Thatcher’s Dream Alive as Homeownership in Royal Tunbridge Wells Increases

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In her first conference speech as the Tory's new leader in 1975, the grocer’s daughter from Grantham, Margaret Thatcher, asserted her conviction in a ‘property-owning democracy’. 

 

Although Thatcher didn't conceive the saying – (that credit belonged to Conservative MP Noel Skelton in 1923), it encapsulated what she thought Britain should be.

 

Through prudence, saving and hard work, she believed that everyday British families should be able to purchase their own homes. Thus, giving them security, self-esteem and independence and freeing them from the nanny state of local authority landlords.

 

Although that idea was a Labour idea initially in the mid-1970s, Margaret Thatcher introduced legislation (Right-To-Buy) in 1980 to allow local authority tenants to buy their own council homes at significant discounts. In the 1980s, homeownership boomed (although it had been on the increase for the previous two decades), and she led the country in an economy with which house buying became a national passion.

 

Between 1981 and 1990, home ownership went up from 11.88m to 15.47m.

 

The other lesser-known fact of the Right-to-Buy legislation in 1980 was it stopped local authorities from building new council houses. 

 

Fundamental to her idea was that government (central or local), which had built between 30% and 45% of all homes in the 1950s, 60s and 70s, should stop providing homes and let the market provide them.

 

The proportion of homes owned rose from 55.4% in 1980 to 65.7% during Thatcher's reign as PM.

 

A few days ago, the housing element of the 2021 Census was released, and it has shown the proportion of home ownership in Britain had fallen to its lowest level since 1985. 

 

The proportion of households owned in the country fell from 64.1% to 62.5% between 2011 and 2021, the lowest level forthe past 37 years, when the figure was 61.6%.

 

In the meantime, the proportion of privately rented households has surged to its highest since the late 1960s, with 20.4% of households renting from a private buy-to-let landlord. 

 

This means the proportion of British households in private rented accommodation has more than doubled in the past two decades, from the 9.5% recorded in the 2001 census.

 

So, let’s look at the local stats for the Tunbridge Wells councilarea.

 

The percentage of households owned in Tunbridge Wells has increased from 65.7%in 2011 to 66.2% in 2021

(bucking the national trend).

 

Let’s look at the actual number of households.

 

The number of owned households in Tunbridge Wells has grown from 30,999 in 2011 to 31,914 in 2021, a rise of 3.0%.

 

Next, looking at the private rental sector, the number of privately rented accommodation has grown as well!

 

The number of privately rented households in Tunbridge Wells has grown from 8,651 in 2011 to 9,281 in 2021, a rise of 7.3%.

 

 

 

Over the coming weeks and months, I intend to drill down further into these stats nationally and locally.

 

Even though homeownership nationally has increased in terms of pure numbers, the proportion of homeowners with a mortgage has dropped.

 

Just some headlines to whet your appetite.

 

As I said above, 64.1% of householders in Britain owned their own home in 2021 (of which 30.8% owned their home outright and 33.3% with a mortgage).

 

In 2021, of the 62.5% of homeowner households, those without a mortgage has increased to 32.8%, and those with a mortgage has dropped to 29.7%.

 

So, has Thatcher's dream been smashed?

 

Of course, nationally, home ownership is at the lowest level in many decades due to several factors, including the late 1980s and 2008 housing crash, negative equity, the credit crunch and increased mortgage regulation. 

 

Yet, at the same time, as every single local authority in Britainhas seen an increase in the number and proportion of private renters over the past 20 years, the entrepreneurial property-owning spirit has moved into the ownership of private buy-to-let property. The market has undoubtedly filled the housing gap that the councils and local authorities left in the 1980s.

 

These are interesting times, and I shall share more insights in the coming weeks and months. 

 

Let me know your thoughts on the information above.

What Will Happen to the Royal Tunbridge Wells Property Market in 2023?

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The autumn of 2022 saw economic and political instability with the resignation of Boris Johnson as Prime Minister and the ill-fated Liz Truss 44-day premiership. Now as we go into 2023, the economic and political turmoil has subdued, offering a greater feeling of stability in money markets. 

 So, on the back of that, what is the expectation for the British (and Tunbridge Wells) housing market as we go into the new year?

The biggest issue is inflation. Low steady inflation of around 2% a year is good for the economy, yet the high levels we are experiencing now isn’t. It affects the spending power of the pound in your pocket, and it alters the way people spend their money (including buying and selling property).

So where has this inflation come from?

Many blame it on inflated gas prices because of the Ukraine issue(however, it is believed by most economists only around 4% of the current 10.7% inflation figure is because of the fuel crisis). 

UK inflation was already running at 6.2% when the Russian tanks rolled into Ukraine in February 2022 which created that energy price shock. Therefore, where has the rest of the inflation come from?

The catalyst of inflation started in 2020 with the Bank of England’s Quantitative Easing (QE). This pumped £450m new money into the economy at a time when the future looked bleak. The problem was, people had nothing to spend that money on, so when things started to get going after the lockdowns, there was a mis-match of too much demand for goods (as people had that money) and a lack of goods and services (because there wasn’t enough supply of those goods and services with the supply chain issues).

This all meant prices went up (i.e., inflation). The catalyst of this inflation was the Bank of England printed too much money in 2020 with QE and the supply chain issues (all easy to say with hindsight!).

Too much inflation is bad for the economy and therefore, ultimately the property market.

Two things will reduce inflation. 

One is a recession and the other is increased interest rates.

Many find it fascinating that the Bank of England were talking the UK economy into a shallow recession in the autumn. Yet there was method in their madness. It was because they didn’t want to rely solely on the second method of increasing interest rates.

Better for the economy to have a shallow mild recession and interest rates rising to say 4.5% by the middle of 2023 to reduce inflation, than placing the whole job of reducing inflation on interest rates.

If that had been the case, interest rates would need to rise to say 7% (or more), causing the economy (and property market) to stall ... and thus create a subsequent deep and long recession.

Therefore, with the Bank of England having recently increased itsbase rate to 3.5%, with more interest rate rises to come in 2023, what does this and the mild recession mean for the Tunbridge Wells property market?

A recession will increase unemployment levels, which have been comparatively low in the last few years. Depending on the type of roles/jobs that are made redundant, will determine the effect on the property market. Until that happens, we won’t know.

Everyone is suffering from higher gas, electric and shopping bills, yet with interest rates rising, this will increase the pressure on household budgets. Higher interest rates mean higher mortgage payments if the homeowner/landlord is on a variable rate mortgage(17 out of 20 homeowners with a mortgage are on a fixed rate).

It’s these two factors of recession and interest rates that will place negative pressure on Tunbridge Wells house prices. 

Yet let us not forget this pressure is coming off the back of two of the strongest years on record in terms of house prices and transaction levels. 

 Tunbridge Wells house prices have experienced 29.4% price growth since the pandemic started in March 2020.

 This is interesting when compared to the UK average, where average house prices have risen by 27.4% or £44,700 since March 2020.

Before I tackle the issue of house prices in 2023, I would like to look at the number of transactions. 

To many the number of properties selling is irrelevant, yet I believe it is as important, if not more important, than house prices. I believe the best way to judge the health of the local property market is the number of people moving home (i.e.housing transactions).

You could ask yourself why Tunbridge Wells people should be more concerned about the number of property transactions and not the change in Tunbridge Wells property values.

Many economists believe the number of property transactions is a better judge of the health and vitality of a housing market. The higher the number of people moving home is better for the whole economy than a smaller number of property transactions, whilst the same can’t be said for higher house prices.

Transactions levels have been quite high in the last couple of years.

1,191 households per year have moved home in Tunbridge Wells since lockdown, compared to the long-term 27-year average of 811 per year.

Looking at the stats coming through in the last couple of months, maybe we will settle for a figure somewhere between the two figures above, yet nowhere near the sub-650 annual figure of homeowners moving in the Credit Crunch years in the 2008/9/10 time frame.

Finally, let’s look at Tunbridge Wells house prices in 2023.

A good place to start to judge house prices is how many reductions are taking place on the properties that are already on the market.

In the last 3 years, the average number of price reductions for the properties for sale in the Tunbridge Wells area (TN1/2/3/4) has been 73reductions per month.  

In October there were 109 price reductions and in November 113 reductions.

Homeowners are being more realistic with their pricing and the price that one will achieve for their Tunbridge Wells home today and the rest of 2023 will be lower than one would have achieved in the spring of 2022.

Yet, as most Tunbridge Wells people buy another property when they sell (and most of the time move up market) the price you would have had to pay on the next purchase would have been even more.

Yes, the price of Tunbridge Wells property will be lower in 2023 by between 5% to 10%, yet these are only levels that were being achieved in the spring of 2022 – and nobody was complaining about those!

Final thoughts. 

Several economic commentators are preaching doom and gloom for the property market in 2023, yet things are very different than the Credit Crunch years of 2008/9.

The property market crashed in 2008/9 mainly because the banks and building societies stopped lending money i.e., credit (that is why it was called the Credit Crunch). 

There are two large differences this time round.

The first is the introduction of Mortgage Market Review mortgage stress testing instigated in 2014.

Homebuyers taking out a mortgage must have undergone a stress test on interest rates to obtain a mortgage since 2014. These stress tests are a safeguard to ensure that if their household income continued to be the same, the homeowner could afford higher mortgage rates. 

The second is the banks and building societies have much higher cash reserves. Higher reserves will ensure they can continue to lend money and so more mortgages are available, although at a slightly higher interest rate than a year ago. 

With mortgage rates falling back, with some very attractive fixed-rate deals knocking on the door of 5%, this is a development that may continue into 2023 as banks and building societies obtain cheaper funding sources and then compete for business by driving down the price of mortgages - which would only be good news for the Tunbridge Wells property market. 

These are my thoughts - what are yours?