Will more people rent?

[muddyday]

Browsing on rightmove with a cuppa earlier just to be nosey, as a house on my street has gone up for sale and I always like to snoop look at peoples style…

A very small 2 bed house (I would say 1.5 beds, really) has gone up for £200k. If you can put ten percent deposit down, that still makes repayments £1200 a month. If your combined household income is £4800, your mortgage on a tiny home is still 25% of your total income which I’d never feel comfortable with.

Not to mention the obvious - 4800 total household income after tax is well above the median, and is the equivalent of two people earning 45k each. If it takes a household income of 90k to afford a 200k property, and still your repayments are a quarter of your income overall then how will folk afford that? Thinking especially of graduates, those with young children who have to weather reduced income due to maternity or childcare, those with chronic illness who can only work part time.

Maybe I am missing something or I’m out of touch. Are more people going to rent forever and will that become normal?

The price of rental properties is also crazy however, and in many areas there a fight to get one .

You’re not wrong!! Plus I imagine finding a decent private landlord isn’t easy

I was wondering this earlier. I don’t live in a particularly desirable area (east Mids) but was shocked at the price of rentals when I had a look recently; we rented about 10 years ago for about 500 a month, the same sort of house is now about 950 a month. That’s more than our mortgage is and I was shocked.

I think interest rates will normalise at some point to around 3 or 4 percent so that would hopefully reduce monthly mortgage payments for many, and those that couldn’t afford to buy previously might have more of a chance (although the deposit issue is another story!). I do think it’s a vicious cycle though, I think house prices will dip due to interest rates, then go up again once rates stabilise, so you either pay more for your house or more on interest 🤷‍♀️

I honestly don't know what people are supposed to do. There are already many spending so much of their money renting and other totally normal living costs that are now insanely high that they'll never be able to raise a deposit, and unless the bank of Mum & Dad literally has £100,000k+ in many parts of the country they won't be able to help either. But now rent is so much more expensive than a mortgage in some places that renting looks unviable as well.

True, if it’s not one it’s the other

House prices will start to come down.

Or disposable income will disappear.

Or both.

Or more adults still living with parents or house sharing…….

The price of rentals is through the roof. Many renters are having to bid for their tenancy which means their actual rent is often several hundreds of pounds over the list price.

It's still cheaper to buy

This might not be the worst idea for families though, living as a unit especially if the house is big enough

Surely can’t be both

I don't think you need so high an income for a 200k house?!

I mean, if you live with parents/house share in your 20s and are motivated to save up, it's actually quite easy to save a deposit.

Fair enough, it's a nightmare if you're already stuck renting to save a deposit but if we had a household income of 90k, I wouldn't be living in a 200k house!

You don’t need a household income of £90k to buy a £200k house. When we bought a £400k house a few years ago our household income was less than that and it was fine. Interest rates weren’t as high as now but our repayments were more than £1200 and it was very manageable. Renting is still a lot kore expensive in many areas so still better to buy, and it is affordable for a lot of people.

As I say, if you were buying one in this economic climate, you’d need a minimum household income of well over 4k

Maybe not when you did but rates make the repayments so high & so that is factored into affordability. I thought lenders won’t usually approve something as affordable if your salary isn’t at least 3x, ideally 4x the monthly repayment.

Surely the size of your deposit is taken into account? Saving 20k on an income of 90k (if not already caught in the rental trap) is not difficult.

And to clarify, I mean they should have more than a 10% deposit at that income level.

@Dacadactyl true. I was badly trying to make the point that not many people will be on anything like an income of 90k though. What about the ones on much less who are caught in the rental trap.. nightmare

Our mortgage is 200k over 35 years for £800 a month. I think it depends on household income spending 25% of 4.8k in your example is two 37k salaries so pretty average and still only £600 per person. The struggle is those on sub 30k who have no other choice. We will be giving DS a house deposit but will also allow him to live at home rent free with a BF/GF to save between two of them even saving 2k a month that's 48k in two years.

I don’t disagree with your point that it’s really hard to buy a house now, especially while renting, without family help. But I don’t think your calculations are quite right. Two people earning £45k each (ignoring student loan repayments and assuming just an auto enrolment pension) would take home a combined total of £5700.

Oops! You’re right. I’ve added it up wrong . I still think it is really bad for first time buyers even if they just need a combined of 70/75k, it’s a lot for some families and newly qualified professionals

I agree, it’s rubbish. I’m mid-thirties, bought my first house 2 years ago and was only able to because of family help and my DP working shedloads of overtime. All of my peers who own also got family help. Without that massive privilege and with the crazy amount people have to pay in rent these days, it’s nearly impossible. To answer your actual question, yes, I think more people will have to rent, and I also think people will have fewer babies!

It doesn't have to be £1200 a month with a longer repayment period. £1200 a month for that mortgage must be over a pretty short time period. Most people will work well into their 60s these days. Plus 25% of wages going on mortgage is pretty normal.

On 45k I was able to buy a 150k house on a solo income a year ago, so, by that Maths, it should be about 60k to buy a 200k house.

But I get your point about insane house prices. 20 years ago, the house I'm in now sold for 30k; it's had a 5-fold increase.

The place I used to rent went from 750pcm to 950pcm in the space of a year.

The increase in house prices is insane. But I thought the rule of thumb was that your monthly payment should be no more than 33% of your gross income? So 25% would be acceptable to lenders.

Something will have to give, so much has been driven by equity gains which is a lot harder to built in this climate.

A local charity (Warming Up The Homeless) has had such a high demand for tents they've ran out of them, people are buying and donating them but they still cant keep up with the requests, this has been going on for months. Plus the amount of females and young people also living on the streets here is insane, as is the number of families living in squalid temporary accommodation.