As the song says: “Ain’t nothin’ goin’ on but the rent”, if only because tenants have so little left over once they have met their commitments to their landlord. The typical rental “spend” has risen to 38 per cent of take-home pay, according to new research from the Rightmove website. In London and the South East, the average has climbed to 40 per cent. Many members of Generation Rent in these and other locations would rather be forking out for a mortgage. But they will find it particularly difficult to change their fate, as, for the moment, house prices are stabilising, rather than slumping. Nationwide’s index indicates that prices crept up by 0.3 per cent in May. The Land Registry’s April numbers do show a decline, but of a mere 0.3 per cent.
These averages are flattered by the performance of London. But as Robert Gardner, Nationwide’s chief economist, notes, the construction slowdown continues to provide a measure of support to property values throughout the UK. Too few homes are being built partly as a result of the confusion caused by Government policies. A new initiative will put “the power to grant planning permission firmly in the hands of communities”. Yet, projects will need the backing of 50 per cent of voters in a local referendum, a process that may be properly democratic but will not necessarily speed up the delivery of dwellings.
For investors, the combination of escalating rents, historically low housing starts and the lack of a catastrophic price descent may seem to be a boon. This impression is correct, but anyone about to set up in the landlord business should be aware that Rightmove discerns some resistance to ever more expensive rents. Miles Shipside, Rightmove’s commercial director, advises that long-term players in the landlord game should provide “quality accommodation” at an “acceptable rent”, rather than maximising yields.
Anyone considering buy-to-let must also mind the narrowing of the generation gap. A growing flock of twentysomethings — and thirtysomethings too — are returning to live with their parents. Mum and Dad are cool and do not make excessive financial or other demands of their adult offspring, giving them considerable competitive advantage over any landlord.
Statistic of the week
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The £1 billion price tag put on Buckingham Palace was a strong competitor (being timely) for the Bricks & Mortar’s statistic of the week. But some estate agents thought this figure too low as it seemed not to take into account the development value of the 42-acres of grounds at Her Majesty’s London residence. These would be ideal for upscale apartments — were garden grabbing to be permitted. These sceptics pointed out that One Hyde Park, the Candy brothers’ deluxe sci-fi block — on a site of just 1.7 acres in Knightsbridge — is worth at least £1 billion.
As a result of the doubt cast on the Buck House figure, we opted instead for the Bank of England’s latest mortgage approvals data (no Jubilee link, sadly). In April 51,823 home loans were granted, against 51,067 in March. This small increase shows that persons with cash and equity retain their enthusiasm for real estate. But the mood of the market remains sluggish. Howard Archer of IHS Global Insight notes that the April number “is only 59.6 per cent of the average monthly level of 86,888 of mortgage approvals seen since 1993”.
Until this week it was thought that finance would flow again when economic recovery arrived. But this assumption could be wrong if the Commons Treasury Select Committee rules that the Bank of England must restrict lending during periods of property price exuberance. Such curbs might lessen boom and bust. But they might also be an unacceptable permanent barrier to homeownership put up by the Bank of England (which has its own grand home, but one that would sell for less than the £4,500 or so per square foot that can be fetched by some pads in our monarch’s neighbourhood).
Guilt-free shopping
It’s a Bank Holiday weekend, so readers who like to refurbish on such occasions have asked for a suitable volume. We propose Flea Market Chic by Liz Bauwens and Alexandra Campbell (published by Cico Books; price £19.99) which illustrates how to turn junk into stylish decor via “recycling, upcycling and repurposing”. Seldom will perusing an interiors book make you feel quite so virtuous and thrifty — in a suitably 1950s fashion.