In a recent report it was cited that “House prices across the UK are set to rocket by 50% by 2025”, reaching an average price of £419,000 according to the National Association of Estate Agents (NAEA) and Association of Residential Letting Agents (ARLA) Housing 2025 report.
Furthermore, rents are predicted to increase by 27% from a current UK average of £134 a week to £171 in 2025.
Lower home ownership rates amongst the working age population and the ageing of the baby-boom generation will continue to drive a decline in the proportion of UK households that own their own home. Currently around 62% of the working population owns their own home, but the report predicts this will fall to 55% in the next ten years. A declining home ownership rate will boost demand for rental properties, and drive house prices up. The Housing 2025 report also predicts the proportion of private renters in the UK will increase from 20% of households in 2015, to nearly 29% by 2025.
David Cox, managing director of ARLA said: “Buying and renting a home is a giant step, and is out of reach for many. Rent costs are already growing at a rate that people are struggling to keep up with, and they’re due to become even less sustainable over the next decade – particularly when the new landlord tax sets in, which will put off many would-be landlords from entering the market. If we’re to see the property market lifted out of its current state, we need to help the rental market from top down as well as bottom up, ensuring landlords are not penalised for their choice of income, and they can in turn give tenants the best possible price and service they deserve.”
Mark Hayward, managing director of the NAEA said: “House prices are only going to go one way, and unfortunately that is up. For so many already priced out of the market, this is news aspiring house buyers will not want to hear.
On-going house price inflation, combined with low wage inflation, tighter lending restrictions and a shortage of affordable housing, means owning a home will continue to be distant dream for many. Increased rental costs will also make it more difficult for current renters to save for a house deposit; as much of their income will be eaten up in rent.”
ARLA and NAEA recommended the following solutions to solve the housing crisis;
The government should make a scheme similar to the London Rental Standard mandatory across the country, to create a way of distinguishing letting agents and landlords who maintain their properties to a high standards, thereby improving the condition of private rental properties coming onto the market
- The government should continue its effort to revisit the idea of reducing the area of the Green Belt and set up a committee which would explore this possibility in detail.
- Giving a wider scope of powers to the Private Rented Sector Taskforce and providing government debt guarantees would encourage large-scale institutional investment into the private rental sector, creating more available properties and helping to bring rental costs down.
- The government should add construction sector occupations, such as brick layers, to its shortage occupation list, making it simpler for employers to hire non-EU nationals.
- Longer term, the government should incentivise firms in the construction sector, to offer more apprenticeships and training programmes.
- The government should form an advisory body in the form of an independent housing policy committee, which is not directly elected.
- The government should offer a stamp duty exception to pensioners looking to downsize their property.
The groups stated: “Our simple plea before the election was ‘Britain deserves better’. Since the General Election, the government has pledged to solve the acute problems facing the property industry, aiming to build one million new homes before the end of this Parliament in 2020. But words simply aren’t enough. The housing crisis Britain is facing is deep-rooted and if it is to be solved, it will require finance, suitable land, time, new skills and most importantly, the appropriate national regulation of the key stakeholders, not least the estate agents and letting agents that form our membership. We are calling for change – and it needs to happen soon.”
There seems to be unanimous opinion that property prices are going to rise over the next 5-10 years, and rental levels likewise. Yes there are additional taxes that need factoring into landlord’s calculations but the raw underlying investment rationale for residential property investment remains strong, and the areas of the East Midlands and East of England, in our opinion, represent good areas to benefit from this rise.
Please do contact us at Osprey Lettings with any queries.