First time buyers and the UK rental market

September 22, 2022

The buy-to-let sector is becoming increasingly vital as more prospective home-buyers are delaying purchasing amid the cost-of-living crisis.

With around a fifth (19%) of households in the UK currently living in privately rented accommodation, the buy-to-let market already provides homes for millions of people. In many cases, people rent through necessity while they save for a deposit on their own home, while for others it is a lifestyle choice due to the flexibility renting can offer.

However, with new research indicating that the already stretched UK rental market could see a further rise in tenant numbers, many buy-to-let landlords and property investors are expecting to see an even greater influx of tenant enquiries for their listings.

A report released by Aldermore has revealed that almost three quarters (72%) of prospective first-time buyers are struggling to get onto the property ladder due to the soaring cost of living. This is leading to delays of an average of 20 months for first-timers to buy their first home, with 32% saying they were now putting off buying.

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Barriers for buyers

The average deposit goal for today’s first-time buyers in England is £43,500. Saving this amount is no mean feat on an average salary, particularly as the cost of living continues to escalate, and this is what is causing more prospective buyers to struggle.

The issue escalates for would-be homeowners in London and the south east, where average deposits are currently £52,777 and £54,570 respectively. In Yorkshire, the average deposit raised by first-time buyers is much lower, at £27,379.

Around 64% of respondents in Aldermore’s survey said they were cutting back on their regular savings right now due to rising bills and outgoings, while 19% had decided to look for a cheaper home.

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Landlords inundated by tenant enquiries

Recently, the rental market supply and demand imbalance has had a big impact on the sector. The number of tenants seeking homes is drastically higher than the number of homes on offer, meaning buy-to-let landlords are reporting their properties being snapped up at record speed, while rental prices continue to rise.

As this study shows, the situation is only likely to be exacerbated as fewer prospective first-time buyers are able to get onto the property ladder. Property investors in areas of naturally high tenant demand in particular, such as cities in the north and the Midlands which have seen a boom of interest in recent years, are unlikely to struggle to rent them out for the foreseeable future.

Another positive to come from this - for both buy-to-let landlords and tenants - is that tenants are generally remaining in their rental homes for longer. Not only is this providing tenants with more stability, it is also reducing void periods for landlords and minimising the admin and costs involved in high tenant turnover.

A recent report from Propertymark - the professional membership body for agents and landlords - found that tenancy renewals were on the rise, with 73% of agents reporting an increase. This could be expected to remain high going by the latest figures from Aldermore.

Commenting on the current situation in the private rented sector, and what the government should do to help both tenants and buy-to-let landlords, Propertymark CEO Nathan Emerson said: “The private rental market continues to be battered by the perfect storm of high demand, low availability and affordability issues that shows no sign of easing.

“Governments across the UK are all engaged in a tenant-focused reform of their private rental sectors.

“To boost supply, they also need to consider the heavy tax burden on property owners, the impact of more profitable and less regulated short-term lets, many of which stand empty for part of the year, and the lack of new homes being built to cope with the varied needs of a growing population.”

First time buyers and the UK rental market

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