While it would be no surprise to learn that first-time buyers in the England are struggling to climb aboard the property ladder, many will be surprised at the decline in owner occupied homes. The report commissioned by the Labour Party and carried out by the chief executive of Taylor Wimpey casts a very interesting light on the market.
Owner occupied homes in England
Since the turn-of-the-century we have seen a constant decline in the number of owner occupied homes across England. Indeed the figure has fallen from 70.9% just after the turn-of-the-century to 63.6% in the financial year 2014/15. The UK as a whole has generally been seen as a home ownership country whereas historically places such as a US have tended to rent more. Unfortunately, these trends seem to be turning full circle with the UK moving towards rental and the US moving towards homeownership.
While there has been housing demand right across England it is London and the south-east, often seen as the hubs of the UK economy, which have struggled most. These are the areas which are attracting most employment opportunities and therefore strong demand for property. The lack of newbuilds and growing demand in these areas has led to a significant increase in property prices moving them way beyond the reach of first-time buyers. As a consequence, more and more property investors are moving into these areas in the knowledge that they will have no problems renting out their properties.
This report also covers the various help to buy schemes announced by the UK government in recent times. While there is no doubt that these schemes offer some benefit to those looking to buy property there has been a suspicion they also push prices higher. There are now calls for these particular schemes to be focused at first-time buyers exclusively thereby bringing more people into the market and reducing the pressure in other parts of the market. This is certainly an interesting discussion point but if those looking to downsize or upsize are not able to move, due to financial restraints, this will impact liquidity.
A long-term problem
While opposition parties will jump on this report and criticise the current UK government over a perceived lack of new builds compared to demand, there is more to this story. We have to look back to the 1980s when the Thatcher government began encouraging homeownership in the UK with various right-to-buy schemes. After that there is a suspicion that politicians were directly or indirectly ensuring demand always outstripped the supply of newbuilds. In many ways this kept voters happy because their property maintained a long-term upward trend but first-time buyers soon began to struggle.
The uncertainty surrounding Brexit could turn out to be extremely positive in the longer term but in the short term many individuals, investors and finance providers have decided to sit on the sidelines. In all honesty this report does not tell us anything we don’t already know and while it does give further food for thought, will the politicians really take notice?