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Sep 15, 2009

Over the years, all housebuilders have asked the rhetorical question - "Why rent when you can buy?" - but few have actually listened to the answers. It is usually true that, on a month by month basis, and given the deals that most people can currently get when buying new-build, it is cheaper to buy than rent. So why do people continue to pour their money into a landlord's pocket?

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The fact is that there is no single answer - and no simple solution for developers to offer to the market. But there are clues that can be followed to boost sales.

We carried out a small-scale 'vox pop' and asked people that very question - and the answers were, in most cases, not very surprising:

"It's too comfortable at home!"
- Female, age 20 - 30

One factor is age - most renters are young, free and single, and (like all men, apparently!), wary of 'commitment'. Our research threw up responses like:

"I wouldn't choose to buy right now because a lifestyle is more important to me at this stage of my life. I am able to live close to friends and enjoy a social life that is far better and easier because of my proximity to both friends and the city."

"If I were to buy a place it would have to be in a poorer area where I would worry about crime and so on. I would be further away from friends and the city which are two of the most important factors for me"

"My current location is also fantastic for me given that I don't have a car - I am able to walk most places I need to get to, If I bought further from the city it would make travelling longer and more costly."
- Male, age 25

and from another 'Party Animal':

"I am currently living with a friend and wouldn't really want to get involved in the complications of sharing a mortgage with her.

"Renting gives me the opportunity to move out, pretty much whenever I want. I could move back in with the folks if need be, get a place with my boyfriend, or even up sticks and emigrate to Australia. Whatever I eventually do, having a mortgage could be restrictive.

"I am renting an apartment, which has been kitted out really well by the previous owner. It's a great party flat, and good to show off to friends, however whilst I enjoy it now, I certainly wouldn't want to own it. My personal preconception is that apartments are for renting, houses are for buying."
- Female, age 25 - 30

Another big hurdle to overcome is the deposit. As we know, with lenders currently demanding cast iron proof that the purchaser has contributed a substatial deposit, affording a new apartment could mean saving up to £25 or £30 K - a tall order. There are still 95% mortgages on the market - but at a price. Many of our respondents cited this as their main reason not to buy:

"My friends who still rent and are in their early 30s do so because they simply can't afford the deposit to buy a place of their own."
- Male, age 30 - 40

and:

"I'm in the age bracket 30-40. We rent because we cannot raise a deposit to buy a house."
- Female, age 30 - 40

Incentives are out there to overcome this - but are potential customers sufficiently aware of them?

Life change is another issue - and this is where housebuilders could see a way in - people who have sold up due to separation or work related change may have money invested but are uncertain what to do next:

"I'm renting now as it was the only way I could undertake a full scale revolution in my finances! My girlfriend/partner and I will almost certainly want to live together in the next couple of years. Me renting (she owns) gives us a bit of flexibility so that we can get all our daughters (two each!) off to college! It puts me in a strongish position to buy next time. Alas, I am paying more in rent than a mortgage would cost!"
- Male, age 40 - 50

and:

" I have a friend (age 33) who is currently renting because he has just separated from his wife."
- Male, age 30 - 40

But finally, as so often, a major factor seems to be the old chestnut, 'location, location. location':

"I have a son who is 3 years old, and we rent to be in the catchment area for our preferred school. I would buy a new build, but none are available in our area. Being in our preferred area is priority."
- Female, age 30 - 40

and:

"I like living in the city centre in Manchester - I would not be able to buy a place here as it would be too expensive but I can afford to rent."
- Male, age 25 - 30

and:

"I can't afford to live in an area I like"
- Female, age 25 - 30

So what can developers do? The fact remains - it is usually cheaper to buy than rent. So as house prices continue - tentatively - to rise, and buy-to-let - potentially - becomes less attractive as an investment, people should start to think twice about renting. If lenders start to make more funds available, as they seem to be doing, there should be an improvement in the first time buyer market. But it remains important to keep your message and your offering out there - if you don't, someone else will!

It's the old adage: when sales drop, your marketing spending must rise (but then I would say that, wouldn't I?)