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Golden goodbye

Paul Thomas assesses reaction to a report claiming we are at the end of a gilded era for homeownership

The Chartered Institute of Housing has announced the end of the “golden age of homeownership” and urged the Government to help people forced into rented housing because they cannot afford to buy.

In a recent report, the CIH claimed homeownership is out of reach for many, leaving a large group, the “in-betweens”, in rented accommodation.
Communities and Local Government statistics show homeownership levels have fallen from 71 per cent of households in 2003 to just under 68 per cent now.

However, the Council of Mortgage Lenders says it is too early to say it is the end of an era when the majority of people still own their own home.

In a newsletter last week, the CML claimed that aspirations to own property are likely to remain strong despite challenges.

With many European housing markets geared to renting rather than buying, the CIH suggests the UK may be heading towards a more continental-type housing market which will spell the end of the “wrong-to-rent” attitude.

Legal & General director of mortgages Ben Thompson says, given the state of the economy since the financial crisis and the improvement in rental accommodation in recent years, it is inevitable that homeownership levels will recede a little.

He says: “Since the peak of homeownership, we have had the crisis, the credit crunch, a big curtailing of lending criteria and restrictions on products. And, of course, the levels of homeownership will only go down in the short and medium term.

“I would say we are at a crossroads and have been for some time. The fundamental thing that has changed is that the quality of rental accommodation is a lot better than it was 20 years ago.”

Thompson agrees with the CML that it is too soon to say the era of homeownership is over.

He says: “We have possibly seen the peak of homeownership but I think it is too early to say there is going to be a terminal decline, it just may be there are other options outside of homeownership at the moment that are perhaps more attractive than they were before.”

But London & Country head of communications David Hollingworth says the desire to own a home is ingrained in UK society.

He says: “I think some people are not settling down as quickly and they want flexibility, maybe for their job, but I think it will be some time before people lose the aspiration to own a property. That is still very entrenched in the British psyche.

“There is also the question of how people will be able to afford to rent into retirement. I am not saying this means you should own a house but it is something to consider. If you have not got the level of income you had before but your rent is the same, then it is not going to ease your situation in retirement. House prices are a key factor but so is attitude to homeownership.”

Abacus Financial director Matthew Fleming-Duffy is not convinced the UK is heading towards a more continental situation.

He says: “I understand what the CIH are saying. On the one hand, people should have a more positive view on renting but the UK market is different to the German market, for example. This is the UK and we are unique. We are not like the US, Germany or Japan.”

Fleming-Duffy says lack of bank lending and strict regulation are putting people off buying their own home.

He says: “If you look at why this is happening, there are two equal pressures on the housing market, stemming from the mortgage market really. You have got the banks, which are in turmoil, and they do not want to lend or take any risk. The second problem with the mortgage market is the mortgage market review. Three years ago, the mortgage market was in a bad place but it is not in such a bad place now and it does not need a heavyhanded approach.

“A lot of it presupposes the existence of mortgage finance at higher loan to value. That is key. If you can get a whole load of products that are more attractive to first-time buyers, then buying might be seen as more attractive than renting.”


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. I’d be fairly confident that if uk house prices fall further (as I expect) or remain in the current range for a long time then people will quickly fall out of love with the idea of owning a home.

    High deposits are here, I hope, to stay. Nil/negative deposits were one of the main reasons why we got into this mess and a return would be disasterous.

  2. Calls for the government to help are mirrored in the USA who have just come to the end of their tax rebates – the reason why second hand property and new build sales fell like a stone but despite tax incentives you can’t buck the market.
    Painful though it maybe for those caught house prices have to equalise to the trend norm and then credit has to available once again before we see the return of this type asset inflation.

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