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Will the Cost-of-Living Crisis Mark the End of the Booming Crediton Property Market?

Crediton property prices have increased by 23.2% over the last two years.

Crediton house prices have risen on the back of several things, including changes in how people see their homes and how they live and work (i.e., working from home), a lack of properties on the market and government tax incentives (the stamp duty holiday in 2020).

Yet, the tide could be beginning to turn as the number of houses coming on the market is increasing as supply is starting to catch up with demand – in Q1 2022, 389,811 properties came onto the market in the UK compared to 425,295 in Q2 2022. One would typically expect Q1 to be larger than Q2 in average years.

Yet some commentators are saying one thing that could stifle this growth is the cost-of-living crisis.

I wanted to delve deeper into what was happening in Crediton instead of reading headlines in the newspapers. Let me start with average incomes.

The average Crediton household income is £595.20 per week, compared to £577.30 in the Mid Devon region and £613.10 nationally.

Roll the clock back twenty years to 2002, and the average Crediton household income was £349.

I wanted to go into greater detail a few weeks ago; I stated that mortgage costs for first-time buyers were much lower today (as a percentage of household income) than in 1989 and 2007. Many of you commented on social media or sent me messages asking what happened to other household bills.

In 1989, 16% of people’s household income went on housing (rent or mortgage) compared to 17.5% in 2021.

Food represented 19% of people’s spending in 1989, compared to 14.4% in 2021.

Also, gas and electricity were 6% of household income in 1989 compared to 4.81% in 2021.
(although that was before we saw the recent energy price hikes)

Interestingly, the UK household spent 15% of their monthly income on leisure activities in 2021, compared to 10% in 1989.

Household goods and services (i.e. household appliances, insurance etc.) have risen from 11% in 1989 to 14.9% in 2021.

Before I leave these stats, I had a peek at the 1957 stats (the earliest stats available), and in that year, food represented 33% of the household income and tobacco 6% (today, it’s 2.34%).

So, compared to 1989, the big-ticket items of housing, food and fuel combined have gone down from 41% to 36.7% of the household income, whilst leisure has increased from 10% to 15%.

The fuel element of household bills will rise to around 11% to 12% of household income, and I suspect the leisure budget will be hit the hardest to pay for that. We are seeing food inflation of around 10% to 15%, meaning that food will go from its current 14.4% of household income to around 16% to 17%.

It’s going to be tough, especially for those people in rented accommodation who may not earn near the average wage yet, as they have similar fixed costs for gas, electricity and food.

Next, let me look at the inflationary effects on housing costs.
A rise in the base rate will, in theory, slow inflation by reducing consumer demand. In the short-term, this increase in the base rate will increase mortgage rates, thus adding fuel to the fire of the cost-of-living crisis by growing mortgage costs.

Those Crediton homeowners on tracker or variable rate mortgages will instantly increase their mortgage payments.

Encouragingly though, just under 17 out of 20 people are on fixed-rate mortgages, the majority on 5-year fixed rate deals, so their housing costs won’t go up significantly in the short-term.

This will alleviate some of the interest rate effects, making it more challenging and expensive for new borrowers like first-time buyers.

However, as I have explained in previous articles on the Crediton property market, many Crediton landlords have been sitting on their hands in the last couple of years as owner-occupiers have outbid each other in buying their next ‘forever home’. If there aren’t going to be so many Crediton first-time buyers, then I suspect we might see more Crediton landlords coming out of the woodwork and buying again.

This is especially true as investing in buy-to-let in inflationary times is an excellent hedge to protecting the buying power of your hard-earned savings (drop me a message if you want to read that article).

In conclusion, although the amalgamation of the Crediton house price rises in the last two years, the increasing interest rate rises, and the continuing cost-of-living crisis, there is no doubt the momentum in the Crediton housing market will be slower in the next 12 months compared to the last 24 months. Nevertheless, I anticipate Crediton house price growth will ease (and, in some months, be slightly negative). A better bellwether of the state of the Crediton property market is the number of people moving house (i.e., the transaction levels).

I expect transaction levels to be lower in the latter part of this year and the first half of 2023, yet they are most likely to stay close to the long-term average. The boom is over, yet it shouldn’t be a bust situation.
What are your thoughts on this? Let me know.

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Crediton’s Millennials to Inherit £696,453 Each From Their Baby Boomer Parents

The total value of homes owned by Baby Boomers in Crediton alone is £443,165,800 – and two-thirds of the Crediton Millennials are set to inherit all that in the next few decades!

Could this be the answer to the housing crisis?

Could Crediton Millennials live it up for the next few decades, safe in the knowledge they will get a huge lump sum to pay off their debts and buy a house with what is left?

Before I look at that, which set of people in Crediton exactly are the Crediton Millennials or Crediton Baby Boomers?

Come to that, who are Generation Z, the Silent Generation or Generation X?

All these are phrases used for the different groups of people in their various life stages of our society.

So, splitting the groups down:

Silent Generation: Born 1945 and before (77 years old and above)

Baby Boomers: Born 1946 to 1964 (58 years old to 76 years old)

Generation X: Born 1965 to 1980 (42 years old to 55 years old)

Millennials: Born 1981 to 1995 (27 years old to 41 years old)

Generation Z: Born after 1996 (everyone under 26 years old)

Using data from the Census, my research shows there are …

1,225 households in Crediton owned by Crediton Baby Boomers and they are worth a combined value of £443,165,800.

The generation that will inherit those Crediton properties will be the millennials.

There are 954 millennials in Crediton.

After looking at the local demographics, homeownership statistics and current life expectancy, around two-thirds of those Crediton Millennials have parents who own those 1,225 Crediton properties, meaning each is in line for an inheritance of £696,453.35.

Yet what about Crediton’s Silent Generation?

There are 1,248 homes in Crediton owned by the ‘Silent Generation’ and they are worth £451,486,464.

The issue for those who will inherit their parents’ homes is that there are far more Generation X people in Crediton than millennials.

Two thirds of the 1,397 Crediton Generation X will inherit £489,671.01 – still nothing to sniff at yet not as much as the millennials!

So, whilst the Crediton Millennials are less likely to own their own home compared to Generation X and so have done not as well in amassing their assets and savings, they are more likely to benefit from an inheritance boom in the years to come.

This is likely to be very comforting information for those Crediton Millennials, including some from humbler upbringings who historically would have been unlikely to receive an inheritance.

Nevertheless, inheritance is not the silver bullet that will get the millennials onto the Crediton housing ladder.

Nor will it deal with the increasing wealth inequalities in British society, as the inheritance they are likely to receive won’t be accessible when they are trying to buy their first Crediton home.

So before all you Crediton Millennials start running up your credit card bills, safe in the knowledge they will be paid for when your parents pass away in 20/30 years, over half of the females and around a third of men are going to have to pay for their nursing home fees.

Remarkably, I recently read 25% of people who must pay for their nursing home fees run out of money, and therefore have to rely on funding from the local authority

Therefore, if you are a Crediton Millennial, no inheritance will be left for you. It goes without saying, most Crediton parents want to give some inheritance to their children.  

Yet if waiting until you pass away to help your children or even grandchildren with your legacy could be seen as too late, so what are the options?

One solution to help and fix the housing crisis in Crediton (and the UK as a whole) is if parents and grandparents, where they can, help financially with the deposit for a house whilst their children/grandchildren are in, say, their 20’s and early 30’s.

Buying a Crediton property is much cheaper than renting – I have shown it many times in these articles.

It’s not a case of not being able to afford the mortgage; the problem is raising the mortgage deposit (of 5% to 10%) for these Crediton Millennials.

Maybe families should be discussing the distribution of family wealth whilst everyone is alive (in the form of helping the family with house deposits) as opposed to waiting until the end, as it will make a massive difference to everyone in the short and long run.

And a final thought, your legacy will have a more significant impact, and you will be here to see it with your own eyes.

A win-win for everyone.