The changing face of home ownership
Barney McCarthy examines how attitudes to property have altered in recent years
“The past is a foreign country; they do things differently there.” So reads the first line of The Go-Between and while the chances are that LP Hartley wasn’t referring to the UK property market, this famous quote rings true for the changing face of home ownership. Gone are the days when it was a simple case of leaving home and buying your first property before slowly but surely working your way up the ladder before perhaps trading down in retirement. A host of obstacles now face first-time buyers trying to get onto the property ladder, while some others simply prefer the freedom of renting.
Trade body the Council of Mortgage Lenders’ (CML) research article, ‘Fuzzy households, fuzzy tenures’, highlights how housing tenures have become interconnected as never before with increasing numbers of people flitting between the private rental sector and home ownership a number of times during their adult lives, as well as owning more than multiple property, some of which they don’t even live in. The CML attributes the shift to a number of factors including affordability considerations, increasing numbers of people attending university, the need to be geographically mobile for work, more fluid household structures and inward migration – all drivers of demand for private rental property.
This is a low
Research by Halifax shows that the number of first-time buyers is at its lowest level since 1980 and that the average house is unaffordable for them in 466 out of 483 towns. Martin Ellis, chief economist at Halifax, says: “Rising property values have priced many potential first-time buyers out of the housing market. When they do enter the market, people are more likely to be in their 30s rather than their 20s, and buy a flat rather than a terraced house. First-time buyers are also buying proportionately more in cities and towns as they opt for convenience over size.”
But despite the dwindling numbers of first-time buyers, CML figures show that the average age that people take their first step onto the property ladder hasn’t changed too dramatically. Three decades ago the average age was 27 and while it reached 31 in the early noughties, it has now been nudged back down to 31 years old. Perhaps the main difference is that while in the 1970s it may have been more common to live with parents until moving out, people now often leave home to attend university and rent for a couple of years before buying.
To buy or not to buy
Renting a property is sometimes seen as pouring money into a black hole when you could be saving to buy, but the modern generation has a more relaxed attitude to renting than their forebears. Living in areas they wouldn’t be able to afford to buy property in, the flexibility to be able to move at short notice and proximity to work are all considerations that make people favour renting over buying.
Abbey publishes an annual UK rent versus buy index and its most recent findings show that the monthly cost of the two is converging. With rising house prices and Bank Base Rates, it is now only £5,811 cheaper to buy rather rent over a 25-year period. There is one obvious difference though, as Abbey’s head of mortgages Nici Audhlam-Gardiner points out. “While on a month-to-month basis in some areas it is cheaper to rent than buy, at the end of the 25 years a homeowner actually has a house whereas a renter has nothing,” she says. “In addition, homeowners benefit from any further house prices rises as the value of their equity increases over time.”
Paragon Mortgages, a specialist buy-to-let lender that regularly publishes data about the rental market, says that rental accommodation is particularly sought after in the current environment when people are unsure about buying. Managing director John Heron says: “Landlords remain confident about the long-term prospects of residential property investment, as the UK population continues to grow on the back of inward migration and other demographic factors.”
Whether you choose to rent or buy will be determined by a number of factors, not just a simple case of personal wealth. With a diverse property market where shared ownership schemes sit alongside a growing number of single occupants and buy-to-let landlords, the only thing that’s for sure is that your situation is unlikely to be unique.
Tags: First time buyers, Home ownership, renting
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