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The UK population has increased significantly over the last few decades; from 51.4 million in 1961 to 60.6 million in 2006. This is forecast to further increase over the next twenty-three years to 71.1 million in 2031, with real ramifications for the investment property UK market. On the other hand household sizes are declining with over 30% of the population living alone and this downward trend is continuing – the forecast for 2031 is an average household size of just 1.91 down from over 3 in 1961. Alliance and Leicester Mortgages research predicts a 53% increase in the numbers of ‘living loners’ by 2026. The government forecasts that in 2031 the demand for housing will be for 37.2 million households. The current supply is 25 million, thus the shortfall is 12.2 million. This equates to 488,000 new houses/dwellings required every year for the next twenty five years. Current house building rates are under 200,000 per year, down from 400,000 in the 1960’s. Supply in the UK housing market is significantly lower than demand, so a crash in the property market appears unlikely, especially over the long term. This has been recognised by the government – Yvette Cooper (Housing Minister at the time) said in October 2007; “Britain was simply not building enough homes and hadn’t been for a generation”. Plus Shadow Housing Minister Grant Shapps told the Daily Telegraph; “It is becoming quite clear that the government doesn’t have a cat in hell’s chance of meeting its targets, either in the long or short term.” The other dynamic from European statistics shows the move from owning to renting. The UK has a higher level of owner occupied dwellings vs rented than most of the other countries in Northern Europe with Germany having only 43% of dwellings owner occupied. The privately rented sector accounts for just 12% of the investment property UK market. This has increased from 9.5% in 1991. Owner occupiers take up 70% and the socially rented sector is 18%. However with the increase in student numbers – where people traditionally learn the renting culture – and the high entry level cost of the housing market, the privately rented sector is set to grow over the next few years – all good news for the property investor. The average house price for a first time buyer is now £160,000, however the average salary in the UK is £23,000 – thus the percentage of first time buyers in the market has gone from 55% in 1997 to just 29% in 2007. This is reflected in the number of people renting which has increased from 2.1 million in 1997 to 2.5 million in 2006 and this growth is accelerating fuelled by immigration and the driving forces of lifestyle and flexibility behind today’s youth culture. All this is positive news for the property investor as demand will remain high for rental accommodation thus ensuring a return on your investment before capital appreciation is taken into account.
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