If those London young professionals manage to make it onto the property ladder, they will have spent an average of almost £70,000 on renting, before they have saved enough to buy. That’s the conclusion of a research report produced by the Association of Letting Agents (Arla) and the Centre for Economics and Business Research
As reported by the Financial Times (FT), to make it onto the capital’s property ladder this year, first time buyers (FTBs) will have spent an average £68,300 on renting a property by the time they come to buy.
That’s an average of nearly £70,000 on rent before they can afford to buy a home, according to new research underlining the affordability crisis faced by young workers in the capital.
This figure could be much higher for those just moving to London. With prices still climbing and assuming new entrants will rent into their thirties, the report calculates the average rent bill will be just over £90,000 by the time they have saved up enough to buy a home in or around London.
Even for those living outside the capital, which is by far the most expensive area to live in, the average that has been spent on rent for those buying for the first time in England this year is over £50,000.
The cheapest part of the country, which is the north east, buyers have spent an average £31,300 on rent before they bought a property this year.
David Cox, managing director of Arla told the FT:
“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.”
The average deposit is £91,000 before for a first-time buyer can hope to buy in London, according to data provided by the Halifax Building Society.
The Government is attempting to help first-time buyers get on the property ladder and has recently launched “Help to Buy London”. At launch last week the scheme was quickly oversubscribed, with over 15,000 first-time buyers registering their interest, despite there being only 61 new-build properties available to the scheme which appeared online at this time.
Under the new scheme, the Government provide interest-free loans which are worth up to 40 per cent of the purchase price of selected new-build properties enabling buyers to get on the ladder with a 5 per cent deposit.
Some have criticised the scheme for stoking demand, rather than increasing supply, but the Government is insisting the scheme has had no impact on house prices.
Mr Cox said:
“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 rental costs.”
The news will no doubt provide encouragement to an estimated 2 million small-scale buy-to-let landlords in Britain who face higher tax bills on their investments from this year, increasing over a 4-year period, plus they will have a 3 per cent surcharge on stamp duty when they buy more investment properties, unless they can buy more than 15 at one go!
More encouragement comes from estate agent Savills prediction that demand for rental accommodation will increase by 1.1m households over the next five years, even if the government were to meet its new-build targets over the same period.
£70k is average cost of renting in London – https://t.co/HSL3RaAv84
— LandlordZONE (@LandlordZONE) February 23, 2016