Why are less Fitzrovia people moving house?

During my school years, my parents seemed to move every other year (or it seemed that way). In reality, looking back at the house moves, we actually moved three times before I left home. However, whilst my parents kept the removal van people in business whilst I was at school, from research I have carried out it shows things have changed considerably in Fitzrovia over the last few decades, and interestingly, the trend is getting worse ... for the removal van people at any rate!

In the Greater Fitzrovia area, there are 6357 properties. However, after we remove the 1373 council houses, 2984 privately rented houses and 236 houses where the occupants live rent free, that leaves us with 1764 owned properties (be that 100% outright, with a mortgage or shared ownership). This means 27.7% of the properties in Fitzrovia are occupied by the owner (the national average is interestingly 64.2%) but the number of people who have sold and moved house in Fitzrovia, over the last 12 months, has only been 68. This means on these figures, the homeowners of Fitzrovia are only moving on average every 25.9 years.

These are the reasons. Firstly, the cost of moving house has risen over the last twenty years. Secondly, with many remortgaging their properties in the mid 2000’s before the price crash of 2008, there is a reluctance or inability in a small minority of homeowners to finance a home sale/purchase, due to lack of equity. These are both factors driving fewer moves by existing homeowners.

However, the big effect has been the change in house price inflation. Back in the 1970’s and 1980’s, house prices were doubling every 5 to 7 years. Even in Greater London, with its stratospheric property price increases over the last few years, it has taken 13 years (August 2002 to be exact) for property values to double to today’s levels.

This change to a relatively low inflation Fitzrovia property market (i.e. Fitzrovia property values not rising quickly) is significant because the long term consequences of sustained low house price growth is that it eats into mortgage debt more slowly than when property price inflation is higher. Fitzrovia homeowners cannot rely on inflation to shrink their debt in real terms as much as they did in say the 1970’s and 1980’s.

So what does this all mean for Fitzrovia buy to let landlords? Well for the same reasons existing Fitzrovia homeowners aren’t moving, less ‘twenty something’s’ are buying their first home as well. Fitzrovia youngsters may aspire to own their own home, but without the social pressure from their peers and parents to buy their first property as soon people reach their early 20’s, the memory of the 2008 housing crisis and the belief the hard times either aren't over or the worst is yet to come, current and would-be homeowners are warming to the idea of renting. 

I also believe UK society has changed, with the youngster’s wanting prosperity and happiness; but wanting it all now... instantly... today... without the sacrifice, work and patience that these things take. As a society, we expect things instantly, and if it doesn’t come easy, doesn’t come quick, some youngsters ask if it is really worth the effort to save for the deposit? Why go without holidays, the newest iPhone, socialising four times a week and the fancy satellite package for a couple of years, to save for that 5% deposit if there is no longer a social stigma in renting or pressure to buy as there was... say... a generation ago?

Even though, in real terms, property prices are 5% cheaper than they were ten years ago (when adjusted by inflation), 46.9% of Fitzrovia properties are privately rented (nearly double it was twenty years ago). As a result, the demand for rental properties continues to grow from tenants, meaning those wishing to invest in the buy to let market, over the long term, might be on to a good thing? For advice and opinion on the Fitzrovia Buy To let property market, one source of information is The Fitzrovia Property Blog -fitzroviapropertyblog.com

  

Are ‘would be’ Fitzrovia homeowners warming to the idea of renting?

I was reading a report the other day produced by the Halifax, about the UK property market and why more and more of the younger generation seem to be renting rather than buying. I find it fascinating that over the last ten years, the British obsession of buying a house almost as soon as you left school, and the fact that if you rented you were seen as a second class citizen, has turned on its head to a point where the hopes and dreams to own a nice home will be replaced by the ambition simply to live in one.

In the latter half of the 20th Century, you left school, got a job, bought a small house and kept buying and selling property, constantly upgrading until eventually they carried you out in a box. However, the perceived shame and stigma of renting is no longer the case, as it seems that the British are now beginning to accept a lifetime of renting. This is a very important consideration for both Fitzrovia homeowners and Fitzrovia landlords as it will transform the way the Fitzrovia property ladder looks in the future and I might ask whether or not it will exist at all for some people? The make up of households is one important factor, especially in the Fitzrovia property market. The normal stereotypical married couple, two kids and dog of the 1970’s and 80’s has changed. More and more we have the need for larger houses where two families come together after divorces (+ kids) and need a property to house everyone through to an increase in the number of one person households.

Looking at the data for Fitzrovia, of the 3,746 private rental properties in the Westminster City and Camden Council areas, 41.40% of those rented properties are one person households (1,551 properties). However, when we compare the number of one person Fitzrovia households who have bought their own property with a mortgage (ie therefore they are still in work), of the 3,434 owner occupied households in the area, only 555 of those properties are a one person household (ie 16.1%). 

Compared to a decade ago, this explosion in demand for decent high quality rental properties that one person households require has not been met with an increase in supply of such properties.  More and more I believe Fitzrovia landlords need to consider this change in the make up of Fitzrovia households, as I believe this could be an opportunity. As an aside, another interesting stat that raised an eyebrow was that 4.56% of those 3,746 rental properties (171 properties) are lone parents households as well. Again, another possible opportunity that Fitzrovia landlords might want to consider in their future investment plans.

It is true that the Governments introduction in 2013 of the Help to Buy scheme, where first time buyers only needed a 5% deposit, changed the perception of peoples’ ability to buy without having to save ten’s of thousands of pounds for a deposit. However, it might surprise you, 95% mortgages were re-introduced within six months of the Credit Crunch in late 2009, so again it comes down to people’s own perception. Many youngsters think they won’t get a mortgage, so don’t even bother trying.

Coming back to the deposit, it’s still a fact that once you start renting it becomes that much harder to save for a deposit, regardless of the size. Interestingly, 7 out of 8 renters polled by the Halifax (86% to be exact) refuse to sacrifice the quality of accommodation they currently live in to reduce the amount of rent they pay in order to save for a deposit.  This is the crux and the real reason why people aren’t buying but renting... and why demand for renting will continue to grow in the future (ie good news for landlords).

Fitzrovia tenants can upgrade the quality and size of the property they live in for a minimal rent increase. The average rent of a two bed property in Fitzrovia is £4,995pm, a three bed is £4,356pm more at £9,351pm, whilst the average four bed rent is £11,944pm. If you had to make that jump when buying, the monthly mortgage payments would be stratospherically more than that!  Without any social pressure and better quality rental properties compared to a decade ago, we will become a nation of renters within the next generation, as the UK is becoming more like Europe, where renting is ‘the norm’. Who is going to supply all these properties to rent? Landlords! Whether you are an existing landlord looking to grow your portfolio or looking to become a ‘first time landlord’, my thoughts are take advice from as many people as possible. However, as the majority of landlords buy their buy to let properties in the same town they live, you will need specific advice about Fitzrovia itself. One place for such advice and opinion is the Fitzrovia Property Blog fitzroviapropertyblog.com

Affordability of housing in Fitzrovia

Talking to an elderly relative recently, he reminded me that in his day, you could have bought a property for the same price of what a decent second hand car would sell for today and that his father was buying property for the same price as a decent 50 inch LCD TV!  Now of course, these are only headline prices and we have had wage growth and inflation.  Interestingly, since the Second World War, property values in Fitzrovia doubled in 1961, 1971, 1975, 1980, 1988, 2000 and 2006.

Looking at more recent times, since the start of the Millennium, these increases in property values have generated large increases in equity for many homeowners but on the other side of the coin also making housing unaffordable for other people.  It might interest readers to note that most of Europe experienced sharp increases in property values in the early years of 2000’s, with only Spain beating  us (although we know what has happened to the Spanish property market over the last few years!).  In the 2000’s, the British situation was different in two regards.  First the property value boom started earlier and saw more sustained increases, second, the regional pattern was fairly uniform.

However, since 2010, the regional pattern has been completely different in the UK.  Compared with  2007 (the last property boom), average property values today in England and Wales are 1.2% higher, whilst in Greater London, they are 35.7% higher, whereas in Fitzrovia they are 81.78% higher. The London property market has been like a different country.  Looking specifically at Fitzrovia though, it has continued for first time buyers to get on the housing ladder.  The best measure of the affordability of housing is the ratio of Fitzrovia Property Prices to Fitzrovia Average Wages, (the higher the ratio, the less affordable properties are).  

·       1997      7.02 to 1  (i.e. the average value of a Fitzrovia property was 7.02 times higher than the average annual wage in Fitzrovia)

·       2000      9.98 to 1

·       2002      11.05 to 1

·       2003      11.37 to 1

·       2007      13.52 to 1

·       2009      13.57 to 1

·       2012      16.89 to 1

·       Today    20.62 to 1

You can see quite clearly, just after the 2007 property crash, in the following subsequent years Fitzrovia house price’s were rising but wages not keeping up with them,  the ratio started rise.  This has meant there has been a deterioration in affordability of property in Fitzrovia over the last couple of years.  This is one of the (many) reasons why the younger generation is deciding more and more to rent instead of buy their own house.  The local Council sold off council houses in the Thatcher years and for many on low incomes or with little capital, owning a home has simply never been an option.

With fewer people able to save up the deposit required by mortgage lenders, more and more people are looking to rent, this has also resulted in a change in attitudes towards renting over the last decade.  This delay in moving up the property ladder has driven rents up in Fitzrovia over the last few years, as more people are seeking properties to rent.  All these things have combined to make the demand for rental property in Fitzrovia rise.  If you are an existing landlord or someone thinking of become a first time landlord looking for advice and opinion and what (or not to buy in Fitzrovia), one source of information is the Fitzrovia Property Blog Fitzroviapropertyblog.com