The good old days of the 70s and 80s, eh…?
24% inflation, 17% interest rates, 3 day working week, 13% unemployment, power cuts … those were the days… but at least people could afford to buy their own home. Why aren’t those in their 20s and 30s buying in the same numbers as they were 30 or 40 years ago?
Blaming the credit crunch and global recession in 2008
Many blame the credit crunch and global recession in 2008, which did have an enormous impact on the Rotherham (and UK) housing market. The young first-time buyers discovered it challenging to assemble the monetary means to get on to the Rotherham property ladder – a problematic mortgage market, the perceived need for big deposits, reduced job security and declining disposable income – buying a house did not look like a worthwhile prospect.
However, I would say there has been something else at play other than the issue of raising a deposit – having sufficient income and rising property prices in Rotherham.
Whilst these are important factors and barriers to homeownership, I also believe there has been a generational change in attitudes towards home ownership in Rotherham (and across the UK).
Back in 2011, the Halifax did a survey of thousands of tenants and 19% of tenants said they had no plans to buy a home for themselves. A recent, almost identical survey of tenants, carried out by The Deposit Protection Service revealed that in late 2016 this figure had risen to 38.4% – many no-longer equated home ownership to success and believing renting to be better suited to their lifestyle.
Renting is an important part of the housing sector
I believe renting is a fundamental part of the housing sector, and a meaningful proportion of the younger adult members of the Rotherham population choose to be tenants as it better suits their plans and lifestyle.
Local Government in Rotherham (including the planners – especially the planners), land owners and landlords need an adaptable Rotherham residential property sector that allows the diverse choices of these Rotherham 20 and 30 year olds to be met.
This means, if we applied the same percentages to the current 12,877 Rotherham tenants in their 5,416 private rental properties… 4,945 tenants have no plans to ever buy a property – good news for landlords.
Interestingly, in the same report, just under two thirds (62%) of tenants said they didn’t expect to buy within the next year.
Does that mean the other third will be buying in Rotherham in the next 12 months?
Some will, but most won’t…
In fact, the Royal Institution of Chartered Surveyors (RICS) predicts that, by 2025, that the number of people renting will increase, not drop.
Yes, many tenants might hope to buy but the reality is different for the reasons set out above. The RICS predicts the number of tenants looking to rent will increase by 1.8 million households by 2025, as rising house prices continue to make home ownership increasingly unaffordable for younger generations.
So, if we applied this rise to Rotherham, we will in fact need an additional 2,321 private rental properties over the next eight years (or 290 a year). As a result the number of private rented properties in Rotherham is projected to rise to an eye watering 7,737 households.
It will be fascinating to see how this all plays out over the next few years.
Join me on this journey – as well as this blog I post my latest insights and thoughts on Twitter and Facebook.
