The Property Landscape is changing across the UK
In the EU the most prosperous countries have the higher numbers of rented housing. This statement is based on reports circulating this year as we come to terms with re-evaluating the way we live today and have to face more fall out from the ongoing financial crisis. The world’s most prosperous nation , according to Professor Andrew Oswald of The University of Warwick , is Switzerland which has the highest number of renters – two thirds – in the western world. This was reported in a recent and entertaining article in The Times by long term renter Ed Smith. In the article Mr Smith lists Romania , Ireland and Greece (96 , 77 and 73 % respectively) as countries with the highest percentage of owner occupiers in the EU. Recent events in Greece may enforce the feeling that Switzerland has got it right. The UK is about 70% , France 58% and Germany 46% . Does this look like a pattern to you ? Such figures are not exact of course but they are corroborated by articles appearing in the magazine Agreement , the voice of the Association of Residential Letting Agents Association and in a new paper by Andrew Heywood on behalf of The Smith Institute. This report , entitled “The End of the Affair” concludes that the decline in housing ownership in this country is set to continue and is only a correction of a recent phenomenon. According to the report In 1918 home ownership stood at 23% with the private rented sector at 76% but by 2003 home ownership was 70.9% .This rapid growth was supported by the policies of successive governments but are the consequences of such policies only now becoming apparent ? The cycle of boom and bust in housing has admittedly been good for some but is it worth the misery foisted on others through the threat of negative equity and has it reinforced the notion of a North South divide rather than remove it ? As Heywood’s report says there is a clear need to increase the supply of new housing but the policies of right to buy and mortgage tax relief are unlikely to be repeated given the debt levels the current government has inherited. The effects of the reducing value of individual equity held by homeowners in this country is far reaching and begs a sea change in thinking from government as they wrestle with the problem , for example of funding pensions. It needs some change in the public perception of the way to obtain the dream home and it seems this may be occurring. The private rented sector may be waking up to the opportunities that exist to invest in the long term provision of housing as property prices fall and rentals rise. I read somewhere recently that rents were reaching record levels , that may be so in London but in the real world I don’t think so. Rents were higher at the beginning of the 21st century and are only just getting back to those levels now. What has held back the rental sector is the fall in returns as house prices shot up. If returns improve then experienced Landlords (and new buy to letters ) will invest and bring forward a supply of homes that would otherwise be unattainable for occupiers due to the tighter lending criteria imposed by lenders. Renting ought to be the thinking person’s tenure of choice. Back to Ed Smith in The Times. He lists Freedom (avoiding a mortgage millstone) Choice (to move as you want) Less Hassle (the Landlord will fix the house) No Fear (of negative equity) together with the general move in society towards more mobility and less clutter as we embrace the technology of ipods and kindles. It is easy to think that the previous entry ticket to dinner party conversation of how much your house was worth is as outmoded as wearing designer labels on your chest but this goes deeper than mere fashion. There are better places to use your money than in repaying loans even if it gives you the right to say you “own your own House” and if you have an interest only mortgage then you’re just paying rent to your lender anyway. If you have a Shorthold Tenancy you may be more secure and at least free from the worry of negative equity or repossession , an issue that could follow you for the rest of your life. Vibrant successful economies rely on a mobile young population eager to prove that there are advances to be made in life and the way we live ; necessity is the mother of invention is it not ? Professor Oswald as mentioned earlier argues that renting makes the national economy more flexible and better placed to deal with change. “Economies thrive better when they have large rental markets. Because homeownership tends to ossify things , it can have bad effects on unemployment . Selling a home and moving is expensive. Hence owner-occupiers are less mobile than renters and more vulnerable to economic downturns in their region “. The private rented sector can be an important part of the solution to our current ills. Britain is not a unique case when it comes to housing tenure. The Smith Institute Report underlines the fact that government policy has a key role to play and that now is the time for the housing market and the financial sector to look to the future and become innovative.