Can we blame the 55 to 70-year-old
Warminster citizens for the current housing crisis in the town?
Also known as the ‘Baby
Boomer Generation’, these Warminster people were born after the end of the
Second World War as the country saw a massive rise in births as they slowly
recovered from the economic hardships experienced during wartime.
Throughout the 1970’s and
1980’s, they experienced (whilst in their 20’s, 30’s and 40’s) an unparalleled
level of economic growth and prosperity throughout their working lifetime on
the back of improved education, government subsidies, escalating property
prices and technological developments, they have emerged as a successful and prosperous
generation.
...Yet some have
suggested these Warminster baby boomers have (and are) making too much
money to the detriment of their children, creating a ‘generational economic
imbalance’, where mature people benefit from house-price growth while their children
are forced either to pay massive rents or pay large mortgages.
Between 2001 and today, average earnings rose
by 65%,
but average Warminster house prices rose by 107.1%
The issue of housing is particularly
acute with the generation called the Millennials, who are young people born
between the mid 1980’s and the late 1990’s. These 18 to 30 year olds, moulded
by the computer and internet revolution, are finding as they enter early adult
life, very hard to buy a property, as landlords are buying up all the property
to rent out back to them at exorbitant rents
... it’s no wonder these Millennials are lashing out at buy to let landlords,
as they are seen to be cashing in on a social despair.
Like all things in life,
we must look to the past, to appreciate where we are now.
The three biggest
influencing factors on the Warminster (and UK) property market in the later
half of the 20th Century were, firstly, the mass building of Council
Housing in the 1950’s and 60’s. Secondly, for the Tory’s to sell most of those
Council Houses off in the 1980’s and finally 15% interest rates in the early
1990’s which resulted in many houses being repossessed. It was these major factors
that underpinned the housing crisis we have today.
To start with, in 1995 the USA relaxed its lending rules by rewriting the
Community Reinvestment Act. This Act saw
a relaxation on the Bank’s lending criteria’s as there was pressure on these banks to lend on mortgages in low
wage neighbourhoods, as the viewpoint
in the USA was that anyone (even someone on the minimum wage) any working class
person should be able to buy a home. Unsurprisingly, the UK followed suit in the
early 2000’s, as Banks and Building Society’s relaxed their lending criteria
and brought to the market 100% mortgages, even Northern Rock started lending
every man and his dog 125% mortgages.
So when we roll the clock
forward to today, and we can observe those very same footloose banks from the
early/mid 2000’s (that lent 125% with a
note from your Mum and a couple of breakfast cereal tokens), ironically reciting
the Bank of England backed hymn-sheet of responsible-lending. On every first
time buyer mortgage application, they are now looking at every line on the 20-something’s
banks statements, asking if they are spending too much on socialising and
holidays ... no wonder these Millennials are afraid to ask for a mortgage (as
more often than not after all that – the answer is negative).
Conversely, you have unregulated
Buy To Let mortgages. As long as you have a 25% deposit, have a pulse, pass a
few very basic yardsticks and have a reasonable job, the banks will literally
throw money at you ... I mean Virgin Money are offering 2.99% fixed for 3 years
– so cheap!
So, in Part Two later this
week, I will continue this emotive article and show you some very interesting
findings on why young people aren’t buying property anymore (and it’s not what
you think!).
