Are Stamford’s first time buyers being squeezed out of the housing market?

I received a very interesting letter the other day from a gentleman who declared himself a Stamford homeowner, retired and mortgage free.  He stated how unaffordable Stamford’s rising property prices were and that he worried how Stamford’s younger generation could ever afford to buy?  He asked if it was right for landlords to make money on the inability of others to buy property and if, by buying a buy-to-let property, landlords are denying the younger generation the ability to in fact buy their own home.

Whilst doing my research for my many blog posts on the Stamford Property Market, I know that a third of 25 - 30 year olds still live at home.  It’s no wonder some people are kicking out against buy-to-let landlords claiming they are “cashing in on a social woe”.  In fact, most people believe the high increases in house prices are the very reason owning a home is outside the grasp of these younger would-be property owners.

 However, the numbers tell a different story.  Looking at the age of first time buyers since 1990, the statistics could be seen to pour cold water on the idea that younger people are being priced out of the housing market.  In 1990, when data was first published, the average age of a first time buyer was 33, today it’s 31.

 

Nevertheless, the average age doesn't tell the whole story.  In the early 1990’s, 26.7% of first-time buyers were under 25, while in the last 5 years just 14.9% were.  In the early 1990’s, 4 out of 10 first time buyers were 25 - 34 years of age and now its 6 out of 10 first time buyers. 

 

Although, there are also indications of how un-affordable housing is, the house price-to-earnings ratio has almost doubled for first-time buyers in the past 30 years.  In 1983, the average Stamford home cost a first-time buyer (or buyers in the case of joint mortgages), the equivalent of 2.3 times their total annual earnings, whilst today, that has escalated to 4.4 times their income (although let’s not forget, it was at 4.8 times their income for Stamford first time buyers in 2007).

Again, those figures don’t tell the whole story.  Back in 1983, the mortgage payments as percentage of mean take home pay for a Stamford first time buyer was 23.5%.  In 1989, that had risen to 51.5%. Today, it’s 27.7% … and no that’s not a typo .. 27.7% is the correct figure.

 So, to answer the gentleman’s questions about the younger generation of Stamford being able to afford to buy and if it was right for landlords to make money on the inability of others to buy property? It isn’t all to do with affordability as the numbers show.

And what of the landlords?  Some say the government should sort the housing problem out themselves, but according to my calculations, £18bn a year would need to be spent for the next 20 or so years to meet current demand for households.  That would be the equivalent of raising income tax by 4p in the pound.  I don’t think UK tax payers would swallow that.

So, if the Government haven’t got the money, who else will house these people?  Private Sector Landlords and thankfully they have taken up the slack over the last 15 years.

Some say there is a tendency to equate property ownership with national prosperity, but this isn’t necessarily the case.  Stamford’s youngsters are buying houses, but buying later in life.  Also, many are actively choosing to rent for the long term, as it gives them flexibility – something our 21^st Century society craves more than ever. 

For advice on buying, selling, renting and managing your homes and property investments in Stamford and Rutland, please call me.  I am here to help.

David Crooke, owner

 

 

Understanding People and Property

 

 

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