Is Property Ownership Linked to Wealth?

Go back to the early 20th century and most working-class, and even middle class, people didn’t own their homes; they were rented, usually from a wealthy landowner. Present-day, although many more of us own our homes, albeit with a mortgage, property wealth belongs to people over the age of 65.

Over the past decade, there has been a significant increase in the buy-to-let properties, second homes and multiple property owners. But conversely, there’s been a drop in the number of people owning their home. So, is property ownership linked to wealth?

What is compound interest?

Firstly, a simple definition of what compound interest means: compound interest is paid on the principal sum invested, plus the accumulating interest. It is the means of not only earning interest on an investment, an investor also earns ‘interest on interest’. So, as well as your initial investment increasing over time, what you earn on a monthly basis also increases in value.

When you lend money for another to use, i.e. you invest money into a property developer’s project, in return they pay you interest on the amount you’ve given them.

Rented or owned?

In 1918, fewer than a quarter of people in Britain owned their homes, predominantly because mortgages were almost unheard of and it was the wealthier sector that could afford to buy a property. Most people rented privately, but that didn’t mean properties weren’t owned by lower-class people; they were. In areas where the industry was thriving and employment was high, more people owned their homes.

So, what changed? Well, principally the First and Second World Wars. In between, as incomes increased and mortgages became more readily available through building societies, a third of homes were owned. However, it wasn’t until the 1950s and 1960s that homeownership became a common theme. The latest homeownership figures show that just over 65% of people own the property they live in; much lower than other European countries, like Romania and Croatia where it is above 90%.

Second-home/multiple properties ownership

There has been an increase in overall wealth inequality in the property industry for many years. This has been fuelled by two principal trends; a decrease in property wealth and an increase in multiple property wealth. These trends demonstrate that in the 21st century, property ownership is more important than homeownership. 5.2 million adults own multiple properties; that’s one in ten homeowners.

This corresponds with an increase in the number of people renting a property in the private sector. The number of landlords earning from their properties has doubled from 1.7% in 2000/01 to 3.4% in 2015/16.

Who owns second homes/multiple properties?

Going back to the highest level of property wealth being held by the over 65s, statistics show that it’s the baby boomers and Generation X people who hold the cards. Those born between 1946 and 1965 — the baby boomers — own more than half of property assets (52%), whilst those born between 1966 and 1980 — Generation X — hold a further 25%. This reflects a lifecycle of consistent earnings and retirement; however, it is Generation X that have capitalised on the multiple property ladder. According to Key’s Retirement Class of 2020 study, 30% of people are intending to use their property wealth to boost their income in retirement.

This, of course, has a knock-on effect on property ownership in terms of inherited wealth. In the past when an elderly relative died, their assets were more along the lines of jewellery, furniture and other personal items. Today, it’s property. On average, one-fifth of people born in the 1980s have parents with property wealth; one-in-ten of those people are likely to receive that property wealth as an inheritance.

When you consider that by the time they receive that inheritance, a large majority of them will already own at least one property, i.e. the one they live in, they will quickly become multiple property owners and their property wealth index will increase. Indeed, it is predicted that one-third of those people are unlikely to get their property inheritance until they are themselves in their 60s or 70s.

This, in turn, changes the way Generation X leave their property wealth to their next of kin. New initiatives, such as lifetime mortgages (a form of property equity release), has enabled the over 55s to not only ensure the potential to lower their children’s Inheritance Tax payment but also allowed them to ‘gift’ them with a lump sum.

A widening wealth gap

With nearly a quarter of property wealth being held by the wealthiest 1% of the population in the UK, according to the Resolution Foundation think tank, it’s not surprising that the property wealth gap is widening. Rising house prices and land values since the financial crisis of 2008/9 has added fuel to the fire. Figures show that there has been a 76% to 93% increase in people’s wealth through property.

Over the last year of COVID-19, this has not abated. However, it has to be remembered that the highest level of property wealth has increased in the south of the UK, rather than the north. The inequality is greater in London and the South East than other parts of the UK. That said, 16% of Londoners are in the top 10% of national income distribution, according to IFS.

With 88% of multiple property owners featuring in the top 50% of the wealth distribution, it appears that property ownership is linked to wealth. That said, ‘an Englishman’s home is his castle’ and this surely demonstrates the wealth of property ownership?

In the UK, the majority of people want to own their home but the younger generation is finding it harder and harder to get on the property ladder. The rise in property prices over the past decade or more has not been reflected in an increase in salaries. But it’s not impossible. With the rise in property ownership platforms, like Bricktrade, the dream of owning your own home, or even multiple properties, can become a reality, whether you consider yourself wealthy or not.

Are you considering investing in property but don’t have the necessary funds? Now you can with Bricktrade. We offer potential property investors the opportunity to get involved in bricks and mortar investments from as little as £500. Our cutting-edge crowdfunding platform opens up great opportunities for property investment, and for property developers looking to raise funds for their property development projects. Discover how Bricktrade can help you invest and earn from property by signing up today.

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