With five million households in the UK already living in rented accommodation and the figure set to rise, many feel more should be done to invest in rental properties. Buying property is out of reach of many young people, with figures showing fewer millennials on middle incomes choosing to get on the property ladder. New research by the Institute for Fiscal Studies shows just over 25% of 24 to 34-year-olds who earn between £22,200 and £30,600 – which is the middle 20% on the wage scale – own their own home. In 1995-96, 65% of the same age group owned a home.
There are various reasons why younger people are not buying property. The biggest factor is that they simply cannot afford to take out a mortgage, with property prices being so high in most areas of the country. For nearly 90% of them, the average house price is more than four times their annual income after tax, according to the IFS. Other young people simply like the flexibility of renting, as they are not tied to a house or part of the country as they would be if they had a mortgage. The figures show that young adults on middle incomes are no more likely to own a property than those earning less than them. IFS senior research economic, Andrew Hood, said there has been a collapse in home ownership among young people in the past 20 years. This is particularly true for those on middle incomes.
The Residential Landlords Association said these findings show the government needs to have a rethink on its tax policy for landlords. Policy director, David Smith, said it is folly to impose higher taxes to put off investment in new rental properties. He pointed out that there has been a huge increase in young people who cannot buy a home, which means more are renting. Not only that, they are renting for longer periods. He called on the government to look again at its policies to support investment to meet the ever-increasing demand for homes to rent.
Although the number of first-time buyers is at its highest for 10 years, the average age of someone just getting on to the property ladder is 30, with an income of £41,000 per year, according to UK Finance figures. The Help to Buy scheme is enabling more people to buy properties, but it is still out of reach of many more.
Calls have been made to modernise the private rental sector to meet the needs of the increasing number of tenants and to make sure they are not being priced out of the market. Research by online lettings platform, HomeRenter, says 70% of tenants would prefer to cut out the estate agent and rent directly from a landlord. In the digital age, they do not see the need to go through the middle man. With proptech, tenants and landlords can communication directly online, which cuts fees paid to the middleman, such as estate agents. This reduces costs for everyone involved.
Start your free trial here today.