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. Banks have been offering 95% mortgaged to first time buyers for over five years and whilst you could certainly find better properties in better condition in better areas, flats/apartments can be bought for as little as £300,000 just south of Hampstead Heath (meaning a modest deposit of £15,000 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 median house prices to median salary was 6.12 to 1 in Hampstead ... and here was the surprise for both of us, according to the Office of National Statistics (ONS), today’s ratio is a staggering 20.0 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 and buying a house was everything. Youngsters today have considerably more disposable 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 or so years ago, if you said you rented a property, you were regarded as being of a lower social status ... but now it’s the norm.
So with mortgage affordability appearing to being well within the bounds of most first time buyers, the level of deposit required for a 95% loan being surprisingly modest (starting off at c. £15,000 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.
Hence, I cannot see the demand for decent, high quality rental properties ever dropping in the next 10 to 20 years, but only ever increasing as the population continues to soar. Just make sure you by the right property, at the price, in the right location.
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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