It’s estimated that within 20 years, over 50% of the housing market will be privately rented. But how do figures compare for renters and buyers and what does it mean?
At present, homeowners make up 63% of the housing market, a fall of 7% from ten years ago. However, this looks likely to change relatively quickly with VeriSmart predicting that rent-paying tenants will make up 65% of the market by 2045.
As property prices continue to increase, many have no choice but to rent privately. Younger people are finding it harder than ever to get their foot on the property ladder.
In 2017, a third of people aged 35-44 were renting from a private landlord, a substantial increase from the reported 1 in 10 people of that age renting 20 years prior. ONS statistics suggest that homeownership has become concentrated in older people with almost three-quarters of people over 65 owning their home outright. This high figure is due in part to the implementation of the 1980 Right to Buy legislation by Margaret Thatcher’s government, which meant that many of the baby boomer generation were able to become homeowners.
On average, rental costs across the UK have never been higher. The ONS reported that in 2020, the median monthly rental cost in England was £700, whilst a Santander study found that the average monthly payment on a mortgage for the country was £723 for first-time buyers. This suggests that whilst some tenants undoubtedly choose to rent for various reasons, many renters are finding it near impossible to save up for a deposit.
Even with government schemes like Help To Buy, which was introduced to help improve the affordability of housing, first-time buyers are still struggling to buy property, and with the average deposit for a UK mortgage growing to well over £40,000 in 2021, lots of renters see themselves as unlikely to ever be able to afford to buy a home.
Since 2009 there has been a consistent, sharp, and dramatic rise in house prices with the average house price has jumped from £154,452 to £252,000 in 2020. Longer-term mortgages have grown in popularity, meaning many of those who have managed to find their footing on the property ladder are still paying more in interest than buyers ever have historically, even with comparatively low-interest rates. Buyers with poorer credit histories and lower deposits can end up on interest rates of 4%+, meaning a 30-year term mortgage on an average house would likely rack up an interest bill of more than £100,000 over said term.
It’s no surprise that as the costs of buying a home increase, so have the number of people in rented accommodation, and it looks very likely that this trend is set to continue. As prices continue to increase and young people’s wages continue to stagnate, we’re likely to see a generation of renters who see owning a home as something only a select few can accomplish.