Rent a home? A perfect storm is coming that could see you priced out
Runaway house prices mean that half the population won't be able to afford to buy a place of their own by 2026. It means that millions of people will be trapped in the rental market - and subject to what has been described as a 'perfect storm' of rising costs.
A study for Money.co.uk by the Centre for Economics and Business Research found that over the next ten years, the average rent will rise 28%. Given that average salaries are predicted to rise by just 20% in that time, this leaves tenants with a budgeting nightmare.
In some parts of the country, the trend will be even more alarming. Rents in London will be up by 39% by 2026 while in the South East they are estimated to grow by 34% and the South West 32%.
Why?
This is partly a result of simple supply and demand. Almost a third of people will be renting by then, so there will be plenty of demand, and not enough supply. It means landlords will be able to push prices up and still guarantee themselves tenants.
There is also the issue of the rising costs that landlords face. In an effort to put buy-to-let investors off, the government has already attacked tax relief on mortgage interest, and will boost stamp duty for these buyers. Given the fact that they have all the power in the relationship with their tenants, landlords can simply pass these costs onto people renting their properties.
Deposits
Getting on the rental ladder is also going to get far harder. The cost of the average rental deposit is expected to rise 40% in the next decade - to £1,111 - which will represent around 70% of the average monthly salary.
In some parts of the country, the figures will be even more shocking - as in London the average rental deposit is predicted to rise to £2,733 by 2026, sucking up 120% of the average monthly salary.
This is partly because the deposit is usually equal to a certain number of weeks' rent - so as rents rise so do deposits. However, it is also because of a growing trend towards landlords charging six weeks' rent as a deposit - up from the traditional four. The study said that around two thirds of landlords will be demanding this within a decade.
What can we do?
Money.co.uk is calling for the government to step in to control the spiralling cost of rent, and rental deposits. Unfortunately, the current government is unlikely to bring in any kind of rent control - as it is counter to their political philosophy. It could consider trying to manipulate the market with tax changes and incentives, but given its record on this issue so far, this may not hold a great deal of hope for generation rent.
Hannah Maundrell, Editor in Chief, said: "Tenants are stuck between a rock and a hard place and the situation is only likely to get worse. Many not only face being priced off the property ladder but also the rental ladder too. This could force people to borrow the extra cash they need for a deposit on loans or credit cards, pushing up the cost and creating a perfect storm for a major renting crisis. Maybe the bank of mum and dad should prepare itself for another withdrawal? Or, we could see many left with little choice but to live with their parents well into their 40s."
