Solihull Property Market in Crisis : Who is to blame?

As I mentioned a couple of weeks ago, at the end of the First World War, 77% of people rented their home. Homeownership rose very slowly in the 1920’s and started to grow as the economy grew after the Great Depression. Local Authorities took up the baton and built large council estates in the 1950’s and 1960’s.

Throughout the post war decades, it became easier to secure a mortgage. Interestingly by 1977 61.6% of 30 to 34 year olds were owner occupiers with a mortgage, compared to 8.7% in private rented accommodation. Ten years later in 1987, we saw some significant growth in homeownership, as 68.2% of 30 to 34 year olds had a mortgage and only 4.6% of people privately rented. A decade later and there wasn’t much of a change in homeownership figure was 68.3% but private renting had jumped to 12.1% in the same 30 to 34-year-old age group.

Move on another ten years to 2007 and figures show a slight drop in homeownership to 65.8% but renting had continued to increase to 18.7% (in the 30 to 34 year old age group). The latest set of figures is for 2014 and only 47.2% of 30 to 34 year olds are recorded as having a mortgage and an eye watering 33.4% privately rent.

When we look specifically at the Solihull homeownership figures, in 1991 83.15% of Solihull households were owner occupied, 14.05% of Solihull households were privately rented. Much of the rise in the number of people privately renting in Solihull, since the turn of the Millennium, is not because property has become more expensive, but due to the fact that the 30 somethings haven’t got a council house to move into so they have to rent. The selling of council houses in the 1980’s artificially increased homeownership, but the younger generation didn't have the same opportunity to buy their council house in the 1990’s. This is why, unless the council start building council houses, private renting will continue to grow in Solihull.

So if you want blame anyone … blame the Grocer’s daughter from Grantham – Mrs T …. but before you do –  remember in the 1970s, the UK was called the "sick man of Europe" by critics of the UK government, because of industrial strife and poor economic performance compared to other European countries culminating with the Winter of Discontent of 1978/9 so she did get the country back on its feet.

If you want to read more articles on the Solihull property market, whether you are Solihull landlord, Solihull homeowner, first time landlord or a first time buyer – then visit the Solihull Property Market Blog… http://solihullpropertyblog.blogspot.co.uk.

Rents in Solihull rise by 1.8% in the last year

I read recently in the financial pages that UK inflation has increased to its highest level in a year. Inflation, as calculated by the Government’s Consumer Price Index (CPI), rose by 0.3% over the last 12 months.  The report explained that it had only reached those ‘heady’ levels as a result of the small falls in supermarket and petrol prices than a year ago. If you recall in early 2015, we had deflation where prices were dropping!

So what does this mean for the Solihull property market ... especially the tenants?

Back in November the Office of National Statistics stated that average wages only rose by 1.8% year on year, so when adjusted for inflation, Solihull people are 1.5% better off in ‘real’ terms.   Great news for homeowners, as their mortgage rates are at their lowest ever levels and their spending power is increasing, but the news is not so good for tenants.

The average rent that Solihull tenants pay for their private rental properties in Solihull (i.e. not housing association or council tenants) rose by 1.8% throughout 2015, eating into most of the growth.  2015 wasn’t a one off either, in 2014 rents in Solihull rose by 1.3% (where salaries only rose by only 0.2%). However, it’s not all bad news for Solihull tenants, in 2013 rents rose by 1.0%, with salaries rising to 2.2%.

It should be noted that the private rents Solihull tenants have been paying for property in Solihull since 2005 are only 15.1% higher, not even keeping up with inflation. Over the same time frame inflation rose to 27.8% (although salaries were only 22.3% higher over the same time period)

Gone are the days where owning your own property is a guaranteed path to wealth, affluence and prosperity. I know I keep mentioning Europe, but some of the highest levels of home ownership are in Romania at 96.1%, Hungary at 88.2% and Latvia at 80.9% (none of them European economic dynamos) and even West European countries like Spain at 78.8% and Greece at 74% (countries which we are all aware are on their knees, riddled with national debt and massive youth unemployment).

At the other end of the scale whilst in the UK homeownership stands at 64.8%, it only stands at 52.5% in Germany and only 44% of Swiss people are homeowners. Interestingly historically home ownership was not always the rule in the UK, in 1918, only 23% of people were homeowners, with no council housing, meaning in fact, 77% of the UK residents were tenants.

Tenants have a choice: flexibility to move and not to be lumbered with huge bills when the boiler breaks, is a choice.  Solihull rents are growing, but not as much as incomes. To buy or not to buy is an enormously difficult decision.  While buying a Solihull home is a dream for the majority of the 20 and 30 something’s, it might not leave them better off in the long run and it isn’t necessarily the best option for everyone.  That is why, demand for renting is only going in one direction -upwards.

Solihull Property Values rise by 2.1% month on month

Whilst in a local coffee shop, a gentleman approached me and asked if I was the person who wrote the newsletters about the Solihull property market. We ended up having an interesting chat about the local property market, as he was concerned his daughter would never be able to buy her own property.

My latest analysis, using the Land Registry and Office of National Statistics, shows that overall, month on month, Solihull property values increased by 2.1%. The year on year figures showed the value of residential property in Solihull has increased by 6.4% in the year to the end February 2016, taking the average value of a property in the council area to £221,200.

It gets even more interesting when we look at the figures from late 2015/ early 2016 and see the patterns that seem to be emerging.

·         January 2016               - a drop of 0.5%

·         December 2015          - a rise of 0.6%

·         November 2015          - a rise of 0.8%

I have talked in many recent articles about a shortfall of properties being built in Solihull over the last 30 years. This lack of new building being the biggest factor contributing to Solihull property values 163.21% higher now than in 1995. Until the Government addresses this issue and allows more properties to be built, this situation will continue as the UK population grows at just under 500,000 people a year, yet only 152,400 properties are being built per year, no wonder demand is outstripping supply.

Another reason intensifying the current level of property values in Solihull, is the fact that people aren’t moving house as much as they used to, meaning fewer properties are coming onto the market for sale. As a consequence to this there is a lack of choice of property to buy, which means people actually thinking of moving are discouraged from putting their property on the market. This unevenness between demand from would-be purchasers and the number of properties coming on to the market for sale is causing pressures in Solihull (and the rest of the UK).

So what of the future of the Solihull property market and the gentleman’s daughter? I firmly believe the property market in Solihull and the country as a whole is changing its attitude towards homeownership. Back in the 60’s, 70’s, 80’s and 90’s, getting on the property ladder was everything. Since the late 90’s, we as a country have slowly started to change our attitude on homeownership So, whatever the vote on the 23rd of June, if you think about it, we might be more European than we realise!

15% of Solihull people Rent - Is that Healthy?

Renting in the 1960s and 1970s was deemed unpopular. You either lived in a ‘Rigsby Rising Damp’ style bedsit with wood chip on the wall and a coin operated electric meter or, you lived in a council house. In the latter part of the 20^th Century, the British were persuaded they were wasting their money on rent payments. However, owning a home often makes less financial sense than renting and provides more flexibility.  The rate of homeownership has started to drop as stigma at to renting diminishes. In fact, of the 122,056 residents of Solihull, 19,113 of those rent their home from either the local authority/social provider or private landlords – meaning 15.65% of Solihull people are tenants.

The idea of homeownership has been historically embedded in the British soul, in fact 101,762 Solihull people live in an owner occupied property. Housing is at the heart of Government policy, with George Osborne promising 200,000 new properties a year. The plan is that this will allow first time buyers to purchase their first home.   Promising everybody their own home, has traditionally been at the heart of election campaigns for all parties and as a country, homeownership is the main goal of British life.

However, despite this more and more people are renting now a days, so are we turning to a more European way of living?  I believe as a country we are, in fact homeownership could be affecting your health! The UK, according to Bloomberg, only lies at number 21 in the list of healthy countries in the world.  Germany is at number 10 and Switzerland number 4 with homeownership at 52.5% and 44% respectively in those countries (in the UK it is 64.8%).

In the Solihull Metropolitan Borough Council area, 72.16% of homeowners who own their home outright said they were in ‘very good’ or ‘good’ health whilst, at the other end of the scale, 7.05% said their health was ‘bad’ or ‘very bad’. Looking at renting, the census splits tenants into two types – 68.23% of Solihull local authority/social tenants said they were in ‘very good’ or ‘good’ health and 11.97% were in ‘bad’ or ‘very bad’ health. Whilst ‘private rented tenants’ in Solihull, were the healthiest, as 87.39% of them described themselves in ‘very good’ or ‘good’ health and only 3.56% were in ‘bad’ or ‘very bad’ health

I’m not suggesting that low homeownership rates in Switzerland and Germany are directly linked to health, but the stats do seem to suggest that with home ownership there is more stress. The numbers for Solihull do go some way to back up the argument and they are the same across the whole of the UK. Nonetheless I do think that substantially all of the upside to home ownership in recent years has been a function of monumental rising house prices. Now that's come to an end, it's hard to see why anybody would want to buy?

Renting is here to stay in Solihull and it’s growing incrementally each year. Even with the new tax rules for landlords, buy to let is still a viable investment option for most people in the town. There has never been a better time to purchase buy to let property in Solihull, but buy wisely. Gone are the days that you would make profit on anything with four walls and a roof.