The proportion of 25 to 34 year olds who own their home in Loughborough
has nearly halved in the last 20 years - so what does this mean for all the
existing Loughborough landlords and homeowners together with all those
youngsters considering buying their first home?
Well, looking at the numbers in greater detail, in Loughborough
there has been a 41.8% proportional drop in the number of 25 to 34 year olds owning
their own home between 1999 and 2019 and a corresponding, yet smaller drop, of 20.4% of 35 to 44 year olds owning their own home over the same time
frame.
So, if you were born in the late 1980’s or early 1990’s, the
dream of owning a home has reduced dramatically over the past
20 years as young adults’ wages and salaries are now much lower in relation to Loughborough
house prices. Nationally, average property values have grown by 186.9%, whilst average
incomes have only risen by 44.8%, yet that doesn’t allow for inflation.
However, whilst not over the same 20 years (it’s close enough though), the
Institute of Fiscal Studies said recently that the average British home was just
over 2.5 times higher in 2015/6 than in 1995/6 after allowing for inflation; yet
the average household income, after tax, of 25 to 34 year olds grew by only 22%
in ‘real-terms’ over those 20 years.
Yet, even though property prices are at record highs, on the
other side of the coin, the monthly cost of mortgage payments has actually
fallen because interest rates have remained low. In 1999, the average mortgage
rate paid by UK homeowners was 6.54% whilst today it’s more than halved to
2.64% - a drop of 59.4%. Many of you reading this will remember the 15%
mortgage rates of 1992!
The fact is, mortgage repayments take up a considerably
smaller proportion of take home pay, on average, than they did before the Credit
Crunch or in the late 1980’s. Although the risk that mortgage rates will
increase if the Bank of England put up interest rates, it might leave some homeowners
in a difficult position – hence I might suggest, if you haven’t already, you
seriously consider fixing your mortgage rate - remember to take advice from a
professional before you do.
Yet, look at the data in even greater detail and you will
see, going back to the 1960’s, we weren’t always the huge homeowning nation
we always thought we were. Today, 23.8% more 35 to 44 year olds and 46.7% more 45 to
54 year olds own their own home compared to 1969. If you look at the graph,
move the clock back to the early 1960’s and you will see the numbers are even
starker. So as the younger generation in Loughborough has seen homeownership
drop in the medium term, they will in fact end up inheriting the homes of their
parents. We are turning into a more European (especially German) model of
homeownership, where people tend to buy their first home in their 50’s instead of their
20’s.
My message to first time buyers of Loughborough is go and
get some mortgage advice! The cost of
renting smaller starter homes is between 20% and 25% more than the mortgage
payments would be. Mortgages at 95% (meaning a 5% deposit is required) have been
available since late 2009 and some banks even do 100% mortgages, i.e. no
deposit. I suggest that you don’t assume that you can’t get a mortgage – for the
sake of a 45 minute chat with a mortgage adviser – you get a straight answer
and all the information you need.
Therefore, what does this mean for homeowners and landlords
of Loughborough? Well, for many tenants, renting is a positive choice and as we
aren’t building enough homes to meet current demand, let alone eating into the
lack of building over the last 35 years, demand will outstrip supply, home
values will, over the medium to long term, rise above inflation – meaning it
will be a good overall investment as demand for rental properties increases.
Good news for Loughborough landlords and Loughborough homeowners alike.
The single biggest issue in the Country, and Loughborough, today
is that we aren’t building enough homes. I know it seems the local area is
covered with building sites – yet looking at the actual numbers – we still
aren’t building enough homes to live in. Residential property only takes up
1.2% of all the land in the Country – and whilst I’m not suggesting we build
housing estates on National Trust land or cut down forests, until we realise
that we aren’t building enough this issue will only continue to get worse.
If you would like to discuss the Loughborough property market or chat about any potential investment please feel free to call us on 01509 260777 or email me at j.lee@belvoir.co.uk.
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