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What next for Generation Rent?
| Author: Craig Bees | Published: 31st August 2021 11:33 |
Long-term renting growing in popularityWe are all familiar with the term ‘Generation Rent’ which has been used for several years in the rental and sales markets. It typically refers to young adults aged between 18-40, used to describe those who have been priced out of the property market which unfortunately is becoming increasingly common.
And the outlook is not good with the recent boom in the property market pushing the average UK property price around £322,000, making it increasingly harder to buy. Yes I’m afraid Generation Rent is growing.
As some of you will know the government has introduced several savings incentives to try and turn Generation Rent into Generation Buy. Here I look at what the future may hold.
What is Generation Rent?
The UK’s climbing house prices have always been a significant barrier for first-time buyers looking to get on the property ladder, with recent figures suggesting that half of millennials will likely rent well into their 40s, while almost a third of this demographic may never own their own home.
For many years, renting a property has typically been perceived as a ‘stepping stone’ – a temporary solution for those who will eventually buy their own property. However, prices have been on an upward trajectory for the best part of 10 years, and more recently, tenants have become content to rent property indefinitely, with less ambition towards buying.
As the number of under-35s renting in England creeps towards 50%, the government has made many conscious efforts to turn Generation Rent into Generation Buy. First introduced by the Conservative party in 2020, the concept of ‘Generation Buy’ is an ongoing effort to make the UK property market more accessible to first-time buyers.
The share of 25–34-year-olds who are owner-occupiers has fallen by around 10% across the UK over the past 20 years, catalysing a rise in 95% mortgages and multiple savings incentives, such as the Help-to-Buy ISA. But with another recession and the unexpected performance of the property market, the government’s efforts haven’t been enough for a lot of first-time buyers.
Covid 19 impact
While many feared the global pandemic would have a similar effect to the 2009 financial crisis, the stamp duty holiday has propelled the market. Although this tax incentive steered the industry away from a market crash, the stamp duty holiday minimised many first-time buyers’ chances of getting on the property ladder.
As well as pushing prices to unaffordable highs, the demand for UK property made the availability of 95% mortgages scarce, to say the least. Data from the beginning of the pandemic suggested that mortgage providers closed their 90% and 95% mortgage offers to new customers almost immediately. Instead, loan-to-values for mortgages for first-time buyers stood at 82% – significantly lower than 95% mortgage deals.
With first-time buyers paying, on average, £73,000 more to get on the property ladder, it’s no surprise that Generation Rent is growing. In comparison to 2019, the number of first-time buyers in the market was 13% lower in 2020, largely driven by the unavailability of affordable mortgage deals.
Equally, the UK rental market underwent considerable growth throughout the pandemic, with increasing rents and rising demand. Despite the average rent across England topping £1,000 per month, renting a property is now more affordable than buying. While the monthly savings was initially an incentive for first-time buyers to get on the property ladder, rising property prices and inaccessible mortgages has made renting 7% cheaper each month than buying.
On average, renting is almost £100 cheaper on a monthly basis than buying a property, even with a 10% deposit. Although the conclusion of the stamp duty holiday could see property prices stabilise and a degree of affordability return to the market, it’s likely that Generation Rent will always remain in some way, shape or form.
The stamp duty threshold is due to return to £125,000 on October 1st but the flurry of supply and demand that we continue to see has bolstered property forecasts for 2022 and beyond. With up to 21% price growth expected in the next four years, the likelihood of Generation Buy outpacing Generation Rent is slowly but surely decreasing unless government initiatives can bolster interest in buying.
It’s also important to remember that renting will never truly disappear. For a lot of people, renting a property will always be that first step to get on the property ladder, and while these tenants gradually move from one market to the other, the natural new wave of tenants will continue to sustain Generation Rent. Whether it’s students renting a HMO, or graduates moving to city centre apartments, there will always be a need for rental property.
The difference is that Generation Rent has generally been perceived as a temporary solution for the younger generation. But as renting continues to be a more affordable option and perceptions towards this market become increasingly positive, renting indefinitely may continue to grow in popularity especially with the continuous cycle of new, younger tenants entering the market.
Badby & Farthingstone Cricket Club News
With the season drawing to an end good to report on an impressive win at Crick Lions last Sunday under stand-in skipper Malcolm Alphonso.
This was the club’s inaugural visit to Crick who have spent a long period getting their ground and pitch ready. Batting first Harry and Toby Bell put on 44 for the first wicket with Toby going on to make an excellent 62 not out, his final 32 runs coming off just 10 balls. In a 30 over total of 191, other notable batting came from Colin Scott (32) and Jordan Shingler, unbeaten on 31.
In reply the home side got off to a solid start until a devastating four wicket spell from bowler Terry Isom turned the match on its head. There was some late order resistance from Crick but the target was beyond them as B&FCC ran out comfortable 42-run winners – sweet revenge as Crick have generally held the upper hand in previous meetings.
Disappointing to report that there will be no club tour this year, here’s looking for better news in 2022.
The club continues to develop off the field as well as on it with several initiatives already planned for the close season including the annual presentation night and a fundraising event. Details to follow in my next column.
Final fixtures: Sunday Sept 5 v Pattishall (a), Sunday September 12 v SNCC (h). Matches start at 2pm.
Monthly draw: a new month starts this week and with it your chance to win a case of Italian wines (red/whites/mixed)
How To Enter: every valuation and instruction for sale or rental between now and Friday September 24 will be entered, the winners being notified by e-mail.
So if you’re thinking of selling or letting your property and want to win this great prize call (01327) 359164 and speak to our sales or lettings team.
Best wishes
Craig Bees, MD Bartram & Co
Tel: (01327) 359164.
E-mail craigbees@bartramandco.co.uk
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