Time to reflect on the real value of home ownership

According to the latest statistics from the Council of Mortgage Lenders (CML), mortgage lending for house purchase continued to increase steadily in August and lending to first-time buyers and home movers was at its highest for more than a year.

The number of house purchase loans increased to 52,000 in August, up 2% year-on-year and 7% month-on-month, while the value of house purchase deals grew to £7.9bn, up 3% on August 2010 and 10% on July 2011.

Encouragingly, lending to first-time buyers grew by 19,000, which was a 5% increase on July. The average loan to value ratio (LTV) for first-time buyers was steady at 80% (although there are an increasing number of 95% LTV now available), with just 13% of their income taken up by mortgage interest payments.

Home movers took out 33,000 loans in August, worth £5.5bn, up 8% by number and 10% by value on July. The average LTV of home movers was 69% and just 9.4% of their income went on mortgage interest payments – and that’s the lowest percentage of income that the CML has recorded since its records began in 2002.

However, the overall trend since the credit crisis of 2008 is for more and more potential first time buyers (FTBs) to choose renting over purchasing, despite the Halifax revealing recently that it is over £100 a month cheaper to buy than rent for FTBs. And housing charity Shelter says average private rents are now ‘unaffordable’ (more than 35% of average take home pay) in over half of local authority areas of England.

So, against the background of this slow but steady recovery in the purchase market and an increasingly overheated rental sector, what is holding back the confidence of so many would-be purchasers? Are they concerned more about job security than buying their own home?

With the move to more renting, institutional investors in housing are more likely to benefit, at the expense of private individuals, who will miss out on private capital growth opportunities as a result. The proactive reason for buying property is to benefit from the long term appreciation in the value of the asset. The defensive reason is to make sure that one is not priced out of owning a home as prices recover.

But perhaps the advantages of home ownership lie less in the capital gains and financial security of owning your own home and more in the pleasure of owning something you can decorate, furnish, extend and where you can watch your family put down its roots? Maybe there are more important things than those measured by straight financial calculations?

Perhaps the most ‘value’ one can derive from owning a home is from its capacity to be a vehicle for enjoying the simple pleasures of life?