Warminster’s ‘Generation Trapped’ and the £1.48bn legacy

Last week, I wrote an article on the plight of the Warminster 20 something’s often referred to by the press as ‘Generation Rent’. Attitudes to renting have certainly changed over the last twenty years and as my analysis suggested, this change is likely to be permanent. In the article, whilst a minority of this Generation Rent feel trapped, the majority don’t – making renting a choice not a predicament. The Royal Institution of Chartered Surveyors (RICS) predicted that the private rental sector is likely to grow substantially by 1.8m households across the UK in the next 8 years, with demand for rental property unlikely to slow and newly formed households continuing to choose the rental market as opposed to buying.

However, my real concern for Warminster homeowners and Warminster landlords alike, as I discussed a couple of months ago, is our mature members of the population of Warminster. In that previous article, I stated that the current OAP’s (65+ yrs in age) in Warminster were sitting on £719.7m of residential property ... however, I didn’t talk in depth about the ‘Baby Boomers’, the 50yr to 64yr old Warminster people and what their properties are worth – and more importantly, how the current state of affairs could be holding back those younger Generation Renters.

In Warminster, there are 1,358 households whose owners are aged between 50yrs and 64yrs and about to pay their mortgage off. That property is worth, in today’s prices, £392.7m. There are an additional 1,294 mortgage free Warminster households, owned by 50yr to 64yr olds, worth £374.2m in today’s prices, meaning...

Warminster Baby Boomers and Warminster OAP’s are sitting

on £1.48bn worth of Warminster Property

These Warminster Baby Boomers and OAP’s are sitting on 5,141 Warminster properties and many of them feel trapped in their homes, and hence I have dubbed them ‘Generation Trapped’.

Recently, the English Housing Survey stated 49% of these properties owned by the Generation Trapped, as I have dubbed them, are ‘under-occupied’ (under-occupied classed as having at least two bedrooms more than needed). These houses could be better utilised by younger families, but research carried out by the Prudential suggest in Britain it’s estimated that only one in ten older people downsize while in the USA for example one in five do so.

The growing numbers of older homeowners who want to downsize their home are often put off by the difficulties of moving. The charity United for all Ages, suggested recently many are put off by the lack of housing options, 19% by the hassle and cost of moving, 14% by having to declutter their possessions and 14% by family reasons such as staying close to children and grandchildren.

Helping mature Warminster (and the Country) homeowners to downsize at the right time will also enable younger Warminster people to find the homes they need – meaning every generation wins, both young and old. However, to ensure downsizing works, as a Country, we need more choices for these ‘last time buyers’.

Theresa May and Philip Hammond can do their part and consider stamp duty tax breaks for downsizers, our local Council in Warminster and the Planning Dept. should play their part, as should landlords and property investors to ensure Warminster’s ‘Generation Trapped’ can find suitable property locally, close to friends, family and facilities. 

‘Generation Rent (Forever)’ – 1,420 Warminster Tenants have no intention of ever buying a property to call home

The good old days of the 1970’s and 1980’s eh … with such highlights lowlights as 24% inflation, 17% interest rates, 3 day working week, 13% unemployment, power cuts ... those were the days (not)… but at least people could afford to buy their own home. So why aren’t the 20 and 30 something’s buying in the same numbers as they were 30 or 40 years ago?

Many people blame the credit crunch and global recession of 2008, which had an enormous impact on the Warminster (and UK) housing market. Predominantly, the 20 something first-time buyers who, confronting a problematic mortgage market, the perceived need for big deposits, reduced job security and declining disposable income, discovered it challenging to assemble the monetary means to get on to the Warminster property ladder.

However, I would say there has been something else at play other than the issue of raising a deposit - having sufficient income and rising property prices in Warminster. Whilst these are important factors and barriers to homeownership, I also believe there has been a generational change in attitudes towards home ownership.

Back in 2011, the Halifax did a survey of thousands of tenants and 19% of tenants said they had no plans to buy a home for themselves. A recent, almost identical survey of tenants, carried out by The Deposit Protection Service revealed, in late 2016, that figure had risen to 38.4%, with many no-longer equating home ownership to success and believing renting to be better suited to their lifestyle.

You see, I believe renting is a fundamental part of the housing sector, and a meaningful proportion of the younger adult members of the Warminster population choose to be tenants as it better suits their plans and lifestyle. Local Government in Warminster (including the planners – especially the planners), land owners and landlords need an adaptable Warminster residential property sector that allows the diverse choices of these Warminster 20 and 30 year olds to be met.

This means, if we applied the same percentages to the current 3,697 Warminster tenants in their 1,471 private rental properties, 1,420 tenants have no plans to ever buy a property – good news for the landlords of those 565 properties. Interestingly, in the same report, just under two thirds (62%) of tenants said they didn’t expect to buy within the next year.

.. but does that mean the other third will be buying in Warminster in the next 12 months?

Some will, but most won’t … in fact, the Royal Institution of Chartered Surveyors (RICS) predicts that, by 2025, that the number of people renting will increase, not drop. Yes, many tenants might hope to buy but the reality is different for the reasons set out above.  The RICS predicts the number of tenants looking to rent will increase by 1.8 million households by 2025, as rising house prices continue to make home ownership increasingly unaffordable for younger generations.  So, if we applied this rise to Warminster, we will in fact need an additional 630 private rental properties over the next eight years (or 79 a year) … meaning the number of private rented properties in Warminster is projected to rise to an eye watering 2,101 households.

Warminster Unemployment At 3.3% and its effect on the Warminster Property Market

It was late May 2016, The Right Hon. Member for Tatton, Mr George Osborne, published an official HM Treasury analysis stating UK house prices would be lower by at least 10% (and up to 18%) by the middle of 2018 compared with what is expected if the UK remained in the European Union. So, eight months on from the Referendum, are we beginning to show signs of that prophecy? The simple answer is yes and no.

Good barometers of the housing market are the share prices of the big UK builders. Much was made of Barratt’s share price dropping by 42.5% in the two weeks after Brexit, along with Taylor Wimpey’s equally eye watering drop in the same two weeks by 37.9%. Looking at the most recent set of data from the Land Registry, property values in Warminster are 0.25% up month on month, but the previous month, property values had decreased by 0.35%  – so is this the time to panic and run for the hills?

Doom and Gloom then? Well, let me consider the other side of the coin.

Well, as I have spoken about many times in my blog, it is dangerous to look at short term. I have mentioned in several recent articles, the heady days of the Warminster property prices rising quicker than a thermometer in the desert sun between the years 2011 and late 2016 are long gone – and good riddance. Yet it might surprise you during those impressive years of house price growth, the growth wasn’t smooth and all upward. Warminster property values dropped by 1.38% in November 2012 and 1.22% in December 2014 – and no one batted an eyelid then.

You see, property values in Warminster are still 9.39% higher than a year ago, meaning the average value of a Warminster property today is £277,950. Even the shares of those new home builders Barratt have increased by 43.3% since early July and Taylor Wimpey’s have increased by 37.3%. The Office for Budget Responsibility, the Government Spending Watchdog, recently revised down its forecast for house-price growth in the coming years - but only slightly.

The Warminster housing market has been steadfast partly because, so far at least, the wider economy has performed better than expected since Brexit. There is a robust link between the unemployment rate and property prices, and a flimsier one with wage growth. Unemployment in the Wiltshire Council area stands at 8,400 people (3.3%), which is considerably better than a few years ago in 2013 when there were 12,900 people unemployed (5.4%) in the same council area.

However, inflation is the only thing that does worry me. Looking at all the pundits, it will get to at least 3% (if not more) in the latter part of 2017 as the drop in Sterling in late 2016 renders our imports with higher prices. If that transpires then the Bank of England, whose target for inflation is 2%, may raise interest rates from 0.25% to 2%+. However, that won’t be so much of an issue as 81.6% of new mortgages in the UK in the last two years have been fixed-rate and who among us can remember 1992 with Interest rates of 15%!

Forget Brexit and yes inflation will be a thorn in the side – but the greatest risk to the Warminster (and British) property market is that there are simply not enough properties being built thus keeping house prices artificially high. Good news for those on the property ladder, but not for those first-time buyers that aren’t! In the coming weeks in my articles on the Warminster Property Market, I will discuss this matter further!