I had a very interesting chat with a couple from Bromley the other day, whilst viewing one of our rental properties. The property wasn’t for them, but their daughter, who requested a second viewing with her parents to get parental approval. 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 Bromley property market and how the parents had bought their first property in the town just after they got married in the late 1980’s when they were in their 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 topics…
Their daughter, like many 20 to 30 year olds’ in Bromley, ideally wants to own her own property and the parents said that they had read in the newspaper recently that when you compare house prices to earnings, the current 20 to 30 something’s generation have to spend much much more of their salary in mortgage payments than any previous generation when purchasing their first property, so I thought I would go through the figures with them.
The demand for private rental sector accommodation in Bromley is huge. There are in fact 130,862 properties in Bromley of which 35,856 are rented, 18,451 of those are socially rented leaving 17,404 private rental properties in Bromley at the last count. However, let us not forget this leaves the majority of 92,781 properties that are owner occupied.
Let us all be honest, private renting doesn’t have the stigma it had when I left my parents home 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 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 of buying a property, I was able to tell them that when they bought their first house in Bromley in 1988, the ratio of house prices to salary was 5.3 in Greater London of which Bromley is part … and here was the surprise for all of us, today’s ratio is only 6.8. I say ‘surprise’ and ‘only’ because whilst there is no doubt this is an increase we had all envisaged with all the news headlines it had gone up much more than that and is way out of control compared to previous generations.
We then add in to this equation the average interest rate in 1988 was 7.25% and today it is just 0.5% so the monthly outgoing on a mortgage is much lower now in real terms than it ever was in 1988. With regards to the deposit there are now various schemes available for first time buyers including contributory deposits and ISA’s etc, therefore it is more than arguable that in fact buying a property now has never been more affordable for the younger generation.
So why are more youngsters not buying? I believe there has been a cultural attitude change towards renting property in Britain and that this quiet revolution is likely to become permanent. In the 60’s, 70’s and 80’s, saving for the deposit was everything, buying a house was everything, having a home to call your own was everything. Youngsters today have a lot of disposable income, but would rather spend it upgrading their mobile phones every 12 months, buying the newest tablet, laptop or PC, the newest 50” TV, Dr Dre Beats headphones, go on two sun drenched holidays a year, spend weekends away and eat out regularly rather than go without and save for a deposit and I say good luck to them, enjoy life whilst you can.
Yes, there are horror stories of tenants living in rat infested properties with landlords who charge massive rents and don’t repair their properties. But that is very much the exception as most tenants rent homes of a good quality and the upside is they don’t have to worry about any repair bills. Twenty years ago, if you said you rented a property, you were considered the lowest of the low … but now it’s becoming the norm and about time to.
The UK housing market is slowly but surely turning into a more European model, where people rent for long periods of their life, buy properties in their 30’s, 40’s even 50’s, or eventually inherit their parents property, and then subsequently become homeowners themselves, albeit later in life.
Hence, I cannot see the demand for decent, high quality rental properties dropping in the next 10 to 20 years, but only ever increasing as the population continues to soar. Just make sure you buy the right property, at the price, in the right location.