I was having a lazy Sunday morning, reading through the newspapers at my favourite coffee shop in Walsall. I find the most interesting bits are their commentaries on the British Housing Market. Some talk about property prices, whilst others discuss the younger generation grappling to get a foot-hold on the property ladder with difficulties of saving up for the deposit.
Others feature articles about the severe lack of new homes being built (which is especially true in Walsall!). A group of people that don’t often get any column inches however are those existing Walsall homeowners who can’t move!
You would think that with ultra-low interest rates at 0.50% (albeit recently increased in the budget from 0.25%) the number of people moving would be booming – wouldn’t you? However, this has not been the case. Less people are moving because of the following reasons:
- low wage growth of 1.1% per annum
- the tougher mortgage rules since 2014
- sporadic property price growth in the last few years
- high property values comparative to salaries
So what does this translate to in pure numbers locally?
In 2007, 6,789 properties sold in the Walsall Metropolitan Borough Council area and last year, in 2016 only 3,270 properties sold – a drop of 51.83%.
Therefore, we have over 3,519 less households moving in the Walsall Council area each year. Now of that number, it is recognised throughout the property industry around fourth fifths of them are homeowners with a mortgage. That means there are around 2,815 mortgaged households a year (fourth fifths of the figure of 3,519) in the Walsall Council area that would have moved 10 years ago, but won’t this year.
The reason they can’t/won’t move can be split down into different categories, explained in a recent report by the Council of Mortgage Lenders (CML). So, of those estimated 2,815 annual Walsall non-movers, based on that CML report –
Demographics: There are around 1,019 households a year that aren’t moving due to a fall in the number of mortgaged owner occupiers.
Lifestyle: I then estimate another 394 households a year are of the older generation mortgaged owner occupiers. As they are increasingly getting older, older people don’t tend to move, regardless of what is happening to the property market.
House Price Growth: Then, I estimate 167 households of our Walsall annual non-movers will mirror the rising number of high equity owner occupiers, who previously would have moved with a mortgage but now move as cash buyers.
Mortgage: I believe there are 1,235 Walsall Council area mortgaged homeowners that are unable to move because of the financing of the new mortgage or keeping within the new rules of mortgage affordability that came into play in 2014.
The first three above are beyond the Government or Bank of England control. However could there be some influence exerted to help the non-movers because of financing the new mortgage and keeping within the new rules of mortgage affordability? If Walsall property values were lower, this would decrease the size of each step up the property ladder. This would mean the opportunity cost of increasing their mortgage would reduce (i.e. opportunity cost = the step up in their mortgage payments between their existing and future new mortgage) and they would be able to move to more upmarket properties.
Then there is the mortgage rules, but before we all start demanding a relaxation in lending criteria for the banks, do we want to return to free and easy mortgages 125% Northern Rock footloose and fancy-free mortgage lending that seemed to be available in the mid 2000’s … available at the drop of a hat and three tokens from a cereal packet?
We all know what happened with Northern Rock …. Your thoughts would be welcome on this topic.
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