I was having an interesting conversation with a solicitor earlier this week, when the subject of a lack of property for first time buyers came into the conversation. I followed the chat up with an email with my findings, findings which I would like to share with you today.
At the time of the last census in 2011, there are 3,401,675 properties in England that were privately
rented, of which it is estimated, were owned by over 1.25 million private landlords. The rapid growth of
buy-to-let is hugely controversial, especially as only ten years before that, there were only 1,798,864
properties under private renting in England. It could be argued that Buy to Let landlords have been
held responsible for forcing up property prices and preventing our younger generations from being
able to buy. There is also growing resentment toward the billions of pounds in tax relief (estimated to
be nearly £10 billion) landlords claim on their mortgage interest relief not available to homeowners.
They may be asset rich thanks to recently rising property values, but let us not make the landlords the
scapegoats for the situation. Despite all these benefits enjoyed by private landlords, let us not forget
the good they have done, especially in Epsom.
Property values today in Epsom are only 16.9% above the 2007 property boom levels (2007 being
the peak of the last property boom before everything dropped in 2008/9), yet inflation has risen by
26% in the same time frame, so in real terms, properties today are 9.1% CHEAPER than they were in
2007. Just think how low they would be without landlords buying all those rental properties in the city.
Interest rates are at an all time low and first time buyers only need to save a £9,000 deposit to secure
a lovely 1 bed apartment around Worcester Park/Stoneleigh areas with a 95% mortgage. Forget what
the papers say, first time buyers can borrow money relatively easily on a 95% mortgage and nine
times out of ten, it’s cheaper to buy than rent.
So here is the question - Why aren’t people buying?
The number of people choosing to rent, either for lifestyle or economic reasons, has grown over the
last 15 years. I also believe they will continue to grow for some time to come (as does every report on
the subject). In fact I would go as far to predict the number of rental properties in Epsom and Ewell
will have risen from the 4,320 properties recorded in 2011 to 5,950 by 2021. Sound fanciful? Well in
2001, there were only 2,400 privately rented properties in Epsom.
It is a fact that we as a Country are more and more turning into a European model when it comes to
home-ownership, where the norm is renting for the first ten years, as opposed to the norm from the
1960’s to 1990’s, where first time buyers were encouraged to buy as soon as they left school and got
Tenants, in particular, will also feel the benefit from potential changes in the market. The likelihood
of interest rate increases in late 2015, existing economic conditions, combined with the uncertainty
of new Government manifestos following the General Election in May could dampen demand to buy,
yet also quell increases in rent. As long as landlords buy the right sort of property, that allows for a
reasonable yield and/or decent capital growth, everyone will be a winner. If you would like to have a
conversation about what would make the best sort of Buy to Let property that would offer good returns
in Epsom, then please email me on firstname.lastname@example.org or keep checking here at the Epsom Property Blog.