To Have Or Have Not

Just a quick note on housing. I think I have mentioned on this blog before that housing, and its costs, is a growing social issue in the UK. It interests me because it is not debated as much as other issues of similar importance. Or at least those issues I deem to be of similar importance. It has been remarked for example, that unlike the press coverage regarding other domestic price increases, news of an increase in housing costs is greeted with cheer. Often the news of an increase in house prices is illustrated by the press with images of sunny days and riches. Rarely do I read any negative comment regarding house price increases.

I have more recently however, read numerous articles on how it is increasingly harder for younger people to get on the property ladder, but any solutions proposed are nearly always directed at 'The Banks' who are both an easy target and easily digestible for those who want their news in under 30 words. The true solution lies in plain and simple, supply and demand. Restrictions on planning and local campaigns against new builds limit supply to such an extent that prices rocket. I will come back to my more detailed suggestions for solving this problem at a later date. But to illustrate the problem at least, I came across a number of statistics today in the Q1 2011 Residential Property Focus by Savills Research which leapt of the page to me.

Yolanda Barnes, Head of Research, comments that "The coming decade could be seen as the beginning of a deep and permanent schism in housing between the equity haves and the equity have nots"

70% of the total value of UK housing stock is held as equity. Or conversely only 30% of the value of all the houses in the UK are mortgaged.

The UK housing stock was valued in 2000 as worth £2 trillion. In the past ten years it has more than doubled to £4.15 trillion today.

The over 45s hold around 83% of the equity held in housing, with the over 60s some 40%. By contrast the under 35s hold just 5%.

Just 5% of the properties, the ones over £500,000, account for 18% of the value of the stock.

The housing stock in both London and the South East is worth more than the total stock of Wales, the Midlands, and the whole of the North of England combined. Moreover the housing stock of London alone is worth more than combined value of the urban counties of the West Midlands, Greater Manchester, Merseyside, Tyne and Wear, South Yorkshire and West Yorkshire.

These stats taken alone are of course not the whole story, but some of the implications of what is going on in the market are quite striking. Residential property has doubled in price in the last ten years. That is a massive windfall to home owners, perhaps even epic. 83% of the equity in this incredible deal is held by the over 45s. Virtually none of this windfall, or appreciation, was or will be taxed. The average first time buyer now needs at least one years salary as a deposit for a house. It is also true almost everywhere, that renting £100,000 by mortgage, costs less (£5,000 @ 5%), than renting a property worth £100,000 (£6,000 @ £500p.m.), but only if you have equity.

There is a huge risk that by not confronting these issues, a whole generation of people, who are not fortunate enough to call on the 'Bank of Mum and Dad' for help with a deposit, will never own a property, and by that measure their children won't either.  

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