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Insight & Opinion

With homeownership at a low, high-quality rental property is vital

Author: Staff

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For many people in the UK – particularly young workers and families on moderate incomes – owning a home seems like an unachievable dream.

Recent research has emphasised just how difficult it is for first-time buyers to get their first foot on the property ladder, meaning many people are reliant on the supply of high-quality housing in the rental sector.

Barriers to ownership

A number of factors have conspired against young people who want to buy a home, including prohibitively high prices in areas such as London and the south-east, slow wage growth and tighter mortgage affordability checks since the financial crisis.

Recent research by the Institute of Financial Studies (IFS) revealed that, in 2016, only around 60 per cent of young adults would have been able to borrow enough to buy one of the cheapest homes in their area, even with a ten per cent mortgage deposit.

That proportion marks a substantial fall from 1996, when more than 90 per cent of 25 to 34-year-olds in the same financial position would have been able to buy a property. Read the History of UK buy-to-let…

The research noted that barriers to homeownership are particularly high in London. Only a third of young adults able to pay a ten per cent mortgage deposit could borrow enough to purchase one of the cheapest homes in their local area in the capital.

Polly Simpson, research economist at IFS and co-author of the research, said: “Big increases in house prices compared to incomes over the last two decades mean that it is increasingly difficult for young adults to get on the housing ladder, even if they do manage to save a ten per cent deposit.

“Many young adults cannot borrow enough to buy a cheap home in their area, let alone an average-priced one.”

Reliant on renting

This study followed an earlier report from the Resolution Foundation think tank, which found that up to a third of young people could end up living in private rented accommodation all their lives.

As a result, there is a strong need for high-quality housing in the private rental sector, particularly for young professionals and families looking for homes that suit their personal tastes and lifestyles.

The Association of Residential Letting Agents (ARLA) highlighted this trend in a recent report showing that demand from tenants is rising, while the number of properties available to rent is falling.

ARLA chief executive David Cox commented: “To put tenants back in the driving seat, we need more homes available to rent, and the only way this will be achieved is if the government makes the market more attractive for buy-to-let investors.”

This combination of high demand and limited supply means owners of high-quality rental property can expect strong interest from renters, which fuels healthy and consistent rental yields.

Demand is likely to be particularly high in London commuter hotspots such as Luton, with many workers looking for housing in these areas to escape the capital’s high living costs.

Experience Invest is currently offering early investor discounts of 10 per cent at Imperial Square Luton, an off-plan development that will help meet the need for high-end apartments in the centre of Luton.

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