Are ‘would be’ Solihull homeowners warming to the idea of renting

I was reading a report the other day produced by Halifax, regarding the UK property market and why more and more of the younger generation seem to be renting rather than buying. I find it fascinating that over the last ten years, the British obsession of buying a house almost as soon as you have left school as well as the belief that renting meant you were a second class citizen, has turned on its head to the point where the hopes and dreams of owning a nice home have been replaced by the ambition to simply living in one.

In the not too distance past, in the 1990’s, one left school, got a job, bought a small house and kept buying and selling property, moving up the property ladder until retirement. However, the property market has changed and there is no longer a stigma associated with renting in the UK indeed people are beginning to accept a lifetime of renting. This is a very important consideration for both Solihull home-owners and landlords as it will transform the way the Solihull property ladder looks in the future and whether or not it will exist at all for some people. The make up of households is an important factor, especially in the Solihull property market. The normal stereotypical married couple, two children and dog of the 1970’s and 1980’s has changed. More and more we have the need for larger houses where two families come together as a result of an increase in the number of divorces as well as an increase in the number of one person households.

Looking at the data for Solihull, of the 7,795 private rental properties in the Solihull Borough Council area, 31.25% (2,436 properties) of those rented properties are one person households. However, when we compare the number of one person Solihull households who have bought their own property with a mortgage, of the 63,559 owner occupied households in the area, only 4,516 of those properties are a one person household (i.e. 7.10%).  This recent explosion in demand for decent high quality rental properties for one person households has not been met with an increase in supply of such properties.  More and more I believe Solihull landlords need to consider this change in the make up of Solihull households, as I believe this could be an opportunity.  Another interesting statistic that raised an eyebrow is 21.82% of those 7,795 rental properties (1,701 properties) are lone parents households.

It is true that the Governments introduction in 2013 of the Help to Buy scheme, where first time buyers only needed a 5% deposit, changed the perception of peoples’ ability to buy without having to save ten’s of thousands of pounds for a deposit. However, it might surprise you that 95% mortgages were re-introduced within six months of the credit crunch in late 2009, so again it comes down to people’s own perception. Many youngsters think they won’t get a mortgage, so don’t even bother trying.

It’s still a fact that once you start renting it becomes that much harder to save for a deposit regardless of the size; interestingly seven out of eight renters polled by Halifax refuse to sacrifice the quality of accommodation they currently live in to reduce the amount of rent they pay in order to save for a deposit.  This is the crux and the real reason why people aren't buying but renting and why demand for renting will continue to grow in the future, which is great news for landlords. Solihull tenants can upgrade the quality and size of the property they live in for a minimal rent increase. If you had to make that jump when buying, the monthly mortgage payment increase would be considerable more.  Without any social pressure and better quality rental properties compared to a decade ago, the next UK generation will become a nation of renters , as the UK becomes more like Europe where renting is ‘the norm’. Who is going to supply all these properties to rent? Landlords!

Whether you are an existing landlord looking to grow your portfolio or looking to become a ‘first time landlord’, my thoughts are take advice from as many people as possible. However, as the majority of landlords buy their buy to let properties in the same town they live, you will need specific advice about Solihull itself. For such advice please email me jane.morcom@centrickproperty.co.uk

Why are less Solihull people moving house?

During my school years, my parents seemed to move every other year (or it seemed that way). In reality, we moved four times before I left home.  From research I have carried out recently it shows that things have changed considerably in Solihull over the last few decades, and interestingly, the trend is getting worse.

There are 50,798 properties in Solihull; however, after we remove the 3,834 council houses, 5,242 privately rented houses and 364 houses where the occupants are living rent free, which leaves 41,358 properties owned by Solihull residents, with a mortgage or shared ownership. This means 81.4% of the properties in Solihull are occupied by the owner above the national average which is interestingly is 64.2%.  The number of people who have sold and moved house in Solihull, over the last 12 months, has only been 2,114. These figures suggest that homeowners of Solihull are only moving on average every 19 years.

Influencing factors for this change in behaviour include the cost of moving house which has risen over the last twenty years and with many re-mortgaging their properties in the mid 2000’s before the price crash of 2008, there is a reluctance or inability amongst a minority of homeowners to finance a home sale/purchase, due to the lack of remaining equity.

However, the biggest influence has been the change in house price inflation. Back in the 1970’s and 1980’s, house prices were doubling every 5 to 7 years. Even in Greater London, with its stratospheric property price increases over the last few years, it has taken 13 years (since August 2002 to be exact) for property values to double to today’s levels.

This change in moving trend, in a relatively low inflation property market such as Solihull is now experiencing, is significant because the long term consequences of sustained low house price growth is the lack of ability to reduce mortgage debt as opposed to when property price inflation is higher and the ratio of equity to debt is greater. Solihull homeowners cannot currently rely on inflation to reduce their debt in real terms as they did in say the 1970’s and 1980’s.

So what does this all mean for Solihull buy to let landlords? Well for the same reasons existing Solihull homeowners aren’t moving and the appeal to rent is increasing.  Fewer ‘twenty somethings’ are buying their first home, Solihull youngsters may aspire to own their own home, but there isn’t the social pressure today from their peers and parents to buy their first property as soon as they reach their early 20’s.  Plus the memory of the 2008 housing crisis and the belief the hard times aren't completely over. I also believe that the UK society has changed, with the younger generation wanting prosperity and happiness, but wanting it all now, without any sacrifice, extra hard work and patience that is required.  As a society, we expect things instantly, and if it doesn’t come easy or quick enough, is it really worth the effort to save for the deposit? Why go without holidays, the newest iPhone, socialising four times a week and the fancy satellite package whilst saving for that 5% deposit if there is no longer a social stigma in renting or pressure to buy as there was a generation ago?

Even though, in real terms, property prices are 5% cheaper than they were ten years ago (when adjusted by inflation) 10.3% of Solihull properties are privately rented, nearly double it was twenty years ago. As a result, the demand for rental properties continues to grow, which can only mean those wishing to invest in the buy to let market, over the long term, are on to a good thing? For advice and opinion on the Solihull Buy to Let property market, please email me jane.morcom@centrickproperty.co.uk

 

Affordability of housing in Solihull

Talking to an elderly relative recently, he reminded me that back in his day, you could have bought a property for the same price as a decent second hand car would sell for today and that his father was buying property for the same price as a decent 50 inch LCD TV!  Now of course, these are only headline prices and we have had wage growth and inflation.  Interestingly, since the Second World War, figures suggest that property values in Solihull have doubled every 5 to 10 years. This boom lasted from the years of 1961 to 2006.

Looking at more recent times, since the start of the Millennium, increases in property values have generated large increases in equity for many homeowners but on the other side of the coin, making housing unaffordable for other people.  It might interest readers to note that most of Europe experienced sharp increases in property values in the early 2000’s, with only Spain beating us (although we know what has happened to the Spanish property market over recent years!).  As we entered the early 2000’s, the British situation differed in two regards.  Firstly the property value boom started and saw more sustained increases; secondly, the regional pattern was fairly uniform.

However, since 2010, the regional pattern has varied across the UK.  Since 2007 (the last property boom), on average today property values in England and Wales have increased by 1.2% higher, whilst in Greater London, they are 35.7% higher, whereas in Solihull they are 1.73% lower. Although we have known for many years that the London property market seems to be in a ‘world’ of its own.  Looking specifically at Solihull however, first time buyers have continued to climb on to the property ladder although affordability to do so has risen and fallen since 1997 (see below).  The best affordability of housing, measure is the ratio of Solihull Property prices to Solihull Average Wages, (the higher the ratio, the less affordable properties are).  

•   1997       4.10 to 1   (i.e. the average value of a Solihull property was 4.10 times higher than the average annual wage in Solihull)
•  2000       5.17 to 1
•  2002       5.79 to 1      
• 2003       6.79 to 1
• 2007       7.18 to 1
• 2009       6.56 to 1
• 2012       7.12 to 1
• Today    8.10 to 1

The figures illustrate quite clearly, even though we had an improvement just after the 2007 property crash when the property prices fell (i.e. the ratio dropped), in subsequent years with Solihull house price’s rising but wages failing to keep up with them, the ratio started to rise.  This has meant there has been a deterioration in affordability of property in Solihull over the last couple of years.  This is one of the (many) reasons why the younger generation is deciding more and more to rent instead of buying their own house.  The local council sold off council houses in the Thatcher years and for many on low incomes or with little capital, owning a home has simply never been an option.

With fewer people able to save up the deposit required by mortgage lenders, more and more people are looking to rent, this has also resulted in a change of attitude towards renting over the last decade.  This delay in moving up the property ladder has driven rents up in Solihull over the last few years, with price elasticity of demand influencing, as more people seek properties to rent.  All these things have combined to make the demand for rental property in Solihull rise.  If you are an existing landlord or someone thinking of become a first time landlord looking for advice and opinion and what (or not to buy in Solihull), one source of information is the Solihull Property Blog (www.solihullpropertyblog.com)

Fewer people are moving house in Solihull

I have recently been looking at the Solihull property market for annual comparisons on property purchases and how the property market has changed from the same period a year ago. Looking at the figures, I haven’t seen any change in recent months and the Solihull market as a whole seems pretty stable. 

In the early part of the year, the top end of the market did have a bit of a spasm in places such as Mayfair and Chelsea with the prospect of a Labour/SNP pact and a possible Mansion Tax for properties over £2 million, but in Solihull, we’ve not really been affected, particularly since only three properties have sold above the £2,000,000 mark in the last 5 years.   

Looking at the numbers for Buy to Let properties in the area, current figures suggest that of the 836 properties that have come on to the market in Solihull  since the 2^nd of April, 295 of them have been brought and are sold subject to contract, which is just over one in three (35.29%).

Things are starting to change in the way people in Solihull buy and sell property.  Back in the 1970’s, 1980’s and 1990’s, the tradition was to buy a terraced house as soon as you left home and refurb it.  Meanwhile, property prices had gone up, so you could trade up to a 2 bed semi after a while, and repeated the process, until you found yourself in a large 4 bedroom detached house with a large mortgage. 

Looking into this a little deeper and as mentioned in my previous articles, the public’s attitude to homeownership itself has changed over the last ten years.  The pressure for youngsters to buy has disappeared as renting, not buying, is considered the norm for the younger generation. This isn't just a trend in Solihull, but, a national occurrence, as I have noticed that people buy property by upsizing or downsizing because they need to, not because ‘it’s what people do’.  This does means there are a lot less properties on the market compared to the last decade.

A by-product of less people moving, is less people selling their property. My research shows there are a lot fewer properties each month selling in Solihull compared to the last 10 years.  For example, in February 2015, only 78 properties were sold in Solihull. Compare this to February 2002, were 108 properties sold and February 2003, were 91 properties sold.  I repeated this comparison to more recent years and the results were identical if not greater.  So what does this all mean?  Demand for Solihull property isn’t flying away, but with fewer properties for sale, it means property prices are proving reasonably stable too. Consistent and steady growth of property values in Solihull, year on year, without the large peaks and troughs we saw in the late 1980’s and mid/late 2000’s might just be the thing that the Solihull property market needs in the long term.

For further information and opinions like this on the Solihull Property market, please email me on jane.morcom@centrickproperty.co.uk .