The so called “Generation Rent” is depicted as downtrodden and exploited and forced, through their economic circumstances, into renting rather than buying, always against their will and better judgement.
However, the reality is renting for many is from choice rather than compulsion, and far from being economically disadvantaged there is an argument say that in 21st Century Britain, renters may in some ways be better off.
There are many advantages to renting, particularly for young professional and working people who want the flexibility to move with their work opportunities, to change partners and shares when they need to, and the freedom from the worry of financial commitments and unexpected expenses like major repair bills, which homeowners can experience.
Writing for the TheLondonEconomic.com, Mark Coulter, Managing Director of Edinburgh Estate agents, says the benefits of renting rather than buying are actually increasing:
“In 1918 homeownership was at a mere 23%, but this accelerated from 1953 and this was solidified further by Thatcher’s ‘right to buy scheme’ scheme in the early 1980’s. Britain has traditionally been a nation obsessed by property and house price inflation” says Coulter.
Coulter maintains that because almost everyone traditionally aspired to home ownership in the past, a rising housing market has a disproportionate effect on people’s feelings of wealth. It also leads onto the direct health of the economy, and even individuals’ perceived social status.
Homeownership in the UK peaked in 2001 at 69% of people owning their own homes. Since then that figures has declined as a result of a generation of younger potential buyers being dissuaded or prevented from buying by a combinations of:
- Significant deposits
- Punitive mortgage rates for first time buyers, or
- Those struggling to raise deposits and,
- The growing realisation by many that the property market is a more of a life style and social investment rather than a monetary investment.
Recent figures show that that by 2011 home ownership had fallen from 69% to 64%, and if this trend continues as Mark Coulter predicts, the benefits of renting over buying, particularly outside of the South East, are pretty obvious he says.
Most predictions from industry experts and research studies by, for example, the likes of Savills, the property agents, capital growth looks like being much more modest over the next decade, than of late, encouraging even more people to look at the renting alternative.
First time buyers are faced with heavy front-loaded costs: a large buyer’s deposit, legal fees and stamp duty, surveyors and valuations fees, mortgage fees, removal fees, the inevitable initial repairs and maintenance costs, all significant amounts when just starting out.
Combine this with the likely need to moves with work within a relatively short time, and the prospected of these costs occurring all over again, and young people are facing huge costs and net losses after all of these outlays.
In Scotland, says Coulter,
“The benefits for renting rather than buying particularly at a value in excess of £327,000 are obvious. The proposed changes of the UK wide SDLT (stamp duty land tax) namely LBBT (land and buildings transaction tax) are very punitive and are no doubt going to persuade a further section of the market that financially, renting makes more sense than buying. For example under current SDLT rules, which were further revised on the 4 December 2014, the tax on a purchase of £420,000 is currently £11,000, but under new SDLT rules that the devolved Scottish government is introducing on the 1 April 2015, the tax will increase to £19,600.”
Coulter maintains therefore that the benefits for renting rather than buying are actually increasing and that the ratio of renters versus buyers will decrease over the next decade.
Coulter sees the advent of the longer tenancy, giving tenants longer term security, would be a “game changer”, where renting could easily become the “default choice” for the majority.
European countries such as Germany have traditionally had a high proportion of their population renting, in some instances as high as 90% compared to the UK average of 19% at present.
Under current legislation the assured shorthold tenancy gives a minimum term of six months security of tenure, a maximum of six months protection, though many landlords are happy to extend this voluntarily, especially for good tenants, and many shorthold tenancies are known to last for years.
With the proposed changes to tenure in Scotland, this status quo could change in the near future.
Coulter says that, with a good proportion of current housing stock known to be in poor condition, in future the onus will be on the private landlords, and perhaps corporate investors in the private rented sector, to up their game.
If this were to happen the future of the rental market will continue to grow, as it appears it needs to.
Coulters is an Edinburgh estate agency specialising prime property – http://www.coultersproperty.co.uk
— LandlordZONE (@LandlordZONE) March 20, 2015