Tamworth’s £72,380,160 “Rentirement” Property Market Time Bomb

Yes, I said ‘rentirement’, not retirement … rentirement and it relates to the 488 (and growing) Tamworth people, who don’t own their own Tamworth home but rent their home, privately from a buy to let landlord and who are currently in their 50’s and early to mid-60’s.

The truth is that these Tamworth people are prospectively soon to retire with little more than their state pension of £155.95 per week, probably with a small private pension of a couple of hundred pounds a month, meaning the average Tamworth retiree can expect to retire on about £200 a week once they retire at 67.

The average rent in Tamworth is £618 a month, so a lot of the retirement “income” will be taken up in rent, meaning the remainder will have to be paid for out their savings or the taxpayer will have to stump up the bill (and with life expectancy currently in the mid to late 80’s, that is quite a big bill …  a total of £72,380,160 over the next 20 years to be paid from the tenant’s savings or the taxpayers coffers to be precise!

You might say it’s not fair for Tamworth tax payers to pick up the bill and that these mature Tamworth renters should start saving thousands of pounds a year now to be able to afford their rent in retirement.  However, in many circumstances, the reason these people are privately renting in the first place is that they were never able to find the money for a mortgage deposit on their home in the first place, or didn’t earn enough to qualify for a mortgage …and now as they approach retirement with hope of a nice council bungalow, that hope is diminishing because of the council house sell off in the 1980’s!

For a change, the Tamworth 30 to 40 somethings will be better off, as their parents are more likely to be homeowners and cascade their equity down the line when their parents pass away.  For example, that is what is happening in Europe where renting is common, the majority of people rent in their 20’s, 30’s and 40’s, but by the time they hit 50’s and 60’s (and retirement), they will invest the money they have inherited from their parents passing away and buy their own home.

So, what does this all mean for buy to let landlords in Tamworth?

Have you noticed how the new homes builders don’t build bungalows anymore … in fact some would said the ‘bungalow storey’ is over.  The waning in the number of bungalows being built has more to do with supply than demand.  The fact is that for new homes builders there is more money in constructing houses than there is in constructing bungalows.  Bungalows are voracious when it comes to land they need as because bungalow has a larger footprint for the same amount of square meterage as a two/three storey house due to the fact they are on one level instead of two or three.

That means, as demand will continue to rise for bungalows supply will remain the same.  We all know what happens when demand outs strips supply … prices (i.e. rents) for bungalows will inevitably go up.

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Decreasing Numbers of Younger Homeowners in Tamworth

Kelvin Palmer, 35-year-old father of two from Tamworth, was out house hunting. It was a pleasant September Saturday afternoon, and our man cycles along on his bike. He cycles up a street of suburban semis, where he spots a few retired mature neighbours, chatting to each other over the garden fence. He leans his bicycle against a lamp post and launches softly into his property search.

Anyone on the road contemplating moving?” Mark asks, “I am not a landlord or developer, I’m just a Tamworth bloke trying to get out of renting, buy a house, do it up and live in it with my wife and two children

The only way I will leave here is in a box”, answers an 80-something lady, wearing her fading Paisley patterned housecoat from the 1970’s.

I‘ve lived here since before you were born, it’s lovely up here .. we aren’t moving, are we Doris? (as her neighbour sagely shook his head at his wife).

Kelvin, like many Tamworth people born in the late 1970’s to the early 1990’s, is keen to get a slice of prime Tamworth real estate. Yet people like Kelvin in Generation Y (or the Millennials as some people call them i.e. born between 1977 and 1994 and needing family housing now) are discovering, as each year passes by, they are becoming more neglected and ignored when it comes to moving up the property ladder.

Looking at the graph for the UK as whole …

Percentage of each age group that are home owners 1981 to today
Percentage of each age group that are home owners 1981 to todayOver 75 percent of Brits aged 65 and above (the baby boomers) are owner-occupiers, the biggest share since records began and a proportional rise of over 48.3% since the early 1980’s. Looking at those Baby Boomers (the current 65+year olds).. moreover roll the clock back 36 years (to when they were in their 30’s and 40’s and two thirds (65.6%) of them owned their own home.

Whilst today, just under a half of 25 to 49 year olds (47.3%) own their own home.

 

However, the biggest drop has been in the 18 to 24-year old’s, where homeownership has dropped from a third (32%) in the 1980’s to less than one in ten (8.9%) today. Looking at the Tamworth statistics, the numbers make even more interesting reading.

Tamworth statistics
Tamworth statistics

 

Government policy contributes to the generational stalemate. Stamp Duty rules prevent older Brits from moving as the price of land and planning rules make it harder to build affordable bungalows that are attractive to members of the older generation who want to move.

variable graph
variable graph

 

The average value of an acre of prime building land in the UK is between £750,000 and £800,000 per acre. Bungalows are the favoured option for the older generation, but the problem is bungalows take up too much land to make them profitable for new homes builders. The housing market is gridlocked with youngsters wanting to get on (then move up) the property ladder whilst the older generation, who want to move from their larger houses to smaller, more modern bungalows, can’t. The problem is – there simply aren’t enough bungalows being built and the high price of land, means they are prohibitive to build.

So, what is my point? Well, all I would say to the homeowners of Tamworth is that one solution could be to start to talk to your local councillors, so they can mould the planners’ thoughts and the local authority thinking in setting land aside for bungalows instead of two up two down starter homes? That would free the impasse at the top of the property ladder (i.e. mature people living in big houses but unable to move anywhere), releasing the middle aged gridlocked people in the ladder to move up, thus releasing more existing starter homes for the younger generation.

… and to you Kelvin … the wandering new home searcher – if things are going to change, it will be years before they do .. so keep going out and spreading the word of your search for a new home for your family.

Many of you reading my blog ask why I say these things. I want to share my thoughts and opinions on the real issues affecting the Tamworth property market, warts and all. If you want rose tinted glasses articles – then my articles are not for you. However, if you want someone to tell you the real story about the Tamworth property market, be it good, bad or indifferent, then maybe you should start reading my blog regularly. https://www.tamworthpropertyblog.co.uk

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