Can young people afford to get on the London property ladder? · 14/01/2024
I had an interesting chat with a mature couple in their early 50’s from Henleaze the other day, whilst viewing one of our rental properties in London.
The property wasn’t for them, but their son, who wanted a second viewing with his parents to get the parental blessing and their opinion on the rented accommodation on offer.
Now I know that isn’t the norm, but in this case the parents were going to act as Guarantors, too. As experienced letting agents in London, we deal with many types of tenants of course, so it’s no surprise to us to see parents stepping in to help out.
We got chatting about the London Property Market and how they had bought their first property in the city just after they got married in the late 1980’s when they were in their early 20’s.
We talked about how the youngsters of the UK seem to rent more than buy nowadays, and from that the conversation covered a number of similar topics.
As a letting agent in London, I want to share the highlights of that conversation with you.
Their son, like many 20 to 30-year-olds in London, desperately wants to own his own property and the parents said he had read in the Telegraph recently that when you compare house prices to earnings, the current 20 to 30-something’s generation have to spend more of their salary in mortgage payments than any previous generation.
The demand for private rental sector accommodation in London is huge, and that shows no signs of slowing down, as our London property agents have noted in recent months.
There are 48,530 private rental properties in London at the last count, which is impressive when you also consider that there are 27,498 council houses in the city.
However, let us not forget 132,342 properties are owner-occupied (71,731 with a mortgage).
Another factor to consider is that private renting in London doesn’t have the stigma it had a few decades ago, and it might surprise people that even though we class ourselves as a nation of homeowners, roll the clock back 100 years and over 75% of people rented their own home.
This was all from private landlords as council housing only started to come in with the introduction of ‘homes for hero’s’ after the first World War.
It might also surprise you to learn that at the time of the national 1971 census, more people rented than owned their own home.
Looking at the affordability issue, I have proved time and time again that it’s cheaper to buy a property than rent one, and when you look at starter homes for first-time-buyers in BS postcodes, 95% mortgages have been available to first-time-buyers for over four years.
Whilst you could certainly find better properties in better condition in better areas, flats and apartments can be bought for as little as the late £90,000’s in the Hanham area of London – meaning a modest deposit of £5,000 would be required to deliver home ownership.
When it came to affordability, I was able to tell them that when they bought their first house in London in 1988, the ratio of house prices to salary was 6.72 to 1 in London, and here was the surprise for both of us. Today’s ratio is only 6.02 to 1.
As a leading exponent of property management services in London, I said I believed there had been a cultural attitude change towards renting property in Britain and that this quiet revolution was likely to be a permanent one.
Our London letting agents based in our Chelsea and Downend offices are certainly seeing no drop in demand for high-quality rented accommodation in various BS postcodes.
In the 60’s, 70’s and 80’s, saving for the deposit to buy a house was everything.
Youngsters today have far much more disposal income than people had in the Callaghan and Thatcher years, but choose to spend it upgrading their mobile phones every 12 months, the newest tablet or PC, a newest 50” LCD TV, and two holidays per year, rather than go without and save for a deposit to buy their own property in London.
Yes, there are horror stories of tenants living in rat-infested properties, with landlords who charge massive rents and don’t repair their rented properties in London.
But that is very much the exception as most tenants rent homes of a quality they couldn’t ever to afford to buy.
Twenty years ago, if you said you rented a property you were considered (quite wrongly in my opinion) the lowest of the low – but now, renting property in London is the norm.
So with mortgage affordability being well within the bounds of most first-time-buyers, the level of deposit required for a 95% being surprisingly modest (starting off at c.£5,000 in London as mentioned above) until we change our attitudes, the UK housing market is slowly but surely turning into a more European model, where people rent for long periods of their life, then eventually inherit their parents’ properties and subsequently become homeowners themselves, albeit later in life.
Hence, I cannot see the demand for decent, high quality rental properties ever dropping in the next 10 to 20 years, but only increasing as the population continues to soar.
Just make sure you buy the right property, at the price, in the right location. Our London property agents can assist you further in making the right choice for you and your kids.
To keep up-to-date with the rented property sector in London, visit my property blog here.