Home Ownership, PRS, Boom and Bust – Management Diversity
Political and economic commentators, whilst never always united, seem to have some common concerns surrounding the nervousness around interest rates, personal borrowing and the traditional property home ownership sectors.
In an interesting article, The Guardian’s Larry Elliot has taken a look at the property market and says 2017 looks like being the weakest year for housing transactions since 2013 while data from Nationwide and Halifax shows a slowdown in price growth. He says a lack of affordable housing has had more of an impact than Brexit uncertainty. Mr Elliot argues that Britain could learn from countries where there is less emphasis on ownership, noting that Germany has not suffered for having a system more geared towards renting. In Germany institutional ownership of the rented sector exceeds 50% of the total market whereas in the UK until the last few years it was less than 5%.
Mr Elliot voices a belief that a politician will eventually say that Britain “has got housing policy completely wrong” and declare that “there is no future in an economy that relies so heavily on a housing market that lurches from boom to bust.”
Neil Shearing, Legal Services Consultant of Metamorph Law says “as growth diminishes and salaries are not able to keep up with inflation it is foreseeable that the private rented sector will continue to be at the forefront of how the government will promote the future of how we live even in the event that rental rates may continue to rise on the back of continuing house price increases caused by a lack of supply.”
Further commentary and new statistics in The Telegraph produced by Oxford Academics Mark Fransham and Danny Dorling suggest the end of an era where the older you got, the more likely you were to be a homeowner. Figures show that 71% of all households headed by someone in their 20s or late teens were renting privately by 2015/16 compared to 50% in 2005/06. The proportion of those aged 48-57 who head a privately rented household has risen from 12% in 2005/06 to 14% in 2015/16. The academics offer that if the increase in private renting continues at the same rate, within 10 years half of all households headed by someone aged under 55 will be renting privately – and all such households will be a decade on from that.
Neil Shearing say “these are interesting times indeed but good news for those managing properties in the private rented sector. Boom conditions are good also for those in the traditional block management sector but bust will mean a downturn in transactional income albeit as such income reduces down other incomes such as those from arrears recovery may rise, however, that income may not off-set what is lost. Diversity in the portfolio of management appears to be key to ride the boom and bust system we seem to be saddled with.”