Property Reporter



Lifetime rent costs puts homeownership out of reach

Line Spacing+- AFont Size+- Print Forward to a friend
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.”

Got something to say? Leave a comment below:

You must be logged in to leave a comment

More articles from Landlords

Rents accelerate to highest levels seen this year

Prime Central London lettings market hit by Brexit wobble

Landlord tip: 1 bed flats to achieve biggest capital gains over next 12 months

Student property sees surge in international investors

Abandoned properties continue to frustrate landlords

The Rental Trap: Financial wellness of UK renters revealed



Latest from Financial Reporter

Just in
LV= and Key Retirement announce partnership

Just in
Computershare to service three in five outsourced UK mortgages

Just in
Fleet to accept transfers to limited companies

Step One to enhance offering with new funding line


Latest from Commercial Reporter

Are SME overdrafts dying out?

Rise of 'flatpack' lenders prompts warning to SMEs

Hampshire Trust Bank completes first commercial deal in six days

Keystone introduces auction and commercial finance


Latest Comments

CommercialTrust
CommercialTrust 20 May 2016

With the bulk of the market controlled by large developers, profit rather than necessity determine the pace at which homes are built. There are hundreds of thousands of plots that have planning permission...

view article
Johna
Johna 20 May 2016

"Easier said than done" is what I would say. Of course, it would be more than great to have more in quality and affordability, but I do not trust talk anymore.. What is said is not what is happening.

view article
Johna
Johna 20 May 2016

in my humble opinion being fair like THE most important! I myself have had bad experience with unfair landlords... not to mention that I know how to do a proper end of tenancy cleaning since I am a fantastic...

view article
richardrawlings
richardrawlings 18 May 2016

NB - even if we doubled our commission levels in the UK, we'd still be by far the cheapest agents in the entire world.

view article
Agent_PeeBee
Agent_PeeBee 18 May 2016

Clueless. Someone needs to take these people's computers away from them so they can do no more harm than they already have.

view article
richardrawlings
richardrawlings 18 May 2016

Nonsense! The cost of selling a house nowadays has little bearing on the fees charged. Don't believe your own spin on this. Fees have spiralled down to pathetic levels in areas where weak agents have allowed...

view article
Simon Oliver
Simon Oliver 16 May 2016

The best solution is to buy a property that has built-in income generating potential: a nice house with a couple of gites in the grounds is a good start. In France, the rune of thumb is that one 2-bedroomed...

view article
WPD
WPD 12 May 2016

I suggest the answer is to have the notary system being one legal person who represents both parties. Having experienced it a couple of times in France it was a dream compared to our dysfunctional system....

view article
warren
warren 03 May 2016

It's enough to make me weep into my Pimm's :(

view article
james anderson
james anderson 03 May 2016

The sad demise of the croquet lawn...

view article
CommercialTrust
CommercialTrust 11 Apr 2016

".. the stricter lending criteria will reduce the amount of buy-to-let lending by 10% to 20% in three years’ time." The PRA was actually referring to cumulative approvals here. What they believe is that...

view article
Paul Watson
Paul Watson 07 Apr 2016

Interesting research. Confirms the myth that supply and demand of housing stock affects house prices. Unless you live in Central London or a National Park, it's credit availability that drives house price...

view article

Latest Tweets