It will come as no great surprise that of all the available ladders, the housing ladder is the hardest to climb.
Taking in both full and part-time work for men and women combined, the average UK salary is a few quid over £29,000 and for full-time employees only, that figure rises to about £35,500.
Now, if we take the average UK house price which currently stands at as near as makes no difference £231,000, the figures already don’t add up.
Go to the bank with a four-times salary multiple and they will lend you £140,000. This means you’ll have to find the business end of £100,000 as a deposit and for solicitors’ fees, surveys and a massive telly.
The Resi Property Market
If you want to live in London, the average home price is an eye-watering £457,000 and even if you’re earning £50,000 you’ll have to look behind the sofa for a quarter of a million pounds to put down as a deposit.
Despite this horror, house prices across the UK fell by 1.5% in May (in London that figure is as high as 4%) and, in a fact that’s also unlikely to surprise you, it’s due in part to a change in sentiment from both buyers and sellers due to Brexit as well as a diminishing number of properties being listed for sale, the looming threat of interest rate rises and the simple fact we touched on earlier – houses and flats are bloody expensive.
According to the Royal Institute of Chartered Surveyors, property prices aren’t going up, but that doesn’t yield much positivity. There are fewer new-build developments being listed for sale and because people can’t afford to move up the housing ladder, they’re simply staying put, so the market stagnates.
Do We Have A ‘Broken’ Housing System?
Joe Beswick writing in The Guardian seems to think so. In part three of our ‘not a massive surprise’ series, he says that; ‘Our housing system has been allowed to degenerate to such an extent that secure and affordable housing is increasingly unavailable to working-class people, and in many places middle-class people too. But it’s not for a lack of ideas that this has happened. What we are lacking is the political will.’
In the 60s, the middles classes were for the most part homeowners and the working classes were housed via social housing which was widely available. Fast-forward two decades to the 80s, there was an over-reliance on the private market to deliver housing and a massive decline – to the tune of many millions of homes – in the social housing sector. It’s the inflated prices and lack of availability that has destroyed the housing system.
The sad reality is that for many, being a homeowner is nothing more than a pipe dream. In fact a survey by Santander found that 70% of 18-34 year-olds believe that home ownership is ‘over for their generation.’
We spoke to a graphic designer recently who started work in the early 80s and was living in Shoreditch. Back then it was a junkie-filled dump but now it’s a hipster paradise. His salary in 1983 was £5,000 and the flat he lived in cost £30,000 (a 6x multiple). Now, he earns £55,000 and that same flat should it come on the market tomorrow would be priced somewhere around £950,000 (a 17x multiple). Today, house prices in London are around 14.5 times the average London income.
Joe Beswick has a plan. ‘The housing crisis is the result of policy choices that could be undone in less than a generation. If the government implemented policies that prioritised the provision of secure, affordable housing for everyone – regardless of age, class, race or gender – in just 10 years’ time young people’s housing options could look radically different, and a lot more hopeful.’
It’s the hope that kills you…
The Commercial Property Market
Where commercial property is concerned, the news is mixed, depending on who you’re listening to.
According to research by West End office agents BDG Sparkes Porter, the first two quarters of 2019 showed a take up 22% down year-on-year. Completed transactions were down from 398 to 303 with ‘only’ 1.1m square feet recorded.
Supply is also down in the core West End markets (pushing rents upwards) to 2.3m square feet from 3.4m square feet and Grade A property is at its lowest supply levels for 13 years.
In an interview with CoStar, partners at private equity and asset management firm Maven Capital Partners Andrew Whiteley and Colin Anderson are a little more upbeat about the prospects for the commercial property market in the second half of 2019 and beyond.
The core focus for the market hasn’t changed for years. It’s about offering the right location and the right deal for tenants. But, say Whiteley and Anderson, ‘The office market has been transformed over the past 10-15 years. Large tenants – blue chip companies and public sector organisations have wound down their leases and many of the traditional office buildings of the 1970s and 1980s no longer match market demand.’
The traditional estate agencies are now looking at the WeWork model as a way to inject a much-needed lease of life into a tired industry. ‘The modern professional now favours access to amenities such as a lounge or gym and proximity to key infrastructure, while companies are seeking shorter leases to stay in line with the changing work environment and fast-moving economy. As such the size and shape of office space has seen big changes in the last few decades, in particular with the advent of flexible and co-working office space.’
Brexit will absolutely have an impact on the market but it remains buoyant. The effects are likely to be short-lived and the long-term outlook for the commercial property market, especially in London, remains strong.
The fact remains that whatever the eventual Brexit outcome is, London is one of the world’s most strategically-important financial and commercial centres due in part to its position between the time zones of the US and Asia and ‘foreign businesses are keen to invest in a market where the ownership of property is seen as probably the most secure in the world.’
Whatever happens to the residential and commercial markets, from a recruitment standpoint, it does seem like the businesses we recruit for across London and the Home Counties – estate agents, housing associations, property developers, construction companies, care home operators, shopping centre agencies and social housing providers – are showing an increase in advertised roles so someone, somewhere is doing something right.
Our guess is as good as yours as to who it is…
Catch you soon.
