FI Analysis 19: Young adults and the housing market

This FI Analysis shows that the the increase in house prices is the primary reason it has become more difficult for young adults to buy a home.


The conditions for young adults on the housing market have deteriorated over time. The supply of rental units has decreased in general, and the waiting lists for rental units have become even longer, particularly affecting young adults. Rising house prices have also raised the threshold for buying a home. This development affects young adults in particular since their income has in-creased slower than the income in other age groups and they are more likely to be first-time home buyers who have not benefited from previous price in-creases. Because the supply of rental units has decreased, young adults have come to represent a growing percentage of all loan-financed home purchases.
A key consideration in this FI Analysis has been the significance of the amor-tisation requirements that FI introduced in 2016 and 2018 for this situation as a whole.

We look at actual home purchases made in 2012 and 2015 and extrapolate them to the conditions from 2018. We focus on young home buyers and study how changes in income, house prices, credit assessments and amortisation requirements would have influenced the possibilities for home buyers with the same characteristics to buy a corresponding home in 2018.
Our analysis shows that 85 per cent of the young home buyers in our sample from 2012 would have been able to buy a corresponding home in 2018. The corresponding figure for older home buyers is 89 per cent. If data is taken from a shorter period, namely between 2015 and 2018, 95 per cent of young home buyers would have been able to purchase the same home. This means that some home buyers needed to adapt their purchase to the altered condi-tions, for example by purchasing a smaller home or a home with a less central location.

The young home buyers who needed to adapt live in large cities, buy compar-atively speaking more expensive homes, and previously had a low agreed rate of amortisation. Their income is not lower than the income of other young home buyers.

The primary reason that it has become more difficult to buy a home since 2012 is the increase in house prices, although the amortisation requirements also had an impact.