Survey highlights strength of desire for home-ownership

Published by MILLIE DYSON

Newly published data from the English Housing Survey shows a sharp rise in the number of people renting privately in the last five years, report the CML.
After a century of almost constant decline, the number of people renting from private landlords has increased by 40% since 2005. Between then and 2009-10, the number of people renting privately rose by one million to 3.4 million.
Despite the increase in renting, however, owner-occupation remains overwhelmingly the tenure of choice. Published on the same day as the latest findings from the EHS, a report from the Department for Communities and Local Government on public attitudes to housing in England said that 86% would buy their home if they had a free choice.
Only 14% would choose to rent. Those aged 18 to 24 had both the strongest preference for buying and the highest expectation that they would become home-owners later in life.
The EHS shows there has been a subtle change in the balance of owner-occupiers, with more people owning their home outright and fewer buying with a mortgage.
Over the last decade, the number of homes owned outright has increased by more than 20%, from 5.6 million in 1999 to 6.8 million in 2009-2010. In 1999, almost 8.5 million households were buying with a mortgage. But by 2009-10, this had declined to 7.9 million.
Despite the widespread continuing popularity of home-ownership, the recent strong growth of private renting has contributed to a decline in owner-occupation from a peak of 14.8 million households in 2005 and 2006. In 2009-10, there were 14.5 million owner-occupiers, equivalent to 67% of all households.
Private renting had grown to account for 16% of households, while 17% rented from social landlords.

House prices – and paying the mortgage

Almost half of people (49%) believe house prices where they live are too high. Despite this, however, 79% of home-owners with a mortgage say it is easy to make their monthly payments.
Fifteen per cent say it is neither hard nor easy, while only 5% say it is difficult. Almost half (43%) say house prices in their area are "about right," while only 2% believe they are too low.
People renting privately (68%) or from housing associations (64%) are more likely to say house prices are too high than home-owners (44%). Those facing the biggest housing affordability challenges, people aged 18 to 34 (58%) and those living in inner London (76%) are more likely to say house prices are too high.
There are significant differences between tenures in how long people have occupied their home. One-third of those renting privately have lived in their home for less than a year, and only 10% have occupied the property for more than a decade. But more than half of owner-occupiers and 43% of households in the social rented sector have lived in their homes for 10 years or more.

Moving on: household mobility

The survey starkly illustrates the impact on household mobility of a stagnant housing market, which has seen a low level of transactions since 2008.
The number of owner-occupiers moving in 2009-10 was 63% lower than two years previously. Just under 1.8 million households moved into their current home in the last 12 months, 10% fewer than in the preceding year. And the number of people moving in the last 12 months was lower than in any of the preceding 15 years.
Those aged 16 to 24 are most likely to have moved recently, with almost half (45%) changing their home in the last 12 months. In contrast, only 2% of householders aged 65 or over have moved in the last year. Asked why they had moved, just over one-third of households (34%) cited job-related, family or personal reasons, including marriage, divorce and separation.Asked about public policy objectives, 5% of people say housing should be the highest priority for extra government spending, a long way behind health (41%) and education (33%). Help for industry was in third place, with 6% saying it should be the highest priority.
Asked what the government should do to make homes more affordable, 29% favour financial assistance to first-time buyers, 23% support increased access to mortgages and 19% think the government should give more money to housing associations and local authorities to build more social homes for people on low incomes.
More than half (51%) think the government should give both advice and financial assistance to people at risk of losing their home because of mortgage payment problems. Forty-two per cent believe the government should provide advice but not financial assistance.
Perhaps surprisingly, owner-occupiers are less likely than those renting to favour financial support for those facing possession. Only 5% of people overall believe the government should do nothing to help owner-occupiers at risk of losing their home.

Age and tenure

Tenure varies significantly between people in different age groups, as Chart One shows. Half of those renting privately are aged 16 to 34, and a fifth of those in the social rented sector are in this age group. But only 11% of owner occupiers are aged under 35.
There has also been a significant shift in tenure for young adults over the last 30 years. Chart Two shows that, back in 1981, more than one-third of those aged 16 to 24 (36%) rented in the social sector, with equal proportions (32%) being either owner-occupiers or renting privately.
By 2009-10, however, the proportion of this age group renting privately had almost doubled to 62%. Only 14% were home-owners, with the proportion renting in the social sector declining to 23%
Now, less than 1% of owner-occupiers are aged 16 to 24. Almost three-quarters of home-owners (70%) are aged 25 to 64.
Of those who own their home outright, 60% are retired. A large majority of those buying with a mortgage are working full-time (84%), with only 6% working part-time and 4% retired. Only 23% of those in the social rented sector are in full-time work, and 60% of households in this tenure have no members in work.
Among first-time buyers, 89% are working full-time, compared to 55% of other home-owners. Almost one-third (32%) of other home-owners are retired.
Nearly half (49%) of those buying with a mortgage have two members of the household in work. There are also significant differences in income between people in different tenures, with those buying with a mortgage having an average income of £47,200, three times the £15,100 average income of those in the social rented sector.
Almost half of home-owning households (44%) comprise couples with no dependent children, and nearly a quarter (24%) of owner-occupiers are single adults living on their own. Only 3% are lone parents with dependent children.
Most owners have bought their home with a mortgage, but other types of funding have been used additionally in many cases, as shown in Chart Three.
The most frequently reported alternative sources of funding are the proceeds of the sale of a former home (used by 7.8 million households), followed by savings (5.3 million households). But some 1.2 million households have used no source of finance other than a mortgage.
The last 15 years has seen a huge shift in the types of mortgages held by home-owners. By 2009-10, only 732,000 households had a mortgage they were planning to repay with an endowment, compared to 5.1 million in 1996-7. Over the same period, the number of repayment mortgages has almost doubled, from 2.8 million to 5.2 million.

Mortgage payments – and arrears

Differences in the amount of monthly mortgage payments vary significantly, partly depending on the type of loan and the age of the borrower.
For those with repayment mortgages, the average weekly payment is £147, with 58% of households paying between £60 and £179 a week. Households with an endowment mortgage have the lowest average weekly repayments (at £91) with 47% paying less than £60 a week and only 22% paying £120 or more (including endowment policy premiums).
The highest weekly repayments are made by those aged 25 to 44, at around £155. Payments by those aged 65 or more average £76 a week, largely because they are usually nearing the end of their mortgage term and bought their home when property prices were considerably lower than today.
Just over 2% of households said that mortgage difficulties had led them to give up their home. Of these, 37.5% sold to avoid getting into arrears, with just over 22% selling while in arrears but without the lender taking court action.
Just over 20% left their property voluntarily with the lender taking it over, and another 20% left after a court order for possession had been made.

Conclusion

The latest data from the ESH confirms that owner-occupation is by far the most popular tenure. Nonetheless, there has been a decline in recent years in home-ownership – and a sharp rise in the number renting privately.
The survey also shows how the economic recession and the credit crunch have slowed down the appetite and ability of people to move home. It provides a stark confirmation of the affordability problems for first-time buyers, with home-ownership heavily skewed towards the middle-aged and the elderly.
However challenging it is for policy-makers to help devise solutions, and for would-be first-time buyers to step on to the housing ladder, it is important to continue to recognise the strength of aspirations to home-ownership, and to help households achieve their goals where possible.