Home ownership: UK & Abroad.

Estimated reading time 6 minutes

It is clear the UK is undergoing a housing crisis; supply is not matching demand and house prices and rental property are sky rocketing. Yet Brits are still obsessed with home ownership, compared to some of their European neighbours.  Individuals are keen to get onto the property ladder as soon as possible, despite a long-term, stress inducing mortgage hanging over their heads. However, things are changing.

Consequently, it is no surprise that home ownership has been in decline since 2002, and took a knock during the recession, and has dropped below France (65%). The home ownership rate in the UK is 63%, compared to the peak in 2003 when it was 71%. Furthermore, the average home owning Brit has a mortgage debt of £85,000. 

Therefore, the average Brit will find themself in huge debt, with high house prices and mortgage repayments that last for years, it is no wonder that the standard 25 year mortgages are fast disappearing. Brits are among the highest indebted in Europe (along with Austria, Belgium, Denmark, Finland, Luxembourg, the Netherlands, and Sweden) and  each year around hundreds of homeowners are struggling to stop repossesion of their properties due to overdue mortgage payments.

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Mark, 29, from Cambridge has struggled to afford a mortgage with his salary: “All my friends were buying their first property, and I felt like a failure as I was still renting, unable to afford a deposit. I’m spending around 25% of my salary on a house share, as opposed to 60% of it on a mortgage. I’ve set up a Help to Buy with my girlfriend and we’ve managed to save £12,000 for a house so far, but we’ve still a long way to go to buy in Cambridge.”

Yet, the rental sector is hardly desirable, with poor quality housing, few regulations and the bad reputation for landlords out to make a quick penny wherever they can. Rentals are not capped, so the demands of housing means that rental prices are increasing and becoming unobtainable. In fact, it is more economical to buy than rent in many British cities. 

Schemes such as ‘Help to buy’ exist to support people wanting to get their first mortgage, where they boost your savings to go towards to purchasing a first home.  

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Generation rent

With house prices going the way they are, many young people are living at home well into their 20’s, and even 30’s. Among those aged 20-34, 1 in 4 currently live with their parents, as found by ONS. 

Lara, 26, North London. “Living at home just makes more sense right now. My parents live in London and I work in the city, so I am saving hundreds every month living at home, rather than renting in London. I don’t want to live with my parents for ever, but right now it feels like the most feasible option.”

Germany

Germany has long been known as a nation of renters. Property ownership has remained fairly stable in the past 20 years, with a slight increase in 2012-13, but a slight decline since. Property prices are indeed growing, yet not at such a rate that they have in Britain.

Factors for Germany’s high percentage of renters (52.5%):
–    Less obsession in home ownership
–    Tenants enjoy far more rights and protection; they have the freedom to decorate, 3 months’ notice is required by both parties and eviction is virtually unheard of.
–    There is far less stigma attached to renting. 
–    Less hostility between tenants and landlords.
–    Banks are stringent on lending.
–    Rents are controlled by local government. Berlin has set rental caps to prevent landlords from setting rents over 10% the national average. 
–    Unlimited rental contracts. 

It is also not easy to get a mortgage for the average German. Banks are very stringent on lending in Germany –you have to have a deposit of 3 months’ salary and shown you’ve been working steadily for 7 years – particularly difficult for young people. 

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France

Home ownership in France is increasing and now sits slightly ahead of the UK. Sarkozy stated back in 2007 that he wanted a nation of “homeowners”, but this has not yet occurred at 64.1%, and renting is still very much normalised. But unlike the UK and Germany, home ownership is on the up.

The attitude in France is different to that of the UK, again there isn’t such a huge rush to get onto the property ladder. The attitudes to debt and taking risks are remarkably different, the French are far more averse to making risks, like taking out huge mortgages. 

Paris contains strict affordability measures on newly built developments. They are required to have 50% of affordable houses. This is very high compared to the figures in the UK, which could point to why home ownership is increasing.  

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Spain

82.7% of the Spanish own their own home, with the culture of home ownership reining strong. Like much of Europe, the numbers of home ownership started to drop during the recession, and that fall has continued today, as young people were largely impacted by the financial crash. However, it is far more economical to buy a house in Spain than it is to rent – Spaniards who rent pay 23% more than those who have a mortgage.  

The unemployment rate in Spain is high at 9%, and this will have an impact on the future of home ownership in Spain.

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Below UK in home ownership

Germany – 52.5%
Switzerland – 44.5%
Austria – 55.7%
Denmark – 62.7% 

Above the UK in home ownership

The UK is actually low in terms of home ownership, compared to many countries in Europe:
France – 
Ireland – 68.6%
Italy – 72.9%
Greece – 74%
Spain – 78.2%
Norway – 82.8%
Hungary – 86.3% 
Russia – 84%
Croatia – 89.7%

With the housing market moving in the direction that it is currently, it is likely that in the next 15 years, we will witness the UK becoming a nation with more renters than homeowners. However, this is not necessarily a bad thing. Germany and Switzerland both have far lower home ownership rates, yet have strong and stable economies and high employment rates. Owning property means people are restricted with regards to labour mobility and a flexible workforce is a major positive for society, and can in turn, strengthen our economy. 

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