The impact of home ownership levels on retail

This may seem a dry topic for an analyst comment, but we think that it is the key to much that is happening in the retail sector at the moment.


In the UK everyone can spot that superstores are in decline and the hard discounters are growing, but they are happy to put that down to cause and effect and not probe the deeper reasons and the possibility that both are driven by an underlying change.

We think that there is an underlying driver and it is the move of people back into inner cities. (Mintel’s Trend, Rebirth of Cities is about just this). Inner city dwellers are likely to be flat dwellers and flat dwellers may not have the space or inclination to do a full weekly shop. They are more likely to shop on an as needs basis and they are more likely to eat out. That observation would lead both to a fall-off in customers for superstores and growth in demand for hard discounters because they are just as much convenience stores as a competitor for the superstores.

But if that is happening in the UK – is it happening elsewhere?

The decline in home ownership

Yes, it is.

The proportion of owner occupiers is falling in most European countries. It is, perhaps, not so noticeable because the exceptions tend to be the largest economies. There are only two countries where the proportion of owner occupiers was at a peak level in 2014 and they were France (65%) and Poland (83.5%). In some others, especially those where there is a long tradition of renting and owner occupancy rates are low, the peak was quite recent (eg Germany 2011 and Switzerland, where the 2014 figure was higher than 2013 but just below the 2011 peak.)

Only one country has seen owner occupancy fall faster than the UK and that is Ireland, whose recession started with a housing market collapse.

Figure 1: Annual rate in decline in owner occupancy since the peak level, 2014
[graphic: image 1]
Source: Eurostat©European Union 2016/Mintel

But over half of households still own their home

The absolute level of the ratio is important too. It is lowest in Germany, where the habit of renting one’s home is deeply entrenched. That means that one could argue that Germany is pointing the way in which the market will develop, because that is the country where the hard discounters are strongest with approaching 40% of the food retail market.

The chart also shows how much the rate has fallen in the UK. Back at the peak level in 2008, the UK would have been in the middle of the table.

Figure 2: Europe: Leading economies owner occupation rate, 2014
[graphic: image 2]
Source: Eurostat©European Union 2016/Mintel


Ireland and the UK are therefore extreme cases. But what is happening there is happening to a lesser extent in many other countries and it will impact on the way that people shop. It is the change that matters, rather than the absolute level, but it could be that those where owner occupancy is low point the way for others.

Taking a pan-European view it looks as if there will be a trend towards convenience retailing, and that means a return to the high street. It is also likely to lead to more eating out and fertile ground for the hard discounters to expand further. If there is a loser, it is likely to be out-of-town retailing and we wonder if that would not have been weaker had there not been the sharp fall in fuel prices.

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