Confidence in house prices, job security and those sorts of things it’s down to 30% to 40% of people saying that’s the reason they aren’t buying. PW: But there is so much involved in unravelling that it’s impossible to end up with a simple A=B scenario. RB: House price expectations are also key in this because the costs of buying and selling now are higher than you’re likely to see in house price inflation over a few years so if you’re likely to want to move house often, practically it makes a lot more sense financially to rent.
“Overwhelmingly the growth of the buy-to-let sector has come from the social housing sector not the owner occupied market at all”
to buy – there are a huge number of people leaking out of the social rented sector for whom it is not realistic to purchase who are on housing benefit. 22% of private tenants are on housing benefit. PR: Whatever the end number of pounds better off you might be by buying it can only be relevant for someone who is choosing to rent rather than buy. BH: But the first-time buyer sector is being neglected in today’s market.
HOW CAN YOU SAY IT IS BEING NEGLECTED IF £24BN WAS LENT TO FIRST-TIME BUYERS LAST YEAR AND £7BN WAS LENT ON BUY-TO-LET?
SHOULD THE GOVERNMENT BE OFFERING MORE SUPPORT TO BOTH SECTORS OR ONE MORE THAN THE OTHER?
BH: I’ve run some numbers and my research suggests that through your lifetime you’re going to be over half a million pounds better off if you buy rather than rent assuming that you buy an average property at an average rate. It’s a very simple model looking at wealth just at today’s house price values. Monthly costs are cheaper if you buy than rent marginally, the moment you buy your repayments are frozen effectively whereas rent goes up in line with inflation. Once you get to 25 years you’ve paid that off and rent still needs to be paid. That feeds into whether you are wealthy enough to help your children to buy in future. You end up with the property owning elite and a rump of people who will never be able to afford to own. It fundamentally is better to buy than rent. JH: Doesn’t that entirely depend on where you are in terms of your capability
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BH: Well I think there is lack of information and people don’t realise the benefits of owning versus renting. PW: That’s just not true. There are huge numbers of websites – the Building Societies Association has just developed a website specifically to help first-time buyers. I think more effort has gone into raising awareness among first-time buyers and those who want to buy in the past few years than has probably ever happened. RT: I don’t agree with Brian’s statistics but there is a more fundamental point he is making that bears thinking about. If you go back to 1900 when there was 90% of households in the private rented sector through to a boom in social housing in the 60s and then through to the dominance of owner occupation we are now in a long term trend back towards a larger private rented sector with no obvious counter balance to that and I think that is bad for society. Most people do aspire to own their own home and if you own then by the time you retire
you have lower outgoings to worry about. I think it is a bit of a time bomb because if there is a whole generation of twenty somethings who are excluded from owning their own home that will be a massive cost to society. How do we keep them in sustainable accommodation when they’re at pensionable age and have to keep paying rent? There is quite an entrenched longer term trend that is opening up the gap between the equity rich haves and the salaried have nots. PW: I think we would all agree with that but we’re not arguing about no first-time buyers. We’re arguing about fewer first- time buyers.
SHOULD THERE BE STATE SUPPORT TO TRY TO REVERSE THAT TREND AND ENABLE MORE HOMEOWNERSHIP?
JH: The past thirty years has seen governments adopt a housing tenure neutral policy position. What we’re left with today is part of an adjustment after the post Second World War period up to the 1980s where the government distorted the housing market by favouring social housing and homeownership through mortgage interest relief. In terms of balance the decline in social housing since then far outstrips the decline in homeownership. Overwhelmingly the growth of the buy-to-let sector has come from the social housing sector not the owner occupied market at all. The question is which tenure should the government support? Should it be distorting the market at all? It can’t really afford to support any sector.
MORTGAGE INTRODUCER OCTOBER 2012 37
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