Worrying new research suggests that spiralling rent prices and high deposit requirements will put even the private rental sector out of reach for many in the future.
It is well known that young first time buyers are struggling to get onto the property ladder, but now Money.co.uk has estimated that in ten years’ time, the average rent deposit could hit £1,111 – a huge 70% of the average Briton’s monthly income of £1,576.
In London, deposits are expected to rise to £2,733 – a whopping 120% of a Londoner’s average monthly salary of £2,281.
Will the Private Rental Sector be Out of Reach for Many in the Future?
The website believes that private landlords will require a deposit equivalent to six weeks’ rent by 2026, while monthly rent prices will go up by over a quarter (28%) to £1,111 over the same period.
Overall, rent price growth is expected to exceed average monthly salary inflation across the UK, which is estimated to increase by just 20% in the next decade.
Money.co.uk predicts that deposits will increase significantly across the whole of the south of England.
In the South East, the average deposit is expected to reach £1,469 by 2026 – over four-fifths (83%) of the average monthly income of £1,761, and up from 72% in 2015.
Meanwhile, in the South West, the average deposit is set to be equivalent to 80% of the average monthly earnings by 2026, up by 14% from 66% of the average salary in 2015.
The Editor-in-Chief of Money.co.uk, Hannah Maundrell, explains the forecast: “The rapid rise in deposits as well as rents is a double blow for everyone on the rental ladder.
“With the forthcoming changes to tax legislation and crackdown on buy-to-let mortgages likely to erode landlords’ profits, there’s little doubt these costs will be passed on to tenants.
“The current booming property market means deposits are likely to continue shooting upwards in the future, and we could well see six weeks’ worth of rent extended to eight.”
She continues: “Tenants are stuck between a rock and a hard place, and the situation is only likely to get worse. Many not only face being priced off the property ladder, but also the rental ladder too. This could force people to borrow the extra cash they need for a deposit on loans or credit cards, pushing up the cost and creating a perfect storm for a major renting crisis. Maybe the bank of mum and dad should prepare itself for another withdrawal? Or, we could see many left with little choice but to live with their parents well into their 40s.”
Maundrell insists: “The Government needs to take action; without intervention, the spiralling cost of deposits and rent could have a huge economic impact on the UK. Giving renters a lifeline is equally as pressing as helping people buy a house. Taking steps to address this now could be a far easier solution than dealing with the prospect of pricing home hunters off of the private rental ladder.”1
How do you see the upcoming changes to landlord finances affecting how you set your rent prices and deposit requirements?
Advice for landlords on setting the perfect rent price can be found here: https://www.justlandlords.co.uk/news/setting-perfect-rent-price-property/