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Annual savings of £742 for those getting on the UK housing ladder
First time buyers in the UK are £742 or 9% a year better off with their own home compared to those who rent, according to new research by the Halifax. The average monthly buying cost, including mortgage payments, associated with a first time buyer buying a three bedroom house stood at £658 in December 2014, some £62 lower than the typical monthly rent of £720 paid on the same property type. With the price of a typical first time buyer home rising by 8% in 2014, the difference has narrowed from £80 or 12% to £62 since 2013 as the average monthly buying costs grew by £46 while average monthly rents increased by £28. However, at the same time, the number of first-time buyers increased by an estimated 22% in 2014, with 326,500 first time buyers getting on the ladder, the highest annual total since 2007 when it was 359,900. In 2014, first time buyers in London had, in cash terms, experienced the largest benefit from buying rather than renting a home. The average monthly cost of £1,275 for those who have bought compares to an average monthly rental price of £1,387, a saving of £112 a month or £1,338 over the year. The second largest difference is found in the North West where first time buyers were paying 17% less a month, £109 a month or £1,304 annually, than the typical private tenant in the region. The smallest differences between the monthly cost of buying and renting are in the East Midlands at £6 or 1%, and the South East at £15 or 2%. The research shows that the gap between cost of buying and renting still substantially higher than in 2009. Five years ago the average monthly cost of buying was £15 higher than the typical rent paid at £576 versus £561. Since 2009 the substantial improvement in the affordability of buying relative to renting largely reflects a 28% or £159 rise in average monthly rental costs over the past five years. This increase was twice as fast as the 14% or £83 rise in average monthly buying costs. ‘Average home buying costs are significantly lower than average rental costs, providing first-time buyers with a large financial saving if they can get on the housing ladder,’ said Craig McKinlay, Halifax mortgage director. ‘While the timescales associated with raising a sufficient deposit to buy a home present a hurdle to many potential first time buyers, the significant difference in costs between buying and renting, combined with still low mortgage rates, increased consumer confidence and the Help to Buy scheme, have all been factors driving the substantial rise in first-time buyers over the past two years,’ he added. Continue reading
Increasing demand and lack of supply hitting UK first time buyer market
The UK housing market is seeing increasing demand and limited supply and first time buyers are finding it increasingly difficult to get on the property market, according to a new analysis. Since 1980, there has been considerable fluctuation in the UK housing market and while house prices have been increasing, home ownership among younger age groups generally has declined. The analysis from the Office of National Statistics also shows that if the number of households in England grows to 24.3 million in 2021 as projected, this would be equivalent to an additional 221,000 households per year. Housing is therefore likely to remain an important topic in the future. Overall, the UK housing market comprises 27.8 million residential properties, the report says. Linked to income, wealth and availability of lending, the housing market is sensitive to the overall economic climate. On average house prices have increased by 6.9% per year since 1980 and the greatest annual increase in house prices was 25.6% in 1988. In 2013, the average price (mix adjusted) of a property in the UK stood at £242,000. There were seven years between 1980 and 2013 where, on average, UK house prices fell, the majority of which occurred during the recession of the early 1990s. The biggest drop, however, was 7.6% in 2009. The economic downturn in 2008 had a considerable impact on the UK housing market. The decline in house prices was accompanied by reduced mortgage availability and stricter lending criteria, and this is a major reason in the UK for the continuing low level of housing transactions. The number of property sales in the UK almost halved from a peak of 1.67 million in 2006 to 0.86 million in 2009. Since 2009, however, the number of sales has partially recovered, increasing to 1.07 million in 2013. The report points out that rising house prices could partially explain the decline in the number of first time buyers taking out a mortgage. Between 1980 and 2002, the number of mortgages agreed for first time buyers was averaging around 486,000 per year. However, in 2003 there was a 31% decline in the number of mortgages for first time buyers from 2002. It also shows that in 2008 saw a further 47% decrease from 2007 as the effects of the economic downturn impacted on the housing market. While some recovery in the numbers of first time buyers has been apparent in 2013/2014, the level remains below the average seen prior to 2003. The report says that the reduction in the numbers of first time buyers has subsequently had an impact on the age of home owners. In 1991, 67% of the 25 to 34 age group were home owners. By 2011/2012, this had declined to 43%. There were also reductions in home ownership over the same period for the 16 to 24 age group from 36% to 10% and for the 35 to 44 age group from 78% to 64%. By contrast, home ownership has increased among… Continue reading
Rents increase in UK as demand outstrips supply
The average UK rent is now £836 per calendar month, an increase of 2% year on year as demand, especially for quality homes outstrips supply. The data from the latest analysis report from lettings agency Countrywide also shows that one and two bedroom properties saw the greatest increase in rent up 8.5% and 3.6% to £751 and £810 respectively. While three bedroom properties recorded a 1.6% increase to £930, however, four bedroom plus properties experienced a 3% decrease to £1,345 per calendar month. On a regional basis Greater London had he largest annual increase in rent, up 10.6% to £1,265, followed by Wales up 6.1% to £666 and the South West up 4.1% to £765. The only region to see a decrease in rent year on year was the South East, down 4.1% to £1,035 and the firm said that was due to a fall in demand for rental accommodation in the region as more tenants move out of the private rented sector and into the owner occupier sector. A breakdown of the figures shows that the average rent for newly let properties was £883, an increase of 2.8%. In this sector one and two bedroom properties saw the largest growth in rents year on year, increasing 3.3% and 1.9% respectively Renewed tenancies averaged £835 per calendar month with one bedroom properties in this sector recording the greatest annual increase in rent with a rise of 3.3%, followed by two bedroom properties up 1.9% and three bedroom properties up 1.7% to £875. Four bedroom plus homes saw rents stay broadly the same with just a 0.2% decrease. The majority of UK regions saw an increase in rent for renewed tenancies in January 2015. Scotland sees the greatest increase up 5% year on year to £634, followed by Greater London, up 4.7% to £1,110 and the Midlands with a 3% increase to £622. Some regions see a decrease in rents, most notably the North of England with a decline of 1.2% to £599, followed by Wales down 0.7% to £592 and the South East down 0.5% to £1,010. Year on year average rents have increased for all property sizes with the smaller properties leading the way. One bedroom properties see the greatest increase in rent up 2.7% to £688, followed by three bedroom properties up 2.2% to £875, two bedroom properties up 1.9% to £768 and four bedroom plus properties up 1.3% to £1,328. The data also shows that arrears have decreased year on year in all regions apart from the North of England where they have stayed the same, and central London where there has been a marginal increase of 0.6%. ‘Renting is a flexible and relatively hassle free way of living which suits many people's lifestyles. It allows them to settle in a location where perhaps they couldn’t afford to buy but they enjoy living in. With a growing population of lifetime renters, increasing the amount of good quality,… Continue reading
