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
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