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)