As my regular readers will know, the most important consideration you will make before investing in property is the balance between annual return and capital growth. However, what affects those two things in Derby are very varied and complex. The quantity of property and whether property is owner occupied, social housing, or private renting has a big difference on yield and capital growth.
The growth in home ownership in Derby, started in the 1950’s, continued through the 1960s and, by 1971, the proportion of owner occupiers was equal to those renting. By 1981, 58% of Derby households were owner occupied and, for the first time, the proportion of rentals was less than home owners but by 1991, it reached 68%.
Roll into the 21st Century and in 2001, there was hardly any change in the tenure structure in Derby, as owner occupation stayed relatively unchanged at 68.4%. The significant change over the decade (1991 to 2001) was within the rental sector, where the proportion of households privately renting increased for the first time since 1918. 7.2% of households were privately renting in 2001, while those socially renting had decreased to 14.2%. Between 2001 and 2011, the number of households in Derby rose from 92,405 to 102,271, an increase of 10.6%. but the percentage of households that were owner occupiers in Derby dropped significantly to 61.4%.
However, that doesn’t tell the full story, because whilst there was a significant drop in the percentages (68.4% to 61.4%), the actual numbers tell a completely different tale. Of the 63,287 households in Derby that were owner occupied in 2001, that figure had only dropped to 62,765 households being owner occupied .. so why the huge drop in percentages?
In 2001, 6,739 houses were privately rented (7.2%) in Derby but roll on another ten years and there are 15,943 households in Derby that are privately rented (15.6%). The rapid increase in the number of households privately renting in Derby could be linked to the decline in the number of households getting on the housing ladder, usually by way of a mortgage. This is mainly because of the increasing difficulty for first time buyers being able to raise deposits for a mortgage, which haven’t been helped by high property prices. The average Derby house price for those who were first time buyers increased by 91.3% between 2001 and 2011. This meant larger deposits which are linked to the house price, were required. Also tighter lending requirements, especially in the wake of the recent credit crunch meant a larger percentage of the house value was required as a deposit, as 100% mortgages became a thing of the past.
Finally, declining wage growth and rising inflation over the period exerted pressure on household spending and eroded the value of savings. While in 2001 the average house price in Derby was four and half times the average gross wage, by 2011 the average Derby house price was seven times larger than the average wage. This meant households needed to save for a longer period in order to provide a deposit.
If you would like to discuss anything further then please pop in and see me, send me an email or call me directly on 07977 235545.
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