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

Oliver Conway
Oliver Conway 18 May 2017

Making a neat inventory is a good idea, but if the seller is not willing to provide it, can the buyer demand it?

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Bertrand
Bertrand 17 May 2017

First step to nationalisation of the private rented sector IMHO. Nanny state poking their noses into things yet again. I object, as a decent landlord, sometimes having to deal with some pretty awful tenants,...

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Izzy
Izzy 16 May 2017

This is such a great a post. I love the detail you've gone into. It's a very useful article for helping those who are looking at deciding which sector they would like to go into! When I first started investing...

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paul burnham
paul burnham 30 Apr 2017

Jeremy Corbyn's pledge that a Labour government would build 500,000 new council houses must electrify the general election campaign. Reliance on markets and the profit motive has brought huge housing-related...

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CommercialTrust
CommercialTrust 28 Apr 2017

Sadiq Khan?s announcement of an online database of landlords and letting agents who have been convicted of housing offences, appears on face value to be a variation of the already implemented Database

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warren
warren 26 Apr 2017

You're very welcome Mary! Glad you enjoyed them :)

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Mary Ward
Mary Ward 26 Apr 2017

Thank you for the wonderful ideas. First impressions can make or break a deal. It's sadly that many homeowners drop the kerb to create an off-street parking space.

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Tony Gimple
Tony Gimple 14 Apr 2017

I'm not at all surprised that so many landlords are still confused about what the tax changes really mean and how it will affect them. In particular, the blind rush to incorporation is leaving landlords...

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MH
MH 13 Apr 2017

You are right that the bank holidays are going to be spoiled in looking for the properties. But people who want to sell their property and looking for the better relocation, they can get benefits of this...

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bnellyb
bnellyb 08 Apr 2017

There will be an exodus of private landlords over the next 5 years as tax changes take effect, private landlords provide an important service to the rental market, why do housing associations and councils...

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Fred Cassman
Fred Cassman 07 Apr 2017

"Make it look like you are at home": often people forget this and share on facebook their location!

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jared townsend
jared townsend 05 Apr 2017

It'll be interesting to see how & if the Government's asset sale regarding mortgages helps

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