The average rent of a newly let home in the UK has increased by 3.6% year on year to £941 per month, according to the latest rental market index.
The gap between the places where people can afford to rent and where they can afford to buy has widened in every year since the market downturn in 2008, the data from Countrywide plc also shows.
People are also moving further away if they buy a home. The index report says that 51% who took their first steps on the housing ladder in 2015 bought outside the town or city where they had been renting, up from 39% in 2008.
With house prices rising faster than rents, an increasing number of households find themselves renting in places where they couldn’t afford to buy and tenants in the South of England tend to move furthest to get on the housing ladder.
This is where the gap between where people can afford to rent and buy is largest and has widened the most since 2012. Across London and the South East house prices have increased 42% since 2012, rising from £218,000 to £375,000. Over the same period rents have only increased 19% from £1,000 to reach £1,234 a month.
The growing number of tenants moving further to buy is both a product of stretched affordability and first time buyers getting older, the report suggests, adding that tenants are increasingly choosing to compromise on location in in order to own their first home. Those renters who bought a home in the last year, bought in a place where the average house price was £35,000 lower than where they were renting.
Across the UK as a whole, two thirds of tenants bought in a cheaper area but there were even more in the most expensive housing markets. In London some three quarters of tenants who bought in the last year, ended up living somewhere cheaper than where they had been renting with an average price gap between the two places of £93,000.
Further north, however, a rather different picture starts to emerge. In some of the less expensive areas of the country, tenants tend to be less constrained by affordability when making the move into home ownership.
Tenants buying in the North East, North West and Yorkshire, tend to buy in similarly priced areas to where they are renting. The average difference in price between where they were renting and where they bought is just £8,000. In a number of the cheapest northern cities such as Newcastle, the average tenant buying their first home actually moves from a cheaper area to a more expensive one.
In addition to affordability, space is a deciding factor of where tenants choose to purchase, according to the report. Irrespective of location, those tenants making the move further afield also tend to buy the largest homes. Nationally, 32% of renters who buy in the same town buy a home with three or more bedrooms, a figure which rises to 45% amongst those buying elsewhere.
‘Renting enables many tenants to live in areas where they could not afford to buy but that means aspiring home owners often have to look elsewhere to find a home they can afford,’ said Johnny Morris, Research Director at Countrywide.
‘It’s common for first time buyers to make sacrifices to buy their first home, so with price rises in recent years outstripping income growth, more are choosing to bypass rising prices by looking further for cheaper areas,’ he explained.
He pointed out that renters are getting older too. ‘With over 30s and families the fastest growing types of tenants, renters buying their first home are getting older and are more likely to do so at a later stage of life. They’re skipping owning the small central city flat, in favour of the larger family home the first time around,’ he said.
‘Rents continue their growth over the year, with prices supported by falling numbers of homes available to rent and sustained demand from tenants. Seasonal factors usually see the rate of price growth slow in the second half of the year, after the rush in activity over summer starts to subside, hence small month on month falls in September,’ he added.
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Source: Property News Spain