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First Time Buyers Spend £50k on Rent Before Buying a House

Published On: February 12, 2016 at 9:44 am

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The average first time buyer purchasing a home this year will have already spent £52,900 on rent by the time they get onto the property ladder, according to the Cost of Renting report from the Association of Residential Letting Agents (ARLA).

The report, compiled with the Centre for Economics and Business Research (Cebr), reveals that the average first time buyer in England in 2016 will have spent 16.4% of their total lifetime earnings on rent for all the years they were a private tenant. It is expected that future first time buyers will spend 22% more than those buying today.

First Time Buyers Spend £50k on Rent Before Buying a House

First Time Buyers Spend £50k on Rent Before Buying a House

First time buyers purchasing this year in the North East will have spent £31,000 on rent – the lowest in England. Contrastingly, those in London will have spent double that, at £68,300.

The South East is the only region other than London where the total spent on rent is above the average, at £55,900.

In 2015 alone, the average tenant in the UK spent 22% of their wages on rent, rising to 30% in the capital. Those in the East of England enjoyed the most affordable rents, due to relatively high earnings in the region. However, rent still ate up 18.9% of their disposable income.

Britons that move out of their family home at the age of 18 will typically rent for 13 years before they buy their own property.

ARLA’s Cost of Renting report revealed that those leaving home and starting to rent this year will spend an average of £64,400 on housing before they can buy their first home – one fifth (22%) higher than the current first time buyer.

Those leaving home and renting privately in London will continue to be worse off, spending an average of £91,500 on rent before they buy a property – £23,100 more than those buying in the capital this year.

The Managing Director of ARLA, David Cox, comments on the findings: “The rising cost of rent in this country is a huge issue, and is preventing tenants from being able to save to buy a home. Our Cost of Renting report reveals that tenants are already spending a significant proportion of their income on rent, and therefore struggling to save any money.

“However, as house price affordability worsens and interest rates start rising, more pressure will be put on renting, with weekly rent likely to rise, so homeownership will remain out of reach for many.”

He continues: “Rents are becoming alarmingly unaffordable due to the lack of available housing; the north-south divide we’re currently seeing in the UK is a clear illustration of this. The London rental market is competitive, with far more prospective tenants looking for properties than actual houses available. This is pushing up rents in the capital, which will continue to put pressure on surrounding areas, including the South East, as Londoners relocate to avoid high rent costs.”1

1 https://www.landlordtoday.co.uk/breaking-news/2016/2/lifetime-cost-of-rent-exceeds-50-000

Tenant evictions reach highest ever level in 2015

Published On: February 12, 2016 at 9:00 am

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An extremely alarming new survey shows that more than 250 tenants were evicted from their rental accommodation in England and Wales during 2015.

Latest Ministry of Justice figures reveal that 42,728 households in rented property were evicted by bailiffs last year. This was the highest number since records began in 2000.

Housing activists point to welfare cuts and the lack of affordable homes for the 2% increase in repossessions in 2015. Over half of these evictions are said to have been by private landlords.

Evictions

Despite the yearly rise, the data also shows that the number of rental properties repossessed actually fell in the final quarter of 2015. 9,775 households lost their home in the three months to December, in comparison to 11,269 in the previous quarter.

In addition, the figures show that the number of evictions rose by 53% in the five years from 2010.

19,093 evictions in England were by social landlords, with 5,919 made by private landlords. A further 16,440 were carried out through the accelerated procedure, which can be utlised by both private and social landlords to evict tenants on assured shorthold tenancies.

Tenant evictions reach highest ever level in 2015

Tenant evictions reach highest ever level in 2015

Repossessions

The borough of Newham in London had the largest rate of repossessions, equivalent to 191 per 100,000 in the region. What’s more, Londoners were most likely to lose their homes, with 16 out of the 20 boroughs with the largest proportion of landlord repossessions located in the capital.

However, the number of repossession claims fell during 2015, to 148,043. Of these, 90,317 were made by social landlords, 20,063 by private landlords and 37,663 were accelerated claims.

‘Today’s figures are clear proof of the devastating impact that welfare cuts and the chronic shortage of affordable homes are having on hundreds of renters every day,’ commented Campbell Robb, chief executive of the housing charity Shelter.[1]

‘Successive Governments have failed to build enough genuinely affordable homes and short-sighted welfare cuts are only making things tougher. The only way to fix this crisis for good is for the Government to commit to building homes that people on ordinary incomes can actually afford to rent or buy,’ Robb added.[1]

Falls

Different figures from the Council of Mortgage Lenders show that repossessions of mortgaged homes were down by nearly half in 2015, to the lowest levels since 2002.

10,200 homes were repossessed during 2015, of which 3,000 were buy-to-let homes. These properties were twice as likely to be repossessed by lenders in the final quarter of the year, at a rate of one repossession per 2,500 mortgages. This was in comparison to one in 5,000 in the homeowners market.

A CML spokesman said that when a homeowner fell into mortgage arrears, the lender would look at a number of options to try and keep the occupant in their home. He said that seeking a repossession, ‘will be the last option,’ for the lender.

Continuing, the lender said, ‘a buy-to-let is taken out by a landlord to invest in property and so is fundamentally different. The borrowers may not have the same range of options. For example, many landlords only borrow on an interest-only basis at the outset, so switching them to cheaper repayments may not be an option.’[1]

‘Lenders must also consider the position of tenants, who may be paying rent to a landlord who is not paying the mortgage. In this case, an option may be to appoint a receiver of rent to fulfil the role of the landlord and ensure that tenants can remain in the property as long as they continue to pay the rent,’ the spokesman concluded.[1]

[1] http://www.theguardian.com/money/2016/feb/11/tenant-evictions-highest-level-england-wales-ministry-of-justice?CMP=share_btn_tw

Even Conservative MPs Cannot Afford a Home

Published On: February 11, 2016 at 3:30 pm

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A Conservative MP has spoken out about his struggles to buy a home after admitting to moving back in with his parents.

William Wragg, 28, earns £74,000 per year plus expenses as the MP for Hazel Grove. He is also entitled to House of Commons expenses to cover the cost of renting a second home in London, as well as office space.

Although he is, admittedly, “paid extremely well”, Wragg has been forced to move back in with his parents in the North West in order to save for a deposit.

Wragg earns over two and a half times the average national salary.

He explains his situation: “I am part of that boomerang generation. In a few years, hopefully I will have saved up enough for a deposit. I know exactly what it is like. I have complete empathy with people in that position.”1 

Many aspiring homebuyers are taking proactive steps to finally getting on the property ladder. Recently, we reported that since its launch on 1st December 2015, a Help to Buy ISA has been opened every 30 seconds by those needing some extra help in saving for the huge deposits required.

Additionally, we announced yesterday that a whopping 15,000 Londoners are looking to use the Help to Buy London scheme to help with purchasing a property. This level is unsurprising, with London’s average house price now £506,724.

The housing spokesperson for Labour, John Healey, comments on Wragg’s circumstances: “He is part of a generation for whom homeownership is in freefall. This is a generation of people who are often on good middle incomes but who still find the dream of homeownership is out of reach.

“A million more people became homeowners under Labour, but since 2010, the numbers have fallen by 200,000.”1 

It appears that more buyers are managing to get a foot on the ladder, however, as Marsh & Parsons reports a surge in first time buyer sales, up from 49% of all sales in December to 66% in January.

1 http://i100.independent.co.uk/article/even-74kyear-tory-mps-are-having-to-move-back-in-with-parents-to-save-up-for-a-house–WyM3qpeR6x?utm_source=indy&utm_medium=top5&utm_campaign=i100

ARLA receives clarification on extra occupants

Published On: February 11, 2016 at 2:18 pm

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ARLA has finally received clarification from the Government relating to specific features of the Right To Rent scheme.

The firm has obtained guidance on existing tenancies where an additional occupier joins a longer-standing and named tenant.

Statement

In a statement on ARLA’s website, it says that the point of beginning in determining agents’ or landlords’ responsibilities is the Immigration Act 2014 and the official Code of Practice.

Here, it reads that a landlord is not permitted to take any action relating to residential tenancy agreements entered into before 1st February 2016. Also, a landlord is also not required to take action should the tenancy agreement be renewed following that date if the agreement will be between the same parties and there has been no break in their right to live in the premises.

ARLA has questioned the Government over what happens when a renewal has one new occupier in addition to a longer-standing tenant. The firm queried whether an agent has to conduct checks on all existing occupiers or just the new tenant.

ARLA receives clarification on extra occupants

ARLA receives clarification on extra occupants

Response

Communicating the response, ARLA said, ‘The Home Office response to this is that if a different occupier is named on the tenancy agreement then it is a new tenancy in terms of the scheme and a Right To Rent check should be made of all occupiers subject to the scheme.’[1]

The association also says that there is new ID Guidance, provided by the Home Office. ARLA advises agents who have copies of the ID Guidance printed before the 2nd February 2015 to check against the guidance currently on the site.

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/2/right-to-rent-arla-gets-clarification-on-extra-occupiers-and-id-guidance

Many Homes Sold Through Right to Buy Now Owned by Private Landlords

Published On: February 11, 2016 at 12:12 pm

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The Communities & Local Government Committee has warned the Government that many homes sold through the current Right to Buy scheme have ended up being rented out through private landlords.

Many Homes Sold Through Right to Buy Now Owned by Private Landlords

Many Homes Sold Through Right to Buy Now Owned by Private Landlords

The committee revealed that landlords are letting 40% of ex-council homes sold through the controversial scheme at more expensive rent prices.

The warning arrives as the committee discussed the Government’s plans to extend the Right to Buy scheme to housing association tenants. The extension would be funded through forcing local authorities to sell off their most valuable assets.

The Government also expects housing associations to build one affordable home for every property sold.

The Chair of the Communities and Local Government Committee, Clive Betts MP, comments: “The fundamental success of this policy will depend not just on whether more tenants come to own their home, but on whether more homes are built.

“As a committee, we are concerned that there are a number of unresolved issues with the Government’s policy, which could have a detrimental effect on the provision of accessible and affordable housing, particularly affordable rented property.”

He continues: “The Government needs to set out in more details on how it will meet its target of at least one-for-one replacement of the sold homes, particularly given issues such as the availability of land, the capacity of the building industry and the uncertainty of income from council home sales.”1

The concerns were raised after the committee found that a large number of properties sold through the original scheme have quickly become private rental sector homes.

Its report states: “The committee believes the potential for selling social housing assets at a discount, only for them to become both more expensive and possibly lower quality housing in the private rented sector, is a significant concern. The committee recommends measures to restrict homes sold through the Right to Buy ending up in the private rented sector need to the explored.”1 

1 http://www.parliament.uk/business/committees/committees-a-z/commons-select/communities-and-local-government-committee/news-parliament-2015/right-to-buy-report-published-15-16/

Chancellor’s measures to harm sector, report shows

Published On: February 11, 2016 at 11:42 am

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A new survey has revealed that the Chancellor’s policies intended to slow buy-to-let growth are actually leading to increased pressure on the sector.

Research carried out by Belvoir shows that despite 68% of landlords surveyed not raising their rents during the last year, 86% think that larger purchasing costs for investment properties will leave them with no choice but to put rents up in 2016.

Analysis

Managing Director of Belvoir, Dorian Gonsalves, explained, ‘the survey ran from mid December 2015 to mid-January 2016 and we invited all landlords, not just those who are clients of Belvoir, to respond to an on-line questionnaire. We received a total of 1,038 answers and many of these concurred with Belvoir’s predictions at the start of this year.’[1]

The vast majority of respondents were investment landlords with between one and ten properties. 93% of these rental properties were in England.

‘When we asked landlords how changes to stamp duty and taxation were likely to influence their investment plans for the next 12 months, 44% responded by saying they will be adopting a cautious approach to further investment,’ Gonsalves continued.[1]

‘A total of 68% of landlords had not increased their rents at all in the last 12 months and almost half of those surveyed have no plans to increase rents in the next 12 months.’[1]

Chancellor's measures to harm buy-to-let sector, report shows

Chancellor’s measures to harm buy-to-let sector, report shows

Ominous

More ominously, 88% of landlords feel that higher purchasing costs for their investment properties as a result of the tax changes will lead to increased rental costs.

‘Landlords are almost equally divided in their views as to whether they think BTL remains a good investment for new people coming into the market. A total of 46% thought it would still be a good investment and 40% thought it would not, with 14% undecided,’ Gonsalves explained.[1]

‘The majority of landlords named George Osborne’s anti-landlord policies as the single largest challenge that landlords will face in 2016. This is entirely in line with my prediction that increased Government interference in the BTL market will put a real squeeze on the supply of property in the rental market in 2016 and beyond,’ he concluded.[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/2/letting-agencys-survey-shows-osborne-measures-hurting-private-rental-sector