A Canterbury homeowner emailed me last week, following my
article posted in the Canterbury Property Blog about the change in attitude to
renting by the youngsters of Canterbury and how they thought it was too
expensive for first time buyers to buy in Canterbury. There can be no doubt that buy to let
landlords have played their part in driving up property values in Canterbury
(and the UK) and from that made housing a lot less affordable for the 20 and 30
somethings of Canterbury.
In the email, they said they thought the plight of the
first-time buyers in Canterbury was like a novice tennis player, playing tennis
with Andy Murray. If you played him once you will unquestionably lose and if
you were to play him 100 times you would lose 100 times. That is what they
thought it was like for all the 20 something’s first time buyers of Canterbury
going against all the buy to let landlords.
They went on to ask if the Bank of England (BoE) should be tasked to control house price inflation in the same way as the BoE controls inflation. The BoE has a target for the annual inflation rate of the Consumer Prices Index of 2%, whilst it is also required to support the Government’s economic policy, including its objectives for growth and employment. So, should BoE be charged with containing buy to let housing market, by possibly changing the rules on the loan-to-value (LTV) ratio’s?
So, let’s look at how affordable Canterbury is. The best measure of the affordability of
housing is the ratio of Canterbury Property Prices to Canterbury Average Wages,
(the higher the ratio, the less affordable properties are). (i.e. looking at the table below, for
example in 2014, the average value of a Canterbury property was 9.02 times
higher than the average annual wage in Canterbury).
1998
|
2000
|
2002
|
2004
|
2006
|
2008
|
2010
|
2012
|
2014
|
2016 (EST)
|
4.42
|
5.29
|
6.84
|
8.02
|
8.78
|
8.98
|
8.14
|
8.43
|
9.02
|
11.12
|
This deterioration in affordability of property in Canterbury over the last couple of years has been one of the reasons why the younger generation is deciding more and more to rent instead of buy their own house.
... but it’s not the only reason.
A quick look on Money Supermarket today found 169 lenders
prepared to offer 75% LTV Buy to let Mortgages and none at 85% LTV. Lenders have self-imposed a high level of
entry for buy to let landlords (i.e. putting down at least 25% of the purchase
price in cash). The BoE don’t need to
meddle there! Also, the Tories have
certainly done lots to level the playing field in favour of first time buyers. For nearly a year now, Landlords have had to
pay an additional 3% in stamp duty on any buy to let purchase and over the
coming four years, tax rules on landlord’s claiming mortgage interest relief
will affect their pocket. Neither, it
doesn’t help that the local Authority sold off council houses in the Thatcher
years and so for many on low incomes or with little capital, owning a home has
simply never been an option (today or in the past).
It’s easy to look at the headlines and blame landlords. First time buyers have been able to access 95%
LTV mortgages since 2010, meaning even today, a first-time buyer could purchase
a 2 bed terraced in Canterbury for around £200,000 and only need to find £10,000
deposit. Yes, a lot of money, but first
time buyers need to decide what is important to them. Either save up for a couple of years to save
the deposit and go without two annual foreign holidays, the full Satellite or
Cable TV package with Sports and Movies costing three figures a month, the
latest mobile phone and out socialising ... or not as the case maybe?
I think we as a Country have changed ... renting is returning
to be the norm. So my opinion is,
landlords have it tough. Let’s not blame
them for the ‘perceived’ woes of the nation ... because to be frank … we
haven’t always been a country of homeowners. Roll the clock back to 1964, and nationally,
30% of people rented their home from a private landlord – today – its only
15.3% nationally.
If you are an existing landlord or someone thinking of become a first-time landlord looking for advice and opinion and what (or what not to buy in Canterbury) then please do get in touch.
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