Stamford’s housing affordability hits a ratio of 8:1

Further to a recent article posted on my Stamford property blog, a Stamford homeowner emailed me regarding the change in attitude to renting by the youngsters of Stamford and how they thought it was too expensive for first time buyers to buy in the area, there can be no doubt that buy-to-let landlords have played their part in driving up property and from that made housing a lot less affordable for the 20-30 somethings.
 

The concerned homeowner asked if the Bank of England (BoE) should be tasked to control house price inflation in the same way they control inflation.  The BoE has a target for the annual inflation rate of the Consumer Prices Index of 2%, whilst it is also required to support the government’s economic policy, including its’ objectives for growth and employment.  Perhaps the BoE should be charged with containing the buy-to-let housing market by possibly changing the rules on the loan-to-value (LTV) ratios?

So, how affordable is Stamford? 

The best measure of the affordability of housing is the ratio of Stamford property prices to Stamford average wages, (the higher the ratio, the less affordable properties are). 

Referring to the table below, for example in 2014, the average value of a Stamford property was 7.48 times higher than the average annual wage in Stamford.

1998	2000	2002	2004	2006	2008	2010	2012	2014	2016 (EST)
3.86	4.38	5.33	7.66	7.67	7.24	6.97	7.26	7.48	8.38

This deterioration in affordability of property in Stamford over the last couple of years has been one of the reasons why the younger generation is deciding more and more to rent instead of buy their own house. 

However, it’s not the only reason.

A quick look on ‘Money Supermarket’ today found 169 lenders prepared to offer 75% LTV Buy-to-let mortgages and none at 85% LTV.  Lenders have self-imposed a high level of entry for buy-to-let landlords (i.e. putting down at least 25% of the purchase price in cash).  The BoE don’t need to meddle there!

Also, the Tories have certainly done lots to level the playing field in favour of first time buyers.  For nearly a year now, landlords have had to pay an additional 3% in stamp duty on any buy-to-let purchase and over the coming 4 years, tax rules on landlords claiming mortgage interest relief will affect their pocket.  Likewise, it doesn’t help that local authorities sold off council houses in the Thatcher years and so for many on low incomes or with little capital, owning a home has simply never been an option (today or historically).  

It’s easy to look at the headlines and blame landlords.  First time buyers have been able to access 95% LTV mortgages since 2010, meaning even today, a first-time buyer could purchase a 3 bed semi in Stamford for around £180,000 and only need to find £9,000 deposit.  Agreed, it’s a lot of money, but first time buyers need to decide on their priorities.

Renting is returning to be the norm.  Landlords have it tough, but let’s not blame them for the ‘perceived’ woes of the nation, and remember that we haven’t always been a country of homeowners.  Nationally, in 1964, 30% of people rented their home from a private landlord, and today it’s only 15.3%.

If you are an existing landlord or someone thinking of becoming a first-time landlord , and looking for advice and opinion and what (or what not to buy in Stamford), please contact me.  I don't bite and am here to help.


David Crooke  -  01780 484 554
david@upp-property.co.uk

Owner and managing director
Understanding People & Property

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