Can we blame the 55 to 70-year-old Rotherham citizens for the current housing crisis in the town?
Known as the ‘Baby Boomers’, these Rotherham people were born after WW2 when the country saw a massive rise in births as they slowly recovered from the economic hardships experienced during wartime.
Throughout the 1970s and 1980s, they experienced (whilst in their 20s, 30s and 40s) an unparalleled level of economic growth and prosperity throughout their working lifetime on the back of improved education, government subsidies, escalating property prices and technological developments. They have emerged as a successful and prosperous generation.
However, some have suggested these baby boomers have (and are) making too much money to the detriment of their children, creating a ‘generational economic imbalance’.
Mature people have benefitted from house-price growth while their children are forced either to pay massive rents or pay large mortgages.
Between 2001 and today, average earnings rose by 65%,
but average Rotherham house prices rose by 143.2%
The issue of housing is particularly acute with ‘Millennials’ – the young people born between the mid-1980s and the late 1990s. They’ve been shaped by the computer and internet revolution. These 18-30 years are finding as they enter early adult life that it is very hard to buy a property. These ‘greedy’ landlords are buying up all the property to rent out back to them at exorbitant rents… it’s no wonder Millennials are lashing out at buy-to-let landlords – they are seen as the greedy, immoral, wicked people who are cashing in on a social despair.
Like all things in life, we must look to the past to appreciate where we are now.
The three biggest influencing factors on the Rotherham (and UK) property market in the later half of the 20th Century were:
- The mass building of Council Housing in the 1950s/60s.
- The Conservative’s decision to sell most of those Council Houses off in the 1980s
- 15% interest rates in the early 1990’s which resulted in many houses being repossessed.
It was these major factors that underpinned the housing crisis we have today in Rotherham.
After the USA relaxed their bank’s lending criteria in 1995 to encourage banks to give mortgages to those in low wage neighbourhoods, Britain unsurprisingly followed suit. The viewpoint in the USA was that anyone (even someone on the minimum wage) should be able to buy a home. Banks and building societies in the UK relaxed their lending criteria and brought to the market 100% mortgages.
Roll the clock forward to today – we can observe those very same footloose banks from the early/mid-2000s now ironically reciting the Bank of England backed hymn-sheet of responsible lending. On every first time buyer mortgage application, they are now look at every single line on a 18-30 year old’s bank statement, asking if they are spending too much on socialising or holidays. No wonder the Millenials seem to be afraid to ask for a mortgage! And if they do ask, more often than not, after all that hassle, the answer is negative.
Conversely, there are unregulated buy-to-let mortgages. As long as you have a 25% deposit, a heartbeat, pass a few very basic yardsticks and have a reasonable job, the banks will literally throw money at you… for example, Virgin Money are offering 2.99% fixed for 3 years – so cheap!
In Part Two next week, I will continue this emotive article and show you some very interesting findings on why young people aren’t buying property anymore.