Many people
think the British obsession with owning your own home started with Thatcher in
the early 1980’s, when she allowed council tenants to buy their council houses
under the right to buy scheme. However, the growth actually started just after
the Second World War. Looking at the country as a whole in 1951, 30% of residential
property was owner occupied then, every ten years that rose incrementally to
39% by 1961; 51% by 1971; 58% by 1981 and 68.07% by 2001 but after that, it
dropped to 63.4% by 2011 and continues to drop today.
Young adults
tend to start to think about settling down and moving out of the family home in
their early-mid twenties. After a couple
of years, they will have a choice of either buying their first house with a mortgage
or decide to privately rent for the long term (because the Council House
waiting list is measured in decades at the moment!). The ratio of people owning
a house with a mortgage verses privately renting is an extremely important
guide to what people are doing about their housing needs and what their
attitude to renting vs buying is. With
that in mind, within the next ten years, I am predicting there will be more
people renting privately in Southampton than own a property with a mortgage and
that the British love affair of property ownership will fade as the decades
roll on.
This is a really
important change in the way we live, as I explained to a local Southampton
landlord the other day, knowing when and where the demand of tenants is going
to come from in the coming decade is just as important as knowing the supply
side of the buy to let equation, in relation to the number of properties built
in the city; Southampton property prices and Southampton rents.
In the Southampton
City Council area as a whole there are 23,007 households that are privately
rented via a landlord or letting agency verses 28,600 households that are owned
with a mortgage, so my prediction appears to be outrageous. However, when we
look deeper (as the devil is always in the detail), 12,908 of those 28,600 households
are 35 to 49 year olds and 7,606 are households of 50 to 64 year olds. I would expect
all the 50+ years to be paying their mortgage off as they enter retirement as I
would with some of the people in their mid/late 40’s.
Meanwhile, at
the other end, in the 25 to 34 age range (the age most people bought their
first home in the 1970’s/80’s/90’s) only 6,147 of the 14,669 households
occupied by those 25 to 34 year olds are owner occupiers with mortgages,
because 8,522 households are privately rented. This means only 41.9% of 25 to
34 year olds have bought their house (with a mortgage). Twenty years ago, that
would have a much higher percentage of homeowners (between 75% to 85%).
It can be
seen that as the older generation pay their mortgages off as they start to get
to retirement and the younger generation aren’t jumping on the property ladder
like they were 20 or 30 years ago, the private rental sector will take up the
slack as more and more people will want a roof over their head, however they won’t
buy one but will rent one instead. With Local Authorities and Housing
Associations not building houses anywhere near like the number of houses they
were building in the 1950’s, 60’ and 70’s, the private landlord appears to have
good demand for their rental properties for many decades to come.
This will
create a polarisation in the housing market between those, mostly older,
households who own outright and those, mostly younger, households who rent. Our
housing market is very much turning into the European model. However, all is
not lost, the younger generation will inherit their parent’s properties, which
in turn will enable them to buy, albeit later in life.
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