A new report from Countrywide plc has indicated the average rent of a newly let home in the United Kingdom has increased by 3.6% year-on-year.
This means that average rents now stand at £941 per month.
The report also shows that the gap between the places people can afford to rent and to buy has grown in every year since the financial crash of 2008. This has been driven by a mixture of increasingly stretched affordability and first-time buyers getting older. Those renters that purchased a home during the last year bought in a region where the average house price was £35,000 less than where they were renting.
51% of people who made their first steps on the housing ladder in 2015 bought a home outside of the town or city in which they were previously renting, up from 39% in 2008. With the price of property accelerating faster than rents, a growing number of households are finding themselves renting in locations where they cannot afford to buy. Tenants in the South of England were found to move the furthest in order to get onto the ladder.
In fact, this region has seen the largest gap between where people can afford to rent and to buy since 2012. Across the capital and the South East, property prices have risen by 42% in the last three years, rising from £218,000 to £375,000. Over the same period, rents have risen just 19% from £1,000 to £1,234 per month.
Within Britain as a whole, two-thirds of tenants purchased property in a cheaper area, with that figure rising in the most expensive housing markets. In London, three-quarters of tenants who bought a home in the last twelve months ended up somewhere cheaper than they had been renting, with an average price gap between the two locations of £93,000.
Moving north up the country sees a different set of results. In the less expensive areas of the country, tenants are less constrained by affordability restrictions when making purchasing decisions. Tenants in the North East, North West and Yorkshire are more likely to buy in a similar area in which they were renting. Indeed, the average difference in price between the areas in which people rented and bought property in these regions was just £8,000. In some cities, such as Newcastle, the typical first-time buyer who had previously been renting actually moves from a cheaper area to a more costly one.
Data from the report also shows that alongside affordability, space is also a deciding factor of where tenants eventually choose to purchase a home. Nationally, 32% of renters who buy property in the same area buy a property with three or more bedrooms, a figure that rises to 45% in people buying elsewhere.
Average rent for newly let UK home £941
‘Renting enables many tenants to live in areas where they could not afford to buy but that means aspiring home owners often have to look elsewhere to find a home they can afford,’ noted Johnny Morris, Research Director at Countrywide. He went on to say that it is, ‘common for first time buyers to make sacrifices to buy their first home, so with price rises in recent years outstripping income growth, more are choosing to bypass rising prices by looking further for cheaper areas.’
Morris went on to point out that renters are getting older, due to lack of affordability. ‘With over 30s and families the fastest growing type of tenants, renters buying their first home are getting older and are more likely to do so at a later stage of life. They’re skipping owning the small central city flat, in favour of the larger family home the first time around,’ he noted.
Concluding, Morris said, ‘rents continue their growth over the year, with prices supported by falling numbers of homes available to rent and sustained demand from tenants. Seasonal factors usually see the rate of price growth slow in the second half of the year, after the rush in activity over summer starts to subside, hence small month on month falls in September.