News of would-be first-time buyers being priced out of homeownership has been rife for years but recent data shows that with rental costs hitting all-time highs, many are finding this supposedly cheaper alternative becoming increasingly unaffordable.
Figures produced for Guardian Money by Halifax show the average monthly rent across the UK has risen to £722. Meanwhile, what it describes as the average monthly buying cost – mortgage payments plus insurance and other costs – has fallen to £600.
In terms of monthly costs, owning a home is now 17 per cent cheaper than renting, claims Halifax. There have always been affordability issues for people wanting to buy – now we are also seeing affordability issues for renters.
Some go so far as to cite this as evidence of a potential crisis in the rental market. London mayoral candidate Ken Livingstone said recently: “Competition is fierce to rent even poor-quality properties and there is little incentive for bad landlords to ensure their property is of a decent standard.”
So what does all this mean for brokers and lenders?
Rising rents may actually be good news for tenants as this may convince more landlords that BTL is still a good investment, despite the general fall in house prices.
Tenants are finding the going tough right now but if BTL investment continues to perform as it has done in the last 12 months, more accommodation will come on the market and prices will stabilise.
From where I am standing, BTL is the must-have addition to any portfolio.
Having said that, the Government could offer greater incentives for landlords, such as stamp duty relief for BTL investors. This would ensure the stock of rental accommodation is big enough to meet demand from our growing population of renters. Security of tenure through the provision of longer leases would also help the market as a whole.
It is fair to say the housing market would have collapsed without the private rented sector, which has underpinned the market during the current downturn and some would argue for almost a decade. It is now recognised as a mainstream investment.
The private rented sector provides a vital alternative for a wide range of people, including students and young professionals looking for flexibility. It is also a vital source of accommodation for those on housing benefits.
It is important that the UK has a diverse mix of housing and it is clear the private rented sector will play an increasingly important role in providing homes in the UK because demand has increased significantly over recent years, which is unlikely to change any time soon.
Over the short to medium term, BTL continues to represent an excellent investment opportunity and, in turn, offers brokers a clear opportunity to carve out a niche for themselves at a time when other areas of the market are struggling.
In the longer term, BTL is likely to go from strength to strength – as long as it does not become a victim of its own success.
Sally Laker is managing director of Mortgage Intelligence and Mortgage Next