The amount of people who own their own home in England is lower than at any other time in the last 30 years it has been revealed today.
The Resolution Foundation, a government think-tank, has released their research on home ownership across the UK. It paints a picture of plummeting ownership rates across the country with London, Manchester, Leeds and Sheffield seeing the worst drops.
Leeds, Sheffield and Greater Manchester fell 14.5% from their peak of 72.4% in April 2003 to 57.9% in February this year. The report put Outer London as seeing the second biggest drop – of 13.5% – to just under 58%. The Foundation said the figures showed the proportion of people owning their own home had plummeted across every part of the UK since their peak in the early 2000s.
It can be partly explained by house prices soaring during times of weaker wage growth and lower supply of new housing. According to the latest official figures, the average UK house price stood at a record £211,230 in May – £227,000 in England. The figure for London was £472,163, the Office for National Statistics (ONS) said, with annual growth running at a rate of almost 14%.
In contrast, annual salary growth had run at levels of 2% or below since the financial crisis.
The one overriding impression to be taken from these figures, however, is that young people who are so often assumed to be desperate to get on to the housing ladder appear to be reshaping their outlook in comparison to the generations preceding them. It has always been widely considered as an irrevocable right that each and all of us should own their own home but it seems certainly true that these sentiments aren’t shared by the ‘millennial’ generation.
To compare the two most popular options, home ownership and private rental, we can see reasons for young people in a globalised world to show preference for the ease of private rental. First and foremost the ownership of one’s own home requires years and years of saving to accumulate a large enough deposit to satisfy lenders’ risk-averse underwriters. More often than not this means moving in with parents for a number of years or sharing a property with friends or even lodgers.
If the average house price in England is around the £200,000 mark and the average deposit required is 15% then millennials would need to save a staggering £30,000 deposit. The average salary in Britain is roughly £25,000 so between a couple saving for one year this would represent a monthly saving of £2,500 per month or alternatively 61% of their income.
These are barriers to entry to the market that lack a sufficient pay-off at the end. A majority of young professionals now live in city centres and enjoy the freedom of being able to move home as and when they need. In a globalised marketplace labour and workers are constantly on the move. An investment in a 20 year mortgage for a property in a place you may not want to live in three years doesn’t represent an ideal situation for somebody who may travel frequently for work.
The commitment to owning your own home further stretches to maintenance and upkeep with insurances, improvements and random issues with boilers, doors and windows (for example) can often set home owners back thousands of pounds.
It is in this environment that both landlords and young tenants can thrive in a mutually beneficial market. Landlords are able to place their money in to a safe, profitable sector where tenancy rates are high and lengthy; especially as savings rates are so abysmal and the stock market continues to falter. Tenants are able to find flexible, suitable, and affordable accommodation that suits their needs in city centres and other areas that would be otherwise difficult.
In the long term as private rental properties continue to increase in popularity, many landlords are able to attain large portfolios and keep tenants happy with the assistance of letting agents who are able to provide customer service and continuity.
As demand soars and landlords continue with their investment strategy, agents have become crucial in helping to find quality tenants and provide a seamless relationship between landlord and tenant.