Just because a country is populated by households that dream of buying their own home does not mean that it contains a large proportion of homeowners. This can be seen in France where, if the desire to become a homeowner remains inalienable – even among young people – in the end “only” 57.7% of households have bought the housing they occupy, says Insee. This makes France one of the European countries with the lowest rate of home ownership.
This is also true for England, where a study by the Resolution Foundation think tank shows that the proportion of the English population owning their homes has fallen to 63.8%, the lowest since 1986, while the highest national level was reached in 2003 with 70.8% ownership. However, the English are very attached to real estate ownership. Only less than 10% of private sector tenants in the UK say they do not want to own a property. And more generally, two thirds of the English who have resigned themselves to the idea of buying their home are resigned because they feel they will never have the means to do so.
A question of purchasing power
The purchase of real estate is therefore above all a question of purchasing power. However, in England, as in France, property prices have risen sharply in relation to household incomes over the past thirty years. In the 1980s, the first real estate purchase was made at an average price for England of less than 30,000 pounds (35,400 euros), while in 2015, an average of 150,000 pounds was required in the country and 330,000 pounds in London, recalls the Resolution Foundation study. As a result, more and more English people have become tenants.
Not surprisingly, the most extreme case is the capital, London, where the percentage of owners is now only 40% of the population. It must be said that London is the most expensive city in Europe: a Deloitte study mapping the areas that can be acquired in 19 countries for 200,000 euros shows that the English capital is the most expensive city in the ranking with… 11 m² ! And the amplification of the real estate bubble in recent years in London has only reinforced the phenomenon of exclusion of an entire segment of the population from home ownership.
A similar phenomenon was observed in Paris. After a sharp and disconnected increase in incomes between 1998 and 2011, real estate prices have become at least twice as high as in other major French cities. Thus, only a third of Parisian households are now homeowners and the rental stock represents a little more than 60% of housing.
Renting does not mean paying less in the short term
Paradoxically, in the short term, renting is not financially more advantageous. In England, for example, private sector tenants spend on average 30% of their income on rent, while landlords’ loans represent only 23% of their income. Renting in the private sector is therefore less a financial choice than an inability of households to buy because of high prices. Deloitte’s study shows that the United Kingdom is the least affordable country because its inhabitants have to save for nearly 11 years to buy a 70 square metre apartment.
Moreover, the drop in the share of homeowners in England is not only true in London: cities like Manchester (-14 percentage points compared to 2003 to 58%) or counties like South Yorkshire or the West Midlands (respectively -10 points to 58.5% and -11 points to 59% compared to 2005) have also lost owners in recent years. “With prices and contributions constantly rising while incomes have stagnated in recent years, it is not difficult to see why an increasing number of people can no longer access real estate ownership,” confirms the think tank study.
How effective are public policies?
The situation is all the more surprising given that the British real estate market benefits from historically low mortgage rates and that the government has set up a purchase assistance program that allows buyers to have only 5% of the purchase value of the property available for contribution. But apparently, such a public policy has not given a section of the population excluded from home ownership the opportunity to buy, quite the contrary, so this observation questions the effectiveness of public policies to stimulate real estate, sometimes inflationary.
They can even have perverse effects, not only because of “the frustration it causes for those who cannot buy, but because of the impact on their standard of living,” the think tank notes. And even in the long term, this is also a problem, because a low rate of home ownership also means that “the younger generations will have a more uncertain retirement”.