As we all still try and work out how much better off we will be from the recent budget we can be forgiven for thinking that the housing market has come off fairly well, but are first time buyers being pushed further and further away from the first rung of the property ladder. For most people, the only alternative to living with parents is to rent, and with the average age of a first time buyer now 42, an increase of 5 years from January 2011, living with mum & dad may have its drawbacks. With increased talk of a change to the eviciton process making it easier for landlords to evict is in contrast to the call for longer standard tenancies. Are we heading towards a generation that is destined to be renters and witnessing the end of a largely British culture of homeownership, the one main goal that our parents worked hard to achieve in their 20s and 30s. Reports show that homeownership is slumping towards its lowest levels since the mid-1980s, Team that with unaffordable house prices even with the Help to Buy scheme, a continuing shortage of housing stock is still the realisation for most, it seems we are set to see an entire generation unable to purchase their own home as their forefathers did. A rise in living standards since the end of the First World War, when only 23% of property was owner-occupied, saw the gradual upwards trend accelerates in the mid-1970′s. This, however is in stark contrast to the now Housing Minister pledged only that the new coalition Government would do everything it could to help would-be buyers. In 2011, Mr Shapps first speech as a minister was certainly rousing. “These people are not asking for a hand-out; they just want a chance”, he declared. ‘The age of aspiration is back!’ On the contrary, the age of aspiration never stopped. However, with an estimated 1.5 million families with children in rented accommodation, it is unlikely that would-be first time buyers will ever see their aspirations realised. Reports have shown that tenant demand reached new heights earlier this year, with over 81,000 new tenants registering with agents – a 67% increase since the start of the year. On average, properties are being rented out within 12.7 days of being placed on the market – seven days quicker than the start of the year. However, the reports also showed that available properties fell by as much as 6.9%, giving an average 5.8 tenant competing for each property. In spite of the “Englishmans home is his castle” attitude we are trying desperately to hold onto, our European cousins are not so concerned with the whole buying a property stigma that seems to be a driving force for many Britons. In contrast, renting in countries such as Germany is regarded as the norm with most people signing a 7 or 10 year tenancy agreement taking away the headache of unforeseen maintenance such as a new boiler or insurance claim following a flood with it. However, renting is not necessarily the cheapest option for many Germans, for instance in thriving cities like Hamburg, Cologne and Munich, tenants can typically see half their wages spent on rent alone. And the prospect of paying a landlord well into old age appeals to Germans no more than it does to the Brits. The attitude of young Germans is where the similarity towards renting ends. There is not the same sense of urgency and necessity to own their own home and this contrast in attitude reflects the dramatic difference in the housing markets. Over the past 10 years UK residential property prices have nearly doubled, while in Germany they have risen a mere 2%-3%. So what is Germany’s secret to keeping prices affordable, and why don’t more Germans aspire to be home owners? Primarily, the most prominent difference is an abundant supply of good quality rental accommodation. German housing associations and municipal authorities hold about 12% of stock, private housing companies 10%, and property funds about 1%; the rest is held by private investors. Secondly, the Germans watch their pennies. Rigorous lending requirements make sure there isn’t a surplus of housing finance readily available. Germany’s tax system does not exactly favour property owners either. The Property Transfer tax (Grunderwerbsteuer) is approx 5% in many states. There is no doubt that Germany offers its tenants a better deal than here in the UK; renting is much more transparent, with rental values rigorously policed to ensure no one pays over the odds, there is even a website where tenants can check their rent is fair using the rental index [Mietspiegel]. And if the tenant does find they are paying too much, the tenants’ association will step in and get the rent reduced to the ideal value. Rents are tightly controlled and cannot normally be increased by more than 20% nominally over three years. Unlimited contracts are standard and tenants, if given notice, can demand continuation. Property is normally freshly decorated in white before tenants move in, and must be repainted when they leave. Although it does appear that the grass is definitely a shade or two greener in Germany, it is not as fertile as you might have first thought, a deposit in Germany to rent a property is equal to 3 months’ rent. The fact is that wherever you are, you don’t want to be paying rent into your retirement. Although Germany is better value than the UK, buying property is still out of the reach of most. The grim reality of today’s property markets – whether it is Leipzig or London – is that most young people cannot get on the property ladder without parental help or inheriting.
