With the Queen’s Jubilee approaching there couldn’t be a more apt time to take a reflective look at the rental market over the past 60 years and what patterns are emerging.
The lettings industry has certainly had its fair share of twists and turns over the last six decades. It will come as no surprise that owner-occupancy rates have increased by 25 percentage points from 43% in 1961 to 68% in 2008 (Halifax), with the sharpest rise in owner-occupation occurring in the 1980s following the introduction of the Right to Buy scheme.
During a ten-year period from 1981, there were approximately 1.3 million sales under the scheme in the UK, which lifted owner occupation from 56% to 67%. Yet the balance between rented and owned has remained relatively stable, although there are some interesting changes happening.
Whilst the ratio of rented to owner occupied properties may have flipped, there is the distinct possibility that this trend could start to go into reverse, with a more European attitude to long-term renting becoming established.
According to Halifax, there has been a more recent increase in the private rented sector. After all, the proportion of households renting their homes privately rose from 9% in 1991 to 14% in 2008 – the highest rate for more than 30 years. In part, the 1988 Housing Act played a role by expanding the supply of private rented property through the creation of assured shortholds and tenancies in common.
However, the simple fact is that for those taking their first step on to the property ladder, mortgage availability typically requires an average deposit of around 25% and the cost of moving continues to climb, with it being 85% more expensive to move home now than in 2009 (www.reallymoving.com).
Ultimately, this, coupled with an anticipated standard variable rate (SVR) rise from high street lenders following Halifax’s decision to raise its SVR a matter of weeks ago, would-be first-time buyers are being forced to rent instead of buying.
Some people may never own their own home and it could be that, over the next 20 to 30 years, we see a more even spread of three or even four distinct sectors in the housing market place: owner occupation; privately owned rented property and their tenants; housing association / shared ownership; and the traditional local authority /council long-term lettings.
In the meantime, more and more people are turning to property in search of higher investment returns than cash in the bank, which has also helped to revive the buy-to-let market.
As an estate agent as well as a lettings agent, we see some properties offering real value at the prices currently being paid, with the prospect that when market conditions improve, good capital growth may kick in again, but in the meantime they provide a good source of revenue.
After all, in the right location a rental property can offer an investor a 12-month income, and therefore continuity of revenue, with gross yields of around 6% depending on the locality.
Interestingly, the Property Academy’s 2011 Landlord Survey provides a good indication of current trends and no doubt, when the 2012 report has been completed within the next couple of months, we might well see some shifts even within a relatively short space of time.
In fact, the 2011 survey highlights that the availability of houses to rent has been largely owed to ‘circumstantial landlords’ with 52% of survey recipients stating they did not buy their property with the intention of being a landlord. I expect this may well change over the next five to ten years, though, with the fluctuating circumstances of those entering on to the property ladder.
There doesn’t appear to be much in the way of foresight from the Government either. In fact, the Queen’s Speech this month provoked mixed reaction from the sector as housing was largely neglected in the Government’s priorities for the next parliamentary session.
At the very least, it would have been useful to know what the Government is planning to do in terms of resolving current issues regarding those on social housing waiting lists, especially in light of the recent speculation that the Government’s welfare cuts are fuelling ‘social cleansing’. I guess we will have to wait until the Government’s next sitting!
* Crystal Horwood is managing director of Southend-based PACE property agents, and is also a landlord
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