Rents to soar over next 3 years

[Twiglets1]

As reported in the Telegraph today, the Resolution Foundation has calculated that rent will rise at almost double the rate of earnings between now and 2027. The think tank said tenancies for new and existing lets are expected to grow by 13% over the next three years – almost double the 7.5% growth in average earnings, as forecast by the Office for Budget Responsibility.

The cost of rent for new tenants has increased by 18% since January 2022, but this burst of growth is yet to work its way through the whole private rental sector.

Cara Pacitti, senior economist at the Resolution Foundation, said: “Millions of families agreeing new tenancies across Britain have faced surging rents in recent years, as we have emerged from the pandemic.
“Those rises for new tenancies are starting to slow but how much renters actually pay will continue to outgrow how much they earn for some years to come as those not yet exposed to higher prices are hit.
“With more families renting privately, and renting for longer too, these rent surges are a bigger problem for Britain, and require bolder solutions from policymakers.”

The question is, with mortgages & rents both becoming unaffordable to many, could the next election be won or lost on the issue of the property market crisis?

https://www.telegraph.co.uk/money/property/buy-to-let/tenants-face-three-more-years-of-soaring-rents/

Agreed

There are huge issues in this country with infantilised young adults which is not good for them and not good for society at large.

We (DB, me and DM) are landlords. We only have 3 properties. We’ve actually find down the route of managing the properties ourselves after years of using letting agencies to handle it (mostly useless). We charge a fair rent for the areas and have generally good tenants. If our costs rise eg with bills increases then of course our rents will increase. Luckily all mortgages are now paid off. My ex boyfriend had 2 flats he rented out and managed them himself too and fair rents. He had these as his work was up and down with contracts.

So many properties owned by Russians, middle easterners, Chinese, Indians who do not live in UK but buy huge swathes of new built flats in cities for big rental profit.

If you read further on in the thread you will see it acknowledged that of course there are good LLs as well as bad, and that it is understandable that as their costs rise, so too will rents.

I’m glad you charge a fair rent & manage your properties well, but the issue for the UK is that market rents are becoming unaffordable in many areas especially to young people. This is why I wonder if strategies to resolve the problem will become a key debate as we get closer to the general election.

I agree it seems more problematic when owners of rental properties live abroad, and that is something a government could address.

Just a personal anecdote but my daughter’s house is divided into 4 flats. Three of them are owner occupied and take care to maintain the fabric of the beautiful old Victorian house. The basement flat is owned by someone who lives in America and rents it out. They take no interest in maintaining a property they never see and their tenants are apparently living with a damp problem that has now turned into a mould problem.

I agree not having to pay for a commute is huge, many people spend 100s a month on commuting around London

But let's not repeat myths about how if young people just stopped drinking expensive coffees, they could afford a deposit. Say someone is spending a tenner a day on their coffee and their lunch, I guess it's a couple so £20 a day. Except, you still have to eat lunch, right- let's say their new lunch costs just £1 a day, being generous here, so they're saving £18 each working day.

252 working days in a year, minus 20 further holiday days, so 232 days where they're saving £18 a day- £4176 in a year- which okay, is not nothing, but you're probably looking at needing to save a minimum of £30,000 to have any kind of deposit + fees and moving costs in the South East. That's over 7 years to save for a deposit, and I think I've been pretty generous in my numbers, in terms of what they'd actually save. And how much do house prices go up in that time? Will that be a big enough deposit in 7 years time?

There's no way people were saving full deposits in lockdown solely based on not getting lunch out. I get maybe clearing a credit card or two, but not saving full deposits.

I know people will say that you can also cut out takeaways and other treats- to be honest, for most of the young professionals I know, these things are a pretty rare treat these days. You're looking at, let's say, 5 years of literally having no treats at all, hoping you have no financial disasters, hoping your landlord doesn't whack up your rent or evict you, to save up a deposit, which, by the time you get it together, may not even be enough.

It really isn't as simple as saying that you can "be more frugal" and everything will be fine. In reality that just isn't how it works at all. Most FTB now will have had either some kind of family help, whether that's a gift, inheritance, being able to live at home for longer, or a windfall from some other source e.g. big bonus at work etc- at least to get them started with their savings. They'll likely have put in some of their own savings on top- but unless you're a very high earner, it's very, very hard to save enough in many areas of the country whilst renting- and the more rents go up, the harder it will get.

Excellent post

People forget far too easily that their “success” with housing is not down to their special ability but rather due to a global trend.

I love when people suggest that young grads could live in Zone 6 or some unpleasant area when they themselves would never have considered living there or have their own dc live there.

Rents and mortgages against earnings have soared to the extent that no amount of frugality is going to make the situation workable for younger people.

Posters muttering vaguely about how the young could afford to buy if only they could cut out Costas and Netflix really need to pipe down.

I would say it's not just the south east as well. I live in the South West, in a toursity area- for the last few summers, a lot of businesses have been complaining they can't get enough staff. Well, of course they can't, because you can't live around here on a waitress/cleaner's wages! Around here, you really need two people earning full time to rent or buy anywhere- maybe not in amazingly well paid jobs, but certainly in full time work that isn't seasonal and probably pays higher than minimum wage, too. In the past, there were a lot of families that could manage if one of the couple was only earning a seasonal wage, but not any more.

In some of the really popular towns it's definitely getting to the point where as you say, teachers, nurses etc can't afford to live there- there are schools I know who massively struggle to recruit because young teachers can't afford the rents locally. A lot of people I know are moving to what were seen as the less desirable or "rough" towns, because that's where they can afford to buy. Which is fine for us, but that probably means we're pushing house prices and rents up beyond what lower paid people in these towns can afford, and the question is, where do they go? And if they move, e.g. out of county, as you say, who does the care work or works in supermarkets or works as cleaners or maintenance staff or does all the other relatively low paid work that makes society function?

There definitely needs to be a solution that ensures that everyone is housed and that people doing all kinds of jobs can live in the communities where they work.

Thank you!

I'm not in the South East (South West) but as I said in a previous post, I know a lot of people who have bought in what might be considered previously "undesirable" towns. Which is fine, but if two income, professional couples with no children are buying in these places, I'm not sure where that leaves everyone else. And a lot of these people have had family help (e.g. living at home well into their 20s/30s to save) or inheritances etc.

It also means that in the more expensive towns there is a shortage of key professionals like nurses, teachers, firefighters etc, because it's not an area that lends itself to long commutes etc- so if you move out of an expensive town, you're then likely to start looking for another job that's easier to get to.

It does also mean there's more housing pressure in these towns (combined with things like air bnb etc), which means rents are shooting up across the county, and a lot of young people will just leave and potentially not come back.

It's not good for anyone.

This has been the same trend for generations though, although I agree it is getting worse. My grandparents were able to buy their house on just my grandfather's salary, then my mum needed to work to pay for stuff beyond the mortgage. Then for my generation, two salaries were required, then the term of the mortgage started getting longer.

It won't be long before we are like some of the Asian countries where a mortgage lasts generations.

After all, the origin of mortgage is from the old French mort meaning death, and gage meaning pledge. It is a death pledge.

Rental prices are directly linked to that trend.

Yes I totally agree it’s not just the South East. I just used that in my post as was replying to another poster who mentioned the South East. I did think afterwards that I should have added “and other expensive areas” as there are lots of other expensive areas like the SW for example.

Yeah, no worries, not getting at you, just expanding.

The thing is, as more and more areas get unaffordable, it begs the question where do those in lower paid jobs end up going?

Obviously some people will say they should increase their earning capacity etc- but even ignoring the fact that not everyone can do that- we need people to do lower paid jobs in all of our communities.

Housing costs are increasing far faster than wages, and it is a major problem- I know this thread is about rents specifically, but rents are mostly linked to mortgage costs and pressures on housing stock.

Decreasing rents, won’t go well with landlords, especially trashing tentants, who make life difficult

A massive increase in social housing is needed. Any stigma around renting these properties needs to be rethought. Truth is, government don’t want an increase in housing stock because then property prices would fall ie no longer be over inflated

My landlord has moved abroad because of the cost of living in crisis in the UK despite bragging on social media he's a millionaire because he's a Landlord and he making it incredibly hard to get the council to get in touch with him because he just doesn't respond.

In addition the renting cycle is no longer just landlord and tenant for example I'm in a rent to rent situation which is becoming increasingly popular whereby a landlord went to someone else and they went to the tenant to a agent and it means that no responsibility is really taken by anybody.

Whilst I understand houseshares will always be a thing we do have to reckon with the fact that if you're earning an above average wage in London you should be able to rent a one-bedroom department that isn't possible anymore. I agree with the point about working and skipping events. I live in a houseshare but in zone 4 because of where I live, I don't feel safe at night therefore if there's a networking event I have to skip it because I know that I'll have an unsafe journey walking home and I live in a houseshare that's not living with parents.

I actually have managed to save a 5% deposit for a home but the maximum I can actually afford is £280k and finding something in London in this price range that doesn't need a significant amount of work to do is incredibly difficult .

My sons friends aged 22 have just taken out a 40 year mortgage 🙈

Wow - I thought my daughter’s 33 year mortgage was bad enough!

Sorry for your struggles @MotherOfRatios and it sounds such a tough situation for young people even those like yourself that earn above average wage in London.