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Home truths

Are we seeing the beginning of another cultural revolution? Chairman Mao and Margaret Thatcher were both instigators and architects of their very own cultural revolutions which changed the face of their nations.

In Thatcher’s case, as Prime Minister from 1979 to 1990, she pushed through right-to-buy legislation and brought about the philosophy of a “property-owning democracy”.

Up until that point, the UK could hardly have been called a nation of homeowners. In 1914, homeownership in Britain stood at about 10 per cent and had reached around 50 per cent by the time Mrs Thatcher took office.

But Thatcher’s Government created a mindshift in the British population. The right-to-buy policy was aimed at those renting council accommodation and proved so popular that it almost obliterated the stock of cheap accommodation for local authorities.

The rapid change in attitude was so fundamental it was as though ’twas ever thus. Even today, most experts will argue the UK has always been a nation of homeowners, even though the facts simply do not support this.

This hit home when the son of one of my friends started university about 10 years ago. More important than what subject the young man would be studying was how the property market was performing in his preferred university towns and what kind of mortgage deal would be available to him.

Instead of New Labour knocking this attitude, they have rather embraced the philosophy. Who could forget the hoo-ha over Mrs Blair buying two desirable apartments in Bristol for her son Euan?

Politically, New Labour has accelerated the demand for homeownership by introducing the Starter Home Initiative in 2001 to help “key workers, including teachers, health workers and the police, buy a home in the areas where high prices were undermining recruitment and retention”.

In addition to shared-equity schemes, mortgage products over the past few years have been far more innovative with self-certified schemes and five times salary mortgages, all developed to answer the “need” of the British public to own their home.

But are we seeing the beginning of another cultural shift as some signs that the British public is being turned off the notion that property is king start to show?

The Council of Mortgage Lenders is already forecasting around 75,000 repossessions during 2009. In addition, recent CML figures show at least 900,000 UK homes in negative equity and even if we are one of the lucky ones not to be in negative equity, most of us have seen the equivalent of 10 years’ growth wiped off the value of our property.

Some commentators are suggesting that some people will never buy again.

Feedback from many Home of Choice advisers is that large numbers of potential first-time buyers are not attempting to obtain a mortgage, preferring to rent rather than striving for deposits of 30-40 per cent.

This would bring the UK more in line with much of continental Europe. In Italy, for example, young people would not dream of buying a home as soon as they finished their education as we have come to expect in the UK.

But not all areas of the mortgage market are contracting and there are areas that seem to buck this trend.

Some advisers are seeing a surge in the number of low-income households moving on to the property ladder with “assistance” and social housing is keeping some pockets of the property market alive.

I have seen this in Milton Keynes, for instance, where much of the movement within property is at the lower end of the scale. Those putting offers forward are more often backed by a shared-equity scheme.

The buy-to-let market is also very much alive. Many investors, disillusioned with the investment performance of almost all investment asset classes are looking for bargains within the property sector.

As prices fall, buy-to-let investors are searching for regions with a healthy influx of students and/or new immigrants on working visas. The opportunity for a decent rental yield is still there but possibly not the actual investment value of the property itself.

Advisers need to be clear with their clients as to the risks associated with potential income from rental properties. As the rental market heats up, consumers are in a position of power and can look around for the best deal. Many are looking for long-term lets with a rental sum linked to base rate. How times have changed.

The green shoots of spring seem to be affecting not only our attitudes but the market. Estate agents are seeing movement and advisers are beginning to have full diaries of appointments but we still need mortgage lenders to shake them- selves out of their state of catatonic shock.

Now is the time for them to show leadership. We need more innovative products and certainly we need to move back to the days of 90-95 per cent mortgages.

I am not calling for a return to the days of five times salary but for homeowners who need to upscale because of expanding families or professional first-time buyers with student debts, the mortgage industry must do more.

The Chancellor has hinted that he will force lenders to provide more consumer-friendly products with the Government acting as legal guarantor.

This is just the sort of kickstart we need but we need the details.

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