The Affordability of Buying Property in Runcorn
Thu 25 Jul 2019
Looking back at the 75thAnniversary of the D-Day landing a few months ago, it reminded me of the vast changes that have happened to Runcorn and more specifically the Runcorn property market since WW2. Back in 1946, the average wage in Runcorn was just over £5 a week and to buy an average car would cost you just under £600, yet this is a property blog, so…
The average value of a Runcorn property in 1946 was £690
In fact, in those 75 years, the average Runcorn house had doubled in price by 1961, then again in 1971, 1975, 1980, 1988, 2000 and 2006. Now a lot of those increases (especially in the 1970s) were caused by hyperinflation, yet since the start of the 21stcentury, inflation has been kept low, and since the credit crunch (2008/9) whilst property values have been rising, they haven’t been at the rates experienced in the latter half of the 20thcentury.
Now what a property sells for is irrelevant, it’s whether someone can afford it.
Increases in Runcorn property values have produced considerable increases in equity for many Runcorn homeowners and Runcorn buy to let landlords, yet on the other side of the coin also making housing unaffordable for other people. The best measure of the affordability of housing is the ratio of Runcorn property values to Runcorn average earnings (i.e. salary/wages). The ratio works on the basis, the higher the ratio, the less affordable properties are.
In 1997, the average value of a Runcorn property was 2.8 times higher than the average annual wage in Runcorn, in 2007 it peaked at 5.1, yet within two years it had dropped to 4.6 and since then has hovered around that figure. It currently sits at 4.8 times higher.
It can be seen that even though property in Runcorn became more affordable after the 2007/8 property crash (i.e. the ratio dropped), in recent years, with house values rising but earnings/salaries not keeping up, the ratio has started to rise. This has meant there has been a decline in affordability of property in Runcorn over the last five years – so for those on particularly low incomes or with little capital, it unfortunately means that buying a Runcorn home will never become an option.
Therefore, the demand for private rented properties in Runcorn will continue to grow as many young Runcorn people are deciding to rent instead of buy their own house (knowing when their parents pass away, the equity built up in their parents property will be passed down – and then they can buy in their 50’s and 60’s – just like it happens in Germany).
That is many decades away and with fewer Runcorn people wanting or able to save up the 5% deposit required by mortgage lenders, more and more people are looking to rent. Tie this in with the subtle shift in attitudes towards renting since the millennium and fewer people jumping onto the bottom rung of the property ladder, this has driven rents and demand up in Runcorn over the last few years. The type, location and demands of Runcorn tenants has changed over that same time frame meaning you can’t just make money from buy to let as easily as falling off a log as you did in the early 2000s.
If you are an existing landlord with us (or even another agent in Runcorn) or someone thinking of becoming a first time Runcorn landlord looking for advice and opinion and what (or not) to buy in Runcorn, one source of information is Runcorn Property News – or drop me an email or phone call and let’s start a conversation – I don’t bite and I don’t do hard sell. And maybe, just maybe, I could help you get better returns from your property portfolio.