The Time Bomb of The Walsall Property Market

I had an interesting telephone conversation with a local property developer and landlord.  Amongst other matters we began to talk about the future of the Walsall property market.  He wanted to know my thoughts on the future of the Private Rental Sector (PRS) nationally and especially locally.  As usual I had an opinion and it sounded like he wanted to hear it.  Below are my thoughts on how I think the next 10 years will play out and why I think the PRS is set to grow even further in Walsall.

TIME

Thatcher’s government introduced the right to buy of council homes but that’s not where the British obsession for owning your own home began.  Prior to WW2 the aspiration of the people wasn’t to buy but to rent.  Looking at the country as a whole, in 1951, 30% of residential properties were owner occupied, then every ten years that rose incrementally to 39% by 1961, 51% by 1971, 58% by 1981, 68% by 2001 but after that, it dropped to 63.4% by 2011 and continues to drop today.

After leaving home, early to mid-twenties young adults tend to start to settle down and move out of the family home into their own home.  They have a choice of either buying their first house, albeit with a mortgage, or decide to privately rent for the long term – bearing in mind that the local authority’s waiting list is measured in decades at the moment!

The ratio of people owning a house with a mortgage verses privately renting is an extremely important guide to what people are doing about their housing needs and what their attitude to renting vs buying is.  With that in mind, within the next ten years, I am predicting there will be more people renting privately in Walsall than own a property with a mortgage and that the British love affair of property ownership will fade further as the decades roll on.

This is a really important change in the way we live, as I explained to the property developer and landlord, knowing when and where tenant demand is going to come from in the coming decade is just as important as the knowing the supply side of the buy to let equation, in relation to number of properties built in the town, Walsall property prices and Walsall rental values.

In the Walsall Borough Council area as a whole, there are 13,463 households that are privately rented via a landlord or letting agent verses 27,646 households that are owned with a mortgage, so my prediction appears to be outrageous.  However, if we delve a little deeper into these figures we see that, 13,412 of those 27,646 households are 35 to 49 year olds and 6,246 are households of 50 to 64 year olds.  I would expect all the 50+ year olds to be paying their mortgage off as they enter retirement as I would with some of the people in their mid/late 40’s.

Meanwhile, at the other end, in the 25 to 34 age range – the age most people bought their first home in the 1970’s/80’s/90’s – only 3,557 of the 8,758 households occupied by those 25 and 34 year olds are owner occupiers with mortgages, because 5,201 households are privately rented.  This means only 40.6% of 25 to 34 years have bought their house with a mortgage.  Twenty years ago, that would have been a much higher percentage of between 75% and 85%.

It can be seen that as the older generation pay their mortgages off as they start to get to retirement and the younger generation aren’t jumping on the property ladder like they were 20 or 30 years ago, the private rental sector will take up the slack, as more and more people will want a roof over their head, but won’t buy one but rent one.  With Local Authorities and Housing Associations not building houses anywhere near like they the number of houses that they were in the 1950’s, 60’ and 70’s, the private landlord appears to have good demand for their rental properties for many decades to come.

This will create a polarisation in the housing market between those, mostly older, households who own outright and those, mostly younger, households who rent.  Our housing market is very much turning into the European model.  However, all is not lost!  The younger generation will inherit their parent’s properties, which in turn will enable them to buy, albeit later in life.

If you are a landlord or thinking of become a landlord, and would like to read more articles like this and other information on the Walsall Property Market, please feel free to contact me.

Email: salekm@ashmorelettings.co.uk

Phone: 0345 257 9850

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