Home is for nesting, not for investing
One of our most recent articles focussed on the way in which the buyer demographics have evolved, but what we have yet to explore is how this new breed of buyers view the home ownership cycle itself as a result of this change.
We have recently seen some interesting patterns emerge in the way that buyers are now moving home throughout the various stages of life. Historically a buyer might make between four to seven separate moves in their lifetime usually beginning with a first time purchase; say a one or two bedroom apartment. Then relationships, marriage, and the patter of tint feet would see them move to something larger. Either a 2/3 bedroom apartment or a small family ‘starter’ house of 1200-1500 square feet. Then, as the children get older, at least one larger family home of 2500 square foot plus, usually followed by one or even two downsizes to a smaller house followed by a lateral apartment. Of course, the majority of these moves would have been profitable, or if not you would have had to do something pretty drastically wrong!
Similarly, in terms of location, this quite often involved moves closer and further from central London. Primrose Hill to Hampstead Garden Suburb, Hampstead Garden Suburb to Hampstead and finally Hampstead to Marylebone was, and still is, a well-trodden path. Over in West London, moves between Notting Hill, Queens Park and Holland Park were just as common.
However over the past few years, the rise in Stamp Duty has seen buyers experience a reduced number of moves in a lifetime. With couples getting married later, student debt almost doubling since the 1990’s and the explosion in house prices above income growth over the past 20 years, “first-time buyers are having to wait until they are older to buy” (BBC). Of course this is a generalisation, but as a result most young adults remain at home or in rented accommodation till much later than they used to, bypassing the first purchase entirely. A report from CNBC revealed that 48% of baby boomers were homeowners by the time they reached thirty, versus only 35% of home-owning millennials today at the same age.
The aim when buying a family home is no longer to buy in the view of selling 5-6 years down the line, but rather to find a house that they will make their home for the next 10-15+ years; a property where they can have their children, watch them grow into teenagers and even perhaps see them leave home. By prioritising quality of life over the potential profit of the transaction, buying cycles have become longer and value has shifted to homes that will offer buyers that flexibility to grow.
Therefore whilst the majority of the market remains highly discretionary and price sensitive, what has emerged is a thriving micro market for specific homes and those homes are achieving higher prices than ever before.
These homes usually offer a wide range of features that give it this broad and lasting appeal. They provide good lateral accommodation with plenty of flexible entertaining spaces. Playrooms become TV ‘snugs’ or home offices, larger bedrooms which can accommodate teenagers and their friends, larger gardens, parking and other amenities all help to create homes which can accommodate both the expansion of a young family and, as the kids move out, the contraction back to couple-focussed living.
As a result, the market has become somewhat fragmented price wise and buyers are more sensitive than ever before as to what they consider worth going the extra mile for.