Mid Sussex House Prices Outstrip Wage Growth by 13.67% since 2007.

I recently read a report by the Yorkshire Building Society that 54% of the country has seen wages (salaries) rise faster than property prices in the last 10 years. The report said that in the Midlands and North, salaries had outperformed property prices since 2007, whilst in other parts of the UK, especially in the South, the opposite has happened and property prices have outperformed salaries quite noticeably.

As regular readers of my blog know, I always like to find out what has actually happened locally in Mid Sussex. To talk of North and South is not specific enough for me. Therefore, to start, I looked at what has happened to salaries locally since 2007. Looking at the Office of National Statistics (ONS) data for Mid Sussex District Council, some interesting figures came out.

 

Salaries in Mid Sussex have risen by 24.7% since 2007 (although it’s been a bit of a roller-coaster ride to get there!) - interesting when you compare that with what has happened to salaries regionally (an increase of 15.87%) and nationally, an increase of 17.61%.

Next, I needed to find what had happened to property prices locally over the same time frame of 2007 and today. Net property values in Mid Sussex are 38.37% higher than they were in late 2007 (not forgetting they did dip in 2008 and 2009). Therefore Property values in the Mid Sussex area have increased at a higher rate than wages to the tune of 13.67% meaning, Mid Sussex is in line with the regional trend.

All this is important, as the relationship between salaries and property values is the basis on how affordable property is to first (and second, third etc.) time buyers. It is also vitally relevant for Mid Sussex landlords as they need to be aware of this when making their buy-to-let plans for the future. If more Mid Sussex people are buying, then demand for Mid Sussex rental properties will drop (and vice versa).

As I have discussed in a few articles in my blog recently, this issue of ‘property-affordability’ is a great bellwether to the future direction of the Mid Sussex property market. Now of course, it isn’t as simple as comparing salaries and property prices, as that measurement disregards issues such as low mortgage rates and the diminishing proportion of disposable income that is spent on mortgage repayments.

On the face of it, the change between 2007 and 2017 in terms of the ‘property-affordability’ hasn’t been that great. However, look back another 10 years to 1997, and that tells a completely different story. Nationally, the affordability of property more than halved between 1997 and today. In 1997, house prices were on average 3.5 times workers’ annual wages, whereas in 2016 workers could typically expect to spend around 7.7 times annual wages on purchasing a home.

The issue of a lack of home ownership has its roots in the 1980’s and 1990’s. It’s quite hard as a tenant to pay your rent and save money for a deposit at the same time, meaning for many Mid Sussex people, home ownership isn't a realistic goal. Earlier in the year, the Tories released proposals to combat the country’s 'broken' housing market, setting out plans to make renting more affordable, while increasing the security of rental deals and threatening to bring tougher legal action to cases involving bad landlords.

This is all great news for Mid Sussex tenants and decent law-abiding Mid Sussex landlords (and indirectly owner occupier homeowners). Whatever has happened to salaries or property prices in Mid Sussex in the last 10 (or 20) years the demand for decent high-quality rental property keeps growing.

Decreasing Numbers of Younger Homeowners in Haywards Heath.

George Thompson, 38-year-old father of two from Haywards Heath, was out house hunting. It was a pleasant August Saturday afternoon, and our man cycles along on his bike. He cycles up a street of suburban semis, where he spots a few retired mature neighbours, chatting to each other over the garden fence. He leans his bicycle against a lamppost and launches softly into his property search.

“Anyone on the road contemplating moving?” George asks, “I am not a landlord or developer, I’m just a Haywards Heath bloke trying to get out of renting, buy a house, do it up and live in it with my wife and two children”

“The only way I will leave here is in a box”, answers an 80-something lady, wearing her fading Paisley patterned housecoat from the 1970’s. 

 

“I‘ve lived here since before you were born, its lovely up here, we aren’t moving, are we Doris?”

OK so I have used a story to paint a picture, but George like many Haywards Heath people born in the late 1970’s to the early 1990’s, is keen to get a slice of prime Haywards Heath real estate. Yet people like George in Generation Y (or the Millennials as some people call them i.e. born between 1977 and 1994 and needing family housing now) are discovering, as each year passes by, they are becoming more neglected and ignored when it comes to moving up the property ladder.

Looking at the graph for the UK as whole.

Over 75 percent of Brits aged 65 and above (the baby boomers) are owner-occupiers, the biggest share since records began and a proportional rise of over 48.3% since the early 1980’s. Looking at those Baby Boomers (the current 65+year olds)  and roll the clock back 36 years (to when they were in their 30’s and 40’s and two thirds (65.6%) of them owned their own home. Whilst today, just under a half of 25 to 49 year olds (47.3%) own their own home.

However, the biggest drop has been in the 18 to 24-year old’s, where homeownership has dropped from a third (32%) in the 1980’s to less than one in ten (8.9%) today. Looking at the Haywards Heath statistics, the numbers make even more interesting reading.

 Source - Denton House Research, ONS and DCLG

Government policy contributes to the generational stalemate. Stamp Duty rules prevent older Brits from moving as the price of land and planning rules make it harder to build affordable bungalows that are attractive to members of the older generation who want to move.

The average value of an acre of prime building land in the UK is between £750,000 and £800,000 per acre. Bungalows are the favoured option for the older generation, but the problem is bungalows take up too much land to make them profitable for new homes builders. The housing market is gridlocked with youngsters wanting to get on (then move up) the property ladder whilst the older generation, who want to move from their larger houses to smaller, more modern bungalows, can’t. The problem is – there simply aren’t enough bungalows being built and the high price of land means they are prohibitive to build.

So, what is my point? Well, all I would say to the homeowners of Haywards Heath is that one solution could be to start to talk to your local councillors, so they can mould the planners’ thoughts and the local authority thinking in setting land aside for bungalows instead of two up two down starter homes? That would free the impasse at the top of the property ladder (i.e. mature people living in big houses but unable to move anywhere), releasing the middle aged gridlocked people in the ladder to move up, thus releasing more existing starter homes for the younger generation.   

And to you George, the wandering new home searcher – if things are going to change, it will be years before they do. So keep going out and spreading the word of your search for a new home for your family.