Renters are running to stand still: English Housing Survey

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, comments on the 2020-2021 English Housing Survey, which shows that renters are running to stand still.

Key points from publication:

There are an estimated 24 million households in England in 2020/21. Just over two thirds (65%) are owned – split roughly evenly between those with a mortgage (30%) and those who own outright (35%).
The average weekly mortgage payment is £174, and the average weekly private rent is £198.
Those with mortgages spend an average of 18% of their household income on mortgage payments, and private renters pay 31% of household income on rent.
81% of owners have savings (up from 68% in 2019/20), while 55% of private renters do (40% in 2019/20).
In London, 27% of people rent privately, 22% own outright and 29% own with a mortgage.

Sarah Coles says:

“Renters are running to stand still, and have to find enormous sums each month to keep a roof over their head. It’s no wonder so many face a horrible challenge in making ends meet, let alone save enough to get onto the property ladder.

“On average, renters hand over a far larger proportion of their income in rent than owners spend on their mortgages, which means they have had far less opportunity to build their resilience during the pandemic than their homeowning counterparts. Just over half have any savings at all (55%), which means they’re far less resilient to sudden shocks than owners, 81% of who have built up savings.

“It also means that despite the fact that two thirds of them expect to get onto the property ladder at some point in the future (61%), it’s an enormous challenge, which means the average age of first-time buyers is now 32.

“Higher earners are far more likely to be able to afford to buy, and two thirds (62%) of first-time buyers were among the top 2/5^th of earners in this age group. It’s hardly surprising when you consider that the average deposit was £44,294.

“The fact that it’s harder for lower earners to buy has been exacerbated by the horrible reality that more people are having to go it alone than in previous years. Among survey respondents, the Bank of Mum and Dad continued to take a step back, so more people were buying with savings (91% – up from 76% three years earlier), and fewer had help from family and friends (23% – down from 39% three years earlier).

“A major proportion of these buyers are single people buying on their own too: 32% of first-time buyers were single people, 39% were couples without children, 23% were couples with children.

“An odd finding in this set of figures was that the proportion of people renting seemed to be falling: 37% of people aged 25-34 were renting – compared to 42% in 2019/20. However, this highly likely just to be a temporary COVID blip. One giveaway is that the survey included far lower numbers of younger people overall. It only measures permanent members of the household, so will have missed a lot of young people who temporary left rented accommodation to live in a bubble with family.

“The long-term trends show we’re still increasingly likely to rent – and to do so at older ages than ever before. Over the past ten years, the proportion of households aged 45-54 in private rental properties rose from 11% to 16%, and over the same period, those aged 55-64 rose from 6% to 11%.

“This reflects the horrible catch 22 facing renters, that renting is too expensive for them to save to get onto the property ladder, which leaves them at the mercy of rising rents.”

Kindly shared by Hargreaves Lansdown

Main photo courtesy of Pixabay