I had the most interesting chat with a mature couple (in
their early/mid 50’s) from Child's Hill the other day, whilst viewing one of our
rental properties. The property wasn’t for them, but their son, who wanted a
second viewing with his parents to get the parental blessing. Now I know that
isn’t the norm, but in this case the parents were going to act as guarantor. We
got chatting about the Hampstead property market and how they had bought their
first property in the area just after they got married in the late 1980’s when
they were in their early/mid 20’s. Anyway, we got chatting about how the
youngsters of the UK seem to rent more than buy nowadays and from that the
conversation covered a number of similar topics. I want to share the highlights
of that conversation with you today.
Their son, like many 20 to 30 year olds in Hampstead,
desperately wants to own his own property and the parents said he had read in
the Telegraph recently, when you compare house prices to earnings, the current
20 to 30 something’s generation have to spend more of their salary in mortgage
payments than any previous generation. The demand for private rental sector
accommodation in Hampstead is huge. There are in fact 31,419 private rental
properties in the borough of Camden at the last count, impressive when you
consider there are 22,517 council houses included in that figure. However, let
us not forget 31,343 properties are owner occupied (14,712 with a mortgage).
Let us all be honest, private renting doesn’t have the
stigma it had a few decades ago and it might surprise people that even though
us Brit’s class ourselves as a nation of homeowners, roll the clock back 100
years and over 75% of people rented their own home (and it was all from private
landlords as council housing only started to come in with the ‘homes for
hero’s’ after the first World War). It might also surprise you to learn that at
the time of the 1971 census, still more people rented than owned their own
home.
Looking at the affordability issue, I have proved time and
time again, it is in fact cheaper to buy a property than rent, when one looks
at starter homes for first time buyers. 95% mortgages have been available to
first time buyers for over four years and whilst you could certainly find
better properties in better condition in better areas, flats/apartments can be
bought for as little as the late £200,000’s
just south of Hampstead Heath
(meaning a modest deposit of £13,750 would be required).
When it came to affordability, I was able to tell them that
when they bought their first house in Hampstead in 1988, the ratio of house
prices to salary was 6.12 to 1 in Hampstead ... and here was the surprise for
both of us, today’s ratio is still only 7.96 to 1!
I said I believed there had been a cultural attitude change
towards renting property in Britain and that this quiet revolution was likely
to be permanent. In the 60’s, 70’s and 80’s, saving for the deposit was
everything and buying a house was everything. Youngsters today have
considerably more disposal income today than people had in the Callaghan and
Thatcher years, but choose to spend it to sustain their lifestyle; Upgrading
their mobile phones every 12 months, the newest tablet or PC, the latest 50” LCD
TV, upgrading their car every 18-24 months and two sun drenched holidays a
year, than go without and save for a deposit.
Yes, there are horror stories of tenants living in rat
infested properties with landlords who charge exorbitant rents and don’t repair
their properties. But that is very much the exception as most tenants rent
homes of a quality they couldn’t ever to afford to buy. Twenty years ago, if
you said you rented a property, you were considered the lowest of the low ... but
now it’s the norm.
So with mortgage affordability being well within the bounds
of most first time buyers, the level of deposit required for a 95% being
surprisingly modest (starting off at c. £13,750 in Hampstead
as mentioned above) until we change our attitudes, the UK housing market is
slowly but surely turning into a more European model, where people rent for
long periods of their life, then eventually inherit their parents properties
and subsequently become homeowners themselves, albeit later in life.
If you are looking for an agent with experience that can help you find the right tenant for your property, then contact us to find out how we can get the best out of your investment property. Email me on chris@ashmoreresidential.com or give me a call on 020 7435 0420. Pop in for a chat – we are based on Ashmore Residential, Suite 7, 25-27 Heath Street, London, NW3 6TR. The kettle is always on.
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