I had the most interesting chat with a mature
couple (in their early/mid 50’s) from Great Gonerby the other day, whilst viewing a property. The property wasn’t for them, but their
son, who wanted a second viewing with his parents to get the parental blessing.
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 Grantham property market and how they
had bought their first property in the town just after they got married in the late
1980’s when they were in their early/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 similar topics. I want to share the highlights
of that conversation with you today.
Their son, like many 20 to 30 year olds in Grantham,
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 Grantham is huge. There are in fact 3,375 private rental
properties in Grantham at the last count, impressive when you consider there
are 2,433 council houses in the town. However, let us not forget 11,169
properties are owner occupied (6,224 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. 95% mortgages have been
available to first time buyers for over four years and whilst you could
certainly find better properties in better condition in better areas, terraced
houses can be bought for as little as the mid £60,000’s in the Earlsfield area
of Grantham (meaning a modest deposit of £3,000 would be required).
When it came to affordability, I was able
to tell them that when they bought their first house in Grantham in 1988, the
ratio of house prices to salary was 5.08 to 1 in Grantham ... and here was the
surprise for both of us, today’s ratio is only 4.96 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 was everything and buying a house was everything. Youngsters today
have far much more disposal income today than people had in the Callaghan and
Thatcher years, but choose to spend it upgrading their mobile phones every 12
months, the newest tablet or PC, a newest 50” plasma LCD TV 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 massive 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
years ago, if you said you rented a property, you were considered the lowest of
the low ... but now it’s the norm.
So with mortgage affordability being well
within the bounds of most first time buyers, the level of deposit required for a
95% being surprisingly modest (starting off at c.£3,000 in Grantham 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. One source of information on
such matters would be the Grantham Property Blog
