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.
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