Why is the UK Housing Market so different to the rest of Europe?

November 8, 2007 2:44 AM

Why is the UK Housing Market so different to the rest of Europe?

Why is the British approach to the housing market so geared towards home ownership, where as european markets have much greater levels of long term rental.

Could the current high property prices in the UK be permanent and cause the UK house market to shift into a more European rental based system?

posted by complience to work & money (8 comments total)

There are many reasons for this. You could start by looking at the policies of Maggie Thatcher and her Conservative government in the 1980s that strongly encouraged home ownership (through right-to-buy council houses, etc.) that has continued on through subsequent governments.

It seemed to be more an ideological position that became the norm and now the whole UK economy is wound up in it.

Could the current high property prices in the UK be permanent and cause the UK house market to shift into a more European rental based system?

I think if anything the opposite is likely to happen. Many more European countries (such as traditional rental systems in France) have moved towards the UK model.

Having said that, I am a renter in the UK who would appear to have been priced out of the market (despite having a decent job) so maybe it will happen. More likely, I think, is that there will be a slow down in prices in the next two years as the credit crunch leads to lower borrowing multiples being allowed by banks and I and others like me will be in like Flynn.
posted by ClanvidHorse at 3:07 AM on November 8, 2007

The legacy of a concerted assault on social housing by the frothing free-market loons behind the Thatcher administration, who hired slick manipulators to link private ownership to deeper-seated traits like "an Englishman's home is his castle" and that liberty is a function of property. This played well to the worst petty bourgeois instincts of a substantial portion of the nation of shopkeepers and the Scots, Welsh and Irish in the North got dragged along by the Great Wen and surroundings. The bubble may well burst soon, and those who squandered the post-war social inheritance for a mess of pottage are now finding their kids can't afford to leave home, so maybe things will swing back at some point, but don't hold your breath.
posted by Abiezer at 3:08 AM on November 8, 2007 [1 favorite has favorites]

The owner-occupancy rate has been rising for at least fifty years, although it has levelled off from the 1990s. There was a sudden increase in 1980-81 as Thatcher introduced Right-to-Buy, a hugely popular policy which allowed council house owners to benefit from rising house prices. Apart from this sudden increase in 1980, the overall trend in increasing home-ownership was not significantly different in the 1980s from the trend in the 1960s.
posted by Aloysius Bear at 3:32 AM on November 8, 2007

Seconding Aloysius. To suggest that Mrs Thatcher is the basis of the, relatively, high rate of property ownership in the UK is to mis-read the situation. It's a much older thing than that.

Seeing as no one has come up with a very definitive answer I hope you'll forgive a wild guess ... is there something about the banking of UK vs other-European countries which has, in the past, made the home mortgage market more competitive ?
posted by southof40 at 3:43 AM on November 8, 2007

My impression is that there are multiple reasons why homeownership rates vary across europe. They range from a lack of housing in post-war Germany being mitigated by big businesses building apartment blocks for employees - to a lack of a true mortgage market Southern Europe up until the 80's. Simply put you couldn't get a mortgage for a house unless you had a huge % of the price as a downpayment.

Add on top of that a view by the Anglo-Saxon world that homeownership is an unmitigated view, and therefore something to be incentivized, you can start to see the wide dispersion in home ownership.

Also bear in mind some countries that have very low homeownership rate have a very different idea of how apartment leases are structured.
posted by JPD at 4:52 AM on November 8, 2007

As long as I remember, it's been seen as a good thing to own your own home. There's an old, old saying that an Englishman's home is his castle and I think this reinforces the common British desire to self-own.

If you add to this the birth and then growth of the middle class in the UK (And the middle class has always owned there own homes) and the low status afforded to Council Houses, you can see why home ownership is aspired to.

Another theory: My house, and the houses of pretty much every person I know in the grim Yorkshire town I call home, live in houses which were built by the local mill-owners to house their workers. (*) I can guess that as the mills stagnated, these were sold off quickly to the local population at such a speed that they couldn't quickly be absorbed into the rental market.

Anyway - this is all supposition. It's an interesting question.

(*) In fact there are Whole Towns built by mill owners in the 19th Century to house workers.
posted by seanyboy at 5:15 AM on November 8, 2007

I am from Spain, where the received wisdom is that "money spent on rental is money thrown away", and where up til very recently many people lived with their parents well into their thirties while they saved up for an apartment in property.

I also know that the "council housing" pheonomenon in the UK is not as prevalent in other parts of Europe, where rental housing is mostly private.

For those reasons the premise "the UK housing market is different from that of the rest of Europe, because it's geared towards home ownership" seemed flawed to me. So I started looking for actual housing statistics.

FEANTSA, an organisation catering for the homeless, says for instance that Spain has 86% owners-occupiers, while in France 56% of the population are renters. This is a figure quoted in 2007.

The Danish EU Presidency's report on Housing Statistics in Europe in 2003 had data on owner-occupied dwellings in most European Countries which fits my expectations better. See table 3.4 for the following data from 2002 (data from 2000 substituted when no data for 2002 is provided). Clusters are almost arbitrary, but they are useful to see that there are a few big trends:

- Spain and Greece have the highest number with 81% and 74% respectively. Ireland is also here with 78%.
- The UK would be part of the second cluster, with 69% home ownership, with Belgium (68%), Finland (64%) and Luxembourg (67%) to make it company.
- Third cluster, the fifties: We have Austrlia (57%), the Netherlands (54%) France (56%) and Denmark with 51%.
- Fourth cluster, mid forties: West Germany (45%) and Sweden (46%).
- Finally and unsurprisingly, we have the ex-DDR (34%).

My conclusion is that home ownership in the UK is high-ish compared to the whole of Europe, but that it is by no means exceptionally high (that accolade corresponds to Spain), and that it is similar to Belgium and Luxembourg's.

Historical evolution of home ownership in the UK also tracks closely that of Belgium: both start in 1980 with 58-59% and climb 10 points in 22 years. Compare to Denmark, where owner-occupied dwellings have remained around 50% for the same period, and it seems a good guess that the Thatcher years (and the Blair reformation of Labour) probably had something to do with it. Who was Belgium's Thatcher is a question that someone will probably be able to answer better than I.
posted by kandinski at 6:17 AM on November 8, 2007 [12 favorites has favorites]

Nice work kandinski!
posted by ClanvidHorse at 6:31 AM on November 8, 2007