Basingstoke’s housing affordability hits a ratio of 8.30 to 1

As the father of 27 and 25 year olds, I often worry about their ability to purchase a property, and am pretty sure a contribution will be required from the bank of Mum and Dad. I was also prompted by a response to one of our recent articles about new properties available in Basingstoke, that the prices simply were unaffordable for first-time buyers in Basingstoke.

There can be no doubt that buy to let landlords have played their part in driving up property values in Basingstoke (and the UK) and from that, made housing a lot less affordable for the 20 and 30 somethings of Basingstoke.

The BoE has a target for the annual inflation rate of the Consumer Prices Index of 2%, whilst it is also required to support the Government’s economic policy, including its objectives for growth and employment.  So, should BoE be charged with containing buy to let housing market, by possibly changing the rules on the loan-to-value (LTV) ratio’s?

If we want to look at how affordable property is for first-time buyers, the best measure of the affordability of housing is the ratio of Basingstoke Property Prices to Basingstoke Average Wages, (the higher the ratio, the less affordable properties are).   (i.e. looking at the table below, for example in 2014, the average value of a Basingstoke property was 7.83 times higher than the average annual wage in Basingstoke).

 

This deterioration in affordability of property in Basingstoke over the last couple of years has been one of the reasons why the younger generation is deciding more and more to rent instead of buy their own house, but this is certainly not the only reason.

 

A quick look on Money Supermarket today found 169 lenders prepared to offer 75% LTV Buy to let Mortgages and none at 85% LTV.  Lenders have self-imposed a high level of entry for buy to let landlords (i.e. putting down at least 25% of the purchase price in cash).  The BoE don’t need to meddle there!  Also, the Government has certainly done lots to level the playing field in favour of first-time buyers.  For nearly a year now, Landlords have had to pay an additional 3% in stamp duty on any buy to let purchase and over the coming four years, tax rules on landlord’s claiming mortgage interest relief will affect their pocket.  

As mentioned in our articles before, the combination of selling off council houses in the 70’s and the substantial lack of properties being built since then, has created a demand for properties that far outstrips those that are available, therefore push up pricing.

It’s easy to look at the headlines and blame landlords.  First-time buyers have been able to access 95% LTV mortgages since 2010, meaning even today, a first-time buyer could purchase a 1 bed apartment in Basingstoke for around £110,000 and only need to find £5,500 deposit.  

I think we as a Country have changed ... we haven’t always been a country of homeowners.  Roll the clock back to 1964, and nationally, 30% of people rented their home from a private landlord, today it’s only 15.3% nationally.