Generation Rent – will this trend continue?
Generation Rent – will the current renting trend continue?
Research shows that more and more people are renting than ever before.. The number of households in the rented sector have more than doubled since 2001, rising from 2.3 million to 5.4 million by 2014. Analysts expect this trend will continue, with an additional 1.8 million households becoming private rented by 2025 – meaning 1 in 4 households in the UK will be rented privately at this time. So, why has ‘Generation Rent’, as analysts have dubbed the phenomenon occurred, and will it continue?
Private renting is particularly popular with the 20 – 39 age group, where it is anticipated more than half will be renting by 2025. For this generation, private renting is becoming the norm. So, how did we get to this position when it has always been said that, as a nation of homeowners, an Englishman’s home is his castle?
Generation Rent – how did we get here?
This trend didn’t happened over night, it is a continued shift away from home-owning from the early 2000’s. Since 2003, growth in private renting accelerated; first a buy-to-let boom brought an influx of new rental properties to the market as individuals decided to try their hands at being residential landlords, many for the first time. This was followed by the global financial crisis, which resulted in the tightening of credit conditions, especially loan to income ratios and deposit requirements (where almost overnight requirements for deposits went from nil to 40% of a property’s value). This forced, even those who had previously been able and wanting to purchase a home into rented accommodation for much longer periods of time. Private renting became the default option for those unable to purchase.
With higher entry prices facing first time buyers and larger deposit requirements in place up until very recently, it has become increasingly more difficult to get your first foot on the on the property ladder and affordability has definitely been an underlying factor in why more and more people decided to rent in previous years.
Steep house price growth in the early 2000’s led to a doubling of house price to earnings ratios, whilst higher loan to value mortgages that were available in the late 2000’s were subsequently withdrawn following the financial crisis. Although higher loan to value mortgages have slowly crept back into the market with 90% mortgages once again being available (some high street lenders are even offering 95% mortgages) these are generally only on offer for those with very good or excellent credit ratings.
Lenders today are typically offering up to 4.5 times a purchasers annual salary, which for a first time buyer with an annual salary of £30,000, this would mean they could borrow a maximum of £135,000. With a 90% mortgage this would mean a £150,000 property could be purchased with a £15,000 deposit. The Government’s Help-to-Buy scheme is readily available for first time buyers for many new homes across the country, allowing a home to be purchased with a 5% deposit and a 20% Government loan.
For people choosing to rent, the market has fast adapting to offer properties tailored to generation rent tenants needs, including apartments for sharers with multiple ensuite facilities and developments that offer communal facilities more traditionally associated with high end luxury developments, such as gyms and cinema rooms. Many apartment blocks are also now owned by one landlord, making management much more easy and professional, as this is something these companies often specialise in. The constraints that previously obstructed people from buying their first home has incontrovertibly helped create better quality rental properties that offers better value than previously and provide a good alternative for those choosing to not to purchase.
Where do we go next?
Today, many people talk about ‘Millennials’ and how this generation (who left school from 2000 onwards) is more concerned with collecting experiences rather than collecting material items, including homes. There may well be some truth in this, as we now tend to stream a film, or download a song rather than buy a DVD or CD. Before putting down roots, people may also see the benefits of renting over home owning that includes convenience and the freedom to move around or try different areas and there is also the social aspect of sharing a property when you are young and single that may appeal to many.
Whilst more and more people are seeing renting as their default option, which is likely to continue for some time as it has its own benefits, the choice of home ownership is starting to become a real possibility again for first time buyers, as better financial terms becoming available.
At LPC Living we are no stranger to providing both a wider range of properties to rent and for sale, from luxury apartments through to family sized houses, all competitively priced.
Below are a few examples of properties in Greater Manchester that are currently on the market and very much affordable for generation rent, alongside similar properties for sale to give a flavour of what is currently available, including a few of our own properties (correct as at January 2017).
Salford Quays area
Three bedroom townhouse
|3 bedroom 3 storey townhouse £399,950 available through Rightmove|
Typical monthly mortgage repayments at 95% of value £1,492 (based on interest at 3.92%). Deposit required: £19,998
|3 bedroom 3 storey brand new townhouse with garage|
Monthly rent £1,100 (currently available through LPC Living 0161 872 2622)
Salford Quays area
Two bedroom apartment
Manchester City Centre