Will the Election cure the issues within the Derby property market?

With the General Election almost upon us, all the parties are trying to woo voters with policies that will attract those important votes come the 7^th May 2015. 

There are 30,724 tenants of voting age in Derby living in private rented accommodation. In a tight election, their votes could be crucial.

Labour’s motivation to keep the private rental sector rents in line with inflation is pretty straightforward; cap rents and extend tenancy terms whilst the Conservatives are focussing on a ‘Right to Buy’ solution.

Since the turn of the Millennium, there has been a significant change in the proportion of people who own their own home in Derby. In 2001, 69.23% of homes in Derby were owner occupied, today the figure is 61.37%, a significant decline in such a short time.  Buy to let landlords can find tenants because young people say they cannot afford a deposit to buy unless they inherit money or are given a loan from the ‘Bank of Mum and Dad’ …but wasn’t that the way how most people got on to the property ladder; 10, 20 even 30 years ago or you just got on and went without and saved up?

In Derby, only 38.08% of 25 to 34 year olds have a mortgage. When you compare Derby against the national average of 35.93%, it just shows how different parts of the country have different housing markets. However, the really interesting fact is that if you roll the clock back to 1991 and nationally, 67% of 25 to 34 year olds had a mortgage.

After WW2, the supply of properties being built kept up with demand as millions of council homes were built. Also private house building increased in the 1950’s, but especially in the 1960’s and 1970’s, and as the Country  got more prosperous it meant that by 1971, there were more home owners than renters. However, since the 1970’s, the population has grown but the number of new properties being built hasn’t kept up at the same rate, the result is that there have been huge rises of property prices in the early ‘70s, the late 80s and more recently between 1999 and 2004. Interestingly, since the early 1970’s, out of the 34 richest countries in the world, the UK has seen highest property prices rises.

95% mortgages have been available to first time buyers since late 2009, but with property prices rising by 153% since 1997 in Derby, as property prices have been rising and first time buyers have been saving, the amount they have to save is continually rising at the same time. The stress on saving even for that kind of deposit, coupled with the new stricter mortgage rules introduced in 2014, means that most 20/30 something’s in Derby are renting instead of buying. Yet at the same time, don’t blame the landlords for this. For every mortgage approved for a landlord last year, three were approved for first time buyers!

The issue quite simply comes back down to a lack of new homes being built. In Derby, only 984 properties a year are being built whilst the population is rising by 2,250 a year. The supply of new homes has been limited by planning laws, local councils not having the money to build council houses, hard-hitting green belt limitations, and our old friend nimbyism (Not in my back yard!).  In fact, I read the Lyons Housing Review Report a few months ago, and in it, it said that at least 243,000 properties a year need to build to keep up with the number of new households being formed in the UK. In 2014, the country only built 109,000!  

With a rising population and net migration, especially from the EU, the mismatch between demand and supply is why we have the problem. Until politician’s have the backbone to realise the Country needs a lot more decent homes built, the problem will just get worse.

In the meantime, demand for rental property will continue to grow because people need a roof over their head at the end of the day ......fact.