Why are less Nottingham people moving house?

Recently I have been looking at the number of times the average Nottingham resident moves house in their lifetime, and how this has affected the housing market. From the research I have carried out it shows that things have changed considerably in Nottingham over the last few decades and interestingly the trend is getting worse.

There are 118,820 properties in Nottingham, however after we remove the 34,651 council houses; 28,492 privately rented houses: and 1,762 houses where the occupants are living rent free, this leaves 53,915 properties owned by Nottingham residents (with a mortgage or shared ownership). This means 45.4% of the properties in Nottingham are owner occupied (the national average is interestingly is 64.2%), however the number of people who have sold and moved house in Nottingham over the last 12 months has only been 9,750. These figures suggest that homeowners of Nottingham are only moving on average every 5.52 years.

Influencing factors for this change in behaviour include the cost of moving house, which has risen over the last twenty years. Additionally with many re-mortgaging their properties in the mid 2000’s before the price crash of 2008, there is a reluctance or inability amongst a minority of homeowners to finance a home sale/purchase due to the lack of remaining equity.

However the biggest influence has been the change in house price inflation. Back in the 1970’s and 1980’s house prices were doubling every 5 to 7 years. Even in Greater London with its stratospheric property price increases over the last few years, it has taken 13 years (since August 2002 to be exact) for property values to double to today’s levels.

This change in moving trend, in a relatively low inflation property market such as we are experiencing in Nottingham , is significant because the long term consequences of sustained low house price growth is the lack of ability to reduce mortgage debt (as opposed to when property price inflation is higher and the ratio of equity to debt is greater). Nottingham homeowners cannot currently rely on inflation to reduce their debt in real terms as they did in say the 1970’s and 1980’s.

So what does this all mean for Nottingham buy to let landlords? Well, for the same reasons existing Nottingham homeowners aren’t moving and the appeal to rent is increasing.  Fewer ‘twenty somethings’ are buying their first home. Nottingham youngsters may aspire to own their own home, but there isn’t the social pressure today from their peers and parents to get onto the housing ladder as soon as they reach their early 20’s.  Additionally, fresh in people’s minds is the memory of the 2008 housing crisis and the belief the hard times aren't completely over. There is also the opinion that the culture of the UK society is changing, with the younger generation looking for prosperity and happiness, but without the sacrifice, hard work and patience required to achieve this. As a society we expect things instantly, and if it doesn’t come easily or quickly enough, is it really worth the effort to save for the deposit? Why go without holidays, the newest iPhone, socialising four times a week and the fancy satellite package whilst saving for that 5% deposit if there is no longer a social stigma in renting or pressure to buy as there was a generation ago?

Even though in real terms property prices are 5% cheaper than they were ten years ago (when adjusted by inflation), 24% of Nottingham properties are privately rented, nearly double compared to twenty years ago. As a result, the demand for rental properties continues to grow, which can only mean those wishing to invest in the buy to let market over the long term are on to a good thing. For advice and opinion on the Nottingham Buy to Let property market, please email me at Jaclyn.Bartlett@centrickproperty.co.uk

  

Affordability of housing in Nottingham

Talking to an elderly relative recently, he reminded me that back in his day, you could have bought a property for the same price as a decent second hand car would sell for today and that his father was buying property for the same price as a decent 50 inch LCD TV!  Now of course, these are only headline prices and we have had wage growth and inflation.  Interestingly, since the Second World War, figures suggest that property values in Nottingham have doubled every 5 to 10 years. This boom lasted from the years of 1961 to 2006.

Looking at more recent times, since the start of the Millennium, increases in property values have generated large increases in the equity for many homeowners whilst on the flip side, making housing unaffordable for other people.  It might interest readers to note that most of Europe experienced sharp increases in property values in the early 2000’s, with only Spain ahead of us (although we know what has happened to the Spanish property market over recent years!).  As we entered the early 2000’s, the British situation differed in two regards.  Firstly the property value boom started and saw more sustained increases; secondly, the regional pattern was fairly uniform.

However, since 2010, the regional pattern has varied across the UK.  Since 2007 (the last property boom), today on average property values in England and Wales have increased by 1.2% higher, whilst in Greater London, they are 35.7% higher, whereas in Nottingham they are 12.08% lower. Although we have known for many years that the London property market seems to be in a ‘world’ of its own.  Looking specifically at Nottingham, however first time buyers have continued to climb on to the property ladder despite the fact that affordability has risen and fallen since 1997 (see below).  The best measure of affordability of housing is the ratio of Nottingham Property prices to Nottingham average wages, (the higher the ratio, the less affordable properties are).  

·         1997       2.65to 1   (i.e. the average value of a Nottingham property was 2.65 times higher than the average annual wage in Nottingham)

·         2000       2.60 to 1

·         2002       3.24 to 1

·         2003       4.00 to 1

·         2007       4.84 to 1

·         2009       3.78 to 1

·         2012       3.98 to 1

·         Today    4.44 to 1

The figures clearly illustrate, that although we saw an improvement just after the 2007 property crash when the property prices fell in subsequent years (i.e. the ratio dropped), Nottingham wages have failed to keep up with the increase in house prices. As such the ratio started to rise.  This has meant there has been a deterioration in affordability of Nottingham properties over the last couple of years.  This is one of the (many) reasons why the younger generation are deciding more and more to rent instead of buying their own house.  With fewer people in a position to be able to save the significant deposit required by mortgage lenders, more people are looking to rent; this has resulted in the change of attitudes to renting over the last decade.

The delay in individuals moving up the property ladder has driven rents up in Nottingham over the last few years, with price elasticity of demand influencing, as more people seek properties to rent.  All these factors have combined causing the demand for rental property in Nottingham rise.  If you are an existing landlord or thinking of becoming a landlord looking for advice and opinion and what (or not) to buy in Nottingham please get in touch with me at jaclyn.bartlett@centrickproperty.co.uk