A first time buyer buying their first house this year will have already spent £52,900 on rent and future first time buyers can expect to spend 22% more, according to Association of Residential Letting Agents (ARLA) Cost of Renting report.
Compiled with the Centre for Economics and Business Research (Cebr), the report reveals the average first time buyer in England in 2016 will have spent 16.4% of their total lifetime earnings on rent for all the years they were a tenant.
Those buying a property for the first time this year in the North East will have spent £31,300 on rent – the lowest amount in England. Whereas in London, the average amount spent is more than double that, at £68,300. The South East is the only region other than London where the total lifetime rent spent is above the English average – where the total rent expenditure equates to £55,900.
During 2015, on average people in the UK spent 22% of their wages on rent, increasing to 30% in London. Those living in the East enjoyed the most affordable rents due to relatively high earnings in the region, yet rent still accounted for 18.9% of their disposable income.
Brits that move out of their family home at the age of 18, will typically rent for 13 years before buying their first property. The Cost of Renting report found those leaving home and starting to rent this year, will spend an average of £64,400 before they are able to buy their first property – 22% more than current first time buyers getting on the housing ladder this year will be spending. Those leaving home and starting to live independently in London will continue to be worse off, as they will spend an average of £91,500 on rent before they can buy their first home – £23,100 more than those buying in the capital this year.
David Cox, managing director of ARLA, said: “The rising cost of rent in this country is a huge issue, and is preventing tenants from being able to save to buy a home. Our Cost of Renting report reveals that tenants are already spending a significant proportion of their income on rent, and therefore struggling to save any money. However, as house price affordability worsens and interest rates start rising, more pressure will be put on renting with weekly rent likely to rise, so home ownership will remain out of reach for many.
“Rents are becoming alarmingly unaffordable due to the lack of available housing; the North-South divide we’re currently seeing in the UK is a clear illustration of this. The London rental market is competitive, with far more prospective tenants looking for properties than actual houses available. This is pushing up rents in the capital, which will continue to put pressure on surrounding areas, including the South East, as Londoners relocate to avoid high rent costs.”
21% of those renting in the UK do not expect to ever be able to afford to buy a home – with rising house prices and low wages forming a barrier against first time buyers getting on the property ladder. Still, younger generations feel optimistic, with three quarters of those aged 18-34 (75%) hoping to buy in the future. This optimism wanes with age as only half (48%) of 35-54 year old renters have plans to buy in the future.
87% of tenants feel they are being held back from being able to buy. Saving for a deposit is the biggest obstacle, with 51% claiming this is stopping them. 23% would not be able to afford monthly mortgage repayments and 26% cannot afford the associated costs such as stamp duty.
Although two fifths of UK renters (39%) are quite happy renting, the majority are not. Spending income on rent rather than being able to save is a problem for two fifths of renters (38%), and 26% think the government should do more for renters to help them get on the property ladder. 8% feel there are not enough family homes available to rent in the area they want to live.
Cox added: “It’s really worrying that so many renters don’t ever expect to be able to afford a home. Although housing is high on the political agenda, all we’ve seen come out of parliament recently is legislation which is set to hinder the experiences of tenants; and the sheer lack of affordable housing means many renters will never fulfil their dreams of homeownership. Despite the Chancellor’s efforts in the Budget to help the housing market, the housing budget accounts for just 0.26% of public spending, lower than other key areas, such as transport which accounts for 3.6% of total spending.
“As rent costs continue to rise, unfortunately more and more tenants will find themselves renting for longer as they have less ability to save. We need to take action now, before we become a nation of forever renters.”