Lifetime rent costs puts homeownership out of reach

Lifetime rent costs puts homeownership out of reach

According to a new report from ARLA, first time buyers purchasing their first house this year will have spent £52,900 on rent by the time they get on the first rung of the ladder, and future FTB’s can expect to spend 22%.

Compiled with the Centre for Economics and Business Research (Cebr), the report reveals the average FTB in England in 2016 will have spent 16.4% of their total lifetime earnings on rent for all the years they were a tenant.
 
Those buying a property for the first time this year in the North East will have spent £31,300 on rent – the lowest amount in England. Whereas in London, the average amount spent is more than double that, at £68,300. The South East is the only region other than London where the total lifetime rent spent is above the English average – where the total rent expenditure equates to £55,900.
 
Last year alone (2015), on average people in the UK spent 22% of their wages on rent, increasing to 30% in London. Those living in the East enjoyed the most affordable rents due to relatively high earnings in the region, yet rent still accounted for 18.9% of their disposable income.

Rising rent costs and future homeowners

Brits that move out of their family home at the age of 183, will typically rent for 13 years before buying their first property. The Cost of Renting report found those leaving home and starting to rent this year, will spend an average of £64,400 before they are able to buy their first property – 22% more than current FTBs getting on the housing ladder this year will be spending. Those leaving home and starting to live independently in London will continue to be worse off, as they will spend an average of £91,500 on rent before they can buy their first home - £23,100 more than those buying in the capital this year.


David Cox, managing director, Association of Residential Letting Agents (ARLA), comments on the findings: “The rising cost of rent in this country is a huge issue, and is preventing tenants from being able to save to buy a home. Our Cost of Renting report reveals that tenants are already spending a significant proportion of their income on rent, and therefore struggling to save any money. However, as house price affordability worsens and interest rates start rising, more pressure will be put on renting with weekly rent likely to rise, so home ownership will remain out of reach for many.
 
Rents are becoming alarmingly unaffordable due to the lack of available housing; the North-South divide we’re currently seeing in the UK is a clear illustration of this. The London rental market is competitive, with far more prospective tenants looking for properties than actual houses available. This is pushing up rents in the capital, which will continue to put pressure on surrounding areas, including the South East, as Londoners relocate to avoid high rent costs.”

A nation of forever renters

21% of those renting in the UK do not expect to ever be able to afford to buy a home – with rising house prices and low wages forming a barrier against FTBs getting on the property ladder. Still, younger generations feel optimistic, with three quarters of those aged 18-34 hoping to buy in the future. This optimism wanes with age as only 48% of 35-54 year old renters have plans to buy in the future.

87% tenants feel they are being held back from being able to buy. Saving for a deposit is the biggest obstacle, with over half claiming this is stopping them. 23% would not be able to afford monthly mortgage repayments and a further 26% cannot afford the associated costs such as stamp duty.

Renting satisfaction

Although 39% of UK renters are quite happy renting, the majority are not. Spending income on rent rather than being able to save is a problem for 38%, and 26% think the government should do more for renters to help them get on the property ladder. 8% feel there are not enough family homes available to rent in the area they want to live.

David Cox concludes: “It’s really worrying that so many renters don’t ever expect to be able to afford a home. Although housing is high on the political agenda, all we’ve seen come out of parliament recently is legislation which is set to hinder the experiences of tenants; and the sheer lack of affordable housing means many renters will never fulfil their dreams of homeownership. Despite the Chancellor’s efforts in the Budget to help the housing market, the housing budget accounts for just 0.26 per cent of public spending, lower than other key areas, such as transport which accounts for 3.6% of total spending.
 
As rent costs continue to rise, unfortunately more and more tenants will find themselves renting for longer as they have less ability to save. We need to take action now, before we become a nation of forever renters.”

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Latest Comments

CommercialTrust
CommercialTrust 30 Jun 2016

This is great news for buyers and investors in a period of significant uncertainty. The 10-year buy-to-let fix at 3.99% in particular is excellent, a clear 100 bps ahead of the nearest competition. Though...

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Lee
Lee 30 Jun 2016

Let's see what happens to north-east property prices when Nissan announce they're leaving.

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DmitriKara
DmitriKara 29 Jun 2016

I just read another article about eviction rising and this was exactly what was on my mind, Housing has become "cat and mouse"...

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DmitriKara
DmitriKara 29 Jun 2016

I am really not surprised. I've seen one too many impudent tenants and in my humble opinion renters have one too many privileges and options to abuse heir landlord in so many ways...

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DmitriKara
DmitriKara 29 Jun 2016

There is still so much uncertainty and I will surely step back and see what's happening before I could make any decisions on my end.

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ChristinaReedUK
ChristinaReedUK 20 Jun 2016

I don't understand why it's always a war between the two sides. Either, way the landlord is probably keeping a detailed inventory and will see the changes you've made. I just don't understand why there...

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NathanGreen
NathanGreen 16 Jun 2016

Seeing that the tenants are quite satisfied with their landlords and the properties is indeed great. I wonder, though, what is the situation in London alone? The tenants face sky-high rent levels in the...

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AndiMur
AndiMur 15 Jun 2016

TheGuardian published the same forecast. But on the other hand, professional brokers express different opinions. According totranio.com, an exit from the EU would not affect the demand/supply imbalance...

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Gary Holmes
Gary Holmes 14 Jun 2016

Having a professionally completed inventory at check-in and check-out is clearly (to me at least) of minor value. Tenants make un-authorised modifications and/or walk off with items that belong to the

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Violet Gibson
Violet Gibson 14 Jun 2016

Cautious people think buying off-plan is reckless, but over the past few years investors have literally made fortunes.Pre-release prices have obvious benefits for the developer, who gets instant finance...

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Kate Windleton
Kate Windleton 14 Jun 2016

An interesting research indeed. I guess that is in complete contrast with the United States where people often move from one coast to another. It will be interesting to hear the trends for people moving...

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NathanGreen
NathanGreen 14 Jun 2016

I think it all depends on the market conditions and how well your company is doing. You will agree that you can't demand more when you're killing yourself just to hang in there. Sometimes you need all

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