Homes, Housing and Property - UK - August 2004

Contents

Introduction and Abbreviations

Aims of the report

• Consumer research
• ACORN

Abbreviations

Executive Summary

• Population growth and household trends will boost housing demand
• Seven in ten properties are owner-occupied dwellings
• There is a strong need to increase the size of the housing stock
• Real house prices have considerably overshot their trend level
• But house prices are more likely to ease gradually than crash
• A fifth of consumers intend to buy a property in the next two years
• A quarter of borrowers would struggle with a 2% interest rate rise
• More than a quarter of homeowners plan to use their home as a pension
• The local neighbourhood is a key priority when deciding where to live
• Just over 1 million households currently own a second home

Market Factors

• Population growth will increase the overall demand for housing
• Figure 1: UK population, by age group, 1994-2009
• Future population growth will largely stem from the over-45s
• The prime first-time buyer age bracket reaches a trough in 2004
• Figure 2: Number of people aged 25-29, 1992-2012
• Women account for a larger proportion of the older age group
• Figure 3: UK population, by gender and age group, 2004 and 2009
• Over a quarter of the population live in London and the South East
• Figure 4: UK population, by region, 1996 and 2002
• South West has seen the largest internal net migration levels
• Figure 5: Internal migration, by region, 1996-2002
• Southern England and the East set for strongest growth
• Figure 6: UK population projections, by region, 2000-11
• Changes in household composition will affect housing demand
• Figure 7: Household composition, 1979-2002
• Properties people live in tend to reflect household composition
• Figure 8: Housing profile, by family type, 2001-02
• A rise in the number of households will boost housing demand
• Figure 9: Number and size of households in Great Britain, 1991-2009
• The South East will see the largest growth in household numbers
• Figure 10: Number of households in Great Britain, by region, 1991-2011
• Rate of owner-occupation has risen sharply in the last 30 years
• Figure 11: Proportion of households in Great Britain, by tenure, 1971-2002
• Strong desire to own a home will underpin owner-occupied sector
• Favourable economic conditions have boosted the housing market
• Strong government support for homeowners has been withdrawn
• Figure 12: Changes in provision of MITR, 1975-2000
• Changing lifestyles are also influencing housing demand

The Housing Stock

• Total stock of dwellings has more than trebled in last 100 years
• Figure 13: Stock of dwellings in Great Britain, 1801-2001
• Seven in ten properties are owner-occupied dwellings
• Figure 14: Stock of dwellings in Great Britain, by tenure, 1951-2002
• The private rented sector has grown in the last ten years
• Tenure of the housing stock varies considerably across the regions
• Figure 15: Stock of dwellings, by tenure and region, 2003
• The average age of a dwelling also varies on a regional basis
• Figure 16: Stock of dwellings in England, by year built and region, 2002
• Around one in 1,000 dwellings are demolished each year
• Figure 17: Annual gains and losses from the stock of dwellings, England, 1997/98-2002/03
• The number of housing starts has risen in the last few years
• Figure 18: Housebuilding: permanent dwellings started in the UK, by region, 2000/01-2003/04
• The need to increase the housing stock is recognised by government

House Prices

• The housing market has enjoyed a sustained period of growth
• Figure 19: Property transactions in England and Wales, 1982-2003
• House prices have more than doubled in the last six years
• Northern Britain has fuelled the growth in the last 12 months
• Figure 20: Average house prices, by region, first quarter 2004
• Real house prices have considerably overshot their trend level
• Figure 21: Real house prices in the UK, 1970-2003
• Traditional affordability indicators also point to a slowdown
• Figure 22: House price to earnings ratio, 1970-2003
• But low rates have meant borrowers could service higher debt levels
• Figure 23: Total mortgage payments relative to income, first-time buyers, 1988-2003
• Recent rate rises are starting to push affordability levels up
• High personal sector indebtedness exacerbates the potential problem
• Figure 24: Mortgage debt to households' disposable income, 1976-2003
• The future level of interest rates will therefore be critical
• There are signs that the housing market is cooling
• But house prices are more likely to ease gradually than crash

The Mortgage Market

• There are now more than 11 million mortgage accounts in the UK
• Total mortgage debt has risen to over �’800 billion
• Figure 25: Total mortgage debt and annual growth rates, 1985-2003
• Mortgage lending rose to fresh highs during 2003
• Figure 26: Net and gross lending secured on dwellings, 1995-2003
• The growth in remortgage activity has been the key driver
• Figure 27: Gross advances, by type of loan, 1997-2003
• Mortgage equity withdrawal amounted to �’57 billion in 2003
• First-time buyers account for just 30% of loans for house purchase
• Figure 28: Loans for house purchase, by type of borrower, 1997-2003
• Fixed-rate loans accounted for more than a third of lending in 2003
• Figure 29: Loans for house purchase and remortgages, by type of product, 1997-2003
• The equity release market is now worth more than �’3 billion
• Figure 30: Equity release products, new advances and balances outstanding, 2002 and 2003
• The buy-to-let market has grown significantly in the last few years
• Figure 31: Buy-to-let market, new advances and balances outstanding, 1999-2003

The House Buying Process

• The home buying process is deemed to be too slow
• Figure 32: Average time between offer and moving into a property, England, by region, 2001/02
• Statutory Home Information Packs are seen as a solution
• HIPs form the centrepiece of the current Housing Bill
• The proposed introduction of HIPs has caused some controversy
• The Scottish Executive is proposing a different initiative

The Consumer - Moving Ahead

• Owner-occupation is the main form of housing tenure in the UK
• Figure 33: Housing tenure, June 2004
• More than a third of the population have an outstanding mortgage
• Just over a third of people live in rented accommodation
• More than half of all 35-54-year-olds are mortgage holders
• Figure 34: Housing tenure, by gender, age and socio-economic group, June 2004
• Four in ten pre-/no family consumers rent privately or from the council
• Figure 35: Housing tenure, by lifestage, working status and marital status, June 2004
• Londoners are the least likely to own their properties
• Figure 36: Housing tenure, by TV region and ACORN category, June 2004
• Four in ten mid-market tabloid readers own their homes outright
• Figure 37: Housing tenure, by newspaper readership, commercial TV viewing and supermarket usage, June 2004
• Six in ten people plan to stay in their current accommodation
• Figure 38: Housing intentions, June 2004
• A fifth of consumers intend to buy a property in the next two years
• One in 15 people plan to move to new rented accommodation
• Over a third of 25-34-year-olds plan to buy a property in next two years
• Figure 39: Housing intentions, by gender, age and socio-economic group, June 2004
• Almost a third of full-time workers intend to buy a property
• Figure 40: Housing intentions, by lifestage, working status and marital status, June 2004
• Only half of Londoners intend to stay in their current accommodation
• Figure 41: Housing intentions, by TV region and ACORN category, June 2004
• Three in ten broadsheet readers intend to buy a property
• Figure 42: Housing intentions, by newspaper readership, commercial TV viewing and supermarket usage, June 2004
• Almost four in ten private renters want to buy a property
• Figure 43: Housing intentions, by current tenure, June 2004

The Consumer - Rate Rises and Retirement Income

• Low interest rates have encouraged people to stretch their borrowing
• Further interest rate rises would impact on borrowers' ability to pay
• Over half of all borrowers feel they would pay less than �’100 extra
• Figure 44: Extra amount payable if rates rise by 2%, June 2004
• Three in ten mortgage holders feel the increase would be over �’100
• One in eight borrowers are oblivious to the impact of a rate rise
• The extra amount needed varies by length of mortgage term
• Figure 45: Extra amount payable if rates rise by 2%, by length of mortgage term, June 2004
• A quarter of 25-34-year-olds feel the impact would be over �’150
• Figure 46: Extra amount payable if rates rise by 2%, by gender, age and socio-economic group,June 2004
• Almost six in ten third age borrowers would pay less than �’100
• Figure 47: Extra amount payable if rates rise by 2%, by lifestage, working status and newspaper readership, June 2004
• Londoners feel that they would have to pay comparatively more
• Figure 48: Extra amount payable if rates rise by 2%, by TV region and ACORN category, June 2004
• A quarter of borrowers would find it very or fairly difficult to cope
• Figure 49: Coping with a 2% rate rise, by length of mortgage term, June 2004
• Borrowers with longer mortgage terms would face greater difficulty
• Ability to cope also varies by the potential increase in repayments
• Figure 50: Coping with a 2% rate rise, by extra amount payable, June 2004
• Younger borrowers are more vulnerable to rate rises
• Figure 51: Coping with a 2% rate rise, by gender, age and socio-economic group, June 2004
• Borrowers at the third age lifestage would find it easier to cope
• Figure 52: Coping with a 2% rate rise, by lifestage, working status and newspaper readership,June 2004
• Borrowers in the North West tend to feel that they would struggle
• Figure 53: Coping with a 2% rate rise, by TV region and ACORN category, June 2004
• Property is often viewed as a key means of funding retirement
• Figure 54: View home as my retirement savings, June 2004
• Over a quarter of homeowners do plan to use their home as a pension
• Growth in equity release would boost the housing market
• Over a third of 45-54-year-olds view their home as a pension nest egg
• Figure 55: View home as my retirement savings, by gender, age and socio-economic group, June 2004
• Londoners are more likely to see their home as a retirement fund
• Figure 56: View home as my retirement savings, by lifestage, TV region and technology usage,June 2004

The Consumer - Location, Location and Second Homes

• The local neighbourhood is a key priority when deciding where to live
• Figure 57: Reasons for choosing home location, 1996 and 2004
• Family, friends and schools can also prove to be influential
• Work often acts as a constraint on where people can live
• A fifth of consumers want a property that is suited to their lifestyle
• Affordability issues are inevitably a consideration for some people
• Around one in six consumers have a rural yearning
• Good schools are more important to first-time buyers
• Figure 58: Reasons for choosing home location, by housing intentions, June 2004
• Women are more likely to want to live close to family and friends
• Figure 59: Reasons for choosing home location, by gender and lifestage, June 2004
• Respondents in the family group are most concerned about schools
• Housing affordability issues are a concern to ABC1 18-34s
• Figure 60: Reasons for choosing home location, by age and socio-economic group, June 2004
• People in the North have a strong attachment to their areas
• Figure 61: Reasons for choosing home location, by TV region, June 2004
• The trend to flexible working will also affect property selection
• Over a third of consumers now need a place to work at home
• Figure 62: Important to have a place to work at home, June 2004
• Work/life balance initiatives are promoting home-based working
• ABs and 18-24-year-olds particularly value the ability to work at home
• Figure 63: Important to have a place to work at home, by gender, age and socio-economic group,June 2004
• Less than half of full-time workers need a place to work at home
• Figure 64: Important to have a place to work at home, by lifestage, working status and Mintel's Special Groups, June 2004
• Londoners are more likely to value somewhere to work at home
• Figure 65: Important to have a place to work at home, by TV region, technology usage and newspaper readership, June 2004
• Just over 1 million households currently own a second home
• Figure 66: Statements about second homes, June 2004
• Almost one in ten people hope to buy a second home in the UK
• One in six respondents intend or want to buy a home abroad
• Almost one in ten AB respondents own a second home
• Figure 67: Statements about second homes, by gender, age and socio-economic group, June 2004
• Almost a quarter of ABC1 families want to buy a home abroad
• Figure 68: Statements about second homes, by lifestage, newspaper readership and Mintel's Special Groups, June 2004
• One in seven people in the Rising ACORN group own a second home
• Figure 69: Statements about second homes, by TV region and ACORN category, June 2004
• Nearly half of all consumers want to enter the buy-to-let market
• Figure 70: Statements about owning properties to rent out, by gender, age and socio-economic group, June 2004
• 18-34-year-olds are keen to become private landlords
• Consumers in London and the South are also keen to buy-to-let
• Figure 71: Statements about owning properties to rent out, by lifestage, TV region and newspaper readership, June 2004
• People can now enjoy housing gains without buying property

The Future

• Demand for housing is set to increase across the next few decades
• The rate of house building in the UK needs to increase
• A 'soft landing' is the most likely scenario for the housing market...
• ...but a more substantial slowdown is a possibility
• The research suggests a strong latent demand for buy-to-let properties
• The equity release market offers distinct potential for future growth

Forecast

• Figure 72: Forecast of gross advances, by type of lending, 2003-09
• Factors used in the forecast