Will Leyland, 04 October 2016
A report released this week has shown in microcosm a trend that is showing no signs of slowing - home buying is on the decline. It has been true that the decline in property purchases has been rapidly dropping since the turn of the millennium thanks to spiraling house prices and tighter lending criteria accelerated by the financial crash of 2008.
First time buyers in particular have been struggling for some time to get themselves on the property ladder as prices rocket and deposits are becoming more unrealistic.
To confirm this, a second report has shown that single buyers have dropped by a massive 4% in just five years. This is the equivalent of around 10,000 transactions a year, according to the report. Of the 1.3m property transactions which take place annually, 60% are now undertaken by people buying with friends, relatives or as part of a couple.
Buying collectively enables homebuyers to afford properties worth up to £100,000 more than their single counterparts – with London, Kent and Essex seeing the highest numbers of group purchases. The report has also seen an increase in the number of people buying as ‘joint tenants’ and ‘tenants in common with unequal shares’. This in turn has discouraged single and other buyers from the market.
Saving for a deposit, and the aversion among banks towards high Loan-to-Value (LTV) mortgages, continues to be problematic. According to the latest AmTrust Moneyfacts LTV tracker, the number of available home loans for those with 5% deposits fell from 243 in July to 238 in August.
While up to four people can purchase a property together, mortgage experts warn that the number of lenders who are able to consider multiple incomes is far more limited. A number may allow four purchasers, but some will only consider two primary incomes for affordability purposes, other lenders are more pragmatic, and will consider three – and even four – but choice is considerably reduced, the report found.
This highlights and compounds the issues that many younger and middle aged buyers are facing across the more expensive parts of the country. Especially in London there have been numerous reports and findings describing how difficult people are finding it purchasing a property. The mayor, Sadiq Khan, based the majority of his mayoral campaign on tackling the problem but has made little progress so far.
It’s not all problematic though as many of the findings also point to changing attitudes towards property ownership with many actually preferring the freedom and reduced responsibility of short or long-term letting. The ability to move at fairly short notice, the lack of requirement to get large amounts of lending and the relatively large stockpile of rental housing allows people a much more free, easy, and non-committal option in comparison.
This has also been helped invariably by the rise in standards from letting agents who are now encouraged to join regulatory schemes such as ARLA (Association of Residential Letting Agents), who promote customer service, transparency, and value. Furthermore the majority are now part of an Ombudsman scheme which allows tenants peace of mind knowing that they have an impartial avenue to take should disputes arise. Disreputable agents still exist and practise, but these agents are now in the minority and are outnumbered by those within the industry who seek to improve standards.
Landlords have subsequently been encouraged to take on more properties as they find superior management companies and are also investing more into their properties which is raising living standards. Yields and capital gains have all remained strong meaning a healthy and bustling market place for landlords and investors.
Whilst these trends continue and news emerges frequently of drops in buyer numbers it’s not inconceivable to imagine a generation of renters who actually prefer the freedom and non-committal nature of tenancy rather than ownership.
Will Leyland, 04 October 2016