Canterbury Property Market in Crisis : Who is to blame?

‘An Englishman’s Home is his Castle’ is the phrase that was coined in Victorian times as the UK has a reputation for being a country of home owners  .. but the truth could be further from the point, because in a league of the top 46 economic nations of the world, where owning your property is permissible, the UK is only ranked no.37.

 

As I mentioned a couple of weeks ago, at the end of the First World War, 77% of people rented their home (the vast majority renting from a private landlord as Council Housing was still very much in its infancy). Homeownership rose very slowly in the 1920’s and started to grow as the economy grew after the Great Depression. However, after the Luftwaffe had flattened huge swathes of housing in the early 40’s, the priority was to get people into clean and decent accommodation .. so Local Authority’s (Councils) took up the baton and they built large council estates in the 1950’s and 1960’s.

 

As the UK economy got back on its feet in the middle part of the 20th Century and wages rose, people decided they wanted to own their own home instead of renting. Throughout the post war decades, it became easier to secure a mortgage. Interestingly, by 1977, 61.6% of 30 to 34 year olds were owner occupiers with a mortgage compared to 8.7% of 30 to 34 year olds being in private rented accommodation (the remaining either being in council housing or living with friends or family). Ten years later, in 1987, we saw some significant growth in homeownership, as 68.2% of 30 to 34 year olds had a mortgage and only 4.6% of people privately rented. A decade later and there wasn’t much change as, in 1997, the homeownership figure was 68.3% but private renting had jumped to 12.1% in the same 30 to 34 year old age group.

 

Move on another ten years to the 2007 figures, and this showed a slight drop in homeownership to 65.8% but renting had continued to increase to 18.7% (in the 30 to 34 year old age group). The latest set of figures is for 2014, and only 47.2% of 30 to 34 year olds had a mortgage and an eye watering 33.4% of 30 to 34 year olds privately rent.

 

When we look at the Canterbury figures of homeownership, looking back to 1991, 68.33 % of Canterbury households were owned by the homeowner, whilst 8% of Canterbury households were privately rented, whilst the 2011 census showed home ownership in Canterbury had dropped to 62.97% and private rented had increased to 20.8%. Much of the recent rise in the occurrence of private renting in Canterbury since the turn of the Millennium is not because property has become more expensive, but the fact these 30 somethings haven’t got a council house to move into (because they were all sold off) – so they have to rent. The selling of council housing in the 1980’s (a subject I have talked about in a previous article in the Canterbury Property Market Blog) artificially grew homeownership in the 1980’s, but as these people have got older, the younger generation didn’t have the same opportunity to buy their council house in the 1990’s, 2000’s or 2010’s. That is why, unless the council start building council houses by the acre, and hundreds of acres, private renting will continue to grow in Canterbury.

 

So if you want blame anyone .. blame the Grocer’s daughter from Grantham – Mrs T …. but before you do – do remember in the 1970s, the UK was called the "sick man of Europe" by critics of the UK government, because of industrial strife and poor economic performance compared to other European countries culminating with the Winter of Discontent of 1978/9 and if it hadn’t been for her we wouldn’t be where we are today.

Rents in Canterbury rise by 2.9% in the last year

I was reading the Sunday Papers, as is my want and, when reading the financial pages, it was announced UK inflation had increased to its highest level in a year. Inflation, as calculated by the Government’s Consumer Prices Index, rose by 0.3% over the last 12 months.  The report said it had risen to the those ‘heady’ levels by smaller falls in supermarket and petrol prices than a year ago. If you recall, in early 2015, we had deflation where prices were dropping!

 

So what does this mean for the Canterbury property market ... especially the tenants?

 

Back in November, the Office of National Statistics stated average wages only rose by 1.8% year on year, so when adjusted for inflation, Canterbury people are 1.5% better off in ‘real’ terms.   Great news for homeowners, as their mortgage rates are at their lowest ever levels and their spending power is increasing, but the news is not so good for tenants.

 

The average rent that Canterbury tenants have to pay for their Private Rental Properties in Canterbury (i.e. not housing association or council tenants) rose by 2.9% throughout 2015, eating into most of the growth.  2015 wasn’t a one off either.  In 2014, rents in Canterbury rose by 2.2% (where salaries only rose by only 0.2%) However, it’s not all bad news for Canterbury tenants, because in 2013 rents rose by 1.8%, (but salaries rose by 2.2%).

 

… and it must be noted that the private rents Canterbury tenants have had to pay for Canterbury property since 2005 are only 20.1% higher, not even keeping up with inflation, which over the same time frame, rose at 27.8% (although salaries were only 22.3% higher over the same time period)

 

More and more, talking to 20 and 30 somethings who rent – it’s a choice.  Gone are the days where owning your own property was a guaranteed path to wealth, affluence and prosperity.    I know keep mentioning Europe, but some of the highest levels of home ownership are in Romania at 96.1%, Hungary at 88.2% and Latvia at 80.9% (none of them European economic dynamos) and even West European countries like Spain at 78.8% and Greece at 74% (and we know both of those countries are on their knees, riddled with national debt and massive youth unemployment).

 

At the other end of the scale, whilst we in the UK stand at 64.8% homeownership, in Europe’s powerhouses, only 52.5% of Germans own a home and only 44% of Swiss people are homeowners.  Looks like eating chocolate, sauerkraut, renting and good economic performance go hand in hand.  Yet, joking aside, home ownership has not always been the rule in the UK.   In 1918, only 23% of people were homeowners, with no council housing, meaning in fact, 77% were tenants.

 

Tenants have choice, flexibility to move, they don’t have massive bills when the boiler blows up, it’s a choice.  Canterbury rents are growing, but not as much as incomes. To buy or not to buy is an enormously difficult decision.   For while buying a Canterbury home is a dream for the majority of the 20 and 30 something’s of Canterbury have, it might not leave them better off in the long run and it isn’t necessarily the best option for everyone.  That is why, demand for renting is only going in one direction – upwards.

Canterbury Property Values rise by 0.8% month on month

I do like to have a coffee at The Sandwich Bar on St Margaret’s Street in Canterbury. Whilst in there, a suited gentleman approached me and asked if I was the person who wrote the newsletters about the Canterbury property market. We ended up having an interesting chat about the local property market, as he was concerned his daughter would never be able to buy her own property, a place in Canterbury she herself can call home.

 

My latest analysis, using the Land Registry and Office of National Statistics, shows that overall, month on month, Canterbury property values increased by 0.8%. The year on year figures showed the value of residential property in Canterbury has increased by 9.0% in the year to the end February 2016, taking the average value of a property in the council area to £227,500.

 

It gets even more interesting when we look at the last few months’ figures and see the patterns that seem to be emerging.

 

February 2016             - a rise of 0.8%

January 2016               - a rise of 0.6%

December 2015            - a rise of 0.7%

November 2015            - a rise of 0.6%

 

We have talked in many recent articles about the lack of properties being built in Canterbury over the last 30 years. This lack of new building has been the biggest factor that has contributed to Canterbury property values still being 246.59% higher than in 1995. At the risk of repeating myself, until the Government addresses this issue, and allows more properties to be built, things will continue to get worse as the UK population grows at just under 500,000 people a year (which is a combination of around 226,000 people because of higher birth rates/people living longer and 259,000 net migration) whilst the country is only building 152,400 properties a year – no wonder demand is outstripping supply.

 

Another reason intensifying the current level of property values in Canterbury, is the fact that people aren’t moving home as much as they used to, meaning fewer properties are coming onto the market for sale, so in consequence, there is a lack of choice of property to buy, meaning people thinking of moving are discouraged from putting their property on the market ... thus perpetuating the problem, as the scarcity of possible properties to buy in order to move also deters people from offering their home for sale. This unevenness between demand from would-be purchasers and the number of properties coming on to the market for sale is causing pressures in Canterbury (and the rest of the UK).

 

So what of the future of the Canterbury property market and this man’s daughter? I firmly believe the property market in Canterbury and the country as a whole is changing its attitude about homeownership. Back in the 1960’s, 70’s, 80’s and 90’s, getting on the property ladder was everything. Since the late 1990’s, we as a country (in particular, the young) have slowly started to change our attitude to homeownership. We are moving to a more European model, where people choose to rent in their 20’s and 30’s (meaning they can move freely and not be tied to a property), then inherit money in their 50’s when their property owning parents pass away, allowing them to buy property themselves ... just like they do in Germany and other sophisticated and mature European counties, meaning his daughter will end up owning property, just later in life than we did. So, whatever the vote on the 23rd of June, if you think about it, we might be more European than we think!

 

If you want to read more articles on the Canterbury property market, whether you are Canterbury landlord, Canterbury homeowner, first time landlord or a first time buyer – then visit the Canterbury Property Market Blog… www.canterburypropertyblog.com

55% of Canterbury people Rent - Is that Healthy?

Renting used to be a dirty word in the 60’s and 70’s. You either lived in a ‘Rigsby - Rising Damp’ style bedsit with wood chip on the wall and a coin operated electric meter (that buzzed in the night) or you lived in a council house. In the latter part of the 20th Century, the British were persuaded that rent payments were ‘wasted money’. However, owning often makes less financial sense than renting and as the rate of homeownership is starting to drop substantially, as we roll the clock forward to today, there is no stigma at all to renting .. everyone is doing it. In fact, of the 47,941 residents of Canterbury, 26,463 of you rent your house from either the local authority/social provider (i.e. council house or housing association) or private landlords – meaning 55.19% of Canterbury people are tenants.

The idea of homeownership is deeply embedded in the British soul, in fact 20,317 Canterbury people live in an owner occupied property (or 42.37%). Housing is at the heart of Government policy, as George Osborne has promised 200,000 new properties a year so first time buyers can buy their first home whilst recently changing the tax laws for buy to let landlords. To get votes, Thatcher (and everyone since) ran election campaigns promising everybody their own home, and as a country, we seem to equate homeownership the goal of British life.

So as more and more people are renting nowadays, are we turning to a more European way of living? Well, I believe, as a country, we are. In fact, homeownership could be affecting your health! The UK, according to Bloomberg, is only the 21st healthiest country in the world. Germany is at No.10 and Switzerland at No.4 and homeownership is at 52.5% and 44% respectively in those countries (in the UK it is 64.8%).

In the Canterbury City Council area, 70% of homeowners who own their house outright said they were in ‘very good’ or ‘good’ health whilst, at the other end of the scale, 7.52% said their health was ‘bad’ or ‘very bad’. Looking at renting, the census splits tenants into two types – 68.69% of Canterbury local authority/social tenants said they were in ‘very good’ or ‘good’ health and 11.32% were in ‘bad’ or ‘very bad’ health …

… whilst ‘private rented tenants’ in Canterbury, were the healthiest, as 88.76% of them described themselves in ‘very good’ or ‘good’ health and only 2.99% were in ‘bad’ or ‘very bad’ health

I am not suggesting that low homeownership rates in Switzerland and Germany are directly linked to health, nor, do I expect Brits to all go to Berlin, Interlaken or Düsseldorf and realise how happy people are when they don't need to worry about all the stresses which accompany homeownership. The numbers for Canterbury do go some way to back up the argument (and they are the same across the whole of the UK). Nonetheless I do think that substantially all of the upside to homeownership in recent years has been a function of monumental rising house prices. Now that's come to an end, it's hard to see why anybody would want to buy?

Renting is here to stay in Canterbury and it’s growing incrementally each year. Even with the new tax rules for landlords, buy to let is still a viable investment option for most people in the City. There has never been a better time to buy buy to let property in Canterbury, but buy wisely. Gone are the days that you would make profit on anything with four walls and a roof. Take advice, take opinion, do your homework. One place to do more homework, to read more articles on the Canterbury Property market like this, is the Canterbury Property Blog  www.canterburypropertyblog.com