A recent report by the UK Housing Review 2007/2008 has said that increasing numbers of people are choosing to rent a property rather than buy one. This not only due to the number of first time buyers being unable to meet the cost of mortgage payments, which have reached record levels recently, but also fears of a slowdown in the housing market leading to greater numbers of people remaining in rented accommodation until the market has “bottomed out”.
During the third quarter of 2007 the average first time buyer spent almost 35% of their income on mortgage payments. This has overtaken the previous high, recorded in 1990, of slightly below 34%.
This jump in property prices and mortgage repayment costs is in stark contrast to the cost of renting a home over the last ten years, which in most areas has generally risen in line with peoples’ earnings.
The review said that these factors now mean that it is significantly cheaper to rent a property than it is to buy one, with rents now approximately 64% of mortgage payments on a comparable property.
The report, published by the Chartered Institute of Housing and the Building Societies Association, attributed the rapid growth in the rental sector in part to the lower cost but also to a much wider range of rental properties available.
The author of the review, Steve Wilcox a professor of housing policy at the University of York, said “Private renting has become far more competitive as an option for many households compared to the cost of buying”
“The sector has grown by almost 21% in the last five years alone and is fulfilling a significant role in today’s housing market”
“With the rates of population and household growth outstripping current and planned new house building, we are likely to see continued growth in the private rental sector”
Director General of the BSA, Adrian Coles, added: “With many first time buyers finding it increasingly difficult to get a foot on the housing ladder, the private rented sector is providing accommodation to an increasing number of people.”
The research was published in the same week that the government announced a major nationwide review into ways of improving the private rented sector for both landlords and tenants.
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