New research from the Intermediary Mortgage Lenders Association (IMLA) has found that 50% of homes in the UK will be rented by the year 2032, as families are continuing to be squeezed out of the property market.
The UK has been a nation of homeowners for decades, and for the first time since the early 1970s, over half of the population are being forced into renting due to ever increasing house prices and mortgage repayments.
The data collected found that the private rented sector has grown by 4% since 2007, whereas the number of owned houses has actually dropped down 4%, alongside social renting. Buy-to-let mortgages have accounted for just 32% of houses in the private rented sector in the last 7 years, with the rest made up of owner rented properties and commercially funded purchases.
The report from the IMLA found a few different reasons behind the movement, including the number of obstacles in the way of home ownership, such as harder mortgage applications, more students, higher immigration levels and a fall in social housing.
House prices in the UK have been rapidly increasing with record-breaking levels of growth. London is still the most expensive place in the country to live, but house prices in other areas of the country are beginning to catch up. A study by Hometrack found that 48% of the country, not including London, saw an increase in house prices over the month of April 2014.
As a result of these continuously increasing prices, people are really struggling to afford a house and get their foot on the property ladder. In the last 12 years alone, the amount of homeowners between the ages of 16 -24 has dropped to 11% and for those between the ages of 25-34 it has dropped down to 40%.
With the UK population expected to reach 75.3m by 2035, house demand is always on the up, and house supply is continuing to fall. This is causing a high level of competition between house hunters and a lot of stress for first time buyers.
Peter Williams, Executive Director at IMLA, said:
“There are many misunderstandings clouding the growth of buy-to-let, including its impact on first time buyers. This report is a fresh look at how and why the private rental sector has grown. It asks important questions about our current direction of travel and the failure to build enough homes to support the rising population.”
More younger people than ever are facing years of rent ahead of them, while the older generation seem to be renting out of choice. This shows a new trend moving towards other European countries where renting tends to be the norm.
While homeowners and those looking to buy may find this situation frustrating, the outlook for landlords and those looking to invest in buy-to-let is very different. Rental prices in five out of ten areas are now up from March 2013, so the situation is actually very positive for landlords.
The recent “Generation Rent” report from Halifax found that even with schemes such as Help to Buy in place, 36% of those in the age bracket of 20-45 year olds still feel like the reality of them being able to buy a house in the next five years is very slim.
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