As predicted for some time, the housing crisis is worsening with fewer people able to get on the property ladder in many parts of the UK, not just London. Home ownership in England has fallen and is now at its lowest level for thirty years as a result of the growing disparity between incomes and soaring property prices.
It is not just people in London who are struggling as the dip in home ownership has also extended to Manchester as well as cities in Yorkshire and the West Midlands, according to a report by the Resolution Foundation think-tank.
Downward dip in property ownership
During the property boom in 2003, 71 per cent of households owned their homes but this figure dropped to 64 per cent in February this year, which is the lowest figure in 30 years. In Greater Manchester 58 per cent of households were homeowners at the beginning of 2016 compared to 72 per cent in 2003.
Outer London has seen a drop from 72 per cent to 58 per cent while Yorkshire and the West Midlands have also seen drops in double figures. The problems are not new because house prices have been rising at a far higher rate than earnings for about the past 15 years. The average cost of a property then was £122,748 but today it is £196,930.
Prime Minister Theresa May has vowed to tackle the housing deficit, otherwise more young people will find it harder to buy their own homes. More affordable housing is one route but it would be quicker to make it more attractive for professional people to become landlords. Instead of increasing taxes on buy-to-lets, the Government could work to encourage landlords to continue investing in this sector.
Renting is popular in Germany
In other countries, the percentage of people who own their homes is far lower than in the UK at 52.5 per cent in Germany and 44 per cent in Switzerland. So one solution could be to look to their models to see why people are happy to rent. One reason could be the laws protecting tenants, which would also root out rogue landlords.
The standard German rental contract also helps tenants as they become older, with increased notice periods and rent increases which can only be made if the quality of the building is improved or in strictly limited increments. These long-term agreements can also be beneficial to landlords as they benefit from a more mature occupant, who is looking to stay in the property long-term which gives security to the owner.
While renting may suit younger people who are keen to move house or move cities for a better job, it may be off-putting to families with children who fear that they may have to move every 12 months. One answer could be to offer longer contracts so that they can feel more secure. Again, this benefits landlords who know that they will be getting a rental income for a set period without having to advertise for new tenants.