The
simple fact is we are not building enough properties. If the supply of new
properties is limited and demand continues to soar with heightened divorce
rates, where one household becomes two; people living longer; and continued
immigration; this means the values of those existing properties continues to
remain high and out of reach for a lot of people, especially the blue collar
working families of Loughborough.
Looking at the
historic nature of the ratio, it can clearly be seen in the graph below that
this has been an issue since the early to mid 2000’s.
Looking at some recent statistics released by the Government,
the ratio of the lower quartile house prices to lower quartile gross annual
salaries in Charnwood Borough Council has hit 8.49 to 1. What
does that mean exactly and why does it matter to Loughborough landlords and
homeowners?
If
we ordered every property in the Charnwood Borough
Council area by the value of those properties, the average value of the lower
quartile properties (i.e. lowest 25%) would be £155,000. If we then did the
same, and ordered everyone’s salary in the same council area then the average of
the lowest quartile (lowest 25%), of salaries would be £18,255
per annum. Thus dividing one with the other, we get the ratio of 8.49 to 1.
Assuming there is one wage earner in the house, the chances of a
Loughborough working family being able to afford to buy their own home, when
it’s over eight times their annual salary, is very slim indeed. The existing
affordability crisis of people wanting to buy their own home is the unavoidable
outcome of the decade on decade failure to build enough homes to keep up with
demand. Nevertheless, improving affordability is not a case of just
constructing more homes. Charnwood Borough Council needs to ensure more properties
are not only built, but built in the right locations and of the right type and
at the right price to ensure the needs of these lower income working families
are met, because at the moment, they presently have few options apart from the
private rental sector.
However, if
one looks at the historic data, those on the bottom rung of the ladder (those
in the lower quartile of wage earners) used to be housed by the local authority
instead of buying. However, the vast majority of council houses were sold off
in the 1980’s, meaning there are much fewer council houses today to house this
generation.
Many of the lower quartile working class families were given a lifeline to buy their own homes in the middle 2000’s, with 100% mortgages, but with the credit crunch in 2009 that rug (of 100% mortgages) was rudely pulled from under their feet. You see it is cheaper to buy than rent, however it’s the finding of the 5% deposit that is the challenging issue for these Loughborough working class families. So unless the Government allow 100% mortgages again, the fact is, demand for rental properties will outstrip supply. But there is some hope, as Lloyds have this week just launched their 100 per cent Lend a Hand mortage for first time buyers.
In the long term, to alleviate that, I would suggest the Loughborough community hold their local politicians at Charnwood Borough Council to account for the actions they could take to ensure the affordability of housing and the extent to which they work with private developers or housing associations, and aggressively use the planning tools at their disposal to safeguard the local community getting the new households that we need. Charnwood Borough Council could make certain parcels of residential building land for private rented development only, eliminating the opportunity of the land being bought to develop large executive homes, which do not solve the current problem.
Many of the lower quartile working class families were given a lifeline to buy their own homes in the middle 2000’s, with 100% mortgages, but with the credit crunch in 2009 that rug (of 100% mortgages) was rudely pulled from under their feet. You see it is cheaper to buy than rent, however it’s the finding of the 5% deposit that is the challenging issue for these Loughborough working class families. So unless the Government allow 100% mortgages again, the fact is, demand for rental properties will outstrip supply. But there is some hope, as Lloyds have this week just launched their 100 per cent Lend a Hand mortage for first time buyers.
In the long term, to alleviate that, I would suggest the Loughborough community hold their local politicians at Charnwood Borough Council to account for the actions they could take to ensure the affordability of housing and the extent to which they work with private developers or housing associations, and aggressively use the planning tools at their disposal to safeguard the local community getting the new households that we need. Charnwood Borough Council could make certain parcels of residential building land for private rented development only, eliminating the opportunity of the land being bought to develop large executive homes, which do not solve the current problem.
Yet, in the short term, all this means is demand for rental properties will continue to grow, keeping Loughborough house prices high and Loughborough rents high.
If you are interested in talking about this or would like a second opinion on any properties you have seen,please feel free to call me on 01509 260777 or email me.
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