► Buying is 16% cheaper than renting

Monday, January 30, 2012

Published by MILLIE DYSON  www.myintroducer.com

Buying a home in the UK is over a £100 a month cheaper than renting, according to research by Halifax.

The typical monthly cost of buying a three bedroom house in the UK was £600 in December 2011: £116 (or 16%) lower than the average monthly rent of £716 paid on the same property type.

This represents a significant turnaround compared with three years ago when the average cost of buying was 29% higher than the average rent paid. The monthly costs associated with buying accounted for 29% of average UK disposable income in 2011, compared to 47% in 2008.

Home buying costs have fallen by more than a quarter (£328) since 2008, driven by a decline in the average monthly mortgage payment of nearly one-third (£242) due to the marked fall in mortgage rates and house prices.

The mortgage rate for a new borrower has been reduced to an average of 3.63% in 2011 from 5.75% in 2008, while the average house price has dropped by 11% over the same period.

Meanwhile, the average cost of renting has risen by 9% (£62) since 2009.

Higher demand for rental property, driven partly by the difficulties for potential buyers entering the housing market, has pushed up rents.  

Over the past year, buying costs have dropped by 5% whilst the typical cost of renting has risen by 5%, continuing the trends seen in 2010.

The regional picture

Buying a home was more cost-effective than renting in eleven out of the twelve UK regions in December 2011.

In contrast, buying was more costly than renting in all regions in December 2008, demonstrating the considerable turnaround over the last three years.

Despite having higher absolute costs, buying is currently most affordable relative to renting in London with the average borrower in the capital paying 10.2% less per month than the typical private tenant.

At the other end of the spectrum, Wales is the only region where renting remains cheaper than buying.

Home Buyers: the inside track

The number of buyers entering the market has continued to decline despite the improvement in the affordability of buying compared with renting since 2008.

Halifax estimates that there were around 510,000 home purchases with a mortgage in 2011: the lowest annual total since 1974 and 6% lower than in 2010. Much of this decline can be attributed to the increase in the size of the deposit required, with the size of the average deposit put down more than doubling over the past decade.

In addition, higher costs related to moving home such as stamp duty and estate agents fees have also added to the overall cost of home buying.

Martin Ellis, housing economist at Halifax, commented:

"The affordability gains for buyers relative to renters in the last three years have been significant. The average mortgage payment has fallen dramatically over recent years as a result of falling house prices and mortgage rates.

"At the same time, rents have risen due to strong demand for rented accommodation.

"Nonetheless, despite the improvement in the relative affordability of buying a home, the number of purchasers has continued to fall due to the ongoing challenges in raising a deposit and the considerable uncertainty over the prospects for the UK economy, which have severely constrained housing demand."

► Homes in 1999 and 2011

1999 was the peak year for sales to First Time Buyers.  

This means 440,000 people a year are not buying their own home compared to 1999, where are they living? At home with parents? Or in rented?

Deposits have risen from £5k to £40k and you will be about 37 before you can buy your first home.

Rents (for this average home) have risen in the same period from £300pm to £800pm and the value has risen from £56k to £161k.

If you rent you do not benefit from any gain in value, you have no security after Short Hold Term expires and you have a landlord and estate agent to deal with.

Well we think all that sucks so we do something about it.

For this average house as a Joint Equity shared ownership home, you will need a minimum deposit of around £8k and the monthly cost is about £850pm, you will share 50% of the rise in value (a massive £52k from 1999 to 2011), stay as long as you like, and have no landlord.

Its your home. And when you want to move we will move with you if you want us to.

Find out how you can buy a Joint Equity home on this site and complete an Illustration here to see what it means for you.

You can email us anytime if you have questions.

► Record number of applicants for every rented home

There are now more tenants than properties- the highest since records began.   The number of new tenancies has been at record levels for the past year (2010/11) but the Private Rented Sector may finally be running out of space to supply tenant demand, according to an ARLA survey.

Tim Hyatt, president of ARLA, said: “The UK cannot rely on the rental sector to support the housing market in perpetuity.  The reality is that there is a finite amount of rental property and unless both housing supply and mortgage availability improves then renters will find that their options in the market are reduced.” In fact tenants are now staying in their properties longer and has increased to a record high of 19 months, as tenants are wary of trying to find a new property in such a competitive market.  

Joint Equity allows you to break out of rented property and buy your own home. Why waste money renting when you can benefit from the price of your home rising? Why suffer from having a landlord when for around the same amount you can have your own home with the help of a Joint Equity Investor-Partner?

► Most people still want to own their own home .

The latest survey from the ESH confirms that owner-occupation is by far the most popular tenure. Despite the decline in home-ownership – and a sharp rise in the number renting privately. Between 2005 and 2010, the number of people renting privately rose by one million to 3.4 million, however, owner-occupation remains overwhelmingly the tenure of choice

The economic recession and the credit crunch have restricted ability of people to buy a home. Providing stark confirmation of the affordability problems for first-time buyers, with home-ownership heavily skewed towards the middle-aged and the elderly. More below.

► Survey highlights strength of desire for home-ownership

February 2011 published data from the English Housing Survey (24/02/11) 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.

Mobility and moving on

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.

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

► Buy to Let revival is a curse for new Buyers

Russell Lynch writing in the Evening Standard 17th May 2011 says.

If you want a brutal example of the economics of supply and demand in action, take the current bloom in buy-to-let lending which is intensifying the nation's housing apartheid. Rental costs have soared as those shut out of the housing market scramble for scarce lettings.

Strong words but true. He estimates 800,000 people are locked out of  owning and the budget and First Buy  will not help.   

Link to online article Here.    Link to full article here.

► Government scheme for First Time Buyers hits problems

The Government has accepted there is a problem for First Time Buyers with a fall from £46bn first-time buyer loans in 2007 to just £24bn in 2010, Council of Mortgage Lenders figures . So the Budget announced the £250M FirstBuy scheme. That is just 1% of the fall in mortgages.

The scheme has also come under attack because as it is limited to new-build, it will not help ‘chains’ and therefore not deliver any benefits to the wider housing market and is widely seen as helping developers sell unwanted houses.

There are also strict limitations: first-time buyers must earn no more than £60,000 per household to qualify, and will only be allowed to have one more bedroom than their initial needs allow – eg, if they are a couple, two bedrooms, and if a couple with a child, three bedrooms.

However. Developers appear to be back-tracking fast on the new FirstBuy scheme, which they put together with the Government saying that the scheme is complex and does not help them. Sorry guys it is supposed to help buyers.

More from Direct Gov

► House builder Barratt admits it is no longer building for First Time Buyers

Thursday 3rd March 2011

A housebuilder has admitted it is hardly building for first-time buyers now, and that first-time buyers are now reliant on the private rented sector.  

Mark Clare, chief executive of Barratt Developments, said the company is moving away from building homes for first-time buyers because young people are finding it too difficult to get mortgages.

He said that less than 30% of Barratt’s new homes outside London are now designed for first-time buyers, compared with 72% two years ago.

He said: “First-timers are being pushed into the private rental market, but that also requires new homes to be built.”

He said there is a “severe” lack of new homes, with only about 100,000 now being built each year. Of these, around a quarter are family units as housebuilders concentrate on larger properties. “The gap is getting bigger and bigger,” he added.

Barratt is looking at entering the rental market and is thought to be considering a business model whereby it sells a bulk of units on its schemes to landlord investors, whilst keeping a stake.

► FSA Complaints procedure

The FSA  requires registered  companies who get more than 500 complaints to report on their action.

As always Joint Equity  tries to be best in class and our Complaints Procedure and reports already exceed the FSA requirements. Details here .

► Joint Equity is not Fractional Ownership

Have you seen articles in the press and on the web recently that mention Fractional Ownership when talking about property?

Fractional Ownership is a very  American term, and that means it will be used here and in Europe, which refers to resort ownership we normally call Timeshare.

Through Fractional Ownership you can buy a week, or more, that allows you to use an apartment on a golf course or in a costal resort. You can also buy Fractional Shares in planes, fast cars and boats and yachts see here for examples.

Joint Equity is not Fractional Ownership but co-ownership where you live in your home 365 days a year and an Investor becomes your Partner adding his Share of the deposit  and helping you get your mortgage. Click the links above for full details.

► Joint Equity’s David Shortt wins prestigious industry award at national event

David Shortt has been awarded one of the industry’s highest recognitions for Lifetime Achievement.  

While we are justifiably proud of David we hope that he will have many mores years of “exceptional” contributions to make.

Great picture David, we love it., but just what time was it taken? Looks like you had been celebrating - Well done.

March 2010

► Main and Main in Cheshire are the latest Estate Agent to join the growing network

Main and Main are a family run estate agency with three offices in Heald Green, Cheadle and Stockport and cover the south Manchester area.

Main and Main can help Owner Partners find their perfect home and Investor Partners their ethical investment. Contact details here

January 2010

► Joint Equity business model is cloned

It is said that imitation is the highest form of flattery and it did not take long for the more unscrupulous people, in the property industry, to see the opportunities available in shared home ownership and to copy our model.

However, they are not content to just make a reasonable return along with the Owner-Partner and Investor-Partner they want to get involved with gifted deposits from Developers and building a chain of dummy organisations to obscure the origin of the deposit from the Lender.

Rightly so the Lenders do not like to lend to these, well sharks, and any one who buys with them is almost certainly going to pay well over the sale price as the so called investor keeps all the kick back from the developer to themselves and charge their “partner” the full asking price, or more.

How do you check that they are ethical investors? Ask to see their Treating Customer Fairly policy, check their Deed of Co-Ownership for default process, and check out if their fees are transparent.

Other than to alert our Partners to the problem of unscrupulous vultures there is very little we can do. We remain very open and transparent, our fees are clearly laid out and we require both Partners to have independent legal and financial advice before they sign the Joint Equity Partner’s Contract (our Deed of Co-Ownership).

In the words of the well known advert “we do what it says on the tin” and our “tin” is this web site where there are over 95 pages of information about us and our services. We have been asked why we put so much information here with the risk it will be copied, well the short answer is it our culture to provide all the information up front then if you want to buy with us you do so with fore knowledge.

We are not averse to dealing with Developers and we are currently negotiating with several but if we get very good prices our Owners, Investors and Funders will know the real sale price and will get the benefit of the discount we can negotiate.

If you want to know if the home you are looking at is being sold under the real Joint Equity email us and ask us.

Click here with your questions or comments.

► Stamp Duty and the changes  

In The Government has raised the initial stamp duty exemption threshold to £175,000 for 12 months.from the 2nd September 2008. It will revert to £125,000 on 1st September 2009.

1% stamp duty will now be levied on properties from £175,001 to £250,000.

Click here with your questions or comments.

► 2008 Budget makes changes to stamp duty, but the outcome is unclear  

August 08 update still no idea, maybe it’s been dropped quietly?

June 08 update there is still no guidance

In yesterday's budget announcement, a change to the Stamp Duty payable on Shared Home Ownership properties was mentioned.

There is no information available at the moment on the details of this change, and we don’t know whether or not it applies only to Government schemes or to private schemes as well.

This change is due to come into force in April and we're investigating and watching developments closely.

As soon as any information becomes available on the Government websites, we'll post the information here.

Click here with your questions or comments.

The Joint Equity Scheme is for first-time buyers, home owners and property investors.  

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