Rentals will soon outstrip home purchases – why is this a problem?
11 Nov 2016 | COMMENTS: 0 | Author: Carlo Ruggiero | General
Landlords rejoice! For the first time since the 1930s, rentals are set to outstrip property purchases in the UK.
Post-Brexit Referendum, the buyers market has slowed. Potential buyers are sitting on their hands, worrying about locking into a mortgage with no idea of what might happen over the coming years.
But people need a roof over their heads. Which has led to a boom in the rental market.
Good for Landlords
The biggest benefactor of the rental boom is landlords. Despite the double stamp duty for second homes being introduced back in April, this led to a negative impact on housing stock. Buy to Let investors rushed to get their sales completed before the new tax year to save themselves thousands of pounds. House prices leaped as we moved into the summer.
“The shift between the number of properties being offered for rent and sale has been a long-term trend, boosted a bit by stamp duty and a bit by the Brexit vote,” said Johnny Morris, research director at estate agent Countrywide.
“September saw record [rental] activity,” Morris added, “with increasing numbers of lets agreed and tenants choosing to renew their contracts. On current trends 2017 could be the first time since the 1930s that more homes are let than sold.”
A locked out generation
Increasing house prices is leading to a whole generation being locked out of the property market. Deposits are becoming increasingly difficult to save, with the average sitting at £34,000 – and almost three times higher at £96,000 in London.
Despite the increase in house prices, interest rates are still at a record low. What you’d pay for a mortgage can be significantly cheaper than rent for an equally or higher valued property. But without the deposit, you’re out of luck.
And while house prices are rising, and rental rates increase along with them, wages aren’t increasing at anywhere near the same level. This leads to living in fear of constant rent increases, being kicked out for a landlord to sell up (losing any potential savings to agency fees and rental deposits), or nightmare stories due to poor renter’s rights.
Tackling the crisis
Kay Lyons, a Guardian contributor sums this crisis up:
“Our generation has to pay back £50,000-odd in tuition fees, expects to have to chip in to help pay for our elderly parents’ end-of-life care, has to fund our own end-of-life care, has been told we can’t rely on state pensions (and the decent workplace pensions are being phased out) and some of us might even want to raise our own children. There’s not enough lifespan to earn enough to pay for all of this without the accumulated wealth that comes with property ownership (even then it’s a stretch).”
The Government needs to tackle this issue quickly. It’s not only in the interest of the people, but in their interest too. More people living on the breadline, with no opportunity to accumulate property wealth means a greater stretch on Government and taxpayers’ resources – may be not now, but in the future.
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