The Public Liability Insurance Blog

Rental market on the rise

This is a guest post from Urban Sales and Lettings.

Data from the latest census has highlighted a surge in the number of private tenants renting in the UK. The proportion of people resident in England and Wales who are renting has increased from 9% in 2001 to 15% in 2011. There are also an additional 17% of people in social housing. Meanwhile the number of people who own their own home either through a mortgage, loan or outright has dropped in the ten years to 2011 by 4% to 64% of households.

HousesThis data has confirmed the growing trend of “generation rent” where young adults continue to rent into their thirties as they struggle to save for a deposit on a property. Rental prices in the UK have continued to rise with more than a fifth of tenants in England and Wales now paying over 50% of their take home pay on rent. There are also three million young adults (20-34 years olds) who still live with their parents whilst they try and save for a property of their own.

Rightmove’s latest consumer rental forecast has offered some hope to tenants, as the majority of landlords look to freeze rental prices for 2013 to ease the financial burden on tenants in the private sector. However 59% of existing tenants did say they would like to buy but cannot afford to and are thus “trapped”. This is now at the highest level since the survey was started in spring 2010. Miles Shipside, director and housing market analyst commented on this saying: “This is an important reminder of how owning the roof over their head is still the principle ambition for the majority of tenants. It is a goal that many are currently being denied by a combination of high deposit requirements and a vicious circle that means that rising rents shackle their ability to save enough to get out of rented accommodation. It is an indication that the ability to purchase seems to be as tough as ever, and the pressure for more properties in the rental sector is not set to ease.”

As it looks increasingly likely that the UK’s housing market will see a fundamental shift towards private rentals as the most typical accommodation the standards of private landlords and letting agents, who are currently unregulated, are likely to come under greater scrutiny.

arial viewIan Potter, the managing director of the Association of Residential Letting Agents said, “The census data confirms what our members have already told us, that would-be home owners are increasingly turning to the private rented sector after being priced out of buying their own property. As the PRS continues to expand, it is imperative that the government takes decisive action on regulating letting agents. This will help prevent less scrupulous landlords from taking advantage of the unprecedented level of consumer demand. Renting should be a positive experience for both tenant and landlord, and a professional agent will be able to guide them through the process.”

As well as calls for regulation of estate agents, the data also highlights the need for the government to take action to provide more affordable housing for those who wish to buy. Whilst 88% of private tenants wish to take their first step onto the property ladder,51% of those currently renting do not think they will be able to own their own property in the next ten years. A recent YouGov poll for Shelter also revealed that 44% of people don’t think their children or future children will be able to afford a decent home. A report by the Institute for Public Policy Research has suggested that the demand for housing in the UK will outstrip supply by 750,000 by 2025. Census data also reported that house building fell by 4% in the last decade.

This situation is now putting increasing pressure on the housing market and house prices. Between 2001 and 2011 it is estimated that wages increased by 29% whilst house prices increased by 94%. At present the average house price is 11.1 times greater than the average salary and a first time buyer is typically 37 by the time they are able to afford a property.

Shelter’s chief executive, Campbell Robb said, “These figures confirm that homeownership is slipping further and further out of reach, no matter how hard people work of save. This means young people are living at home well into their thirties, desperate to get on in life but unable to afford a place of their own. Meanwhile, more young families are stuck in rented housing under constant threat of being evicted, worrying about whether they’ll have to move again.”

Whilst new government schemes such as the First Buy Equity Loan and New Buy Housing Scheme provide some assistance to first time buyers looking to get on the property ladder, there remains a lack of affordable housing in the country for the UK’s growing population and for new buyers coming onto the market. As rising rents leave tenants unable to move on from rental accommodation it seems more likely that over the next decade the housing market in the UK will become more like that of countries in Continental Europe, where it is the norm to remain in rental accommodation for a significant period of time. However the UK needs to see further regulation of letting agents so as to offer greater security to tenants, especially those with families who do not want to live under the threat of eviction.

Written by Nationwide Online Estate Agents