Home Ownership Falling in the UK! Why?
The BBC have run a story regarding the reduction in home ownership in the UK. The story is accurate, the numbers of people buying is falling. The number of people renting is increasing.
The reason usually given for this is the unaffordability of housing in the UK. House prices have risen dramatically and wages have not managed to keep pace. There are other factors and the previous statement is a little misleading.
House prices have increased steadily since the data held by the Nationwide was started back in the 70’s. See the link below.
The average house price will always move forward over time, although there will be peaks and troughs along the way.
In the past decade, well since 2007, prices have been through a period of depreciation and then recovery. Some prices are still lower than their 2007 equivalents, particularly in apartments.
Over that period it made sense, for young people particularly, to rent. The fact that there was effectively a net zero increase in the property market, meant they would not have made a loss by renting.
The next factor is a choice, a lifestyle choice to be precise. There are many things that young people want to do and they all cost money:
30 years ago my first car was a beaten up old Mini, my son’s was a 1 series BMW.
The availability of holidays is on the rise and the relative cost is decreasing. It is accepted now that a couple of foreign holidays in the sun is relatively normal.
The availability of fast food is unbelievable and not limited to the local chippy or a Chinese take away.
The cost of renting is typically lower than a mortgage on a like for like basis.
All of these factors contribute to the overall state of home ownership, however, as a percentage of all buyers, those in the age bracket of first time buyers is increasing.
I am aware that this is not a symptom of just younger people, that there is for instance a number of large houses, bought each year to be converted into apartments or HMO’s.
The point is that these houses leaving the ranks of home ownership and joining the private rented sector is, at least in part, directly linked to the pattern of the younger people in the market.
So in summary, next time you are having a chat about the property market and all of its wonderful aspects, please remember to include this one, it usually results in quite an involved discussion.