Can young people afford to own a home in Bournemouth?

Home ownership amongst young people in Bournemouth has nearly halved in the last 20 years. Thanks to rising housing prices and a changing economy, starting salaries are now much lower in relation to house prices, and a growing number of would-be young buyers have opted to rent. But is the market changing, and is there more hope for those who do want to own their first home in our town? 

Owning a home in Bournemouth

The simple fact is that if you were born in the late 1980s or early 1990s, the dream of owning a home in Bournemouth has reduced dramatically over recent years. Bournemouth has seen a 41.7% proportional drop in the number of 25-34 year olds who own their own home between 1999 and 2019, and a corresponding yet smaller drop of 24.3% of 35-44 year olds owning their own home over the same time frame.

It’s easy to see why. Nationally, average property values have grown by 186.9%, whilst average incomes have only risen by 44.8%. That doesn’t allow for inflation, but the Institute of Fiscal Studies said recently that the average British home was just over 2.5 times higher in 2015/6 than in 1995/6 after allowing for inflation; yet the average household income (after tax) of 25-34 year olds grew by only 22% in ‘real-terms’ over those 20 years.

Yet, even though property prices are at record highs, on the other side of the coin, the monthly cost of mortgage payments has actually fallen because interest rates have remained low. In 1999, the average mortgage rate paid by UK homeowners was 6.54%. Today it has more than halved to 2.64%. Many of you reading this will remember the 15% mortgage rates of 1992!

Mortgages for young people

The fact is, mortgage repayments currently take up a considerably smaller proportion of take home pay, on average, than they did before the Credit Crunch or in the late 1980s. But of course, the risk that mortgage rates will increase if the Bank of England puts up interest rates might leave some homeowners in a difficult position – hence I might suggest (if you haven’t already) you seriously consider fixing your mortgage rate (remember to take advice from a professional before you do). 

If we take a look at the data in even greater detail we can see that, going back to the 1960s, we weren’t always a huge homeowning nation. Today, 19.9% more 35-44 year olds and 35% more 45-54 year olds own their own home compared to 1969. Move the clock back to the early 1960s and you will see the numbers are even starker.

Home ownership by age – 1960s to today

Although the younger generation in Bournemouth has seen homeownership drop in the medium term, many will in fact end up inheriting the homes of their parents. We are turning into a more European (especially German) model of homeownership, where people buy their first home in their 50s instead of their 20s.

My message to the first-time buyers of Bournemouth is go and get some mortgage advice! The cost of renting smaller starter homes is between 20% and 25% more than the mortgage payments would be. 95% mortgages (meaning a 5% deposit is required) have been available since late 2009 and some banks even do 100% mortgages. Don’t assume you can’t get a mortgage – for the sake of a 45-minute chat with a reputable independent mortgage adviser, you will get a straight answer and all the information you need.

The bigger picture for Bournemouth homeowners

So what does this mean for homeowners and landlords in Bournemouth? Well, for many tenants, renting is a positive choice. We aren’t building enough homes to meet current demand, let alone eating into the lack of building over the last 35 years, so demand will outstrip supply, home values will, over the medium to long term, rise above inflation – meaning it will be a good overall investment as demand for rental properties increases.

Good news for Bournemouth landlords and Bournemouth homeowners alike.

The single biggest issue in the country (and Bournemouth) today is that we aren’t building enough homes. It may seem that the local area is covered with building sites but looking at the actual numbers, we still aren’t building enough homes to live in. Residential property only takes up 1.2% of all the land in the country – and whilst I’m not suggesting we build housing estates on National Trust land or cut down forests, until we realise that we aren’t building enough, this issue will only continue to get worse.

If you’re a young person thinking of buying your first home, or a landlord keen to understand more about the local market, talk to the experts at Foxes. We have over 20 years’ experience in the Bournemouth property market, and can help with every aspect of buying, as well as managing property and tenancies.

Simply call the Foxes Sales & Lettings team on 01202 299600 or email hello@foxes.co.uk for expert advice which is honest, accurate and informative.

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