to buy a house, but what it represents: the ability to start a family, well-being, reach of autonomy.
“We got here due to several factors: the price of housing, which has risen impressively; the 2008 crisis; the pandemic crisis; the war in Ukraine and rising cost of living, which we don´t know where it will end. This generation has to face multiple crises”, emphasizes the researcher.

The difficulty of accessing housing credit

Most young people need to resort to bank financing to buy a house. And the dream starts to “bump” here, first of all because the bank only lends a part of the value of the property – a maximum of 90% – and it is necessary to have equity capital to cover the remaining costs: not only theentry value (at least 10%) but also taxes and other related costs.
The problem? Most young people do not have enough cash or savings to pay the down payment on a house, which nowadays can represent large sums, given the rise in property prices. And then, to these obstacles, others are added: is there financial stability to assume the mortgage? Are the incomes sufficient? In the event of an increase in interest rates (as is currently the case), what about the effort rate?
António Ribeiro, representative of Santander, recalls that the criteria are currently tight for most people. He bought his first house at the age of 26, but he admits that if it were today, most likely, and given the new rules, he himself would not be able to meet the criteria for borrowing money from the bank and buying a house.
“Difficulties in accessingmortgage loansresult from a set of rules that the bank has to respect and that greatly limits the imagination of the financial sector to find solutions”, since it is an “intellectually gray model”, he says. Despite this, the official believes that the sector can be part of the solution, but this will require a team effort between the banking sector, political and municipal power. “I believe a lot in young people. I believe that we will find solutions and I believe that the financial sector can help to find solutions”, he stresses.
Also for Alexandre Poço, national leader of the JSD, who is part of the PSD Housing Working Group, “unless he has wealthy parents, a young person cannot have enough money to pay a down payment on a house, taking into account the percentage value , taxes, etc..” and, therefore, considers that a state instrument capable of functioning as a guarantee for the purchase of the first home should be considered, and highlights the proposal advanced by his party that intends to help young people in the acquisition of housing.
Remember that the PSD presented a set of measures to respond to the housing crisis. And among them there are two measures focused on making it easier for young Portuguese people to buy a home: the exemption from IMT and stamp duty when buying a home; and the attribution of a public guarantee of the down payment that young people have to pay to the bank when applying for a home loan to buy a house, thus ensuring 100% financing. This guarantee, as explained by Alexandre Poço, would be given to young people up to the age of 35 who intend to buy a house of up to 250 thousand euros.

How to make Portugal a country for young people?

Filipa Roseta, Lisbon City Councilor, responsible for Housing and Local Development, recalls that "whoever deals with the housing problem wants to solve it" and the only thing she asks, as a representative of local government, is that "they don´t send more problems upstairs.” “What we want is solutions,” says the person in charge, referring to the program More Housingof the Government which, according to Filipa Roseta, poses more obstacles to the municipalities.
He regrets that the title of the conference is “Isn´t this country for young people?”. “It is necessary, due to the important but sad debate of ideas”, he says, stressing that “there cannot be the idea that there are generations that have less than others”. “There cannot be a generation that had everything and another that has nothing. There has to be an intergenerational contract (...) This is a country for everyone ”, she argues.
Romana Xerez also regrets that “we missed opportunities”. For the researcher, the Mais Habitação program “has little to do with youth”. “This program does not contemplate young people. has thePort 65 which was created in the 90s in the face of a situation completely different from the one we are experiencing. It is too little, we need much more ”, he defends.
The problem of access to housing also lies in the lack of supply and, therefore, it is essential to increase the number of available homes, according to the leader of the JSD. He recalls that a major driving force for building more houses is precisely the private sector. “We need to increase supply in the medium segments”, stresses Alexandre Poço.
The CEO of ERA Portugal, Rui Torgal, has no doubts that Portugal should be a country for young people, even “because a country that does not have young people is a country that does not exist”, in the opinion of the mediator. For the person in charge, “it makes absolutely no sense for us to be creating talent that is constantly exported”. “We have become a country of pensioners, a country where our strategy is to create tax benefits for people who want to come here to “end” their lives or people who want to start their lives. And therefore I would say there is a lot to do. A lot has to be done. But I believe with absolute conviction that this country has to be a country of young people. We have no other alternative”, he says in statements to idealista/news, on the sidelines of the debate.

Source: Idealista

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