Ending Help To Buy Hurts West Midlands, But BTR And Immigration Could Save It
The UK residential sector is changing fast and everyone knows it. But does everyone appreciate how uneven the changes are, and have they spotted some of the longer-range trends that will make all the diference? Cushman & Wakefield think they have, and published the results in their Future of Demand report.
Here are the three key takeaways.
1. Beware The End Of Help To Buy
The end of the government's Help to Buy scheme in 2023 will hurt Walsall and Sandwell. Two West Midlands boroughs feature on the list of UK locations most vulnerable when the homes market initiative expires.
The data is part of its Future of Demand report, which looks at a wide range of key issues set to impact the UK residential market. The list reveals the 24 locations where Help to Buy accounted for more than 80% of house purchases in the last 18 months.
However, from 2021, the scheme will be subject to regional maximum value caps, and limited to first-time buyers. This will create ‘cliff edges’ in areas straddling regions with high and low caps, specifically the borders between the South East, and those of the West and East Midlands.
Help to Buy has probably inflated housing prices, which isn't a good idea if official policy is to make homes more affordable. But the more serious longer-term problem could be that the government has a stake in around 11% of newly constructed UK homes, exagerating the unhappy dominance of housing (rather than something productive) in the UK economy.
“The success of the scheme has also reinforced the already strong relationship between the national economy and our housing market," Cushman & Wakefield researcher Lee Layton said. "This will be of concern to those who already feel this bond isn’t a particularly healthy one.”
2. Houses Down, BTR Up
Each individual's lifetime journey through housing is going to change. We are already familiar with the route map from parental home, through student housing, to renting, purchasing and retirement or senior care. But according to Cushman, the proportion of our lives occupied by each stage will change. The long version of their account suggests a rise in shared living and micro-living. The short version is that build to rent is going to be very big.
The report suggests that in core UK cities like Birmingham we are likely to see less co-living (which will cluster in the larger global cities) and more micro-living, a variant on BTR in which students move from shared student residences to small self-contained rentals. This could fill the two-to-five-year period whilst they establish their careers.
This phase will be followed by 10 to 15 years of private renting or rent to own. The RTO sector is expected to be particularly significant in core UK cities and the suburbs. At the further end of life, another variant on BTR, this time themed to senior living, will provide a comfortable retirement.
3. Immigration Is The Key
Without overseas immigration, the UK's core cities, including Birmingham, would be in demographic trouble. That is the conclusion of the report, which shows that (with the single exception of Bristol) the core cities would be shrinking rapidly if it were not for international arrivals. This is because the volume of existing residents who migrate away from core cities is so large. Bristol is unique in having a net positive inflow of domestic migration.
Birmingham has the highest international inward migration, but also the highest domestic outward migration, easily double the domestic outflow figures in Manchester and dwarfing those in other core cities. This suggests a real problem for Birmingham, which needs to make itself sufficiently attractive to retain more locals. If it did, the Cushman & Wakefield data show it would be the fastest growing city in the UK.