Nine in 10 renters do not have the savings for 5% home deposit
By Will Leyland, 19 August 2016
As the housing crisis deepens more bad news has emerged for first time buyers after it was revealed recently that UK home ownership is at its lowest for thirty years as young people struggle to get a deposit together for their first home.
There is a real concern that the pressures of saving such huge amounts combined with the requirement of a squeaky clean credit history are making it near-impossible for these people to enter the property market.
These concerns were realised today as a study has found that nine in ten renters simply do not have the ability to save for even a 5% deposit. The average required for a 5% deposit on the average UK house is £8,838 but fewer than 15% of private renters are able to accumulate this amount. The study, by the Equality Trust, found that high private rents are taking such a significant amount of families’ disposable income that they are simply unable to save.
Londoners already spend more than 60% of their income on rent, while in many other parts of the country landlords are collecting about half the take-home pay of private tenants. Average rents in the UK are £764 a month, while in the capital they are £1,543.
The charity found that in the local authority with the cheapest houses in Britain – Burnley – eight out of 10 people still do not have enough savings to fund a quarter of the deposit needed to buy. These are trends that are only set to worsen over the course of the coming years as incomes stagnate and the economy starts to slow post-Brexit.
There are, however, positives to be taken from the news for tenants and landlords. First of all, for landlords the supply of housing isn’t likely to increase so, despite a dropping demand, the balance isn’t likely to swing significantly in favour of buyers any time soon. Instead we should see lower, but still steady, growth as demand starts to even out and the market sees an influx in investment thanks to shaky performances in financial markets. Furthermore, interest rates for landlords look set to be lowered again by the central bank and this will allow many to decrease their outgoings when it’s time to re-mortgage their properties.
The good news for tenants is that, as the market starts to shift slowly towards a primarily private rental market, we are seeing improvements in tenants’ rights and the services they receive. As being a landlord is becoming a safe and profitable way to invest money in tumultuous times the level of professionalism has increased significantly. This has been helped enormously by the increase in reputable and effective letting agents able to act as a professional middle-man.
As the housing economy gears up for a large increase in private renters it certainly makes sense that buy-to-let landlords have upped their game significantly and in most cases landlords with a portfolio of properties are taking a hands-off approach and instructing professionals to deal with the day-to-day running of their properties.
In time it is believed that through the improvement in reputable and professional letting agents, tenants will be able to resolve issues more quickly while avoiding disputes and landlords will be able to increase their portfolio more easily than they would have on their own.
It seems certain that private renters will continue to grow as a group over the coming years and, while some may feel dismayed at not being able to become homeowners in the near future, there is much to be positive about from all sides.
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