I had the most interesting chat with a mature couple (in
their early/mid 50’s) from Catherine-De-Barnes the other day, whilst viewing
one of our rental properties nearby. They were viewing with their son, who
wanted his parent’s parental blessing. Now I know that isn't the norm, but in
this case the parents were going to act as guarantor. We got chatting about the
Solihull property market and how they had bought their first property in the town
just after they got married in the late 1980’s when they were in their early/mid
20’s. Anyway, we got chatting about how the youngsters of the UK seem to rent
more than buy nowadays and from that the conversation covered a number of
similar topics. I want to share the highlights of that conversation with you
this week.
Their son, like many 20 to 30 year olds in Solihull,
desperately wants to own his own property and the parents said he had read an
article in the Telegraph recently comparing house prices to earnings for the
20-30 age group today have to spend more of their salary in mortgage payments
than any previous generation. The demand for private rental sector
accommodation in Solihull is huge. There are in fact 5,242 private rental
properties in Solihull at the last count, a considerable amount when you take
into account that there are 2,859 council houses in the town. However, let us
not forget 41,098 properties are owner occupied (19,556 with a mortgage).
We must acknowledge that private renting does not have the
stigma it had a few decades ago and it might just surprise people that even
though us Brit’s class ourselves as a nation of homeowners, roll the clock back
100 years and over 75% of people rented their own home (and it was all from
private landlords as council housing only started to come in with the ‘homes
for hero’s’ after the first World War). It might also surprise you to learn
that at the time of the 1971 census, still more people rented than owned their
own home.
I have proved time and time again, when looking at the
affordability issue, that it is in fact cheaper to buy a property than rent,
when one looks at starter homes for first time buyers. 95% mortgages have been
available to first time buyers for over four years, whilst better properties in
better condition in better areas can be found, terraced houses can be bought
for as little as around £110,000 in the Acocks Green area of Solihull (meaning
a modest deposit of £5,500 would be required).
When we discussed affordability, I was able to tell them
that at the time they bought their first house in Solihull in 1988, the ratio
of house prices to salary was 5.34 to 1 in Solihull ... and here was the
surprise for both of us, today’s ratio is only 5.23 to 1!
I said I believed there had been a change in cultural
attitude towards renting property in Britain and that this quiet revolution was
likely to be permanent. In the 60’s, 70’s and 80’s, saving for the deposit and
buying a house was the be-all and end-all. Youngsters today have far much more
disposal income today than people had in the Callaghan and Thatcher years, but
choose to spend it upgrading their mobile phones every 12 months, the newest
tablet or PC, a newest 50” plasma LCD TV and two sun drenched holidays a year,
than go without and save for a deposit.
Yes, there are horror stories of tenants living in rat
infested properties with landlords who charge massive rents and don’t repair
their properties. But that is very much the exception as most tenants rent
homes of a quality they couldn’t ever to afford to buy. Twenty years ago, if
you said you rented a property, you were considered the lowest of the low ... but
now it’s the norm.
So with mortgage affordability being well within the bounds
of most first time buyers, the level of deposit required for a 95% being
surprisingly modest (starting off at £5,500 in Solihull as mentioned above) until
we change our attitudes, the UK housing market is slowly but surely turning
into a more European model, where people rent for long periods of their life,
then eventually inherit their parents properties and subsequently become
homeowners themselves, albeit later in life.
Hence, I cannot see the demand for decent, high quality
rental properties ever dropping in the next 10 to 20 years, but only ever
increasing as the population continues to soar. Just make sure you by the right property, at the price,
in the right location.
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