Home Ownership has been an emotive and important political issue in the UK. Not for nothing do we have the phrase ‘ An Englishman’s home is his castle’.
In the post war period, rising affluence, enabled a marked rise in homeownership as more families could now afford to buy outright rather than rent.
In the 1980s, the Conservative government aggressively promoted the idea of a ‘home owning democracy’ – leading to a further growth in home ownership, helped in particular, by the policy of selling council houses cheaply to tenants.
source: CML – pdf
Home Ownership rates in UK
In 1953, the proportion of owner-occupiers in England was 32 per cent. In 1961 this was 43%
Homeownership rates peaked at just over 70% in 2000. As mentioned in post – ‘first time deposits’, they have now fallen to 68%.
Reasons for Home Ownership
Homeownership is the most popular form of living. The majority of people aspire to be a homeowner, even if they may not be able to afford one. The traditional benefits of homeownership include:
- Benefit from rising Prices and hence rising wealth – historically, house prices have exceeded inflation in UK.
- Potential of Living rent free during retirement years.
- Provides Greater Security, can’t be asked to move.
More: Benefits of buying own house.
However, there are also potential problems of this desire for home ownership.
- The 1980s, which saw a rapid rise in home ownership, also saw a boom and bust in house prices.
- In a bid to get ‘on the property ladder’ many people overstretched themselves getting mortgages several times income.
- Homes can be difficult to sell reducing labour market flexibility.
- Volatility in house prices can leave new buyers with negative equity
- Volatility in interest rates can make mortgage payments unaffordable – e.g. 1991, 1992 period.
- Increased wealth inequality between those who own property and those who don’t
More: Disadvantages of buying house
Homeownership per se is not a bad thing. But, the pursuit of ever increasing homeownership can be a problem when there is a shortage of housing and a volatile housing market. The UK, may well need to learn to lessen its obsession with home ownership.
3 comments ↓
Another potential problem of home ownership is negative equity, when you own more on your mortgage than your house it worth. In this economy, this problem is even more common. But I think with home values marginally rising, it’s important for home owners to ride it out and stay in their homes.
It seems in the future if affordability continues to be a serious issue we are potentially going to revert back to previous levels. Lots of people in their twenties especially in London have no hope of buying and need help from parents which obviously puts pressure on parents to help out. Something needs to be done to help first time buyers other than reducing stamp duty.
In many other EU nations home ownership is not such a high, or perhaps viable, notion with many happy to rent long term or even permanently, Spain in particular is rental orientated
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