Published: 11th June 2019
While the UK, in general, is very much a property-owning culture, rather than a “rent-for-life” culture, it does still have a very strong rental market, the backbone of which is young adult professionals, typically in their pre-child years, who value the flexibility of renting over the stability of home-ownership.
Over recent years, there has been extensive media coverage of the plight of first-time buyers, who need to save for a deposit while paying rent, however, new research from Zoopla suggests that the underlying issue here may be less one of high rents and more one of high house prices.
Zoopla analysed data from 2007 onwards and determined that, on a national basis, rents typically fluctuated between 28% and 32% of an individual’s earnings.
There is, however, a distinct North/South divide in rental affordability with rents in the north of England coming in at around 25% to 27% of an individual’s earnings and rents in the south of England coming in at around 35% of an individual’s earnings, with London trending at a long-term average of 39%.
Interestingly, rental affordability in London reached its most recent nadir in 2017 when rents stood at 43% of an individual’s earnings. Although spending somewhere between a quarter and a third of your income on rent may seem like a significant expense, there is nuance. All these affordability calculations were undertaken on the basis of an individual on an average salary (average salary being calculated on a national or regional basis as appropriate).
Young-adult renters, however, often live as couples or in house-shares and they are also more likely to be either students (with parental support) or professionals, meaning they are in line to earn above-average salaries. Both of these factors could significantly impact affordability calculations.
Over recent years, buy-to-let investors seem to have been coming under an endless stream of fire from the government in its efforts to “fix the broken housing market”. They do, however, have one very compelling defence, namely the fact that the UK has long suffered from a chronic under-supply of rental property (and property in general), an issue which has been exacerbated by property investors reducing their buy-to-let portfolios (or exiting the market completely), thus constraining supply even further while demand remains high.
To put this situation into context, according to analysis by VeriSmart, if England’s rental market were a country, its GDP would be higher than that of 159 actual, real countries (beating Luxembourg). In fact, London on its own would outrank 124 actual real-world countries (beating Iceland).
This is clear evidence, if more were needed, that politicians can never override age-old laws such as the law of supply and demand (and that attempts to do so often backfire) and that the best results for everyone are generally achieved when authorities work together with industry bodies, such as associations representing residential landlords.
Fortunately, there are signs that the government is beginning to realize that widescale attacks on landlords are both unfair and unproductive and that sensible regulation and a fair tax structure will benefit everyone, including tenants.
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