- The Neath housing market over the last five years has behaved oddly.
- Neath house prices are 36.1%
higher than in 2017, even though during those five years, the British economy
had the uncertainty of Brexit and the massive fall in GDP during the pandemic.
- Yet, a less observed trend is
that the net number of homeowners in Neath has risen by 1,154 households, a
jump of 3.7%.
- Why has growth in
homeownership happened, and what does it mean for Neath’s existing homeowners
(and landlords)?
With the
newspapers full of news about the death of homeownership and the growth in
Generation Rent, it must surprise many (as it did with me) that the number of
homeowners in Neath has grown.
To give some
context …
the number of homeowners in Neath dropped between 2011 and 2017 by 117 households, yet between 2017 and 2021, that grew by 1,154 households.
So, what is behind
this growth in homeownership and is it a good thing?
Politicians love
it when homeownership rises, as they believe owning a house turns individuals
into model upright citizens. It was one of the critical reasons for the council
house sell-off in the 1980s.
Yet the hard data
to back this up is unexpectedly slim, whilst other studies hint that
homeownership has some harmful costs to the economy, such as reduced
entrepreneurial spirit and the disinclination to move home to find work.
However,
increasing homeownership may be a good foundation for Britain’s economic
recovery after the last few years. Homeowners have a greater propensity to live
in single-family unit homes like townhouses and semi-detached houses.
A greater demand
for more single-use homes supports the construction of such dwellings (instead
of other types such as small apartment blocks or Homes of Multiple Occupation).
This is important because single-family unit homes tend to be better build
quality, have more extensive gardens, and have more local amenities.
So, what are the
sort of numbers I am talking about in Neath?
In 2017, there were 15,027 Neath owner-occupied homes. By 2021, this had grown to 16,180 Neath homes. This means homeownership in Neath has risen from 66.24% of the households in Neath in 2017 to 68.67% in 2021, a proportional increase of 3.7%.
So, what is behind
this growth in homeownership?
- 95% mortgages have been readily available at low-interest rates now for
over a decade. In 2017, first-time buyers also got an exemption from stamp
duty. This created a perfect storm of demand, which caused the number of Neath
first-time buyers to rise.
- Whilst the rise in homeownership in Neath precedes the pandemic by a
couple of years, another factor to the growth relates to the last property
market recession of 2008/9 (the Credit Crunch). Between 2009 and 2012, many Neath
homeowners found themselves unemployed and still had to pay mortgages at 6% to
8%. Some homes were repossessed or some had to sell their home at a low price
to unshackle themselves from their high mortgage costs. This development,
nevertheless, took many agonising years to play out, reducing the homeownership
until the middle of the last decade.
- People’s views on the way they live have altered during the lockdowns.
In a sphere of stay-at-home instructions and social distancing, the peace of
mind of homeownership gives Neath homeowners the security of tenure.
- Finally, there has been a long-term change in the demographics of the
UK. Millennials (currently aged between 26 and 41) are less likely to be
homeowners than their Baby Boomer parents were at the same age. Yet, the
British millennial generation is now entering its prime home-buying period as
they have saved their deposit and are more likely to inherit money from their
grandparents. (The average age of a first-time home-buyer in the UK is 33
compared to 26 in the mid-1990s).
So, the final
question has to be …
how much further could homeownership go in Neath?
The biggest hurdle
could prove to be the supply of available homes.
Many ‘accidental
landlords’ have been selling their properties recently, which first-time buyers
have bought. Accidental landlords put their own homes up for rent in the early
to mid-2010’s because they could not sell. Now they have been motivated to cash
in on the higher Neath house prices in the last couple of years, which
increased the supply of properties to buy for owner-occupation.
Also, the number
of houses on the market in Neath available to buy from existing owner-occupiers
is starting to grow (up from 355,700 in December 2021 to 431,000 in March
2022). This is giving greater confidence to other Neath homeowners too scared
to put their homes up for sale because they are concerned they would not be
able to find anything. Things are starting to change in that regard.
Also, there are
signs of a recovery in British new home building as the number of new housing
starts in 2021 hit the highest level since the financial crisis of 2007. Yet
with a steady increase in Neath landlords returning to the market in the last
few months, this tide will turn.
Neath’s
homeownership could continue to swell for a while yet!
P.S. What does
this mean to the private rented sector in Neath? Come back next week as I give
some fantastic insights every Neath landlord will want to read to ensure they
remain profitable in the Neath buy-to-let market.
