The UK Rental Market Doubled Since 2008
Our latest blog takes a brief look at the rental market versus the house buying market in the UK over the past year and why so many of the population cannot afford to get on the property ladder.
The UK’s rental market is growing, and has been for a whopping ten years. The paradigm for housing in this country is changing – the average buying power of individuals has gone down due to inflation and a high value property market, and as a result property ownership is at a notable low compared to more prosperous times.
The outlook for rental becoming less prevalent and house ownership coming back up doesn’t look likely either – it’s all to do with the cost of living against the real wages of the average worker. Since the 1970s, the cost of living has steadily risen, whilst actual real wages haven’t risen by the same magnitude. This has resulted in an ever widening gap between the cost of living and people’s wages.
A lack of disposable income means people are finding it more difficult to save, and rising house prices also mean that getting a mortgage is becoming somewhat of a luxury for young people when they get onto the property ladder – or in this case, they don’t. New houses are being built, but while these homes are coming onto the market, they’re being built for profit, as opposed to ease housing issues so they’re not considered ‘affordable’ for new buyers.
These factors combined have created a scenario where rental is becoming even more prevalent, and the total in rent being paid by tenants is set to overtake mortgage repayments very soon. In 2017 a whopping £51.9 billion in rental was paid out to landlords, meaning that wealth was consolidated and kept as opposed to going to companies building new houses. Young people made up the majority of this amount, with millennials (people reaching young adulthood in the early 21st century) paying 59% of all rent in 2017, a total of £30.2 billion.
As younger people gradually get onto the property ladder, the amount the rental market is worth could start to decrease, but for now, for the younger generation, prospects are seemingly geared towards rental and rental alone – and as market value of the homes being rented increases, some unscrupulous landlords can and will increase the costs of monthly rental when yearly contracts are renewed.
In more difficult economic times, many tenants find themselves with few options except staying in rental properties when earning a minimal salary as it becomes harder for them to amass the funds needed to put down a deposit on their own home. Unless there is some sort of intervention, possibly the revival or expansion of affordable homes schemes, rental might be a reality for a big chunk of the population for the time being.