What is the reality of housing costs revealed?


Renters spend more on housing costs each month than homeowners. It was recently noted by Zoopla that renters fork out considerably more of their monthly income on their home each month than mortgage holders. This was via an English Housing survey.

The key items in relation to housing costs were as follows;

Renters spend 31% of their household income on rent each month in 2020-2021 whilst homeowners only spent 18% of their income.

Of those renting, 35 expected to be able to buy their home within the next 2 years. Nearly 1 million of people have bought their first home in 2021 according to the English Housing Survey.

The cost of renting a home in the United Kingdom outside of London now stands at approximately £809.00 per month. This is according to the latest rental market reports. The good news for potential buyers is that there has been a steep increase in the number of people getting on the property ladder.

A total of 61% of people in private renting sector expect to be able to buy their own home at some point. Of those, 35 expect to be able to step into the property market within the next 2 years.

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Why are renters paying more?

People in the private rented sector paid an average of £198.00 per week for their home.

This is a lot more than people paying for a mortgage. The discrepancy is caused by the fact that homeowners are currently benefiting from the record low mortgage rates.

Some private landlords are also facing increased costs due to tax changes and new rental requirements that are coming in this year. Some of these costs are now being passed onto tenants. Private sector rents reflect the current market rate, because rents are typically adjusted when tenants contracts are renewed.

How many people are in private rented homes?

It is believed to be one in five people in England rent a home in a private sector, rising to 27% in London.

Younger people are more likely to rent than older. 65% of people in the private rented sector are under the age of 45. There has been an increase in the older age groups recently who now rent. There are 11% of people aged between 55-64 letting in the private sector and this has now doubled a decade earlier.

Number of people aged between 45-54 renting stands at 16% up from 11% 10 years ago.

Rent increases hit a 13 year high as demand in major cities doubles.

According to Zoopla rent increases have hit a 13 year high as demand for renters in the central zones of major cities has now doubled. The typical cost of renting a home in the UK, excluding London, now stands at £809.00 per month. According to the latest rental market report.

It is accepted now that renters are returning to cities. The rise in demand is not being met by the number of homes that is now available. This is now forcing the rents to be higher.

This good news for buy to let landlords. Whilst there has been an increase in rents the affordability is also remained unchanged thanks to rising pay. Most rents now account for an average of 37% of tenants monthly income.

What is happening to rents?

Average UK rents, excluding London, have now risen by 6% during the year to the end of September, jumping by 3% in the past 3 months alone. Strong rental growth has been driven a return of workers to the city centres and students to university.

It can also be explained by renters are opting for larger and more expensive properties. However this results in a large sum of people income goes directly to housing costs per month. This is part of the pandemic induced search for space. You will find that a lot of private renters are now looking to have some form of outside space when renting a property. Anything with a garden or a balcony is now providing a premium price.

The South – West alone saw the biggest jump in rental growth at 9%. It has become a popular place to live. Close behind it was Wales and then the East Midlands. Rent increases are running well ahead of a 5 year average in most large cities. The biggest growth has been in Bristol seeing 8.4%.

What is the demand for rental homes currently like?

Demand in major cities such as Leeds, Edinburgh doubled in the first 3 months to the end of September. This is compared with the earlier part of the year. This is due to the renters coming back to city centres.

Birmingham have seen a spike of over 60% and London has seen a 50% jump in demand.

Across the UK as a whole though the demand has gone up by nearly 43% on the 5 year average. This is making it more difficult for renters to find properties. There is a lack of property on the market due to people deciding not to find a new home and are renewing their contracts. They may be renewing them at a higher price but it is cheaper than it is for them to move. The supply is now being outstripped by the demand. There is such a lack of supply that many rents have increased quite dramatically in the past 3 months.

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What does this mean for landlords?

If you are a landlord with a property to rent, the duel trend of rise in demand and higher rent is good news for you. The current buoyancy of the rental market may mean it is a good time to think about extending your portfolio. Obviously, demand patterns have changed prior to the pandemic and it is always good to take a note of these. You should also look at your rental figure and ascertain whether your tenants are still paying the correct market valuation.

What is the outlook?

The shortage of homes available to rent are set to continue due to the lower levels of investment by landlords. Demand is expected to be strong as the employment market remains relatively robust and there is still a pent up demand. This is the case particularly for homes in the city centres. There is a huge mix-match between supply and demand that will continue to push up rents. Therefore having an overall increase for housing costs.

Update 21.02.2022

There has recently been a lot of discussion regarding the increase in rent costs in the rental market.

It has recently been confirmed that in 2019 there were 120,000 properties on the rental market but in 2022 there were only 50,000.

This shows there is a huge lack of properties currently on the market itself and these are increasing the rental figures dramatically. Some landlords have seen increases anywhere between 9-30% in certain areas that are considered hot spots.

There has been a lot of discussion regarding the electricity and the gas rises and these are all items that the tenants will find problematical in future.

Did you know that we did all types of insurance. Anything from rent guarantee, contents cover, occupied and unoccupied properties. We do from commercial through to residential and everything in between even museums. Why not contact us on 01273 827090 or enquiries@iinsure365.co.uk to discuss any requirements you may have.

Our panel of insurers can deal with any form of levels of cover from contents cover to buildings to rental insurance. Anything you require don’t hesitate to contact us in this regard.

Are you aware of the growing risk of underinsurance?

In the words of the financial conduct authority “there is already an alarming degree of underinsurance”. With both the UK businesses and consumers creating issues throughout each of the property sectors.

It is the responsibility of landlords to ensure they take out sufficient levels for cover for the insured risk of having insurance.

If they fail to take out sufficient level of cover this can have devastating consequences for you. It can result in significant reductions to any insurance pay outs and potentially in the worst case scenario, it may void the policy. Resulting in no pay out at all.

A practical example is as follows;

If the rebuild cost of your premises is £200,000 but the property is only insured for £100,000. You are underinsured by 50%. Every insurance company will have an average clause in the policy which is standard and therefore it reduces the sum insured by leaving the policy holder with 50% of an insurance pay out of just £50,000.

We understand from iInsure that they recently had one of their clients check their rebuild costs. iInsure have an ability to be able to check a policy for the correct sum insured for only £160.00. Substantially more than what most surveyors charge.

The client was insured for £630,000. Once the report was carried out it stated that it should have been £856,000. There was an underinsurance of £226,000 which would have been taken off any claim.

They can provide you with a RICKS certified up to date revaluation. Ensuring that your property is correctly insured for the right amount. The cost is minimal compared to what the situation would be if you weren’t paid out to the correct amount.


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