The initial findings of the 2011 census were published in July this year with a second wave of more detailed local data due out in the autumn. Using a range of published government information together with analysis unique to Hometrack, this new Insight paper looks at what the forthcoming data is likely to tell us about changes in the housing market over the last decade.
There is a series of clearly defined trends emerging in the UK housing market and the Insight paper identifies three headline trends which Hometrack expects to dominate the census findings when published later this year. These include:
Growth in outright homeownership - 47% of home owners own their property outright. If current trends continue, by 2014/15 there will be more outright owners than those with a mortgage.
Accelerating growth in the private rented sector (PRS) over the downturn. In the early 1990s private rented housing accounted for just 9% of all housing stock, today it accounts for 16%. Over the last five years the PRS has grown at its fastest rate in absolute terms for two decades.
A growing imbalance between three and four bed family houses, which Hometrack estimate account for 63% of private housing supply, and smaller two bedroom houses (suitable for first time buyers and downsizers) which Hometrack calculate as representing just 18% of private housing supply.
Richard Donnell, Director of Research at Hometrack comments: “The census is an unrivalled data source. Not only does it provide us with a snapshot of how we live our lives today, but forms the basis on which policymakers can make decisions and plan for tomorrow. This is vital in the housing arena where supply is failing to keep pace with demand and the pressure on the market is building.”
The last ten years have seen a continued shift in housing tenures. The headline rate of owner occupation has, over the last seven years, started to fall, as buyers, stymied by lack of mortgage finance and large deposits, have struggled to access the housing ladder. But as households pay off their mortgages, the number of people who now own their home outright has continued to grow.
Owner-occupied households with no mortgage now own property worth an estimated £2,000bn. This represents 38% of the total value of the housing market. Donnell explains, “Looking at growth rates for mortgagees and non-mortgagees over the last 10 years and using this as a basis for forward projections, we calculate that by 2014 there will be more people owning their home outright without a mortgage than with. This is further confirmed by Hometrack’s analysis of housing stock by tenure which shows that the largest percentage of mortgagees have mortgages worth less than half the value of their home.”
The last census showed that the largest concentrations of those owning their home outright were to be found in the coastal areas of the country. More than 45% of homes owned outright were in Christchurch, East Devon and East Dorset - a figure that is likely to exceed 50% this time around.
The challenge of accessing mortgage finance since 2008 has boosted demand for private rented housing. In 1990 just 9% of all housing stock was privately rented but 20 years on, the private rented sector has almost doubled in size. The de-regulation of private renting (1990s), the introduction of buy-to-let finance (1996) together with a boom in house prices (1996-2007), have all contributed to the sector’s growth. Hometrack also believes an increasing number of homeowners have become accidental landlords. The resulting conversion of owner-occupied homes to rented is likely to be responsible for a large proportion of the recent growth in the rental market. The private rented market has accelerated across all regions of the country over the last 5 years.
The census will show not just the profile of the growth in private rented housing over the last decade, but also the distribution of its housing stock which is highly concentrated in very specific urban areas. An analysis of the largest rental markets shows that 50% of all lettings in 2011 were concentrated in just 6% of the UK by area - primarily in major urban centres. Seventy five percent of private lettings were distributed across 26% of the country by area.
Donnell again, “Based on an 88% growth in the private rental market over the last decade, we expect the 2011 census to show the concentration of rental supply. The recent Montague report highlighted the role that private renting can play in supporting new housing but Hometrack’s analysis shows that there is little point in building homes to rent in locations where a viable rental market simply doesn’t exist.”
The 2011 census will be the first to capture data on housing by bedroom count. Hometrack calculates that larger three and four bed homes account for 63% of the country’s private housing stock, while smaller properties - suitable for first-time buyers and downsizers - are in limited supply. Two bed houses account for just 18% of supply.
As Donnell explains, “Better information on the supply of housing in local markets should lead to better policies to address affordability issues. Targeting the right supply into the pinch-points of a market will be far more effective than building homes that simply mirror what exists on the ground today.”
The 2011 census will give greater insight into how the housing market is responding to the sustained shortage of new homes. New build output has fallen well below levels needed to meet increased demand and has meant that pressure has been placed on existing housing stock.
Donnell concludes, “Housing policymakers at both a national and local level will find the 2011 census data invaluable in helping plan how best to make their housing markets fit for purpose. For those developing and investing in housing, it will highlight the many gaps in the market that are in need of targeting.”