Have we become a nation of renters?

More and more it seems people are renting accommodation instead of buying. For first time buyers the reason is simple, the initial outlay. The average property in the UK is valued at around £240,000, so with a 95% mortgage you’re looking at a £12K deposit. Add to this the costs involved, such as arrangement fees and stamp duties, and you could well be looking at paying over £15K upfront. The next problem that immediately arises is repayment fees. The greater percentage of the property that is mortgaged, the higher the interest payments. In other words, if you take out a 95% mortgage you are deemed to be a greater risk than someone who has taken out a 70% mortgage and as such, you will pay more interest.

Rising house prices

Part of the problem is caused by house prices rising at a far greater speed than inflation. The average house in the UK is around twice the cost than in 1980 (allowing for inflation). This has led to more and more of those who earn less not being able to get on the property ladder, with properties going to those with more money, who in turn rent out the properties, thus leading to a nation of renters.

According to the Guardian owner occupation has been steadily declining for several years, with private renting increasing at the same time. Some of the reasons for this are obvious. Many people are having their incomes frozen or have pay rises that aren’t keeping up with inflation. As a result, mortgages aren’t as easy to obtain as they once were and more and more are being forced into renting.

With the lack of social housing, more people are having to opt for private renting, which is also becoming more expensive due to the basic economics of supply and demand. The more people that want to rent, the more landlords can charge.  There is also the issue of a housing shortage. The population is on the increase and houses are becoming harder to find. With this, house prices are still rising and as such, more and more people will struggle to get on the housing ladder. Unless this issue is addressed at some point in the future, there doesn’t really look like an end in sight and the reality is that the nation will see more people renting and less buying.

Camberwell estate agents are one of a large UK network and can help you to find a home, whether it’s renting or buying, or even buy-to-let.

Rogue Landlord Complaints Underestimated?

A survey commissioned by the Housing Charity Shelter has found that complaints over rogue landlords have increased by 27% over the course of the last three years. The stories behind those figures are quite alarming but the Charity feels that the actual numbers of landlord problems are even higher and that many tenants are simply not reporting their problems through fear of reprisals.

In the last year alone, 85,000 complaints were submitted to local authorities across England and Shelter found that 62% of these issues involved serious or life threatening situations. An additional 781 cases needed the involvement of local health services due to private landlord behaviour or neglect.

Shelter are urging their supporters to petition their local councils and they believe that the situation is even worse than the figures suggest.

“Despite the significant increase in complaints, we believe that the number of rogue landlords is still underestimated,” said Campbell Robb, Shelter’s Chief Executive.

“Some local authorities don’t keep records of complaints and tenants often hold back from complaining out of fear of the consequences or because they don’t believe their voices will be heard, even though such a high proportion of complaints are about life-threatening issues.”

The figures have come after a two year campaign by Shelter to highlight the growing problems with regards to rogue landlords and to encourage the government to put effective measures in place to tackle them.

In a response to these moves, the government has set up its own dedicated taskforce to tackle these problems. Under the scheme, local authorities will be given all the support they need to deal with rogue landlords and to bring about prosecutions.

In addition, £1.8m will be invested to tackle so-called ‘sheds with beds’ – slum properties that are unfit for habitation – while the plans will also remove limits on the fines that can be imposed on landlords.

Shelter may have welcomed the proposals but they insist that there is more work to be done.

“There is still much to be done,” Mr Robb continued. “It’s ultimately local authorities that must do everything in their power to support people who are suffering by cracking down on the worst offenders in their area.”

Those wishing to add their name to the charity’s campaign are invited to e-mail their local council while Shelter are urging any tenants experiencing problems with rogue landlords to get in touch with them for advice without delay.

Labour Highlights Issues of ‘Rip-Off’ Letting Fees

The issue of an unregulated private letting industry has hit the headlines on a number of occasions in recent weeks and one of the problems faced by tenants has been highlighted this week by Labour’s Opposition Government.

Hilary Benn, the shadow secretary of state for communities and local government has spoken out over the high charges placed by letting agents and has claimed that some are genuinely ‘ripping off’ landlords and tenants. The numbers in question don’t just relate to commission charges as Labour are also concerned about fees for add-ons such as reference checking and sending renewal letters.

The Labour Party underlined their concerns amidst claims that in 2013, the numbers of homes rented out privately is set to exceed social housing for the first time and their findings suggest that agents’ charges vary to a huge extent.

The charges for reference checking range from a mere £10.00 all the way up to an unnecessarily excessive £275.00 while the charge for renewing a tenancy –  a process which involves sending an e-mail or a letter and asking for it to be signed and returned – varied from £12.00 right up to £220.00.

“What is actually £220 of cost in terms of administration if you had just to send an email, open an envelope, stick it on file?” Asked Mr Benn.

“That seems to me a rip-off. It’s a problem not just for tenants but also for landlords.”

Hilary Benn and his party have promised that they will look into ways in which caps can be introduced in the private sector and this is a move that has been widely welcomed by Landlords and Tenants Groups right across the country.

“Anyone can set themselves up as a letting agent, and then potentially abscond with hundreds of thousands of pounds of people’s cash,” said Ian Fletcher, Director of Policy at the British Property Federation.

“It is therefore counterintuitive that estate agents who handle relatively little cash are regulated, but letting agents who handle lots of cash are not.”

Labour has conceded that part of the problem lies in the fact that the levels of social housing weren’t increased when they were in power. As a result, more and more home seekers are turning to the private rental sector as they are unable to get on to the property ladder and into home ownership.

In the present day, the Labour Party recognise that the private sector is therefore meeting an urgent need and it seems set to press on with finding a solution to any excessive agents’ charges.

Scale of Rental Arrears Revealed

Recent reports have shown just how much of the UK are relying on renting their homes while many of those are facing the prospect of having such an arrangement on a permanent basis. As a financial comparative, it’s widely claimed that renting is more expensive than buying and the struggle to maintain payments seems to be getting worse.

A report generated by Receivers Templeton LPA, who comprise part of the LSL Property Services Group, is suggesting that over 100,000 people across Great Britain are more than two months behind with their rent. This represents a significant increase of 24% compared with a year ago and the numbers are at their highest since 2008.

In addition, the number of eviction court orders for tenants increased by 6% in the first quarter of 2012 and by 5% over the figures declared twelve months ago.

Paul Jardine of Templeton LPA suggested that the rise was, in some part due to the increase in the number of rental contracts but that falling incomes and genuine hardship were significant contributors to the final statistics.

“As the private rented sector grows, the number of tenants in dire financial straits is steadily climbing. Falling wages in real terms have been compounded by rising rents, pushing a greater number of rented households over the edge financially,” Mr Templeton said.

“With the instability in the labour market and wider economy, and public sector cuts still to come, the section of renters in multiple months of arrears is likely to continue its expansion.”

Meanwhile, the Housing Organisation Shelter are claiming that the situation is being compounded by higher rents that are rising towards unaffordable levels.

“This is yet more evidence of the crushing impact rising rents and stagnating wages are having on family finances,” said Shelter’s Kay Boycott.

“Shelter research found that average private rents are now unaffordable for working families in more than half of England, with many paying up to half of their income each month. And with homeownership out of reach for so many, hundreds of thousands of families are beginning to realise renting looks set to be a way of life, not just a temporary stopgap.”

In recent weeks, there have been calls from Shelter and others for the government to look at ways in which they can overhaul the rental sector. The findings from Templeton LPA cannot differentiate between those who are hit by higher rents compared to others who have lost their job or are suffering financial issues due to other factors. Everyone does seem to be agreed however that the statistics can only get worse over the course of the next few months.

Action Required to Make Home Ownership More Than Just a Dream

Earlier in the week we saw the reaction of Shelter, the housing and homelessness charity to a survey claiming that property rental could soon become a permanent way of life for many. The organisation suggested that the government had to wake up to the reality that only a quarter of the UK population may be owning their own home by the year 2025 and to ensure that improvements were made in all areas.

“It’s time government woke up to the fact that ‘rental Britain’ is here to stay,” said Shelter’s Chief Executive Campbell Robb.

While these are apt comments, some observers were surprised that the organisation didn’t take the opportunity to suggest that home ownership needs to be more affordable. To be fair however, Shelter have been vocal on this subject in the past but for the time being, this particular challenge has been taken up by another charity – the Joseph Rowntree Foundation.

The organisation focuses on potential buyers between the ages of 18 and 24: At present it claims that 2.4 million of them live in private rented accommodation but as they attempt to save for home ownership, ‘inflated’ house prices mean that they face an uncertain future.

The foundation then calls for major reforms in order to avoid a permanent rental trap by the start of the next decade. By 2020 it claims that young people will be staying with their parents for longer and they will subsequently need to call on those parents to help them purchase their own home.

Those that decide that staying at home has run its course face the prospect of a long period of private rental.

“The challenges facing young people by 2020 will require fundamental changes to the UK housing system. Young people are particularly vulnerable in a badly functioning housing system due to their lack of resources and opportunities,” the report states.

It goes on to echo the comments made by Shelter in suggesting that huge reforms are needed in the private rental sector.

“There is a particular need to reform the private rental sector, balancing the interests of both landlords and tenants. The growing number of families living in the private rental sector will create a need for more stability in the sector,” the report concludes.

While Shelter and the Joseph Rowntree Foundation may be approaching things from slightly different angles, they both agree that home ownership may become just a distant dream unless more positive steps are taken to address the issue.

Rental Trap or New Way of Life?

In previous weeks, studies and surveys have told us that many families are currently caught up in a rental trap. With the lack of available mortgages and the struggles for first time buyers to raise a deposit for a new property, a significant proportion of potential buyers are having to be patient in the current climate.

However, there are increasing suggestions that this pattern is set to become a permanent way of life for this and possibly future generations. A study by Cambridge University which has been published by The Observer suggests that much of the UK buying public face being locked out of the market for the long term.

In the present day, the survey claims that 35% of the population are homeowners although that figure has dropped from 43% in 1993. It goes on to claim that further decline is set to follow and that as few as 27% of us will own our own homes by the year 2025.

The report indicates that those with families are in the greatest danger of renting for life as they continue to spend over half their income on monthly rental charges. As a result, there is simply no money left to save for a deposit and they remain locked in to the prospect of renting on a permanent basis.

“The worse the economy, the more the likelihood of this group’s housing being in the private rented sector,” the report continues. “In London, if current trends continue, tenants will soon outnumber owners, with important political, social and economic implications.”

The news has been met with resignation in some areas and the housing organisation Shelter says that the government has to recognise that renting has now become a ‘way of life’ for many families. It has gone on to call for major investment in the private rental sector in order to improve standards in all areas.

“This report shows what is fast becoming the new reality of our housing market in the current economic climate: home ownership continuing to fall while renting becomes a way of life for British families,” said Shelter’s Chief Executive Campbell Robb.

“Yet despite the growing pressure on the rental market, the government’s recent housing strategy virtually ignored the sector and did little to address the issues of affordability, stability and quality that so many renters face. It’s time government woke up to the fact that ‘rental Britain’ is here to stay.”

Many of those families would naturally want to retain a hope that they can still move into home ownership and as such, will be hoping that the future isn’t as bleak as the report suggests. As far as Shelter are concerned however, maybe a proportion should really be considering that rental has now become permanent.

Thousands Trapped By Generation Rent

In recent weeks and months, much of the focus in the property market has been on rental properties and the constant argument between buying and renting. Recent surveys have indicated that in pure financial terms, renting is actually a better option and other positives continue to be highlighted.

On the downside, we’ve seen a rise in complaints about landlords to the Ombudsman and while it seems that property rental is a growth area, it’s been suggested that it’s not exactly a preferred option and there are many who would rather own their home but are simply unable to do so.

A recent survey was conducted by YouGov on behalf of Countrywide, who include an estate agency, a lettings arm and a mortgage broker within their business and are therefore ideally placed to offer an unbiased view of all sides of the market.

The survey of 18-34 year olds found that 45 per cent claimed that the issue of deposit affordability was the biggest stumbling block to buying a home. More tellingly, of the private tenants surveyed, only 32 per cent declared that they were happy where they were and just 5 per cent of tenants claimed that they were delaying a property purchase because they believed that house prices would fall.

“We see first-hand that mortgage deposit and repayment affordability remain the biggest issues facing homebuyers in the UK,” said Grenville Turner, Chief Executive of Countrywide.

“These findings confirm that we are at a crossroad for homeownership, where we could see the next generation becoming a nation of renters without the right intervention from Government.

Mr Turner went on to claim that movement in the property market was so slow that it could go on to have serious implications for estate agents all over the UK.

“Based on current levels of activity, the average home owner moves house once every 25 years as opposed to once in every 12 years,” he added.

“These levels are unsustainable and we call for further support as a strong, vibrant housing market contributes to gross domestic product growth and will dramatically improve the economy.”

In amongst all of these statistics Countrywide maintain that the desire to own one’s own home remains high right across the UK. Throughout the first few weeks of the year we’ve seen figures released relating to property market activity but we seem set for a long period of stagnation if those potential buyers remain trapped in unwanted rental arrangements.

To Rent or To Buy? The Debate Rages On!

It’s a question that will probably never be met with a definitive answer as many would be homeowners face up to the question of whether buying or renting is their best option. Naturally, as individuals, those in this position will have a differing set of circumstances and the difficulties in securing a mortgage may well be enough to push many down the rental channel.

As for the costs involved, the Halifax has declared that home owning is considerably cheaper and on average, anyone renting their property could be paying in excess of £100 a month more for the privilege.

As part of the Halifax Buying Versus Renting Review, the organisation took into account many factors including the relative cost of monthly mortgage and rental payments, the cost of essential building repairs and maintenance and any money lost as a result of funding a deposit. Additional expenditure such as buildings insurance was also used as part of the overall survey.

Using their own records and those supplied by the National Office of Statistics, Halifax claim that the typical cost of purchasing a three bedroom house in December 2011 was £600, which is £116 less than the finances involved for renting an identical property.

Ultimately, that works out to be a 16% saving and a significant change to a previous survey carried out in 2008 which claimed that the costs involved for buying a home worked out to be 29% more expensive than renting.

“The affordability gains for buyers relative to renters in the last three years have been significant,” said Martin Ellis, housing economist at Halifax.

“The average mortgage payment has fallen dramatically over recent years as a result of falling house prices and mortgage rates. At the same time, rents have risen due to strong demand for rented accommodation.”

The findings also arrive after a claim from the Association of Letting Agents that the rental market is showing clear signs of softening and that demand for the type of three bedroom property used in the survey is on the decline.

The figures are indeed significant but as the property market has already indicated, this promises to be a volatile and uncertain period in terms of mortgage rates and the ability to arrange a home loan. In addition, economic uncertainty and the difficulty in raising a substantial deposit are likely to see very few renters change their current position in the light of these statistics.

Spotlight Shines on 2012 Rental Costs

Property lettings are put under the microscope this week as a survey released by one prominent agent suggests that the costs of renting your home may be dropping. Meanwhile, the survey goes on to suggest that Christmas spending is one of the factors currently having an impact on a rise in late rental payments.

LSL Property Services claim that the average monthly rental payment across the UK in December fell by 0.8% from the previous month. However, LSL go on to state that this still represents an increase of 4% on comparative prices from December 2010.

The fall comes after ten straight months of rental increases, although this does represent a fairly familiar ‘seasonal decrease’.

“The rental market was sheltered from the full impact of the seasonal lull by the strength of underlying tenant demand as many prospective renters took the opportunity to move in the run-up to Christmas at a time when the market is traditionally less competitive,” said David Newnes, director at LSL.

The survey also revealed an increase in late rental payments which it blames squarely on the impact from Christmas spending. The findings suggest that 10.7% of all rental payments were late or unpaid in December, as opposed to a figure of 9.3% from the previous month.

Those figures have prompted the Association of Residential Letting Agents to highlight the difficulties faced by tenants and landlords alike and has reiterated the need for watertight contracts, preferably from a recognised agent.

“It is more critical than ever to take references and conduct thorough research before signing a tenancy agreement,” said Arla’s President Tim Hyatt.

“Seeking advice from a professional, licensed letting agent is the best way to ensure tenants and landlords’ rights are protected.”

The fall in monthly rental prices may be seen by those looking to rent as a positive sign however, industry experts are warning against too much excitement, while affirming their belief that this is no more than a seasonal anomaly.

“It may be premature to say the UK rental market has peaked and that we are about to see rents fall away,” said Matt Hutchinson, director at Spareroom.co.uk.

“What we are probably seeing is a temporary blip, a natural cooling off period for the rental market.”

Overall, rental prices are expected to shortly begin climbing once again while continuing to increase throughout 2012 but the next survey run along similar lines may give us a more telling picture.

Tenant Checks – A Service No Landlord Should Ignore

If you are just starting out in the buy-to-let game or you’re a seasoned landlord, you need to understand the importance of carrying out background checks on potential tenants.  It’s a landlord’s market right now with more and more people choosing to rent so you don’t need to bite off the hand of the first person who shows an interest in your property.  You can afford to be a little more choosy.

The National Landlords Association (NLA) has issued a reminder to landlords to carry out checks on potential tenants before they let out a property.

This advice is being given to all landlords so they can confirm the identity of the tenant and ensure there are no reasons why rent payments would be missed.

The NLA carried out recent survey which revealed that almost three quarters of all landlords seeking possession of one of their properties suffered from rent arrears.

After carrying out a number of searches, NLA’s Tenant Check found that almost 1 in 20 tenants had more than one CCJ (County Court Judgement) against their name at a previous address during the first quarter of 2011.

Most tenant check services include a CCJ search, ID check, alias name search, history of previous addresses, together with a bankruptcy check.  A more thorough check, and this is recommended, will include employer and landlord references and an assessment of a tenant’s ability to meet rent payments.

The NLA reported a record number of tenant checks during the month of August and this included the highest number of full tenant checks in any one month.  These figures show that landlords are becoming more and more conscious of the tenants they let their properties out to.

David Salusbury, Chairman, NLA, said: “Getting a proper background check done on all tenants before they move into a property is one of the most important things a landlord can do before handing over the keys.

“It is vital landlords find out basic information about their prospective tenant to help avoid rent arrears or other problems further down the track. This gives the landlord peace of mind that their properties are in good hands and will hopefully mark the start of a satisfactory and hassle-free tenancy.”