Home ownership decline is arrested!

publication date: Feb 18, 2016
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

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Home ownership decline is arrested!
English Housing Survey latest news

Latest data from the English Housing Survey for 2014/15

This is one of the most interesting and useful reports on our housing stock that exists, this is just a bit of a ‘quick snapshot’ from the research, more will come and I’ll do a more detailed analysis when the full report comes out in the summer, but, you know me, latest stats on property like this, is one of the highlights of my year! 

The government can start to relax because the first big news is:-

"After a period of recent decline, the fall in owner occupation appears to have abated. 

"Of the estimated 22.5 million households in England in 2014-15, 14.3 million or 64% were owner occupiers. 

"The proportion of all households in owner occupation increased steadily from the 1980s to 2003 when it reached a peak of 71%. A period of gradual decline in owner occupation followed but this seems to have abated with no change in owner occupation rates between 2013-14 and 2014-15."

This really should be no surprise. The growth in home ownership to the end of the late 1980s was mainly due to the sale of council houses – basically the government’s actions artificially increased home ownership, so that, coupled with a massive fall in the numbers buying/selling houses during the recession 2007-2013, has meant that the figures reflect sensible decisions on behalf of the public – why buy when prices are falling? 

Number of those owning a property outright higher than those owning with a mortgage! 
As per Monday’s article, no-one really seems to be recognising how ‘safe’ our property market is now. Apart from London,

In 2014-15, there were more outright owners (33%) than ‘mortgagors’ (30%), a continuation of the trend first identified in 2013-14.

London is the exception:-
This was not the case in London where there were more mortgagors (27%) than outright owners (23%), most likely as a result of the younger age profile of the population in London.

What’s happening in the PRS? 
Well as the government is determined to sell of social housing stock and place people in the private rented sector, no surprise it continues to be bigger than the social sector. 

The private rented sector remained larger than the social rented sector.

In 2014-15, 19% (4.3 million) of households were renting privately, while 17% (3.9 million) of households lived in the social rented sector. There was no change in the size of either sector between 2013-14 and 2014-15.

More families renting with kids in the PRS
Whether through choice or forced into the PRS due to government’s refusal to support social housing at the level that’s required:-

Over the last 10 years, the proportion of households in the private rented sector with dependent children increased from 30% in 2004-05 to 37% in 2014-15. 

With considerable growth in the overall number of private renters over this period, this seven percentage point increase equates to about 912,000 more households with children in the private rented sector.

Over the last decade the average age of first time buyers increased
I find this data fascinating and no doubt it will be ‘spun’ as bad news and down to terrible affordability etc. 

I don’t agree with this view at all. If you were ready to buy your first home in 2007, 2008, 2009 etc why would you buy? You wouldn’t because property prices were crashing around people’s ears. It’s completely natural that the age of first time buyers has increased throughout one of the worst recessions we have had and it’s probably saved huge numbers of them ending up in negative equity. 

So just like the fall in home ownership has abated, I think this number will begin to fall back over the next few years, especially with the government’s efforts to boost first time buyer ownership. 

Latest data says:-

In 2014-15, the average age of first time buyers was 33, up from 31 in 2004-05. Younger people (aged 25-34) are more likely to rent privately than to be buying with a mortgage.

However, the numbers of 25-34 year olds in the PRS has increased
Latest stats say:-

Over the last 10 years there has been a significant increase in the proportion of younger households in the private rented sector.

In 2004-05, 24% of those aged 25-34 lived in the private rented sector.

By 2014-15 this had increased to 46%. Over the same period, the proportion of 25-34 year olds buying with a mortgage decreased from 54% to 34%.

In other words, younger households aged 25-34 are more likely to be renting privately than buying their own home, a continuation of a trend first identified in 2012-13

What happened to rents? Social rents up, private rents static. 
Yep, please note all those who are accusing the PRS of ‘extortionate rents' or ‘sky high rents’ etc. According to the English Housing Survey 2014-15:-

For social renters, average rents increased between 2013-14 and 2014-15, from £94 to £99. 

Average private rents were unchanged.

While private rents did not increase between 2013-14 and 2014-15 at the national level, in London there was a £17 per week increase, from an average of £281 per week to £298 per week.

So even in London where demand far outstrips supply, rents were up by 6%, nowhere near the kind of double digit increase in house prices we have seen in the capital over the last few years, but that is double the rate of wage growth. 

The proportion of working private renters in receipt of Housing Benefit increased. 
Latest stats show the devastation that a lack of social homes is causing, putting more people in the PRS:-

Between 2013-14 and 2014-15, the proportion of non-working private renters on Housing Benefit declined from 57% to 49% while the proportion of private renters in work and on Housing Benefit increased from 14% to 18%. No such pattern was observed among social renters. Rates of overcrowding remained low but under-occupation increased, driven by an increase in the proportion of under-occupied homes in the owner occupied sector.

The energy efficiency of the English housing stock continued to improve.
Things are getting better, although the PRS still has some way to go to achieve the same level of decent homes as in the owner occupied sector:-

In 2014, the average SAP rating of English dwellings was 61 points, up from 45 points in 1996. The improvement was evident in all tenures.

The number of non-decent homes in England continued to decline. In 2014, a fifth of dwellings (20% or 4.6 million homes) failed to meet the Decent Homes standard, a reduction of 3.1 million homes since 2006, when 35% of homes failed to meet the standard.

The private rented sector had the highest proportion of non-decent homes: 29% while the social rented sector had the lowest (14%). Among owner occupied homes, 19% failed to meet the Decent Homes standard in 2014.

For more, visit the English Housing Survey Headline Report 2014-15

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