The proportion of 25 to 34-year olds who own their home in Rotherham has dropped by more than a third in the last 20 years. What does this mean for all the existing Rotherham landlords and homeowners (as well as all those youngsters dreaming of one day buying their first home)?
Let’s start by taking a look at the numbers in greater detail. In Rotherham there has been a 36.0% proportional drop in the number of 25 to 34-year olds owning their own home between 1999 and 2019. During the same time frame there has been a smaller drop of 18.1% of 35 to 44-year olds owning their own home.
Therefore, if you were born in the late 1980s or early 1990s, the dream of owning a home in Rotherham has reduced dramatically over the past 20 years.
Are there any particular reasons?
The most prominent reason is that young adults’ salaries are now much lower in relation to Rotherham house prices. Nationally, average property values have grown by 186.9%, whilst average incomes have only risen by 44.8%, yet that doesn’t allow for inflation. However, whilst not over the same 20 years (it’s close enough though), the Institute of Fiscal Studies said recently the average British home was just over 2.5 times higher in 2015/6 than in 1995/6 after allowing for inflation – yet the average household income (after tax) of 25 to 34-year olds grew by only 22% in ‘real-terms’ over those 20 years.
Yet, even though property prices are at record highs, on the other side of the coin, the monthly cost of mortgage payments has actually fallen because interest rates have remained low. In 1999, the average mortgage rate paid by UK homeowners was 6.54% whilst today it’s more than halved to 2.64% – a drop of 59.4%. Many of you reading this will remember the 15% mortgage rates of 1992!
The fact is t mortgage repayments take up a considerably smaller proportion of take home pay, on average, than they did before the Credit Crunch or in the late 1980s. Although the risk that mortgage rates will increase if the Bank of England put up interest rates might leave some homeowners in a difficult position – hence I might suggest (if you haven’t already) you seriously consider fixing your mortgage rate (remember to take advice from a professional before you do).
Yet look at the data in even greater detail and you will see, going back to the 1960s, we weren’t always the huge homeowning nation we always thought we were.
Today, 18.4% more 35 to 44-year olds and 51.3% more 45 to 54-year olds own their own home c
ompared to 1969, and if you look at the graph, move the clock back to the early 1960s and you will see the numbers are even starker. So as the younger generation in Rotherham has seen homeownership drop in the medium term, they will in fact end up inheriting the homes of their parents. We are turning into a more European (especially German) model of homeownership, where people buy their first home in their 50s instead of their 20s.
Our message to first time buyers in Rotherham
Our message to first time buyers of Rotherham is go and get some mortgage advice! The cost of renting smaller starter homes is between 20% and 25% more than the mortgage payments would be. 95% mortgages (meaning a 5% deposit is required) have been available since late 2009 and some banks even do 100% mortgages (i.e. no deposit). I suggest that you don’t assume you can’t get a mortgage – for the sake of a 45 minute chat with a mortgage adviser – you get a straight answer and all the information you need.
What does this mean for landlords in Rotherham?
Ultimately, this is great news for landlords. For many tenants, renting is a positive choice so if you keep your property fairly well maintained, there should always be demand for it to be let. Furthermore, as we aren’t building enough homes to meet the current demand, home values will (over the medium to long term) rise above inflation. Therefore, the property market, despite new legislation, is still a worthwhile and positive investment. Good news for Rotherham landlords and homeowners alike.
The single biggest issue in the country (and Rotherham) today is that we aren’t building enough homes. We know it seems the local area is covered with building sites – yet looking at the actual numbers – we still aren’t building enough homes to live in. Residential property only takes up 1.2% of all the land in the UK – and whilst we’re not suggesting we build housing estates on National Trust land or cut down forests, until we realise that we aren’t building enough… this issue will only continue to get worse.
Advice for landlords
If you are a landlord and need our expert advice, please get in touch. We’re always happy to help and provide valuable insights into the local market. We want to support you and help you make the most of your property portfolio.