housing affordability in Colchester

Colchester Housing Affordability Ratio 9.6 to 1

The best measure of housing affordability in Colchester is the ratio of Colchester Property Prices to Colchester Average Wages. The higher the ratio, the less affordable properties are. The headline ratio of 9.6:1 is the estimated figure for 2016.

Looking at the table below we can see housing affordability in Colchester has been relatively stable over the last decade with the latest confirmed figures for 2014 showing the average value of a Colchester property was 7.8 times higher than the average annual wage in Colchester.

1998200020022004200620082010201220142016 (EST)
3.834.385.817.707.487.796.807.247.809.60

The deterioration in housing affordability in Colchester since the millennium has certainly been one of the reasons the younger generation are choosing to rent instead of buying their own house but it’s not the only reason.

Housing Affordability in Colchester

Following my recent Generation Rent Forever blog post about the change in attitude to renting by the youngsters of Colchester I received an email making the point that buy to let landlords have played their part in driving up property values in Colchester (and the UK) which has made housing a lot less affordable for the 20 and 30 somethings of Colchester. It goes on to suggest the plight of first-time buyers in Colchester, going head to head against all the Colchester buy to let landlords, was like “a novice tennis player, playing tennis against Andy Murray. If you played him once you would unquestionably lose but even if you played against him 100 times you would lose 100 times”. The email further suggested “The Bank of England should control house prices the same way they control inflation”.

Currently The Bank of England is set an annual inflation target of 2% (plus or minus 1%) based on the Consumer Prices Index (CPI) and they are also obliged to support the Government’s economic policy, including its objectives for growth and employment. Do you think the Bank of England should also be made responsible for regulating the buy to let housing market? How would they do this? Perhaps by changing the rules on the loan to value (LTV) ratios?

The Headlines Blame Landlords…

I took a look at the LTV ratios on the Money Supermarket website today and found 169 lenders prepared to offer 75% LTV buy to let mortgages and none at 85% LTV.  Lenders have self-imposed a high level of entry for buy to let landlords (they have to put down at least 25% of the purchase price in cash) so I don’t personally think there’s any need for Bank of England regulation – but I’d be interested to hear your opinions. The government have also recently helped level the playing field in favour of first time buyers with an additional 3% in stamp duty on any buy to let purchase and, over the next four years, tax rules on landlord’s claiming mortgage interest relief will also adversely affect their profit.

Renting is Normal Reality Check

Contrary to popular belief we haven’t always been a country of homeowners.  In 1964 30% of people rented their home from a private landlord, today it’s just 15.3%. First time buyers have been able to access 95% LTV mortgages since 2010 which means, right now, a first-time buyer could purchase a 2 bedroom apartment in Colchester for around £140,000 with a £7,000 deposit. It’s still a lot of money but, in my opinion, it remains an attainable option for determined first time buyers in employment.

UK housing comparison

Apart from a privileged few most homeowners made sacrifices to get onto the property ladder. Anyone that wants to become a homeowner has to make it a priority and take a close look at their income and expenditure and figure out exactly where savings can be made in order to raise the deposit. One big change, compared with earlier generations, is the availability and cost of online sport,  music, movie, TV and mobile phone plans. It’s not uncommon to be spending three figures a month on entertainment before taking into account the cost of holidays and socialising with friends.

I personally believe buying their own home is no longer the top priority for many 20 to 30 somethings for a variety of reasons. If my assumption is correct, it follows that the proportion of Colchester renters will also continue to increase, and may even return, to historically “normal” levels. I believe it’s time to stop blaming landlords for the woes of the nation, or a generation, and accept they’re just part of the mix that can help provide much needed housing in Colchester.

If you have an opinion about housing affordability in Colchester or you’re a prospective home buyer or first-time landlord looking for advice, on what (or what not to buy in Colchester) please get in touch. I’m available to offer a free opinion on Colchester properties for sale. Send me the Rightmove or Zoopla links you’re interested in and I’ll get back to you. Alternatively telephone 01206 862288 or email grahamwood@hometorent.co.uk or add your comments below.

 

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