If we look back to the 1980s the UK property market was in its relative infancy prior to the council house giveaway instigated by Margaret Thatcher’s Tory government. This led to a massive boom in home ownership across the UK and was the birth of the market that we see today. However, a report today by the Resolution Foundation casts a very different shadow across the UK property market today.
Home ownership across the UK as a whole fell from a peak of 71% in October 2004 down to 64% in February 2016. This is a bitter blow for the industry but what is happening behind the scenes?
Home ownership in England fell from a high of 71% in April 2003 to 64% in February 2016 which is not only a reversal of the previous trend but a significant pullback. The situation in Northern Ireland is even worse falling from a peak of 74% in November 2006 down to 63% in February 2016. Scotland fared slightly better falling from a peak of 69% in October 2004 down to 64% while Wales fell from 75% in May 2006 to 70% in February 2016. It is obvious from the figures that markets right across the UK have been hit by the falling trend in home ownership.
It may surprise many to learn the Greater Manchester has been hit hardest falling from a peak of 72% in April 2003 down to just 58% in February 2016. Indeed the vast majority of the larger falls occurred in the northern cities of England although there were significant falls in Outer London, West Yorkshire and the West Midlands.
Private renters taking up the slack
The proportion of private renters owning UK property has increased from 11% in 2003 up to 19% in 2015. Is it a coincidence that greater Manchester saw one of the largest increases in private rental ownership rising from 6% up to 20%? Many of the other cities which have chalked up double-digit reductions in home ownership have also seen significant increases in private rental. One issue which could become something of a self-fulfilling prophecy, stopping many from climbing aboard the property ladder, is the fact that private renters spend 30% of their income on housing costs compared to just 23% for those with a mortgage.
While it is obviously disappointing to see private home ownership falling in the UK, and private rental increasing, these investors are just filling a gap in the market. There are many other issues to take into consideration one of which is employment mobility with many people are now able to move around the country in search of employment. As a consequence, perhaps fewer people are looking for roots and are therefore happy to rent in the short term?
More new houses are required
It seems every time we talk about the UK property market it comes down to the fact that governments of the day for many decades have now seriously starved the UK property market of new builds. Time and time again, even despite promises by David Cameron, governments of the day have fallen well behind the number of new builds required. As a consequence, fewer properties and a growing number of investors is a recipe for disaster for those looking to climb aboard the property ladder for the first time.