Jeff Salway: Is the British love affair with property ownership nearing an end?

IT SEEMED unthinkable four years ago when the absence of funds was viewed merely as another trivial obstacle to overcome if you wanted to take your first step on to the property ladder.

Ministers talked up home ownership and lenders did their bit by offering loans of up to 125 per cent of property value. Turn on the TV and smug property experts evangelised about so-called home improvements that would push prices up even higher.

The belated removal of that brand of materialistic tat from our collective conscience was a silver lining in the credit crunch cloud. But the dramatic change in housing market conditions over the past three years could have more fundamental implications by taking the heat out of the UK's love affair with property ownership.

The Chartered Institute of Housing (CIH) believes we're at the end of a "golden era of home ownership" and the Council of Mortgage Lenders (CML) this week pondered the same possibility. Their comments came in sharp contrast to the claim made last month by the new housing minister, Grant Shapps, who crowed that the "age of aspiration is back".

To continue preaching the gospel of home ownership at the expense of developing a sustainable alternative would be a huge mistake, however. The most obvious factor weighing against home ownership is the dramatic tightening of mortgage criteria in the last two and a half years that continues to exclude first-time buyers from the property market unless they have substantial deposits or generous relatives; While an estimated 1.4 million people want to buy their own home, three quarters of them can't afford a mortgage with an 80 per cent loan-to-value.

The CIH also highlighted the growing population of people that earn too much to qualify for social housing but not enough to even consider buying. The problem for those who are unable - or unwilling - to get on to the property ladder is made worse by a growing shortage of housing supply. The Scottish Government this week revealed that the number of new homes completed in 2009/10 slumped by 47 per cent compared with 2007/08. There was an even bigger drop in new home starts.

The private rented sector has to grow to meet the needs of the growing number excluded from both ownership and social housing, but instead we are witnessing a dramatic contraction.

Builders and developers can be excused their reluctance to commit in the current market - how can they justify (or even secure) the investment when the lending outlook is so uncertain? The consequence could be a massive imbalance of housing supply and demand. And while house prices are almost certain to decline over the next year or so, that imbalance will push them up again, driving first-time buyers even further out of the picture.

But this time it would be a stretch to imagine that lenders will want - or be allowed - to return to the lax practices of the nineties when they encouraged would-be buyers to take on unmanageable debts in order to realise their ownership dream.

The CML believes rumours of the death of the "golden age of home ownership" are premature. But it was right to address the issue and both the UK and Scottish governments must do more to address the ongoing lending restrictions and to commit to developing a sustainable rental system.