by Mark Johnston
In the past renting was for a brief stage in people’s lives, between leaving their parents homes and saving to buy their own home. Increasingly now though it is becoming a preferred or only choice rather than a stop gap.
With most first time buyers struggling to find many lenders willing to provide them 95% loan to value (LTV) mortgage deals, they are turning to the rental market, which in turn is putting a great pressure on it thus causing a ‘scrabble’ for all rooms, supply to the market still remains unable to keep up with demand.
The recession, followed by a slump in house sale due to the financial crisis has seen a rise in private renting each record level. The Eastern Landlord Association states that home ownership is in decline, dropping to 67.4%.
Research has shown that currently an average of four tenants are competing for each room that becomes available and this number is soaring in some ’hotspot’ areas of the country to an astonishing excess of 13 tenants competing. In most of these particular ‘hotspots’ rooms and flats are being let within hours of going on the market.
Figures for England provided by easyroommate showed that of 86,000 room rentals and 30,000 flat hunter’s profiles, the number of tenants to each room has increased from 3 to 4.1 over the past year.
With tenants demands continuing to reach even higher peaks there simply are not enough rental property to match it.
Due to the high demand for rental it therefore means landlords can charge high rent especially in hotspot areas such as London where rents were in excess of £701 per month which is exceptionally high when compared with the national average of £419 per month. Letting agents figures released this week showing rents have risen by 4.1%the equivalent of an extra £28 per month.
Even with rent figures such as these house hunters are turning to ‘gazumping’ one another to secure a rental property. Some figures show that one in eight renters (13%) say they have been gazumped and 26% of potential renters have admitted being the gazumper, placing a higher bid of up to £80 per month more at the last minute to snatch away a rental property.
As the cost of renting a whole flat continues to soar it seems that many first time buyers are turning to flat share in a bid to keep rental costs low enabling them to save enough money to be able to put down the kind of deposit now required by lenders to purchase their own property.
James Scott-Lee a spokesperson for the Royal Institution of Charted Surveyors said that “although we are beginning to see more mortgages aimed at first time buyers, many of them are still restricted from getting on to the property market, this in turn is leading to an increased demand in an already oversubscribed rental market.
Lending levels are it seems slowly heading in the right direction, although the main problem is still the lack of change in the number of mortgage deals for first time buyers, lenders still have a tight grip on the market.
The Council of Mortgage Lenders (CML) figures show that although first time buyers numbers were down in May this year, overall the number of mortgages increased by 1.7% April to 41,500, this was down however 5%on May 2010 figures.
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