The UK has witnessed a significant increase in private tenants over the last decade, with many people below 35 having to postpone their dream of buying their first home. Instead, those tenants have been forced into renting for longer, as soaring house prices, stagnant wages and stricter mortgage lending criteria have made a home purchase unaffordable for many. Those tenants are now part of so-called “Generation Rent”.
Significant increase in the number of tenants
Over the last decade, the number of tenants in England between 25 and 34 has increased from 20% to 50%. The supply of rental properties could not keep up with demand – with the number of applicants per rental property at an all time high – 7 on average in England and even higher in London, according to the English Housing Survey.
Generation Rent is now not only a way to refer to those young renters in question, but has also become an active campaign aiming at helping private tenants get access to better managed, affordable private rental homes.
Private rental sector growth likely to continue
But demand for more rental properties also means more landlords – or landlords with larger portfolios. Whilst we are starting to see some institutional interest in the UK residential rental sector, the majority of homes still remain in private hands. Moreover, about 80% of private landlords only own one rental property – for most of them, this represents a long-term investment allowing them to benefit from capital growth and to park a large part of their savings.
However, growth in buy-to-let will also be helped by a recent regulatory change: since April 2015, pensioners are able to withdraw an unlimited amount of their pension pot to invest it elsewhere – according to Property Wire, 32% of people between 45 and 65 would consider using parts or all of their pension pot to buy a rental property; furthermore, according to Moneyfacts, 69% of survey respondents over 50 see property as a safe investment. Another study by the Office for National Statistics showed that 42% people thought that investing in property was most likely to “make the most of [their] money” compared to other asset classes.
It is therefore easy to conclude that the phenomenon of small, mostly amateur buy-to-let landlords will continue to grow in the UK. And, whilst some first time buyer schemes as well as a renewed rise in wages could help revive first time home ownership somewhat, the bulk of Generation Rent will continue to be renting for longer – and, in many cases, from private landlords.
Renting also has its benefits
Whilst renting instead of owning can feel frustrating, there are also major advantages of being a tenant:
- Flexibility – it is not only easier to move for tenants – it is also easier to change their lifestyle, especially now that working remotely or part-time has become easier. Owning becomes even more complicated for couples who bought together and later decide to separate.
- Less financial commitment: Having to make monthly mortgage payments is a major commitment, and young people in particular may want to retain more financial flexibility.
- Cost of owning vs. renting – Ownership always costs more than you think – many first time buyers in particular will stretch their finances already to afford their home, without taking into consideration the additional costs for furniture and equipment. Over the last couple of decades, house prices have risen fast, making capital appreciation a great way to cover the costs of buying – however, in the absence of capital gains, owning can often be more expensive than buying.
- Maintenance – Last but not least, don’t forget all the additional unexpected repair costs, as well as ground rent and service charge.
Landlords mostly want to find the right tenant
Most importantly, we believe that having a trustworthy, reliable landlord or managing agent – and a constructive, positive relationship with them can be key to a tenant’s peace of mind. Most tenant complaints stem from poor communication with their landlord and a lack of mutual trust. Establishing and building a good relationship is essential – after all, our own research shows that, for 80% of landlords, what number one priority for them – before time and cost – is to find the right tenant.
Tenants don’t need to be the poor or pesky students Victoria Whitlock of the Accidental Landlord was unfortunate enough to have to deal with. After all, Generation Rent highlights research by AXA showing that 74% of tenants pay their rent on time, and that 85% of them haven’t had complaints about noise. It is just about finding the right ones.
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