Last edited 28 Mar 2019

Home ownership


[edit] Background

A house is most people’s biggest asset. It is a symbol of security and it is a stake in the future.

In her 1984 address to the National House Building Council, Margaret Thatcher said:

"The spreading of home ownership is a worthy philosophy. Why should not everyone in the UK be a man or a woman of property? It should be as common to own a house as it is to own a car because the UK is a nation of people whose history and character is one of independence. Where property is widely owned, responsibility and freedom flourishes. Frustration and anger is nurtured by those who are dispossessed with nothing to lose. Political freedom is supported by economic freedom. In Wilfred Blount’s words:

'Nor has the world a finer thing

Though one should search it round

Than thus to live one’s sole king

Upon one’s own sole ground'".

In five years of her government 1.7 million additional people acquired their own homes averaging 340,000 first-time buyers per annum. Home ownership reached 63% in England but research by the Housing Research Foundation suggested a goal of 80% was achievable.

[edit] Current situation

The Halifax First-Time Buyer Review published on 29 December 2012 reveals how little subsequent progress there has been. Halifax report that in 2011 there were just 193,000 first-time buyers and in 2012 there were 216,000. According to the English Housing Survey (ref. bulletin 7 July 2012), home ownership is now 66% and in London is less than 50%.

To better understand the reasons for the lack of progress, the period before the 2007 banking crisis is worth studying. 2006 produced 402,800 first-time buyers. This was at a time when mortgage payments consumed 50% of disposable income and required a deposit of 10%. In 2012, deposits were substantially higher, with many funding agencies looking for a minimum 20%. However, mortgage repayments were on average just 27% of disposable income due to historically low base rates.

This suggests that progress is hindered by the inability of first-time buyers to fund deposits.

The Halifax report suggests that parents prepared to help finance their children’s down payments has doubled since 2005. In 2012, 65% of first-time buyers had parental assistance.

[edit] Current strategy

[edit] Other possibilities

  • It might benefit parents if residential property could be put into a self-administered pension scheme. Currently this is not allowed, even though a car, business premises or a factory can be in a pension scheme.
  • Mortgage tax relief could be re-introduced for mortgages up to the average price paid by a first-time buyer in Greater London. The tax relief mechanism could include legally drawn up mortgages arranged with self-administered pension funds.
  • Apart from providing a tax incentive to buyers who switch from renting property to ownership, this two pronged proposal might encourage parents to use their pension as a provider of mortgages to their children (possibly at a better rate of return than the pension funding markets are providing).
  • The threshold attracting zero stamp duty could be raised to match the average price paid by a first-time buyer in the capital.

[edit] Related articles on Designing Buildings Wiki

[edit] External references