Housebuyers have never been so disadvantaged.
Lee Travis is head of professional development at the Society of Mortgage Professionals (SMP).
Despite the best intentions of MMR, a spate of new lenders and new products entering the market, numerous government initiatives for first-time buyers and record low interest rates, it seems to me that housebuyers have never been so disadvantaged.
Because despite such a plethora of support and worthy intentions, the houses just aren’t there to buy.
For a start, the Government’s target of 240,000 new homes per annum hasn’t been achieved for almost a decade and is currently falling around 100,000 short every year. It’s a quarter of a century since it last hit such a figure.
And even if the houses were available, the widening gulf between earnings and house prices is threatening to cut millions adrift, or condemn them to years of saving even to get the minimum deposit – never mind afford the repayments if they get beyond that significant hurdle.
Using data from Land Registry and HMRC, The Guardian recently found that house prices have rocketed so much in the last 20 years, that even in the most affordable regions of England and Wales, buyers have to borrow six times their income. Twenty years ago the figure was 3.2 times. This leaves millions effectively locked-out of the property market.
In London during the nineties, it was only 4.4 times income, but by 2013, that multiple had exploded to 12.2. The cheapest area in which to buy at the time of writing is the north east, where you’re looking at a multiple of 6.1.
During the same period it is thought that salaries have only risen by approximately four times, which only serves to exacerbate the situation. Consequently, saving for a deposit and contemplating buying a house is increasingly being dismissed by many potential first-time buyers.
Not surprisingly, that has led to a sizeable swing in favour of rental market. But is that such a bad thing?
The UK has long been out of step with countries such as Austria, Germany and Switzerland, where as many, if not more people rent than buy. OECD data shows that Germany’s home ownership rate in 2013 was just 43 per cent, compared to 66 per cent in the UK.
Economists think German housing policy strikes a much better balance between government involvement and private investment than in many other countries. There are signs the UK is beginning to follow suit, as the larger institutional investors realize that they can achieve larger returns.
Such new thinking could not only make getting roof over one’s head easier, but could also mean that it’s a better quality one too, as standards will be higher and property will be built to more modern, modular guidelines.
Young Germans, we are told, do not feel frustrated if they don’t get on the property ladder. Ownership is not a national obsession, despite the fact that it has been many years since Germany experienced a housing bubble.
Will that sentiment become prevalent among young Brits too? Could the ‘stigma’ eventually disappear and renting become accepted as the norm?
Demand for rental property has increased exponentially in the last 24 months, with an estimated seven tenants chasing every new property that appears on the market.
All we need now is the supply. But that’s another story…
