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More Home Owners Move To Private Rental Sector

More Home Owners Move To Private Rental Sector

Many new tenants in the private rental sector are former home-owners who have opted to become tenants due to the increasing financial pressures associated with home ownership.

In fact more people are quitting home ownership to become private tenants, than are leaving the private rental sector to become home-owners.

The “Generation Rent” trend was identified by the English Housing Survey, which estimated that there were 22 Million households in England in 2011/12.

The trend underlines the fact that home ownership levels in the UK have continued to fall over recent years as the number of households in private rental sector accommodation has increased.

  • 65% of property in the UK is owned by the occupiers
  • 17% are private rental sector properties
  • 17% are social housing

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The threat of a double dip recession and the current Eurozone economic crisis have been cited as influencing factors scaring both UK property buyers and sellers.

With the reduction in disposable income and the increased cost of living, it appears that UK homeowners are aiming to sit tight and ride out the worst.

Squeezed purchasing power, tightening fiscal policy, a weakening labour market and concerns over the economic outlook limit the options for potential buyers and are factors for driving down property prices in the UK housing market.

Even though the UK has had record low interest rates of 0.5% since March 2009, it is not enough of an incentive for many homeowners.

Mortgage application fees are now higher than in previous years and there are the direct costs of moving house like stamp duty and people tend to spend money on a new home as well, so for many UK homeowners staying put is the obvious thing to do.

A recent survey discovered that in the UK…

  • 14 Million households can afford to move,
    (Would not struggle to get a mortgage)
  • 8 Million people own their home without a mortgage
  • 6 Million people have a mortgage of less than 50% loan to value.
    (But the cost of moving is prohibitive)

Property prices are down 19.3% from the summer of 2007, using the Halifax measure, and according to some economists, they have further to fall.

However, Halifax itself has reported that mortgage payments for new borrowers are at their most affordable level for nearly 15 years.

Predictions from some leading economists state that after a 3% fall this year, property prices will drop by up to 5% in 2012 and the same again in 2013.

When viewed over a long period, UK house prices tend to rise at an average of 1% above inflation. However, in the last 15 years, UK property prices have risen 5% per annum in real terms.

Prices in the UK will eventually have to revert back to trend, whether that is by a US or Irish-style property crash, or thanks to low interest rates, something similar to Japan where prices have fallen every year for the last 20 years.

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