Fall in homeownership finally stalls after a decade of decline

The fall in home ownership appears to have abated after a decade of decline, but the age of first time buyers has increased and the number of households paying off a mortgage has continued to slip back, new figures from the English Housing Survey reveal.

From the 1980s to 2003 the proportion of households in owner occupation steadily increased, until it reached a peak of 71%.

A period of gradual decline then followed, but last year, of the estimated 22.5 million households in England, 14.3 million (64%) were owner occupied, showing no change from 2013-14.

And among owner occupiers, the proportion of households who owned their property outright was larger than the proportion buying with a mortgage, except in London.

Outright owners accounted for 33% of owner occupiers in England, where as ‘mortgagors’ accounted for 30%.

This is true everywhere but London where despite the proportion of ‘mortgagors’ decreasing from 34% in 2004-05 to 27% in 2014-15, they still outnumbered outright owners at 23%.

The English Housing Survey explained that the younger age profile of home owners in London is likely to be the reason behind this.

The survey also revealed that over the last decade the age of first-time buyers has slowly increased. In 2014-15, the average age of first-time buyers was 33 years, up from 31 in 2004-05.

The findings also show that from 2004-5 to 2014-15, the proportion of 25-34 year olds buying with a mortgage has fallen from 54% to 34%.

‘Younger people (aged 25-34) are more likely to rent privately than to be buying with a mortgage’, the report stated.

This decline is said to be largely driven by a fall in the number of first time buyers outside of London (from around 668,000 to 438,000). The numbers of first time buyers in London remained fairly stable.

49% of first-time buyers were couples without dependent children, while about a third (31%) were couples with dependent children.

The average first-time buyer needed a deposit of £42,505 to get on the property ladder in 2014-15. As such the survey found that the majority of first-time buyers were in the upper income quintiles.

Almost all buyers in this sector had a repayment mortgage and 51% had repayment terms over 20-29 years, while 43% had mortgages of 30 years or more.

While two-thirds (67%) of first-time buyers contributed a deposit of less then 20% of the purchase price of their property, a very small number of buyers (20,000 or 4%) were able to buy their first home outright.

In terms of where this capital came from, 83% of first-time buyers used their savings, 27% had help from family and friends and 10% used their inheritance.

The majority of buyers (59%) purchasing their first home did so with a partner or spouse, while 39% bought in their name only.

Outright owners, meanwhile, tended to be 65 years or older and predominately in couples with no dependent children. ‘Mortgagors’ were found to be in the middle age bands, with 65% aged between 35–54 years old, of which 41% were found to be couples with dependent children and 35% were couples without dependent children.

Homeowners’ economic status reflected their ages too, with the majority (62%) of outright owners being retired, while a third of this group were still working.

This is in contrast to 91% of ‘mortgagors’ still working and just 4% retired.

On average, in 2014-15, owner occupiers had lived at their current addresses for 17.5 years, with outright owners living in their homes for 24.1 years compared to 10.4 years for ‘mortgagors’.

Commenting on the findings, Kevin Purvey, chairman, Intermediary Mortgage Lenders Association, said:

“The apparent end to a decade of declining owner-occupation in England should not gloss over the fact that serious thought needs to be given to the direction of UK housing policy.”

Similarly, Neal Hudson, associate director of residential research at Savills, was reported in the Financial Times as saying that he expected the overall trend of declining home ownership to resume given that the long-term fall has been driven by a shortage of new homes and house price inflation that has outstripped wage growth.

22nd February 2016