A new investigation has predicted that private rental tenants could soon face similar financial challenges to those buying a new home.
Research on behalf of financial comparison website money.co.uk by the Centre for Economics and Business Research suggests that the cost of an average rental deposit will grow by 40% by 2026 to £1,111. The average monthly rent is predicted to rise by 28% over the same period of time.
Increases
If these predictions are true, the average monthly rental deposit will be 70% of the typical monthly salary. However, strong regional variations must be taken into account.
For example, in London, the average rental deposit is expected to rise to £2,733 by 2026. This would amount to 120% of the average monthly salary, a rise from 99% in 2015.
Across the South, deposits are expected to rise sharply. In the South East, the average deposit is predicted to hit £1,469 in 2026. This represents 83% of the average monthly salary at £1,761, a rise from the 72% recorded in 2015. In the South West, the typical deposit is thought to hit 80% of average monthly earnings at £1,437.
Rental rises
Average monthly rents are due to increase by 28% by 2026, 8% greater than average salaries over the same timeframe, which are set to grow by 20%.
The greatest increase in in rents during the next ten years is expected to occur in the capital, with growth expected to hit 39%. Other regions expected to perform well are the South West and South East, where rents are expected to grow by 32% and 34% respectively.
On the other hand, the lowest increases in rent are likely to be Yorkshire and the Humber, with a 17% increase expected. Overall monthly salary is not expected to keep up with the pace of the rental market.
Between 2015 and 2026, the typical monthly salary is expected to increase by an average of 20% to £1,576. This is lower than the projected increase in both monthly rental costs and deposits, which in turn could see many finding the cost of renting just as unaffordable as buying.
Could tenants be priced out of market?
Blow
Hannah Maundrell, editor in chief of money.co.uk, said, ‘the rapid rise in deposits as well as rents is a double blow for everyone on the rental ladder. With the forthcoming changes to tax legislation and crackdown on buy to let mortgages likely to erode landlords’ profits, there’s little doubt these costs will be passed onto tenants. The current booming property market means deposits are likely to continue shooting upwards in the future and we could well see six weeks’ worth of rent extended to eight. Many not only face being priced off the property ladder but also the rental ladder too.’[1]
‘The Government needs to take action, without intervention the spiralling cost of deposits and rent could have a huge economic impact on the UK. Giving renters a lifeline is equally as pressing as helping people buy a house. Taking steps to address this now could be a far easier solution than dealing with the prospect of pricing home hunters off the private rental ladder,’ she added.[1]
[1] http://www.propertywire.com/news/europe/uk-buy-rent-costs-2016031411664.html