I was reading the Sunday Papers, as is my want and, when reading the financial pages, it was announced UK inflation had increased to its highest level in a year. Inflation, as calculated by the Government’s Consumer Prices Index, rose by 0.3% over the last 12 months. The report said it had risen to the those ‘heady’ levels by smaller falls in supermarket and petrol prices than a year ago. If you recall, in early 2015, we had deflation where prices were dropping!
So what does this mean for the Lancaster property market …… especially the tenants?
Back in November, the Office of National Statistics stated average wages only rose by 1.8% year on year, so when adjusted for inflation, Lancaster people are 1.5% better off in ‘real’ terms. Great news for home owners, as their mortgage rates are at their lowest ever levels and their spending power is increasing, but the news is not so good for tenants.
The average rent that Lancaster tenants have to pay for their Private Rental Properties in Lancaster (i.e. not housing association or council tenants) rose by 1.0% throughout 2015, eating into most of the growth. 2015 wasn’t a one off either. In 2014, rents in Lancaster rose by 0.6% (where salaries only rose by only 0.2%) However, it’s not all bad news for Lancaster tenants, because in 2013 rents rose by 0.4%, (but salaries rose by 2.2%). It’s swings and roundabouts!
It must be noted that the private rents Lancaster tenants have had to pay for Lancaster property since 2005 are only 12.4% higher, not even keeping up with inflation, which over the same time frame, rose at 27.8% (although salaries were only 22.3% higher over the same time period)
More and more, talking to 20 and 30 somethings who rent – it’s a choice. Gone are the days where owning your own property was a guaranteed path to wealth, affluence and prosperity. I know keep mentioning Europe, but some of the highest levels of home ownership are in Romania at 96.1%, Hungary at 88.2% and Latvia at 80.9% (none of them European economic dynamos) and even West European countries like Spain at 78.8% and Greece at 74% (and we know both of those countries are on their knees, riddled with national debt and massive youth unemployment).
At the other end of the scale, whilst we in the UK stand at 64.8% home-ownership, in Europe’s powerhouses, only 52.5% of Germans own a home and only 44% of Swiss people are home owners. Looks like eating chocolate, sauerkraut, renting and good economic performance go hand in hand. Yet, joking aside, home ownership has not always been the rule in the UK. In 1918, only 23% of people were home owners, with no council housing, meaning in fact, 77% were tenants.
Tenants have choice, flexibility to move, they don’t have massive bills when the boiler blows up, it’s a choice. Lancaster rents are growing, but not as much as incomes. To buy or not to buy is an enormousl y difficult decision. For while buying a Lancaster home is a dream for the majority of the 20 and 30 something’s of Lancaster have, it might not leave them better off in the long run and it isn’t necessarily the best option for everyone. That is why, demand for renting is only going in one direction – upwards.