Inflation, as calculated by the Government's Consumer Prices Index, rose by 0.3% over the last 12 months. The question is: what does this mean for the South West property market, especially the tenants?
Back in November, the Office of National Statistics stated average wages only rose by 1.8% year on year, so when adjusted for inflation, South West people are 1.5% better off in 'real' terms. This is great news for homeowners, as their mortgage rates are at their lowest ever levels and their spending power is increasing. Unfortunately, the news is not so good for tenants.
The average rent that tenants have to pay for their Private Rental Properties in the South West (i.e. not housing association or council tenants) rose by 1.4% in 2015, eating into almost all of the growth. In 2014, rents rose by 1.7% and salaries by just 0.2%), a significant difference.
However, it's not all bad news for South West tenants; in 2013 rents rose by 1.3% in comparison with a much greater salary increase of 2.2%, so we at least have evidence of similar, sustainable growth. It must be noted that South West rents have risen 19.0% since 2005, not even keeping up with inflation which, over the same time frame, rose by 27.8% (although salaries were only 22.3% higher over the same time period).
Yet, given these figures and the financial knots so many people are in, I'm finding that renting is an option that more people want to take, especially for the average 20-and-30-something. Gone are the days when owning your own property was a guaranteed path to wealth, affluence and prosperity. We're in a different economic situation to generations of the past, and buying a property is no longer the norm for most.
The UK has 64.8% homeownership, and most of the homeowners are older. In perspective, that figure in 1918 was only 23%, leaving the remaining 77% as tenants (there was no council housing at the time). Today we are seeing a slow reversion back towards to a tenant majority. The question is, will the percentage of tenants in the South West go up in the coming years, or down? The figures suggest that rents are growing but, critically, not as much as incomes, leaving some degree of choice for prospective buyers.
For now, the sustainable option is to remain a tenant - you save yourself the stress of saving and buying, you get to keep that extra wage increase for yourself, and there are no guarantees that you will be better off in the long run if you do end up buying. My prediction is that renting in the South West is only going to go in one direction in the future - up.